Locke Lord QuickStudy: Interim Treasury Rule Implements CFIUS Filing Fee

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.

Exceptions

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.

Conclusion