The Committee on Foreign Investment in the U.S. is closely monitoring Chinese investors who are trying to take advantage of struggling U.S. companies, trade lawyers said. CFIUS is also focusing on the semiconductor sector, where Chinese entities are hoping to evade recent U.S. rules that impose more strict license restrictions on sales of semiconductors and other technology to China and Huawei (see 2005150058), the lawyers said.
Amid rising U.S.-China technology competition, Congress will continue to push for increased restrictions on inbound Chinese investment, said Rep. Darin LaHood, R-Ill. LaHood also said the Trump administration -- which has experienced success using tariffs and export controls to gain ground in trade negotiations -- will likely continue to leverage those measures, particularly against China.
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The Committee on Foreign Investment in the U.S. is increasing scrutiny on transactions involving basic medical supplies and sensitive technologies, trade lawyers said. Companies may also be seeing more CFIUS-related delays and a heavier involvement by political appointees in the CFIUS process as the Trump administration seeks to place more pressure on China, the lawyers said.
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The Treasury Department issued a proposed rule to modify mandatory declaration requirements for certain transactions involving critical technologies. Under the rule, transactions would require a declaration if the critical technology would normally be subject to a U.S. export license. This would be a change from certain declaration requirements for the Committee on Foreign Investment in the U.S. outlined under a 2018 pilot program, which based those decisions on whether the transactions met criteria established by the North American Industry Classification System.
Parties will soon be able to submit information for transactions relating to U.S. foreign investment reviews through an online portal, the Treasury Department said May 18. Treasury will launch a web portal later this month to allow filers to submit information through a case management system, which will send all “transaction-related information” to the Committee on Foreign Investment in the U.S. Filers who plan to submit a notice or declaration later this month should create an account at ID.me, an online identity verification program that is required to access the CFIUS CMS. Treasury said it will release more information about the CMS before its release. The agency implemented the Foreign Investment Risk Review Modernization Act (see 2002200002) earlier this year and recently announced CFIUS filing fees for certain transactions (see 2004280027).
Chinese direct investment in the U.S. last year fell to its lowest levels in a decade and will likely continue to drop this year, according to a May 11 report from the National Committee on U.S.-China Relations and the Rhodium Group. Investment dropped to $5 billion in 2019 from a decade-high of $45 billion in 2016 due to more investment reviews by the U.S., restrictions on outbound investment by Beijing, the COVID-19 pandemic and rising tensions between the two countries, the report said. The decreased investment may be part of a broader trend caused by the pandemic as industry grows concerned about the consequences of over-dependence on foreign supply chains, the report said.
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The Treasury Department announced fees for filing certain transactions with the Committee on Foreign Investment in the U.S., according to a notice. The interim rule, which will apply to formal written voluntary notices filed with CFIUS and not transactions submitted through declarations, establishes a range of possible fees, depending on the value of the transaction, with $300,000 being the highest fee. The rule takes effect May 1, but Treasury is accepting public comments through June 1. The agency also issued a fact sheet and a guidance for paying filing fees.