CFIUS Expands Mandate With First Pilot Program

As a part of the Foreign Investment Risk Review Modernization Act (FIRRMA),1 the Committee on Foreign Investment in the United States (CFIUS) will begin its first pilot program on November 10.

What You Need To Know

  • The pilot program has two new principal features:
    • Certain non-controlling investments by non-U.S. persons in U.S. businesses involved in critical technologies are now subject to CFIUS review.2 
    • Parties to a transaction covered by the pilot program are required to submit a short-form filing to CFIUS subject to monetary penalties for failing to do so.
  • The pilot program adopts FIRRMA’s exemption to certain investments by non-U.S. persons in U.S.-managed investment funds.


To assess and address risks to the national security of the United States in the interim period before final regulations on FIRRMA are published, the pilot program encompasses investments by non-U.S. persons in "Pilot Program U.S. Businesses" that "design, test, manufacture, fabricate or develop" a "critical technology"3 that is: (a) utilized in connection with the U.S. business’s activity in on or more Pilot Program Industries, or (b) designed by the U.S. business specifically for use in one or more of the Pilot Program Industries. Twenty-seven Pilot Program Industries have been identified (see below) for which CFIUS believes strategically motivated foreign investment could pose a threat to U.S. technological superiority and national security.

Pilot Program Covered Transactions

The pilot program expands the scope of transactions subject to review by CFIUS to include non-controlling investments in a U.S. business that would afford a foreign investor: 

  • access to material nonpublic technical information held by the U.S. business;
  • membership or observer rights on the board of directors or similar governing body of the U.S. business or the right to appoint a member of its board of directors; or
  • any involvement, beyond the mere voting of shares, in substantive decision-making regarding the U.S. business’s use, development, acquisition or release of critical technology.

Parties to a transaction within the scope of the pilot program, including both controlling investments and the non-controlling investments described above, must file a mandatory declaration (which should not exceed five pages in length) with CFIUS. A mandatory declaration is due 45 days before the transaction’s expected closing date. For covered transactions expected to close between November 10 and December 25, 2018, a mandatory declaration is due on November 10, or promptly thereafter. Parties failing to file a mandatory declaration on time are subject to a penalty of up to the value of the transaction.4  

FIRRMA’s exemption for certain foreign investments in U.S.-managed investment funds extends to the pilot program. A mandatory declaration, therefore, is not required when a non-U.S. person acquires an interest in an investment fund with a Pilot Program U.S. Business in its portfolio so long as the fund is managed exclusively by a U.S. person and:

(i) neither the foreign investor nor an advisory board or investment committee on which the foreign investor participates is able to approve, disapprove or otherwise control the fund’s investment decisions or decisions of the fund manager relating to the fund’s portfolio companies;

(ii) the foreign investor may not unilaterally dismiss, prevent the dismissal of, select or determine the compensation of the fund manager; and

(iii) participation on an advisory board or investment committee does not afford the foreign investor access to material nonpublic technical information of the Pilot Program U.S. Business.

Pilot Program Industries

  • Aircraft Manufacturing (NAICS Code: 336411)
  • Aircraft Engine and Engine Parts Manufacturing (NAICS Code: 336412)
  • Alumina Refining and Primary Aluminum Production (NAICS Code: 331313)
  • Ball and Roller Bearing Manufacturing (NAICS Code: 332991)
  • Computer Storage Device Manufacturing (NAICS Code: 334112)
  • Electronic Computer Manufacturing (NAICS Code: 334111)
  • Guided Missile and Space Vehicle Manufacturing (NAICS Code: 336414)
  • Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing (NAICS Code: 336415)
  • Military Armored Vehicle, Tank, and Tank Component Manufacturing (NAICS Code: 336992)
  • Nuclear Electric Power Generation (NAICS Code: 221113)
  • Optical Instrument and Lens Manufacturing (NAICS Code: 333314)
  • Other Basic Inorganic Chemical Manufacturing (NAICS Code: 325180)
  • Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing (NAICS Code: 336419)
  • Petrochemical Manufacturing (NAICS Code: 325110)
  • Powder Metallurgy Part Manufacturing (NAICS Code: 332117)
  • Power, Distribution, and Specialty Transformer Manufacturing (NAICS Code: 335311)
  • Primary Battery Manufacturing (NAICS Code: 335912)
  • Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing (NAICS Code: 334220)
  • Research and Development in Nanotechnology (NAICS Code: 541713)
  • Research and Development in Biotechnology (except Nanobiotechnology) (NAICS Code: 541714)
  • Secondary Smelting and Alloying of Aluminum (NAICS Code: 331314)
  • Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing (NAICS Code: 334511)
  • Semiconductor and Related Device Manufacturing (NAICS Code: 334413)
  • Semiconductor Machinery Manufacturing (NAICS Code: 333242)
  • Storage Battery Manufacturing (NAICS Code: 335991)
  • Telephone Apparatus Manufacturing (NAICS Code: 334210)
  • Turbine and Turbine Generator Set Units Manufacturing (NAICS Code: 333611)


1 See our bulletin "Changes Coming for U.S. Foreign Investment Review Process" for more on FIRRMA.

2 The acquisition by a non-U.S. person of a controlling interest, in accordance with existing CFIUS regulations, in a "Pilot Program U.S. Business" is also covered transaction under the pilot program.

3 "Critical technologies" are "(i) military technologies subject to the International Traffic in Arms Regulations; (ii) civilian/military dual-use technologies subject to Export Administration Regulations export controls (a) under multilateral regimes relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation or missile technology or (b) for reasons relating to regional stability or surreptitious listening; (iii) nuclear technologies covered by rules relating to foreign atomic energy activities and export and import of nuclear equipment and materials; (iv) select agents and toxins; and (v) emerging and foundational technologies controlled pursuant to FIRRMA’s sister legislation, the Export Control Reform Act of 2018."

4 Parties required to file a mandatory declaration under the pilot program also have the option of submitting a standard filing with CFIUS under existing regulations.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2021 by Torys LLP.
All rights reserved.


Get in Touch