CFIUS updates for July 2020: Final rules for filing fees and "principal place of business"; annual report for 2019

In an active final week of July 2020, the Committee on Foreign Investment in the United States (CFIUS) issued final regulations locking in the filing fees that have been in effect since May 2020 and clarifying its definition of “principal place of business.” The latter rule will have implications for CFIUS jurisdiction over certain transactions—especially indirect foreign investments via U.S.-managed investment funds. CFIUS has also published the unclassified version of its 2019 annual report to Congress, confirming fewer reviews of transactions from China, a higher overall clearance rate, and a 37 percent clearance rate for short-form declarations filed under the CFIUS pilot program for critical technology transactions.

CFIUS Filing Fee

In April 2020, CFIUS issued interim rules, effective May 1, requiring filing fees for full notices submitted by the parties either voluntarily or in lieu of mandatory declarations. After reviewing public comments on the interim rules, CFIUS issued final regulations, effective August 27, 2020, adopting the same fee structure as in the interim rules:

Value of Transaction (in U.S. dollars)

Filing Fee (in U.S. dollars)

Less than US$500k


At least US$500,000 but less than US$5m


At least US$5m but less than US$50m


At least US$50m but less than US$250m


At least US$250m but less than US$750m


US$750m or more


Filing fees will be subject to annual adjustment for inflation

These fees apply to corporate investments reviewable under Part 800 of the CFIUS regulations as well as real estate transactions subject to Part 802 of the CFIUS regulations.  For more information regarding the calculation of CFIUS filing fees and their strategic implications for parties considering a transaction subject to CFIUS review, please see our previous note on the interim filing fee rules.

Definition of “Principal Place of Business”

Even before the enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), the CFIUS regulations referred frequently to an entity’s “principal place of business,” most importantly in the context of determining whether a transaction was being undertaken by a “foreign person” for purposes of establishing CFIUS jurisdiction.  The pre-FIRRMA regulations, however, left the term undefined. Now, with CFIUS’s issuance of regulations implementing FIRRMA, the term is used far more frequently and with far greater implications, especially with the introduction of mandatory pre-closing filings and exemptions for indirect foreign investments via U.S.-managed investment funds and “excepted investors” from certain countries.

The set of FIRRMA regulations that took effect in February 2020 included the interim definition of an entity’s principal place of business as the primary location where an entity’s management directs, controls, or coordinates the activities of the entity. Recognizing that many investment funds are offshore entities managed from other countries, the rule qualified the definition by saying the principal place of business of an investment fund is where the fund’s “activities and investments” are primarily directed, controlled, or coordinated “by or on behalf of the general partner, managing member, or equivalent.” Both parts of the definition were qualified by an important proviso: If the entity or fund had ever made a government filing, in the United States or elsewhere, that its principal place of business was outside the United States, the entity or fund could not claim a U.S. principal place of business for CFIUS purposes unless it can demonstrate that the principal place of business had been relocated to the United States since the conflicting representation had been made.

The final version of the definition is nearly identical to the interim definition; the only change is to the provision for investment funds, which deletes the reference to a fund’s “investments,” since they are already included within the definition’s reference to a fund’s “activities.” Notably, CFIUS received a request to modify the proviso regarding conflicting government submissions, but left it intact. In its comments on the final definition, CFIUS noted that identifying an entity’s registered office would not automatically be viewed as a representation of the entity’s principal place of business, as the functions performed at a registered office may not include management of the entity’s activities.

2019 Annual Report to Congress

On the heels of its release of its 2018 annual report to Congress, CFIUS has cleared its annual report backlog with last week’s publication of its 2019 annual report to Congress. Since the 2018 report was published alongside a set of high-level statistics for 2019, many of the key takeaways from 2019 were already addressed in our May 2020 note:

  • The growth of CFIUS’s caseload, measured in terms of transactions;
  • Greater efficiency as CFIUS begins to implement FIRRMA’s reforms; and
  • Fewer transactions effectively blocked by CFIUS objections.

Additional details provided in the 2019 annual report offer some additional insights:

China is no longer the leading source of CFIUS notices

As anticipated in our May 2020 note, and consistent with reported statistics on foreign direct investment, CFIUS is reviewing fewer investments from China. CFIUS notices filed by Chinese investors dropped precipitously in 2019, consequently removing China from its former position as the leading source of CFIUS’s caseload. As illustrated in the table below, the decline in filings from China has been offset primarily by increased notices from Japan, the United Kingdom, Australia, South Korea, and Singapore.



2018 2019



55 25



31 46

United Kingdom


5 13



4 11

South Korea


4 10



5 10


The United Kingdom and other Commonwealth countries were the leading sources of CFIUS filings before the 2008 financial crisis, but the growth from the United Kingdom and Australia may be short lived, now that those countries (along with Canada) have been designated as “excepted countries” by CFIUS and certain investors from those countries are exempt from CFIUS’s expanded jurisdiction over noncontrolling investments and mandatory filing requirements. Please see our February 2020 note on excepted countries and investors for more details.


CFIUS cleared 37 percent of transactions for which declarations were filed in 2019

In the interest of allowing CFIUS to streamline its process for certain transactions, FIRRMA established the concept of short-form declarations that CFIUS could assess within 30 days. CFIUS initiated the use of declarations in a “pilot program” requiring pre-closing filings for certain foreign investments in U.S. businesses that develop or produce “critical technologies” for use in certain industries. In 2019, CFIUS received 94 declarations under the pilot program (though one was subsequently withdrawn by the parties for commercial reasons). As with full notices, Japan led the way as the source of declarations (14), followed by Canada (12) and the United Kingdom (11). For 35 of the declarations, CFIUS issued unconditional clearances or determined that it lacked jurisdiction over the subject transaction. In 26 cases, CFIUS asked the parties to file full notices, suggesting at least some substantive interest in the transaction or a need for additional information to determine whether CFIUS had jurisdiction. In 32 cases, CFIUS told the parties that it would not be able to clear the transaction on the basis of the declaration. Parties receiving this response may have responded by filing full notices, especially if CFIUS clearance was a condition precedent for the transaction. None of the 2019 declarations resulted in CFIUS self-initiating a full notice and review.

Earlier this year, CFIUS expanded parties’ ability to submit short-form declarations, either as required pre-closing filings for foreign investments in certain U.S. businesses involved with critical technology, critical infrastructure, or sensitive personal information of U.S. citizens (TID Businesses) or in lieu of a full notice for any voluntary filings. As CFIUS gains more experience handling declarations, especially declarations filed voluntarily for transactions that may be less sensitive, we expect the clearance rate for declarations to grow.


CFIUS hints at greater transparency in future annual reports

In our May 2020 note on the 2018 annual report, we expressed our disappointment that CFIUS had not yet provided, as required by FIRRMA:

A list of all notices filed and all reviews or investigations completed during the period, with basic information on each party to the transaction, the nature of the business activities or products of all pertinent persons, along with information about any withdrawal from the process, and any decision or action by the President under this section.

Moreover, some of the language in the 2018 annual report suggested that this information might not be released in the unclassified versions of future annual reports. This language was not repeated in the 2019 annual report, suggesting that the list required by FIRRMA could be made public in the future. If so, the CFIUS process will become far more transparent, and parties will have greater insight into how CFIUS might treat future deals. Moreover, if CFIUS is able to continue releasing annual reports shortly after the end of each calendar year, the list will be far more current and therefore, far more useful.


On the Horizon

We expect a couple of other important developments at CFIUS in the near future:

New thresholds for mandatory filings

In May, CFIUS published draft regulations that would adjust the thresholds for mandatory pre-closing filings, particularly for investments in U.S. businesses that develop or produce “critical technologies.”

For “critical technology” investments, one of the key mandatory filing thresholds, dating back to the 2018 “pilot program,” was whether the U.S. business developed or produced the relevant export controlled technologies as part of its activities in one or more of 27 specific industries or specifically for use by others in one or more of those industries.  The draft regulations replace this test with one based on whether an export license or other U.S. government authorization is required to transfer the technology to the foreign transaction parties, certain other indirect foreign owners, or other foreign parties for whom a change of interests in the U.S. business would be subject to CFIUS jurisdiction.  Export license obligations would be determined on the basis of the principal place of business (as newly defined) of foreign entities or the nationality(ies) of foreign individuals.

For foreign investments in TID Businesses, mandatory pre-closing CFIUS filings are also required if the foreign investment meets a two-prong “substantial interest” test:  (i) the foreign investor must acquire at least a 25 percent voting interest in the U.S. target, and (ii) a foreign government must directly or indirectly hold at least a 49 percent voting interest in the foreign investor.  The draft rule clarifies that if the foreign investor is primarily controlled by a general partner, managing member, or equivalent (as opposed to merely having a general partner or equivalent), the 49 percent foreign government interest test applies only to the general partner, managing member, or equivalent.

Public comments on the draft rules were submitted to CFIUS by June 22, so final regulations may be released at any time.


CFIUS enforcement guidelines

CFIUS has established an internal office dedicated to monitoring and enforcement. Its responsibilities include confirming that parties comply with mitigation conditions and submit mandatory pre-closing filings, as well as assessing whether previously non-notified transactions fall within CFIUS’s jurisdiction and present potential national security issues. To assist with these responsibilities, the monitoring and enforcement office has established a dedicated email address through which the public can submit tips and referrals.

CFIUS has indicated that it will soon issue more detailed guidance on how it will enforce its authorities. Some issues that may be addressed in the guidelines include: when and to what extent CFIUS is likely to pursue civil penalties for failure to submit mandatory filings (e.g., whether parties will be penalized for good faith interpretations of the CFIUS regulations), whether enforcement of civil penalties and fines will principally target the foreign investor or the U.S. target, and when breaches of mitigation conditions could result in CFIUS initiating a new review of a previously cleared transaction.



CFIUS leadership has been clear that during its implementation of FIRRMA, CFIUS regulations will not be static, but will continue to evolve.  We will continue to monitor and share these developments in the future.  Please see Linklaters’ Navigating CFIUS webpage for more information on CFIUS, FIRRMA, and their implications for prospective cross-border investments.