[Federal Register Volume 86, Number 217 (Monday, November 15, 2021)]
[Proposed Rules]
[Pages 62978-62980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-24597]


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DEPARTMENT OF THE TREASURY

Office of Investment Security

31 CFR Parts 800 and 802


Regulations Pertaining to Certain Investments in the United 
States by Foreign Persons and Regulations Pertaining to Certain 
Transactions by Foreign Persons Involving Real Estate in the United 
States

AGENCY: Office of Investment Security, Department of the Treasury.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would modify the definitions of ``excepted 
foreign state'' and ``excepted real estate foreign state'' by extending 
by one year the effective date of one of two criteria set forth in the 
definitions in the regulations implementing certain provisions of 
Section 721 of the Defense Production Act of 1950, as amended.

DATES: Written comments must be received by December 15, 2021.

ADDRESSES: Written comments on this proposed rule may be submitted 
through one of two methods:
     Electronic Submission: Comments may be submitted 
electronically through the Federal government eRulemaking portal at 
https://www.regulations.gov. Electronic submission of comments allows 
the commenter maximum time to prepare and submit a comment, ensures 
timely receipt, and enables the Department of the Treasury (Treasury 
Department) to make the comments available to the public. Please note 
that comments submitted through https://www.regulations.gov will be 
public, and can be viewed by members of the public.
     Mail: Send to U.S. Department of the Treasury, Attention: 
Laura Black, Director of Investment Security Policy and International 
Relations, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
    Please submit comments only and include your name and company name 
(if any), and cite ``Proposed Regulations Pertaining to Certain 
Investments in the United States by Foreign Persons and Proposed 
Regulations Pertaining to Certain Transactions by Foreign Persons 
Involving Real Estate in the United States'' in all correspondence. In 
general, the Treasury Department will post all comments to https://www.regulations.gov/ without change, including any business or personal 
information provided, such as names, addresses, email addresses, or 
telephone numbers. All comments received, including attachments and 
other supporting material, will be part of the public record and 
subject to public disclosure. You should only submit information that 
you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: Laura Black, Director of Investment 
Security Policy and International Relations, or Richard Rowe, Senior 
Policy Advisor, at U.S. Department of the Treasury, 1500 Pennsylvania 
Avenue NW, Washington, DC 20220; telephone: (202) 622-3425; email: 
[email protected].

SUPPLEMENTARY INFORMATION:

[[Page 62979]]

I. Background

A. The Statute

    On August 13, 2018, the Foreign Investment Risk Review 
Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of Public 
Law 115-232, 132 Stat. 2173, was enacted. FIRRMA amends section 721 (as 
amended, section 721) of the Defense Production Act of 1950, as 
amended, which delineates the authorities and jurisdiction of the 
Committee on Foreign Investment in the United States (CFIUS or the 
Committee). Executive Order 13456, 73 FR 4677 (Jan. 23, 2008), directs 
the Secretary of the Treasury to issue regulations under section 721. 
This proposed rule is being issued pursuant to that authority.
    FIRRMA maintains the Committee's jurisdiction over any transaction 
which could result in foreign control of any U.S. business and broadens 
the authorities of the President and CFIUS under section 721 to review 
and take action to address national security concerns arising from 
certain noncontrolling investments and real estate transactions 
involving foreign persons. FIRRMA requires CFIUS to specify criteria to 
limit the application of FIRRMA's expanded jurisdiction over these 
noncontrolling investments and real estate transactions to certain 
categories of foreign persons.

B. Definitions of Excepted Foreign State and Excepted Real Estate 
Foreign State--Sections 800.218 and 802.214

    On January 17, 2020, the Treasury Department published a final rule 
at 85 FR 3112 (Part 800 Rule) that amended 31 CFR part 800 to implement 
CFIUS's jurisdiction over certain non-controlling investments (which 
this rule describes as ``covered investments''), as well as certain 
other provisions of FIRRMA. The Treasury Department also published a 
final rule at 85 FR 3158 (Part 802 Rule) that established new 
regulations at part 802 of title 31 of the Code of Federal Regulations 
relating to CFIUS's authorities and the process and procedures to 
review transactions involving the purchase or lease by, or concession 
to, a foreign person of certain real estate in the United States. The 
Part 800 Rule and the Part 802 Rule each took effect on February 13, 
2020, and each address FIRRMA's requirement to limit the application of 
FIRRMA's expanded jurisdiction.
    The ``excepted foreign state'' definition in the Part 800 Rule 
operates together with other relevant terms to exclude from CFIUS's 
jurisdiction covered investments by certain foreign persons who meet 
certain criteria establishing sufficiently close ties to certain 
foreign states. Section 800.218 defines excepted foreign state by a 
two-criteria conjunctive test, with delayed effectiveness for the 
second criterion. The first criterion is that the Committee identify a 
foreign state as an eligible foreign state. The second criterion is 
that, by the end of the two-year delayed effectiveness period (i.e., by 
February 13, 2022), the Committee make a determination under Sec.  
800.1001(a) for each eligible foreign state as to whether such foreign 
state ``has established and is effectively utilizing a robust process'' 
to analyze foreign investments for national security risks and to 
facilitate coordination with the United States on matters relating to 
investment security.
    The ``excepted real estate foreign state'' definition in the Part 
802 Rule operates together with other relevant terms to exclude from 
CFIUS's jurisdiction certain real estate transactions by certain 
foreign persons who meet certain criteria establishing sufficiently 
close ties to certain foreign states. The Part 802 Rule applies a two-
criteria conjunctive test in the definition of excepted real estate 
foreign state that is analogous to the test in the Part 800 Rule, 
except that the second criterion is a determination under Sec.  
802.1001(a) that the foreign state must have ``made significant 
progress'' in establishing and effectively utilizing the robust process 
and coordination that is described in Sec.  800.1001.
    On January 17, 2020, the Committee identified Australia, Canada, 
and the United Kingdom of Great Britain and Northern Ireland as 
eligible excepted foreign states under the Part 800 Rule and as 
eligible excepted real estate foreign states under the Part 802 Rule. 
Thus, as of February 13, 2020, when the Part 800 Rule and the Part 802 
Rule became effective, each of the three identified eligible foreign 
states was deemed to be an excepted foreign state and excepted real 
estate foreign state, without regard in each case to the second 
criterion, which is a determination under Sec. Sec.  800.1001 and 
802.1001. In order to remain an excepted foreign state and excepted 
real estate foreign state after February 12, 2022, each foreign state 
must remain eligible under Sec. Sec.  800.218(a) and 802.214(a), 
respectively, and the Committee must make the determinations required 
under Sec. Sec.  800.1001(a) and 802.1001(a), respectively, regarding 
the foreign state.

II. Proposed Change

    The proposed rule would change the date in each of Sec. Sec.  
800.218 and 802.214 from February 13, 2022, to February 13, 2023. The 
proposed rule therefore would have the effect of extending the delayed 
effectiveness period for the second criterion in each of the Part 800 
and Part 802 Rules without making any change to the two-criteria 
conjunctive test in either the definition of excepted foreign state or 
the definition of excepted real estate foreign state. The proposed rule 
would make no change to any country's status as an excepted foreign 
state or excepted real estate foreign state. Under the proposed rule, 
the Committee may make a determination under Sec.  800.1001 or Sec.  
802.1001 for an eligible foreign state, including Australia, Canada, 
the United Kingdom of Great Britain and Northern Ireland and any other 
state that the Committee identifies as eligible, at any time before the 
revised February 13, 2023, date.
    As stated in the preambles to the Part 800 Rule and the Part 802 
Rule, the two-year period of delayed effectiveness for the second 
criterion in the definitions of excepted foreign state and excepted 
real estate foreign state was intended, in part, to provide the initial 
eligible foreign states time to ensure that their national security-
based foreign investment review processes and bilateral cooperation 
with the United States on national security-based investment reviews 
meet the requirement under Sec. Sec.  800.1001 and 802.1001. Extending 
the time period before which such requirements become applicable is 
desirable given certain ongoing changes to foreign investment review 
regimes.

III. Rulemaking Requirements

Executive Order 12866

    These regulations are not subject to the general requirements of 
Executive Order 12866, which covers review of regulations by the Office 
of Information and Regulatory Affairs in the Office of Management and 
Budget (OMB), because they relate to a foreign affairs function of the 
United States, pursuant to section 3(d)(2) of that order. In addition, 
these regulations are not subject to review under section 6(b) of 
Executive Order 12866 pursuant to section 7(c) of the April 11, 2018, 
Memorandum of Agreement between the Treasury Department and OMB, which 
states that CFIUS regulations are not subject to OMB's standard 
centralized review process under Executive Order 12866.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq., RFA) 
generally requires an agency to prepare a

[[Page 62980]]

regulatory flexibility analysis unless the agency certifies that the 
rule will not, once implemented, have a significant economic impact on 
a substantial number of small entities. The proposed rule would extend 
the delayed effectiveness period for the second criterion in each of 
the Part 800 and Part 802 Rules without making any change to the two-
criteria conjunctive test in either the definition of excepted foreign 
state or excepted real estate foreign state. The proposed rule 
therefore would not change the circumstances of any investor. Both 
before and after the proposed rule's effectiveness, any investor with 
sufficiently close ties to an eligible foreign state may be excepted 
from certain aspects of CFIUS's jurisdiction, including if engaging in 
a transaction with a small business. Such exception would be expected 
to lessen the burden on any such small business. The proposed rule 
therefore would not impose any additional burden on potential filers, 
including small businesses. Considering the foregoing, the Secretary of 
the Treasury certifies, pursuant to 5 U.S.C. 605(b), that this proposed 
rule will not have a significant economic impact on a substantial 
number of small entities.

List of Subjects

31 CFR Part 800

    Foreign investments in the United States, Investments.

31 CFR Part 802

    Investments, Real estate transactions in the United States.

    For the reasons set forth in the preamble, the Treasury Department 
proposes to amend 31 CFR parts 800 and 802 as follows:

PART 800--REGULATIONS PERTAINING TO CERTAIN INVESTMENTS IN THE 
UNITED STATES BY FOREIGN PERSONS

0
1. The authority citation for part 800 continues to read:

    Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.

Subpart B--Definitions


Sec.  800.218  [Amended]

0
2. Amend Sec.  800.218 introductory text by removing the year ``2022'' 
wherever it appears and adding in its place ``2023''.

PART 802--REGULATIONS PERTAINING TO CERTAIN TRANSACTIONS BY FOREIGN 
PERSONS INVOLVING REAL ESTATE IN THE UNITED STATES

0
3. The authority citation for part 802 continues to read:

    Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.

Subpart B--Definitions


Sec.  802.214  [Amended]

0
4. Amend Sec.  802.214 introductory text by removing the year ``2022'' 
wherever it appears and adding in its place ``2023''.

Larry McDonald,
Acting Assistant Secretary for International Markets.
[FR Doc. 2021-24597 Filed 11-10-21; 4:15 pm]
BILLING CODE 4810-25-P