Advisories April 25, 2024

International Trade & Regulatory Advisory: Treasury to Sharpen CFIUS Procedures and Enforcement

Executive Summary
Minute Read

Proposed changes to how the Committee on Foreign Investment in the United States (CFIUS) can request information and impose civil penalties signal that CFIUS will increasingly focus on compliance and enforcement. Our International Trade & Regulatory Group breaks down the impact on businesses.

  • The proposed rule would greatly expand the information collection authority of CFIUS
  • The maximum civil penalty for a violation would increase from $250,000 to $5 million per violation
  • It would expand when a civil monetary penalty may be imposed due to misstatements or omissions

On April 11, 2024, the U.S. Department of the Treasury issued a Notice of Proposed Rulemaking, Amendments to Penalty Provisions, Provision of Information, Negotiation of Mitigation Agreements, and Other Procedures Pertaining to Certain Investments in the United States by Foreign Persons and Certain Transactions by Foreign Persons Involving Real Estate in the United States to sharpen and enhance certain procedures and enforcement authorities of the Committee on Foreign Investment in the United States (CFIUS).

In its press release, Treasury emphasized that this Proposed Rule “marks the first substantive update to the mitigation and enforcement provisions of the CFIUS regulations since the enactment and implementation of the Foreign Investment Risk Review Modernization Act of 2018.”

CFIUS is an interagency committee authorized to review certain transactions involving foreign investments in U.S. businesses to determine their effects on the national security of the United States. CFIUS can mitigate any national security risk resulting from such a transaction, or even recommend to the President of the United States that the transaction be prohibited. According to the Treasury press release, the Proposed Rule “hones CFIUS’s ability to accomplish its national security mission consistent with the United States’ open investment policy.”

The Proposed Rule signals that CFIUS is increasing its focus on compliance and enforcement through some key changes to its authorities in information collection and imposition of civil penalties.

Key Changes

Information collection

The current regulations permit CFIUS to issue requests for information “related to a transaction’s potential status as ‘covered’ (i.e., subject to the jurisdiction of the Committee),” but “they do not specifically address other types of information requests.” The Proposed Rule would greatly expand the information collection authorities of CFIUS.

First, the Proposed Rule expands the type of information CFIUS can collect when engaging with parties on transactions that were not filed with CFIUS (otherwise known as “non-notified transactions”). This would allow CFIUS to request—and require related parties to respond to such requests—information related to “whether a transaction may raise national security considerations” and “information as to whether a transaction meets the criteria for a mandatory declaration.” The Proposed Rule contemplates that such changes would enable CFIUS to “engage in preliminary fact-finding relevant to potential national security considerations prior to receiving a formal notice,” preventing “unnecessary filings and increasing efficiency in connection with filings for transactions that may present an extant risk.”

Second, the Proposed Rule requires parties to provide information upon requests from CFIUS (1) when CFIUS seeks information to monitor compliance with or enforce the terms of a mitigation agreement, order, or condition; and (2) when it seeks information to determine whether the transaction parties had made a material misstatement or omitted material information during a previously concluded review or investigation (including a review or investigation that ended with the rejection of the parties’ notice).

While CFIUS has in practice long requested information in both circumstances, and parties are generally advised to cooperate in such requests, the Proposed Rule points out that the current regulations “do not expressly obligate parties to respond” to such requests.

Third, the Proposed Rule amends the subpoena power of CFIUS. While the current regulations permit the use of subpoena authority when it is “deemed necessary by the Committee,” the Proposed Rule would permit such uses when it is “deemed appropriate by the Committee,” with the goal of enhancing the operational efficiency of CFIUS.

Responding to proposed mitigation terms

Although CFIUS, as required by the statute, must complete the review of a transaction within 45 days, the current regulations do not require transaction parties to respond within a specific time frame in connection with proposed mitigation terms. The Proposed Rule will implement an extendable three-day period for parties to submit substantive responses to any proposed mitigation terms by CFIUS. CFIUS would expect such substantive responses to “consist of acceptance of the terms, a counterproposal, or a detailed statement of reasons that the party or parties cannot comply with the proposed terms, which may also include a counterproposal.” Such a timeline would similarly apply to any follow-up requests from CFIUS.

Increased civil penalties

Section 721 of the Defense Production Act of 1950, as amended, authorizes CFIUS to impose monetary penalties and seek other remedies (e.g., directed notices or action plans) for violations of Section 721, the regulations promulgated thereunder, or mitigation orders, conditions, or agreements pursuant thereto. CFIUS penalties and other remedies under Section 721 are available without prejudice to civil or criminal penalties that may apply under other authorities, and CFIUS may refer conduct to other government enforcement authorities when appropriate.

In expanding CFIUS’s information collection authorities, the Proposed Rule would also expand the circumstances when a civil monetary penalty may be imposed due to a party’s material misstatement or omission. New circumstances would include when the material misstatement or omission occurs outside a review or investigation of a transaction (i.e., declarations and notices) and when it occurs in the context of CFIUS’s monitoring and compliance functions (e.g., information requests for non-notified transactions, monitoring or enforcement compliance, and agency notices).

Additionally, the Proposed Rule would significantly increase the maximum civil penalty amount for a violation from $250,000 to:

  • $5 million per violation under sections 800.901(a) and 802.901(a).
  • The greater of $5 million or the value of the transaction per violation under section 800.901(b).
  • The greater of $5 million or the value of the transaction (or the value of the party’s interest in the U.S. business at the time of the violation or time of the transaction) per violation under sections 800.901(c) and 802.901(b).

The Proposed Rule states: “The current maximum penalty amounts provided for in sections 800.901 and 802.901 are not specified in statute and were developed over 15 years ago.” In explaining the increase from $250,000 to $5 million, the Proposed Rule notes that $250,000 may not be a sufficient deterrent when transactions are routinely valued in the billions of dollars. CFIUS does not provide additional clarity on the rationale for the calculations that resulted in the new $5 million maximum penalty.

Finally, the proposed rule would extend the time for parties to petition for reconsideration after a penalty is imposed. The current regulations allow 15 business days after receiving a penalty notice for parties to submit a petition and 15 business days for CFIUS to review and issue a final penalty determination. The Proposed Rule would increase both time frames to 20 business days and continue to allow them to be extended by the staff chairperson. In practice, parties have typically been engaged in discussions about potential penalties before the formal initiation of penalty proceedings with the issuance of a notice of penalty. The Proposed Rule does not address the conduct of any such pre-notice engagement.

In raising the penalties, CFIUS also points out: 

  For the avoidance of doubt, while the amendments provided for in the proposed rule pertain to the maximum penalty that may be imposed for certain violations, they would not affect the Committee’s discretion to determine the appropriate penalty in individual cases, similar to other Federal enforcement regimes. In exercising this discretion, the Committee will continue to take into account the specific facts and circumstances of the violation and relevant aggravating and mitigating factors as identified in the Committee’s Enforcement and Penalty Guidelines.   

The Proposed Rule does not expand upon or clarify these penalty guidelines (available on CFIUS’s website), which identify aggravating and mitigating factors but provide relatively little guidance on how penalty outcomes will be calculated and determined in practice. In comparison, the penalty guidelines of other national security regulatory agencies, such as Treasury’s own Office of Foreign Assets Control and the Bureau of Industry and Security of the Department of Commerce, establish much clearer expectations for industries (and the agencies) about the calculation of penalty amounts, which is of critical importance when the enforcement agency also acts as the adjudicator and exercises significant discretion.

Similarly, the Proposed Rule establishes no practice or expectation that information on any penalties levied will be publicly released. CFIUS has not published such information since it reported a single penalty in 2018 and a single penalty in 2019 for violations of a mitigation agreement and interim order, respectively.


The proposed changes to CFIUS’s authorities to issue requests for information and impose civil penalties signal that CFIUS has refined and sharpened its focus on compliance and enforcement. This marks a potentially notable shift in the culture of CFIUS and its engagement with transaction parties, the hallmark of which has historically been cooperation and collaboration.

CFIUS has substantial discretion, but the exercise of such discretion in allowing or mitigating the threats of foreign investment or ownership in a U.S. business raises different concerns than the exercise of discretion in the imposition of monetary penalties, which can depend on the interpretation of complex regulations and requirements.

We note that without clear legislative guidelines, a 1,900% increase to the maximum penalty available is a remarkable exercise of agency discretion, an action that potentially runs counter to the non-delegation doctrine. Similar agencies with substantial enforcement experience and history operate under clearer penalty guidelines and have established transparency measures and practices to help ensure consistency in penalty administration grounded in clear statutory authority. It remains to be seen whether CFIUS will evolve its rules and practices toward being an active enforcement agency.

CFIUS is requesting public comments on the Proposed Rule until May 15, 2024.

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Alex Wolfe
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