On May 21, 2020, the U.S. Department of the Treasury published a proposed rule that would revise the mandatory declaration requirement for foreign investments involving a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies.
Currently, a key element of the mandatory declaration requirement is whether the U.S. business engaged in the specified activities involving critical technologies utilizes that critical technology, or designs the technology specifically for use in, one or more industries identified by North American Industry Classification (NAICS) codes.
Under the proposed rule, this industry test is removed. Instead, a declaration would be mandatory if a “U.S. regulatory authorization” would be required to export or reexport the critical technology to the foreign investor and certain foreign persons in its ownership chain.
The proposed rule defines “U.S. regulatory authorization” to include licenses or authorizations under the four main U.S. export control regimes:
- A license or other approval (e.g., approved technical assistance agreements or manufacturing license agreements) issued by the Department of State under the International Traffic in Arms Regulations (ITAR);
- A license from the Department of Commerce under the Export Administration Regulations (EAR);
- A specific or general authorization required from the Department of Energy pursuant to 10 CFR Part 810, except the general authorization at 10 CFR 810.6(a) for the export of certain controlled nuclear technology to specified countries or entities; or
- A specific license from the Nuclear Regulatory Commission pursuant to 10 CFR Part 110.
Importantly, the proposed rule does not take into consideration any license exemptions available under the ITAR and only excludes from the definition of U.S. regulatory authorization the following license exceptions in the EAR: