CFIUS Risks, Export Controls and Economic Sanctions
December 10, 2020
By Sheena Kalia
The Committee on Foreign Investment in the United States and further attention on trade compliance have been high-profile topics this year. During a recent webcast titled “CFIUS Risks, Export Controls & Economic Sanctions,” Michael Rosenberg, Director, EisnerAmper Digital and co-leader of the firm’s CFIUS Advisory Services, sat down (virtually) with Doreen Edelman, Partner at law firm Lowenstein Sandler and Christian Contardo, Associate at Lowenstein Sandler, to discuss the subject. The conversation focused on current trends associated with trade compliance and the need for buyers, sellers, and investors to understand that noncompliance could result in penalties in amounts of thousands to millions of dollars. Here were a few areas addressed:
- General Compliance Violation: When clients set up a business, they need to be mindful of the compliance rules regarding international participation. If not, they can face penalties.
- A TID (Technology, Infrastructure, and Data) Business’ Involvement with Critical Technologies: A TID business refers to a business that produces, designs, tests or develops one or more critical technologies. A critical technology refers to articles or services listed on the U.S. Munitions List (USML) and could be subject to mandatory CFIUS declarations. Some of these articles or services refer to export-controlled items under the Export Administration Regulations (EAR), chemical and biological weapons proliferation, certain agents and toxins covered by the Select Agents Regulations, and some emerging technologies.
- Voluntary Filing: Parties have the ability to obtain a “safe harbor” ruling from CFIUS by doing a voluntary filing. This enables CFIUS to review the transaction which guarantees that CFIUS will not try to undo the transaction at a later time if no national security concerns are detected.
- Sanctions: There is a list of countries that are currently embargoed by the Office of Foreign Assets Control (OFAC) who enforce economic and trade sanctions. If a company has foreign subsidiaries, or foreign companies as portfolio clients and if they touch U.S. technology or the U.S. banking system, they may be subject to OFAC sanctions.
To listen to the webcast, please click here.