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House Passes Foreign Investment Risk Review Modernization Act

joseph.moreno@cwt.com's picture
Commentary by Joseph Moreno

By a bipartisan vote of 400 to 2, the House of Representatives passed a bill that would expand the powers of the Committee on Foreign Investment in the United States ("CFIUS") and reform the existing export control regime.

The House version of the Foreign Investment Risk Review Modernization Act ("FIRRMA") (H.R. 5841) would, among other things:

  • broaden the scope of "covered transactions" that are subject to CFIUS review;
  • expand the scope of technologies subject to export controls;
  • impose heightened scrutiny on transactions connected to "countries of special concern," including those that are subject to export restrictions or identified as state sponsors of terrorism; and
  • require the parties to a covered transaction that involves an "investment that results in the release of critical technologies by an unaffiliated United States business . . . to a foreign person in which a foreign government has, directly or indirectly, a substantial interest" to submit a declaration to CFIUS.

The Senate is expected to pass its own version of FIRRMA (S. 2098) after it was advanced by the Senate Banking Committee.

In a statement, President Donald J. Trump praised Congress for making "significant progress toward passing legislation" that will bolster America's ability to protect "critical technologies from harmful foreign acquisitions." He asserted that the legislation has the potential to improve the national defense against "threats posed by foreign investment," and warned that if Congress fails to pass FIRRMA, he is prepared to take executive action to impose new restrictions on transactions that threaten national security.

Commentary

If enacted into law, FIRRMA would constitute the most significant reform of the CFIUS review process in years, with an emphasis on the strategic threat posed by China's continued investment in U.S. technology and intellectual property. The current House and Senate versions of the bill contain minor differences that will now be reconciled in conference, and each have omitted language from an earlier draft that authorized the review of certain outbound technology transfers via joint ventures and other business arrangements. However, the overwhelming vote for FIRRMA in the House of Representatives, coupled with the support of President Trump, makes it highly likely that some form of the legislation will be enacted this year.

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