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In August 2018, President Trump signed into law the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which substantially expanded the power of the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) to review certain foreign investments in U.S. businesses. In addition to widening the scope of CFIUS’s jurisdiction, FIRRMA also authorized CFIUS to establish a filing fee for parties that notify transactions to CFIUS. Pursuant to FIRRMA, the filing fee cannot exceed the lesser of 1% of the transaction value or $300,000.1
Calculating the Filing Fee
On March 9, 2020, the Treasury Department published a Proposed Rule that would implement a filing fee for parties that submit voluntary notices of certain transactions to CFIUS.2 The comment period for the Proposed Rule concluded on April 3. On April 27, the Treasury Department issued an Interim Rule that makes only clarifying edits to the Proposed Rule. Although the public has an additional opportunity to comment until June 1, the Interim Rule is effective as of May 1. In its current form, the Interim Rule applies to both “covered transactions” and “covered real estate transactions,” terms that are defined broadly in 31 C.F.R. Parts 800 and 802, respectively. In accordance with FIRRMA, and as set forth in the table below, the Interim Rule instructs the parties to calculate a filing fee based on the value of the notified transaction:
| Value of Transaction
| < $500,000
|| No Fee
| $500,000 - $4,999,999.99
| $5,000,000 - $49,999,999.99
| $50,000,000 - $249,999,999.99
| $250,000,000 - $749,999,999.99
| > $750,000,000
In determining the filing fee, transaction value “means the total value of all consideration that has been or will be provided in the context of the transaction by or on behalf of the foreign person that is a party to the transaction, including cash, assets, shares or other ownership interests, debt forgiveness, or services or other in-kind consideration.”3 Where the consideration paid by the foreign person includes non-cash assets, interests, or services or other in-kind consideration, the transaction value would be determined based on the fair market value as of the date the parties file the notice. In determining fair market value, the parties must make a good faith estimate and may rely on the last valuation of the assets as presented in financial statements prepared in accordance with GAAP or other widely recognized accounting principles. Another option for determining fair market value is to consult the valuation of an independent appraiser. To this end, the Interim Rule mandates that the parties to a voluntarily notified transaction include in their notice a good faith estimate of the transaction value, together with an explanation of the method used to determine such value and the corresponding filing fee.
Importantly, where the target company is composed of both U.S. and non-U.S. businesses, the parties will assess the transaction value based on the global value of the transaction, meaning a value that encompasses the U.S. and non-U.S. businesses. There is an exception where (1) the global transaction value for a non-real estate transaction is equal to or greater than $5,000,000 and (2) the value of the interests acquired in the U.S. businesses is less than $5,000,000. If this exception applies, then the filing fee is just $750. In this circumstance, requiring only the minimum filing fee encourages investment targets that qualify as “U.S. businesses” (as defined by CFIUS), but that maintain only a limited presence in the United States, to consider filing with CFIUS.
Notably, the Interim Rule does not impose a filing fee for a transaction that is notified to CFIUS via a mandatory declaration, which is the abbreviated notification process introduced by FIRRMA. Parties may elect, however, to file the longer notice filing in lieu of a mandatory declaration. Accordingly, in deciding whether to submit a declaration or a notice, parties to either a covered transaction or a covered real estate transaction should consider the potential filing fee.
The Interim Rule also does not require a filing fee in the case of a unilateral review initiated by CFIUS. Similarly, an additional filing fee does not apply to a situation where CFIUS permits the parties to withdraw and then refile their notice, unless CFIUS determines that “a material change to the transaction has occurred, or a material inaccuracy or omission was made by the parties in information provided to the Committee.”4 Furthermore, the Interim Rule permits the Staff Chairperson of the Committee to waive the filing fee if “extraordinary circumstances relating to national security warrant,” but such a waiver is highly unlikely.5
Finally, if CFIUS concludes that a voluntarily notified transaction is not a covered transaction or covered real estate transaction subject to its jurisdiction, the Interim Rule requires the Committee to return the filing fee.
Timing and Method of Payment
The parties must pay the filing fee by electronic payment, in U.S. dollars, and in accordance with instructions that are available on CFIUS’s section of the Treasury Department website. Under the Interim Rule, CFIUS may refuse a voluntary notice for review until the parties pay the applicable filing fee. Moreover, if CFIUS concludes that the parties underpaid the filing fee based on the value of the transaction, the parties will be required to cure the deficiency within three (3) days of receiving written notice. If the parties do not pay what is owed, then the Committee may reject the notice.
The Interim Rule implements one of the few pending provisions of FIRRMA. Moving forward, parties will need to account for the filing fee contemplated by the Interim Rule in deciding whether to file with CFIUS.
1. This amount will be adjusted for inflation on an annual basis.
2. Filing Fees for Notices of Certain Investments in the United States by Foreign Persons and Certain Transactions by Foreign Persons Involving Real Estate in the United States, 85 Fed. Reg. 23,736 (Apr. 27, 2020).
3. Id. at 23,740, 23,743.
4. Id. at 23,742, 23,745. The parties would have already paid a filing fee when submitting the original notice, obviating the need for an additional filing fee upon resubmission.
5. Id. at 23,742, 23,744.