[Federal Register Volume 87, Number 4 (Thursday, January 6, 2022)]
[Rules and Regulations]
[Pages 731-732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28599]


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DEPARTMENT OF THE TREASURY

Office of Investment Security

31 CFR Parts 800 and 802


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

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

ACTION: Final rule.

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SUMMARY: This final rule adopts without change the proposed rule 
modifying 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: This final rule is effective on February 4, 2022.

FOR FURTHER INFORMATION CONTACT: For questions about this rule, 
contact: Laura Black, Director of Investment Security Policy and 
International Relations, Meena R. Sharma, Deputy 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: 

I. Background

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

    On November 15, 2021, the Department of the Treasury (Treasury 
Department) published a proposed rule amending the definitions of 
``excepted foreign state'' and ``excepted real estate foreign state'' 
in 31 CFR part 800 and 31 CFR part 802, respectively. 86 FR 62978. 
These terms operate together with other relevant terms to provide an 
exception from the jurisdiction of the Committee on Foreign Investment 
in the United States (CFIUS or the Committee) over covered investments 
by certain foreign persons who meet specific criteria establishing 
sufficiently close ties to certain foreign states, as well as certain 
other provisions of the Foreign Investment Risk Review Modernization 
Act of 2018.
    The preamble to the proposed rule provides background on CFIUS's 
statutory authority and the rationale for these definitional changes. 
The public was provided an opportunity to comment on the proposed rule 
and comments were due by December 10, 2021. The Treasury Department 
received two comments prior to the deadline, which are described in the 
next section.

B. Excepted Foreign States and Excepted Real Estate Foreign States

    As described in the preamble to the proposed rule, ``excepted 
foreign state'' and ``excepted real estate foreign state'' are each 
defined by a two-criteria conjunctive test, with delayed effectiveness 
for the second criterion. This second criterion is a Committee 
determination under Sec.  800.1001(a) for each eligible foreign state 
that it 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, and a Committee determination under Sec.  
802.1001(a) for each eligible foreign state that it has ``made 
significant progress'' toward establishing and effectively utilizing 
the robust process that is described in Sec.  800.1001. The final rule 
extends the effectiveness of the second criterion with respect to each 
definition. Instead of becoming effective on February 13, 2022, each 
such second criterion will become effective on February 13, 2023.

II. Summary of Comments

    During the public comment period, the Treasury Department received 
two comments to the proposed rule. The Treasury Department considered 
each submitted comment. All comments received by the end of the comment 
period are available on the public rulemaking docket at https://www.regulations.gov and addressed herein.

[[Page 732]]

    One comment supported the proposed rule and asked whether foreign 
states understand the determination criteria set forth in Sec.  
802.1001(a). The Treasury Department notes that there is additional 
information with respect to the factors that the Committee will 
consider in making determinations under Sec. Sec.  800.1001(a) and 
802.1001(a) on its website, available at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius/cfius-excepted-foreign-states. The public 
disclosure of the factors that CFIUS will consider in its 
determinations is informative to foreign states of the progress needed 
to meet the definitions of excepted foreign state and excepted real 
estate foreign state. CFIUS also engages with foreign counterparts on 
investment screening issues.
    Another comment asked about the impact of the pandemic and the 
excepted foreign state determinations. Extending the effective date of 
the second criterion in each definition provides foreign states with 
additional time to meet the determination factors. As stated in the 
preamble to the proposed rule, the Committee had determined that 
extending the time period before which such requirements become 
applicable is desirable given certain ongoing changes to foreign 
investment review regimes. The proposed rule does not make any change 
to the two-part conjunctive tests or to the factors set forth under 
Sec. Sec.  800.1001(a) and 802.1001(a) for the second criterion. These 
tests and factors continue to provide the basis for CFIUS to designate 
excepted foreign states and excepted real estate foreign states.
    Upon review and consideration of these comments, the Treasury 
Department has determined that the proposed rule is desirable given 
certain ongoing changes to foreign investment review regimes. The final 
rule therefore adopts the proposed rule without change.

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 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 final rule extends the delayed effectiveness 
period for the second criterion in each of 31 CFR part 800 and 31 CFR 
part 802 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 final rule therefore does not change the 
circumstances of any investor. Both before and after the final 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 final rule therefore does 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 final rule will not have a 
significant economic impact on a substantial number of small entities.

Congressional Review Act

    This rule has been submitted to the Office of Information and 
Regulatory Affairs (OIRA), which has determined that the rule is not a 
``major'' rule under the Congressional Review Act.

List of Subjects

31 CFR Part 800

    Foreign investments in the United States, Investments.

31 CFR Part 802

    Real estate transactions in the United States, Investments.
    For the reasons set forth in the preamble, the Treasury Department 
amends 31 CFR parts 800 and 802 regarding the definition of excepted 
foreign state and excepted real estate foreign state 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. 2021-28599 Filed 1-5-22; 8:45 am]
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