Final Rule Is Submission of a Declaration for Covered Corporation

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■ 3. In appendix C to part 4022, Rate Set Appendix C to Part 4022—Lump Sum 324 is added at the end of the table to Interest Rates for Private-Sector read as follows: Payments * * * * *

For plans with a Immediate Deferred annuities Rate set valuation date annuity rate (percent) (percent) On or after Before i1 i2 i3 n1 n2

******* 324 10–1–20 11–1–20 0.00 4.00 4.00 4.00 7 8

PART 4044—ALLOCATION OF Authority: 29 U.S.C. 1301(a), 1302(b)(3), Appendix B to Part 4044—Interest ASSETS IN SINGLE-EMPLOYER 1341, 1344, 1362. Rates Used to Value Benefits PLANS ■ 5. In appendix B to part 4044, an entry * * * * * ■ 4. The authority citation for part 4044 for ‘‘October–December 2020’’ is added continues to read as follows: at the end of the table to read as follows:

The values of it are: For valuation dates occurring in the month— it for t = it for t = it for t =

******* October–December 2020 ...... 0.0162 1–20 0.0140 >20 N/A N/A

Issued in Washington, DC. related provision, and makes one section 721 of the Defense Production Hilary Duke, technical revision. Act of 1950 (DPA) to authorize CFIUS Assistant General Counsel for Regulatory DATES: to mandate through regulations the Affairs, Pension Benefit Guaranty Effective date: The final rule is submission of a declaration for covered Corporation. effective on October 15, 2020. transactions involving certain U.S. [FR Doc. 2020–20179 Filed 9–14–20; 8:45 am] Applicability date: See § 800.104. businesses that produce, design, test, BILLING CODE 7709–02–P FOR FURTHER INFORMATION CONTACT: For manufacture, fabricate, or develop one questions about this rule, contact: or more critical technologies. Meena R. Sharma, Deputy Director of The proposed rule made DEPARTMENT OF THE TREASURY Investment Security Policy and modifications to the scope of the International Relations; or David mandatory declaration provision in Part Office of Investment Security Shogren, Senior Policy Advisor, at U.S. 800—primarily reorienting it from one Department of the Treasury, 1500 based on a nexus to certain industries to 31 CFR Part 800 Pennsylvania Avenue NW, Washington, one based on whether certain U.S. DC 20220; telephone: (202) 622–3425; government authorizations would be RIN 1505–AC68 email: [email protected]. required to export, reexport, transfer (in- SUPPLEMENTARY INFORMATION: country), or retransfer the critical Provisions Pertaining to Certain technology or technologies produced, Investments in the United States by I. Background designed, tested, manufactured, Foreign Persons On May 21, 2020, the Department of fabricated, or developed by the U.S. AGENCY: Office of Investment Security, the Treasury (Treasury Department) business to certain transaction parties Department of the Treasury. published a notice of proposed and foreign persons in the ownership ACTION: Final rule. rulemaking amending certain provisions chain. To accomplish this, the proposed in 31 CFR part 800 (Part 800). 85 FR rule amended § 800.104 (applicability SUMMARY: This final rule modifies 30893. (The Office of the Federal rule) and § 800.401 (mandatory certain provisions in the regulations of Register made the proposed rule declarations); introduced two new the Committee on Foreign Investment in available for public inspection on May definitions: ‘‘U.S. regulatory the United States that implement 20, 2020.) Public comments on the authorization’’ and ‘‘voting interest for section 721 of the Defense Production proposed rule were due by June 22, purposes of critical technology Act of 1950, as amended by the Foreign 2020, and are discussed below. mandatory declarations;’’ and removed Investment Risk Review Modernization The proposed rule made revisions to the North American Industry Act of 2018. Specifically, the rule the requirement to submit declarations Classification System (NAICS) codes at modifies the mandatory declaration to the Committee on Foreign Investment appendix B to Part 800. The proposed provision for certain foreign investment in the United States (CFIUS or the rule also made amendments to the transactions involving a U.S. business Committee) for certain critical definition of ‘‘substantial interest’’ at that produces, designs, tests, technology transactions. This § 800.244 of Part 800. manufactures, fabricates, or develops declaration requirement in Part 800 Further explanation of FIRRMA and one or more critical technologies. It also implements section 1706 of the Foreign the proposed rule can be found at 85 FR makes amendments to the definition of Investment Risk Review Modernization 30893; changes to the proposed rule are the term ‘‘substantial interest’’ and a Act of 2018 (FIRRMA), which amends explained in further detail below.

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II. Overview of Comments on the transactions for which specified actions simply has a general partner, managing Proposed Rule occurred prior to that date. member, or equivalent. The Treasury Department expects that when B. Subpart B—Definitions During the public comment period, analyzing the specific relationship the Treasury Department received Section 800.213—Covered Transaction between a general partner and an entity, written submissions on the proposed it will generally be clear to the parties rule. All comments received by the end The rule makes a technical revision to example 2 in paragraph (e). whether the general partner primarily of the comment period are available on directs, controls, or coordinates the the public rulemaking docket at https:// Section 800.244—Substantial Interest activities of the entity. In a situation www.regulations.gov. Section 800.244 in Part 800 sets forth where a third party controls and The Treasury Department considered how to determine the percentage coordinates the activities of an entity on each comment submitted on the interest held indirectly by one entity in behalf of the general partner, the general proposed rule and made certain another for purposes of whether a partner does not cease to primarily revisions in this rule in response to foreign person obtains a ‘‘substantial direct, control, or coordinate the comments. The Treasury Department interest’’ in a U.S. business where a activities of the entity simply by recognizes the vital importance of foreign government in turn holds a contracting a third party to perform foreign investment to the U.S. economy, ‘‘substantial interest’’ in the foreign such services. including for businesses that are person. This definition forms the basis involved in critical technologies. The Section 800.254—U.S. Regulatory for the declaration requirement for Authorization Treasury Department drafted the certain covered transactions where a Consistent with the proposed rule, the proposed rule, and made revisions in foreign government has a substantial new defined term at § 800.254 specifies issuing this rule, taking into interest in a foreign person that will the types of regulatory licenses or consideration various factors including acquire a substantial interest in certain authorizations that are required under national security considerations, the types of U.S. businesses. The proposed the four main U.S. export control effect on foreign investment, and the rule clarified that § 800.244(b) applies regimes, which if applicable in the effect on small business concerns. only where the general partner, context of a particular transaction Overall, the commenters were managing member, or equivalent described under the rule, trigger a generally supportive of the proposed primarily directs, controls, or mandatory declaration. rule. Some of the commenters suggested coordinates the activities of the entity. revisions or clarification, and the The proposed rule also removed three Section 800.256—Voting Interest for section-by-section analysis below instances of the word ‘‘voting’’ from Purposes of Critical Technology includes responses to these comments. § 800.244(c) in order to clarify that the Mandatory Declarations Further edits were made to the rule for calculation rule applies to the The proposed rule introduced a new consistency and clarity, and one calculation of ‘‘voting interests’’ as defined term at § 800.256 that specified technical revision was made. described in paragraph (a) and which persons in the ownership chain III. Summary of Comments and ‘‘interests’’ as described in paragraph (b) of the persons described in Changes From the Proposed Rule of that section. § 800.401(c)(1)(i)–(iv) should be One commenter suggested that the analyzed for export licenses and A. Subpart A—General Provisions current definition at § 800.244(b) be authorization purposes in determining Section 800.104—Applicability Rule retained and not be revised to include whether a particular transaction could the language, ‘‘primarily directed, trigger a mandatory declaration. While no comments were made controlled, or coordinated by or on One commenter suggested raising the specifically on the applicability rule, for behalf of a general partner, managing applicable voting interest threshold the avoidance of doubt, the operation of member, or equivalent,’’ from the from 25 percent to 50 percent. No the applicability rule will be the same proposed rule. The commenter change was made in response to this as detailed in the proposed rule. That is, explained that there are situations comment. A threshold of 50 percent the interim rule at 83 FR 51322 (Oct. 11, where it is not clear whether a fund could exclude interest holders that 2018) implementing a pilot program would be deemed to be ‘‘primarily could wield significant influence over requiring declarations for certain critical directed’’ by the general partner. The the U.S. business, including with technology transactions will continue to commenter also expressed concern respect to its critical technologies. The apply to transactions for which about the inclusion of the same phrase Treasury Department concluded that a specified actions occurred on or after in § 800.256(b). Another commenter threshold of 25 percent is appropriate November 10, 2018, and prior to requested clarification of the application and sets a clear criterion with respect to February 13, 2020, as specified in the of § 800.244(b) where a third party the persons that need to be analyzed regulations at 31 CFR 801.103. The controls and coordinates the activities of under this provision. critical technology mandatory an entity on behalf of the general The rule makes clarifying edits, declaration provision based on NAICS partner. including omitting the extraneous codes and published as part of the final No changes were made in response to language ‘‘foreign’’ before ‘‘person’’ in rule for Part 800 at 85 FR 3112 (Jan. 17, these comments. The substantial several instances, to maintain the 2020) will apply to transactions for interest analysis as revised in the intended meaning of the text. which specified actions occurred on or proposed rule at § 800.244(b) is after February 13, 2020, and prior to appropriately focused on the interest C. Subpart D—Declarations October 15, 2020, as specified at held in the general partner, managing The proposed rule revised the § 800.104(d) of this rule. Finally, the member, or equivalent when such mandatory declaration provision for modifications to the critical technology general partner, managing member, or transactions involving U.S. businesses mandatory declaration provision equivalent primarily directs, controls, or with critical technologies so that it discussed in this rule apply starting on coordinates the activities of the entity applies only to the extent that a U.S. October 15, 2020, except for certain rather than in all cases where an entity regulatory authorization would be

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required to export, reexport, transfer (in- a declaration is mandatory under eligible for the EAR license exception; country), or retransfer the U.S. § 800.401(c), what constitutes a ‘‘critical therefore, the CFIUS exception to the business’s critical technologies to the technology’’ shall be assessed as of the mandatory filing requirement would not foreign persons involved in the earliest date of any of the conditions set apply unless a classification request is transaction or certain foreign persons in forth in § 800.104(b)(1)–(4). An example submitted in accordance with the the ownership chain. of the application of § 800.401(c)(3) was procedures set out in 15 CFR Several commenters noted the added at § 800.401(j)(6). The rule 740.17(b)(2) and (b)(3), including that 30 language referencing a ‘‘party to the similarly modifies paragraph (b) of days have elapsed since the submission transaction’’ in the proposed rule at § 800.401, creating a new subparagraph of the classification request to BIS. By § 800.401(c)(1) and questioned whether (b)(1) and adding new subparagraph contrast, the reporting requirements at the intent was to include persons (b)(2) providing that, for purposes of 15 CFR 740.17(e) are not a condition of acquiring an indirect ownership interest whether a substantial interest in the U.S. business. In order to clarify transaction involves a TID U.S. business eligibility—that is, parties availing the operation of this provision, the rule under § 800.248(a), the determination of themselves of the mandatory declaration revises § 800.401(c)(1) to refer to ‘‘a what constitutes a critical technology exception in the CFIUS rule based on person’’ that meets the criteria of shall be assessed as of the earliest date eligibility for EAR license exception 800.401(c)(1)(i)–(v), which includes of any of the conditions set forth in ENC do not need to submit semiannual direct and indirect ownership interests. § 800.104(b)(1)–(4). reporting to BIS for purposes of this The rule also omits the extraneous One commenter suggested clarifying aspect of the CFIUS regulations. language ‘‘foreign’’ before ‘‘person’’ in that the persons referred to in (Though if there is a qualifying export several instances in paragraph (c) to § 800.401(c)(1)(i)–(v) must be the same under the EAR, parties would need to maintain the intended meaning of the persons that are eligible for the Export satisfy all applicable conditions of the text. The Treasury Department notes Administration Regulations (EAR) license exception in order to comply that the term ‘‘foreign person’’ is license exceptions described in with the EAR.) The same is true with defined at § 800.224 and the main U.S. § 800.401(e)(6). Clarifying revisions respect to the recordkeeping export control regimes also define have been made to the rule to address requirements under the EAR license foreign person within their respective this comment. exception for technology and software- Several commenters requested regulations. For avoidance of doubt, for unrestricted (TSU) at 15 CFR 740.13(h) clarification on what it means to be purposes of evaluating whether certain and the requirement to furnish certain U.S. government authorizations would ‘‘eligible’’ for the EAR license commodity classifications to third be required to export, reexport, transfer exceptions specified in § 800.401(e)(6). parties under the EAR license exception (in-country), or retransfer a critical In particular, commenters questioned technology to a relevant ‘‘person’’ in an whether parties were required to satisfy for strategic trade authorization (STA) at ownership chain, parties should the procedural requirements set forth in 740.20(d)—satisfying these aspects of consider whether such (hypothetical) 15 CFR 740.17(b) in order to be the license exceptions are not a export activity would require a U.S. considered ‘‘eligible’’ for the EAR condition of eligibility for purposes of regulatory authorization under the license exception for encryption the CFIUS regulations. The Treasury relevant U.S. export control regime. commodities, software, and technology Department has determined that this One commenter discussed the (ENC) and thus exempt from the clarity with respect to eligibility for a reference to a ‘‘group of foreign mandatory declaration provision under license exception under the CFIUS persons’’ in § 800.401(c)(1)(v) and § 800.401(e)(6). The rule includes regulations will help parties evaluate whether it was limited to the revisions and an explanatory note whether to submit a mandatory description in § 800.256(d). The indicating that for purposes of the declaration to CFIUS or comply with the Treasury Department notes that the CFIUS exception to the mandatory eligibility requirements under the proposed rule included a cross- declaration provision at paragraph relevant EAR license exception and reference to § 800.401(c)(1)(v) within (e)(6), ‘‘eligibility’’ for an EAR license hence be excepted from the CFIUS § 800.256(d). Nevertheless, in the exception refers to having satisfied any declaration requirement. interest of clarity, the rule adds a cross- requirements imposed by the EAR that reference to § 800.256(d) in must be satisfied prior to export (even Additionally, the Treasury § 800.401(c)(1)(v) as well. if no export is to occur). For example, Department notes that certain end users, One commenter suggested that the under EAR license exception ENC at 15 such as entities listed in Supplement mandatory declaration requirement be CFR 740.17(b)(1), a person may self- No. 4 to Part 744 of the EAR, are subject assessed as of the time the parties reach classify certain encryption items, and to license requirements, limitations on a binding agreement, rather than upon that self-classification is sufficient for an availability of license exceptions, and the closing of the transaction, given the item to be eligible for that license license application review policies that potential for immediately effective exception. As a result, if the U.S. are in addition to those set forth changes to the export control business’s only critical technologies are elsewhere in the EAR. regulations. The Treasury Department items self-classified pursuant to 15 CFR This rule also makes clarifying edits expects that in most circumstances, 740.17(b)(1), a CFIUS declaration under to the examples in paragraph (j). parties can reasonably anticipate if a paragraph (c) of § 800.401 would not be transaction will meet the criteria of required (assuming other requirements Finally, for the avoidance of doubt, in § 800.401(c) based on whether there is of the license exception are met with accordance with FIRRMA, the one or more critical technologies upon respect to the person to which the mandatory declaration provision at closing. Nevertheless, in response to the hypothetical export would be made). § 800.401(c) applies only to U.S. critical comment and acknowledging Note that under license exception ENC technology businesses under circumstances that may be reasonably at 15 CFR 740.17(b)(2) and (b)(3), a party § 800.248(a), not to businesses that are outside the control of parties, the rule must submit a classification request to TID U.S. businesses solely under includes a new subparagraph (3) the Commerce Department’s Bureau of § 800.248(b) or (c). providing that for purposes of whether Industry and Security in order to be

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IV. Rulemaking Requirements rule would affect certain U.S. businesses information to estimate the number of that have particular activities involving transactions involving small U.S. Executive Order 12866 critical technologies and that receive businesses that might be subject to This rule is not subject to the general foreign investment (direct or indirect) of CFIUS’s jurisdiction and affected by the requirements of Executive Order 12866, the type described in the rule. These rule. which covers review of regulations by U.S. businesses could be found across a Of the above mentioned 832 U.S. the Office of Information and Regulatory range of industries. Accordingly, businesses receiving foreign investment Affairs (OIRA) in the Office of because SBA size standards are in 2018, 576 were involved in Management and Budget (OMB), designated by industry, and not all U.S. transactions valued at less than because it relates to a foreign affairs businesses that constitute small entities $50,000,000. Although this figure is function of the United States, pursuant within a particular industry will be under inclusive because it does not to section 3(d)(2) of that order. In affected, it is difficult to apply the SBA capture all transactions that could be addition, this rule is not subject to size standards to determine how many subject to a filing requirement pursuant review under section 6(b) of Executive small entities will be affected by this to the rule, it also is over inclusive Order 12866 pursuant to section 7(c) of rule. Additionally, some of these U.S. because it is not limited to any the April 11, 2018, Memorandum of businesses are already subject to a particular type of U.S. business. The Agreement between the Treasury declaration requirement when they Treasury Department believes the figure Department and OMB, which states that receive foreign investment (direct or of 576 is the best estimate based on the CFIUS regulations are not subject to indirect) under the existing CFIUS available data of the number of small OMB’s standard centralized review regulations. U.S. businesses that may be impacted by process under Executive Order 12866. The Treasury Department considered this rule, although the Treasury Paperwork Reduction Act the data on new foreign direct Department recognizes the limitations of investment in the United States that is this estimate. The collection of information collected annually by the Bureau of Even if a substantial number of small contained in this rule has previously Economic Analysis (BEA) within the entities were affected, the economic been submitted to OMB for review in Department of Commerce through its impact of the rule on small U.S. accordance with the Paperwork Survey of New Foreign Direct businesses will not be significant. First, Reduction Act of 1995 (44 U.S.C. Investment in the United States (Form a portion of the U.S. businesses affected 3507(d)), and approved under OMB BE–13). While these data are self- by the rule are already subject to the Control Number 1505–0121. An agency reported, and include only direct existing declaration requirement under may not conduct or sponsor and a investments in U.S. businesses in which the existing CFIUS regulations. Second, person is not required to respond to a the foreign person acquires at least 10 the rule replaces the analysis and nexus collection of information unless it percent of the voting shares (and to NAICS codes with an analysis of displays a valid OMB Control Number. consequently, do not capture export control authorization Regulatory Flexibility Act investments below 10 percent, which requirements. U.S. businesses with may nevertheless be covered critical technologies are already aware, The Regulatory Flexibility Act (5 transactions), they nonetheless provide or should be aware, of the application U.S.C. 601 et seq., RFA) generally relevant information on a category of of export controls to their items and requires an agency to prepare a U.S. businesses that receive foreign regularly analyze export authorization regulatory flexibility analysis unless the investment, some of which may be requirements particularly when agency certifies that the rule will not, covered by the rule. considering a foreign investment. The once implemented, have a significant According to the BEA, in 2018, the process of completing the declaration economic impact on a substantial most current year for which data is form under the rule is no different from number of small entities. The RFA available, foreign persons obtained at the existing CFIUS regulations. applies whenever an agency is required least a 10 percent voting share in 832 Accordingly, the revisions in this rule to publish a general notice of proposed U.S. businesses. See U.S. Bureau of are not expected to change the general rulemaking under section 553(b) of the Economic Analysis, ‘‘Number of burden hour estimate for analyzing a Administrative Procedure Act (5 U.S.C. Investments Initiated in 2018, transaction and preparing a declaration. 553, APA), or any other law. As set forth Distribution of Planned Total For the reasons stated above, the in the preamble to the proposed rule at Expenditures, Size by Type of Secretary of the Treasury certifies that Section III, because rules issued Investment,’’ available at https:// the rule will not have a significant pursuant to the DPA, such as this rule, apps.bea.gov/international/xls/Table15- economic impact on a substantial are not subject to the APA or another 14-15-16-17-18.xls (last visited August number of small entities. law requiring the publication of a 18, 2020). The BEA reports only the The Treasury Department invited general notice of proposed rulemaking, general size of the investment public comment on how the proposed the RFA does not apply. transaction, not the type of the U.S. rule would affect small entities, but Regardless of whether the RFA business involved, nor whether the U.S. received none. applies, available data does not suggest business is considered a ‘‘small that the rule will have a significant business’’ by the SBA. The smallest Congressional Review Act economic impact on a substantial foreign investment transactions that the This rule has been submitted to OIRA, number of small entities. For purposes BEA reports are those with a dollar which has determined that the rule is of the RFA, a ‘‘small entity’’ is (1) a value below $50,000,000. While not all not a ‘‘major’’ rule under the proprietary firm meeting the size U.S. businesses receiving a foreign Congressional Review Act. standards of the Small Business investment of less than $50,000,000 are Administration (SBA); (2) a nonprofit considered ‘‘small’’ for the purposes of List of Subjects in 31 CFR Part 800 organization that is not dominant in its the RFA, many might be, and the Foreign investments in the U.S., field; or (3) a small government number of U.S. businesses receiving Investigations, Investments, Investment jurisdiction with a population of less foreign investments of less than companies, National defense, Reporting than 50,000. 5 U.S.C. 601(3)–(6). This $50,000,000 is the best available and recordkeeping requirements.

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For the reasons set forth in the (b) In the case of an entity whose mandatory declarations held indirectly preamble, the Treasury Department activities are primarily directed, by one person in another, any interest amends part 800 of title 31 of the Code controlled, or coordinated by or on of a parent will be deemed to be a 100 of Federal Regulations as follows: behalf of a general partner, managing percent interest in any entity of which member, or equivalent, the national or it is a parent. PART 800—REGULATIONS subnational governments of a single (d) For purposes of § 800.401(c)(1)(v), PERTAINING TO CERTAIN foreign state will be considered to have foreign persons who are related, have INVESTMENTS IN THE UNITED a substantial interest in such entity only formal or informal arrangements to act STATES BY FOREIGN PERSONS if they hold 49 percent or more of the in concert, or are agencies or interest in the general partner, managing instrumentalities of, or controlled by, ■ 1. The authority citation for part 800 member, or equivalent of the entity. the national or subnational governments continues to read: (c) For purposes of determining the of a single foreign state are considered Authority: 50 U.S.C. 4565; E.O. 11858, as percentage of interest held indirectly by part of a group of foreign persons and amended, 73 FR 4677. one entity in another entity under this their individual holdings are aggregated. section, any interest of a parent will be Subpart A—General Provisions deemed to be a 100 percent interest in Subpart D—Declarations any entity of which it is a parent. ■ 2. Amend § 800.104 by revising ■ 7. Amend § 800.401 by revising paragraph (a) and adding paragraphs (d) * * * * * paragraphs (b), (c), and (e)(6) and adding and (e) to read as follows: § 800.254 [Redesignated as § 800.255] paragraphs (j)(4) through (6) to read as follows: § 800.104 Applicability Rule. ■ 5. Redesignate § 800.254 as § 800.255 (a) Except as provided in paragraphs and add a new § 800.254 to read as § 800.401 Mandatory declarations. (b) through (e) of this section and follows: * * * * * otherwise in this part, the regulations in § 800.254 U.S. regulatory authorization. (b)(1) Subject to paragraph (b)(2) of this part apply from February 13, 2020. The term U.S. regulatory this section, a covered transaction that * * * * * authorization means: results in the acquisition of a substantial (d) Subject to paragraphs (b) and (c) (a) A license or other approval issued interest in a TID U.S. business by a of this section, for any transaction for by the Department of State under the foreign person in which the national or which the following has occurred on or ITAR; subnational governments of a single after February 13, 2020, and before (b) A license from the Department of foreign state (other than an excepted October 15, 2020, the corresponding Commerce under the EAR; foreign state) have a substantial interest. provisions of the regulations in this part (c) A specific or general authorization (2) For purposes of paragraph (b)(1) of that were in effect during that time will from the Department of Energy under this section, the assessment of what apply: the regulations governing assistance to constitutes a critical technology, as (1) The completion date; foreign atomic energy activities at 10 relevant to § 800.248(a), shall be as of (2) The parties to the transaction have CFR part 810 other than the general the first date on which one of the executed a binding written agreement, authorization described in 10 CFR conditions set forth in § 800.104(b)(1) or other binding document, establishing 810.6(a); or through (4) is met with respect to a the material terms of the transaction; (d) A specific license from the covered transaction. (3) A party has made a public offer to Nuclear Regulatory Commission under (c)(1) Subject to paragraph (c)(3) of shareholders to buy shares of a U.S. the regulations governing the export or this section, a covered transaction business; or import of nuclear equipment and involving a TID U.S. business that (4) A shareholder has solicited material at 10 CFR part 110. produces, designs, tests, manufactures, proxies in connection with an election ■ 6. Add § 800.256 to read as follows: fabricates, or develops one or more of the board of directors of a U.S. critical technologies for which a U.S. business or an owner or holder of a § 800.256 Voting interest for purposes of regulatory authorization would be contingent equity interest has requested critical technology mandatory declarations. required for the export, reexport, the conversion of the contingent equity (a) The term voting interest for transfer (in-country), or retransfer of interest. purposes of critical technology such critical technology to a person that: (e) Except as provided in paragraphs mandatory declarations means, for the (i) Could directly control such TID (b) through (d) of this section, the purposes of § 800.401(c)(1)(v), a voting U.S. business as a result of the covered amendments to this part published in interest, direct or indirect, of 25 percent transaction; the Federal Register on September 15, or more, subject to paragraphs (b) and (ii) Is directly acquiring an interest 2020 apply from October 15, 2020. (c) of this section. that is a covered investment in such TID (b) In the case of an entity whose U.S. business; Subpart B—Definitions activities are primarily directed, (iii) Has a direct investment in such controlled, or coordinated by or on TID U.S. business, the rights of such § 800.213 [Amended] behalf of a general partner, managing person with respect to such TID U.S. ■ 3. Amend § 800.213 in paragraph member, or equivalent, a person will be business are changing, and such change (e)(2) in the next to last sentence after considered to have a voting interest for in rights could result in a covered the word ‘‘provides’’ by removing purposes of critical technology control transaction or a covered ‘‘Corporation X’’ and adding in its place mandatory declarations in such entity investment; ‘‘Corporation A’’. only if it holds 25 percent or more of the (iv) Is a party to any transaction, ■ 4. Amend § 800.244 by revising interest in the general partner, managing transfer, agreement, or arrangement paragraphs (b) and (c) to read as follows: member, or equivalent of the entity. described in § 800.213(d) with respect to (c) For purposes of determining the such TID U.S. business; or § 800.244 Substantial interest. percentage of voting interest for (v) Individually holds, or as described * * * * * purposes of critical technology in § 800.256(d) is part of a group of

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foreign persons that, in the aggregate, critical technology controlled under the DEPARTMENT OF THE TREASURY holds, a voting interest for purposes of EAR. A foreign national of Country G critical technology mandatory owns 25 percent of the voting shares of 31 CFR Parts 1010 and 1020 declarations in a person described in Corporation A. Under the EAR, a license RIN 1506–AB28 paragraphs (c)(1)(i) through (iv) of this is required to export the critical section. technology to Country G but not Financial Crimes Enforcement (2) For purposes of paragraph (c)(1) of Country F. Assuming no other relevant Network; Customer Identification this section, whether a U.S. regulatory facts, the acquisition of Corporation Y is Programs, Anti-Money Laundering authorization would be required for the subject to a mandatory declaration. Programs, and Beneficial Ownership export, reexport, transfer (in-country), or Requirements for Banks Lacking a (5) Example 5. Corporation B, a retransfer of a critical technology to a Federal Functional Regulator person described in paragraphs (c)(1)(i) foreign entity with its principal place of through (v) of this section shall be business in Country G, makes a covered AGENCY: Financial Crimes Enforcement determined: investment in Corporation Z, a U.S. Network (‘‘FinCEN’’), Treasury. (i) Without giving effect to any license business that designs a critical ACTION: Final rule. exemption available under the ITAR or technology controlled under the EAR. license exception available under the Under the EAR, a license is required to SUMMARY: FinCEN is issuing a final rule EAR except as described paragraph in export the critical technology to Country implementing sections 352, 326 and 312 of the Uniting and Strengthening (e)(6) of this section; G. The license exception at 15 CFR America by Providing Appropriate (ii) Based on such person’s principal 740.4 authorizes Corporation Z to export Tools Required to Intercept and place of business (for entities) as the critical technology to Country G Obstruct Terrorism Act of 2001 (‘‘USA defined in § 800.239, or such person’s without a license. Assuming no other nationality or nationalities (for PATRIOT Act’’) and removing the anti- relevant facts, the covered investment is money laundering program exemption individuals) under the relevant U.S. subject to a mandatory declaration. regulatory authorization, as applicable; for banks that lack a Federal functional and (6) Example 6. Corporation A, a regulator, including, but not limited to, (iii) As if such person is an ‘‘end foreign person, and Corporation B, a private banks, non-federally insured user’’ under the relevant U.S. regulatory U.S. business, execute a binding written credit unions, and certain trust authorization, as applicable. agreement pursuant to which companies. The Final Rule requires (3) For purposes of paragraph (c)(1) of Corporation A will acquire a 10 percent minimum standards for anti-money this section, the assessment of what equity interest in Corporation B and will laundering programs for banks without constitutes a critical technology shall be be afforded the right to appoint two a Federal functional regulator to ensure as of the first date on which one of the members of Corporation B’s board of that all banks, regardless of whether conditions set forth in § 800.104(b)(1) directors. As of the date of the they are subject to Federal regulation through (4) is met with respect to a agreement, none of the items that and oversight, are required to establish covered transaction. (See the example in Corporation B manufactures constitutes and implement anti-money laundering paragraph (j)(6) of this section.) a critical technology. After the programs, and extends customer identification program requirements and * * * * * agreement is executed, but prior to the beneficial ownership requirements to (e) * * * completion of the transaction, a product (6) A covered transaction described in those banks not already subject to these manufactured by Corporation B is requirements. paragraph (c)(1) of this section involving included as a defense article on the DATES: Effective Date: November 16, critical technology for which the export, USML. Assuming no other relevant 2020. reexport, transfer (in-country), or facts, under paragraph (c)(3) of this retransfer to any of the persons Compliance Date: The compliance section, the transaction is not subject to date for anti-money laundering described in paragraphs (c)(1)(i) through a requirement to submit a declaration to (v) of this section would require one or programs, customer identification the Committee. However for purposes of programs, and beneficial ownership more U.S. regulatory authorizations and § 800.211, the transaction may be a each such critical technology and requirements for banks that lack a covered investment. person, considered as if in the context Federal functional regulator is March of an export, reexport, or transfer, is Appendix B to Part 800 [Removed] 15, 2021. eligible for at least one of the following FOR FURTHER INFORMATION CONTACT: The license exceptions under the EAR, as ■ 8. Remove appendix B to part 800. FinCEN Resource Center at (800) 767– 2825 or email [email protected]. applicable: Dated: August 18, 2020. (i) 15 CFR 740.13; SUPPLEMENTARY INFORMATION: (ii) 15 CFR 740.17(b); or Thomas Feddo, (iii) 15 CFR 740.20(c)(1). Assistant Secretary for Investment Security. I. Background Note 1 to § 800.401(e)(6): To be ‘‘eligible’’ [FR Doc. 2020–18454 Filed 9–11–20; 4:15 pm] A. Statutory Provisions for a license exception refers to any BILLING CODE 4810–25–P FinCEN exercises its regulatory requirements imposed by the EAR that must functions primarily under the Currency be satisfied prior to export even if no export and Financial Transactions Reporting is to occur. Act of 1970, as amended by the Uniting * * * * * and Strengthening America by (j) * * * Providing Appropriate Tools Required (4) Example 4. Corporation A, a to Intercept and Obstruct Terrorism Act foreign entity with its principal place of of 2001 (‘‘USA PATRIOT Act’’) (Public business in Country F, acquires 100 Law 107–56) and other legislation. This percent of the interests of Corporation legislative framework is commonly Y, a U.S. business that manufactures a referred to as the ‘‘Bank Secrecy Act’’

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