31 CFR § 800.401 - Mandatory declarations.
(a) Except as provided in paragraph (d), (e), or (f) of this section, the parties to a transaction described in paragraph (b) or (c) of this section shall submit to the Committee a declaration with information regarding the transaction in accordance with § 800.403.
(b)
(1) Subject to paragraph (b)(2) of this section, a covered transaction that results in the acquisition of a substantial interest in a TID U.S. business by a foreign person in which the national or subnational governments of a single foreign state (other than an excepted foreign state) have a substantial interest.
(2) For purposes of paragraph (b)(1) of this section, the assessment of what constitutes a critical technology, as relevant to § 800.248(a), shall be as of the first date on which one of the conditions set forth in § 800.104(b)(1) through (4) is met with respect to a covered transaction.
(c)
(1) Subject to paragraph (c)(3) of this section, a covered transaction involving a TID U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies for which a U.S. regulatory authorization would be required for the export, reexport, transfer (in-country), or retransfer of such critical technology to a person that:
(i) Could directly control such TID U.S. business as a result of the covered transaction;
(ii) Is directly acquiring an interest that is a covered investment in such TID U.S. business;
(iii) Has a direct investment in such TID U.S. business, the rights of such person with respect to such TID U.S. business are changing, and such change in rights could result in a covered control transaction or a covered investment;
(iv) Is a party to any transaction, transfer, agreement, or arrangement described in § 800.213(d) with respect to such TID U.S. business; or
(v) Individually holds, or as described in § 800.256(d) is part of a group of foreign persons that, in the aggregate, holds, a voting interest for purposes of critical technology mandatory declarations in a person described in paragraphs (c)(1)(i) through (iv) of this section.
(2) For purposes of paragraph (c)(1) of this section, whether a U.S. regulatory authorization would be required for the export, reexport, transfer (in-country), or retransfer of a critical technology to a person described in paragraphs (c)(1)(i) through (v) of this section shall be determined:
(i) Without giving effect to any license exemption available under the ITAR or license exception available under the EAR except as described paragraph in (e)(6) of this section;
(ii) Based on such person's principal place of business (for entities) as defined in § 800.239, or such person's nationality or nationalities (for individuals) under the relevant U.S. regulatory authorization, as applicable; and
(iii) As if such person is an “end user” under the relevant U.S. regulatory authorization, as applicable.
(3) For purposes of paragraph (c)(1) of this section, the assessment of what constitutes a critical technology shall be as of the first date on which one of the conditions set forth in § 800.104(b)(1) through (4) is met with respect to a covered transaction. (See the example in paragraph (j)(6) of this section.)
(d) The submission of a declaration shall not be required under paragraph (b) of this section with respect to:
(1) A covered transaction by an investment fund if:
(i) The fund is managed exclusively by a general partner, a managing member, or an equivalent;
(ii) The general partner, managing member, or equivalent is not a foreign person; and
(iii) The investment fund satisfies, with respect to any foreign person with membership as a limited partner on an advisory board or a committee of the fund, the criteria specified in § 800.307(a)(3) and (4) (See the examples in paragraphs (j)(2) and (3) of this section); or
(2) A covered control transaction involving an air carrier, as defined in 49 U.S.C. 40102(a)(2), that holds a certificate issued under 49 U.S.C. 41102.
(e) The submission of a declaration shall not be required under paragraph (c) of this section with respect to:
(1) A covered control transaction by an excepted investor;
(2) A covered transaction in which the foreign person's indirect investment in the TID U.S. business is held solely and directly via an entity that as of the completion date is:
(i) Subject to a security control agreement, special security agreement, voting trust agreement, or proxy agreement approved by a cognizant security agency to offset foreign ownership, control, or influence pursuant to the National Industrial Security Program regulations (32 CFR part 2004); and
(ii) Operating under a valid facility security clearance pursuant to the National Industrial Security Program regulations (32 CFR part 2004);
(3) A covered transaction by an investment fund if:
(i) The fund is managed exclusively by a general partner, a managing member, or an equivalent;
(ii) The general partner, managing member, or equivalent is:
(A) Ultimately controlled exclusively by U.S. nationals; or
(B) Not a foreign person; and
(iii) The investment fund satisfies, with respect to any foreign person with membership as a limited partner on an advisory board or a committee of the fund, the criteria specified in § 800.307(a)(3) and (4) (See the examples in paragraphs (j)(2) and (3) of this section);
(4) An investment that is a covered investment solely due to the application of § 800.219(d);
(5) A covered control transaction involving an air carrier, as defined in 49 U.S.C. 40102(a)(2), that holds a certificate issued under 49 U.S.C. 41102; or
(6) A covered transaction described in paragraph (c)(1) of this section involving critical technology for which the export, reexport, transfer (in-country), or retransfer to any of the persons described in paragraphs (c)(1)(i) through (v) of this section would require one or more U.S. regulatory authorizations and each such critical technology and person, considered as if in the context of an export, reexport, or transfer, is eligible for at least one of the following license exceptions under the EAR, as applicable:
(i) 15 CFR 740.13;
(ii) 15 CFR 740.17(b); or
(iii) 15 CFR 740.20(c)(1).
To be “eligible” for a license exception refers to any requirements imposed by the EAR that must be satisfied prior to export even if no export is to occur.
(f) Notwithstanding paragraph (a) of this section, parties to a covered transaction may elect to submit a written notice under subpart E of this part regarding the transaction instead of a declaration.
(g) Parties shall submit to the Committee the declaration required under paragraph (a) of this section, or a written notice under paragraph (f) of this section, no later than:
(1) February 13, 2020, or promptly thereafter, if the completion date of the transaction is between February 13, 2020 and March 14, 2020; or
(2) Thirty days before the completion date of the transaction, if the completion date of the transaction is after March 14, 2020.
(h) Notwithstanding paragraph (g) of this section, the parties to a covered transaction may complete a transaction subject to a mandatory declaration or notice under this section at any time after having been informed in writing by the Committee that the Committee has concluded all action under section 721 or that the Committee is not able to complete action under § 800.407(a)(2).
(i) In the event that the Committee rejects or permits a withdrawal of a declaration or notice required under this section, the parties shall not complete the transaction earlier than 30 days after the date of the resubmission, except with the written approval of the Staff Chairperson.
(j) Examples:
(1) Example 1. Corporation A, a foreign person that is not an excepted investor and in which no foreign government has a substantial interest, proposes to acquire a four percent, non-controlling equity interest in Corporation B, an unaffiliated TID U.S. business that manufactures a critical technology. Under the terms of the investment, a designee of Corporation A will have the right to observe the meetings of the board of directors of Corporation B. Corporation B manufactures the critical technology for commercial off-the-shelf use by businesses in various industries, including some identified in appendix B to this part. Assuming no other relevant facts, the proposed transaction is a covered investment, but is not subject to a mandatory declaration or notice under § 800.401 because Corporation B does not produce, design, test, manufacture, fabricate, or develop the critical technology specifically for use in one or more industries identified in appendix B to this part.
(2) Example 2. Investment Fund A, a foreign person that is not an excepted investor, acquires a 10 percent equity interest in Corporation A, an unaffiliated TID U.S. business, and the right to appoint one member of Corporation A's board of directors. Corporation A is manufacturing critical technologies utilized in Corporation A's activity in one or more industries identified in appendix B to this part. Investment Fund A satisfies the requirements under paragraph (e)(3) of this section. Investment Fund A's investment in Corporation A is a covered investment, but the transaction is not subject to the mandatory declaration requirement.
(3) Example 3. Same facts as the example in paragraph (j)(2) of this section, except that in connection with Investment Fund A's transaction, Limited Partner X, a limited partner of Investment Fund A and a foreign national that is not an excepted investor, receives access to the material non-public technical information of Corporation A. Limited Partner X's indirect investment in Corporation A is a covered investment. While Investment Fund A's direct investment is not subject to a mandatory declaration, Limited Partner X's indirect investment in Corporation A is subject to a mandatory declaration.
(4) Example 4. Corporation A, a foreign entity with its principal place of business in Country F, acquires 100 percent of the interests of Corporation Y, a U.S. business that manufactures a critical technology controlled under the EAR. A foreign national of Country G owns 25 percent of the voting shares of Corporation A. Under the EAR, a license is required to export the critical technology to Country G but not Country F. Assuming no other relevant facts, the acquisition of Corporation Y is subject to a mandatory declaration.
(5) Example 5. Corporation B, a foreign entity with its principal place of business in Country G, makes a covered investment in Corporation Z, a U.S. business that designs a critical technology controlled under the EAR. Under the EAR, a license is required to export the critical technology to Country G. The license exception at 15 CFR 740.4 authorizes Corporation Z to export the critical technology to Country G without a license. Assuming no other relevant facts, the covered investment is subject to a mandatory declaration.
(6) Example 6. Corporation A, a foreign person, and Corporation B, a U.S. business, execute a binding written agreement pursuant to which Corporation A will acquire a 10 percent equity interest in Corporation B and will be afforded the right to appoint two members of Corporation B's board of directors. As of the date of the agreement, none of the items that Corporation B manufactures constitutes a critical technology. After the agreement is executed, but prior to the completion of the transaction, a product manufactured by Corporation B is included as a defense article on the USML. Assuming no other relevant facts, under paragraph (c)(3) of this section, the transaction is not subject to a requirement to submit a declaration to the Committee. However for purposes of § 800.211, the transaction may be a covered investment.