The Intersection of Export Control and CFIUS

The Committee on Foreign Investment in the United States (CFIUS) plays a crucial role in reviewing foreign investments for national security concerns. One key aspect of this review process is export classification, which involves determining the export control status of products, technology, and software to identify “critical technologies.” The pivotal role of export classification in the CFIUS review process highlights its significance in ensuring national security and maintaining the integrity of the U.S. defense industrial base.

Key Aspects

1. Identifying Controlled Technologies: Export classification helps CFIUS identify technologies that are subject to control under the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR), among other U.S. export control laws and regulations. Comparing the technical characteristics of products and services against the categorical guidance of the U.S control lists (the United States Munitions List and the Commerce Control List) reveals their export control status and informs the CFIUS process as to whether their transfer to foreign entities poses a national security risk. This is particularly important for technologies that have military applications or are essential to the U.S. defense industrial base.
2. Assessing Licensing Requirements: Export classification also informs the CFIUS process regarding licensing requirements for the export of controlled items, technology, and software. This includes identifying whether a license is required for the transfer of these items to foreign entities, including investors, and whether any license exceptions are available. By understanding the licensing requirements, CFIUS can ensure that foreign investment transactions comply with export control regulations and do not compromise national security.
3. Evaluating Compliance History: Export classification helps the CFIUS team evaluate the compliance history of U.S. companies involved in foreign investment transactions. This includes reviewing their past export control compliance, licensing history, and any previous violations. By assessing the compliance history, CFIUS can identify potential risks and ensure that companies involved in foreign investment transactions adhere to export control regulations.
4. Mitigating National Security Risks: Export classification plays a crucial role in mitigating national security risks associated with foreign investment transactions. By identifying controlled technologies and assessing licensing requirements, CFIUS can implement measures to protect sensitive technologies and prevent their unauthorized transfer to foreign entities. This includes imposing conditions on foreign investment transactions, such as requiring the implementation of Export Compliance Programs or restricting access to certain technologies.

Final Takeaways

Export classification is a vital component of the CFIUS review process, as it helps identify controlled technologies, assess licensing requirements, evaluate compliance history, and mitigate national security risks. By ensuring that foreign investment transactions comply with export control regulations, CFIUS can protect sensitive technologies and maintain the integrity of the U.S. defense industrial base. As the global landscape continues to evolve, the importance of export classification in the CFIUS review process will remain essential for safeguarding national security and promoting responsible foreign investment.

For more information, contact Rick Phipps at CTP Compliance: 703-615-8227- rphipps@ctp-inc.com