US regulation of foreign direct investment

Expansion of CFIUS into agricultural supply chain and genomics tools in the United States

The passage and implementation of the Foreign Investment Risk Review Modernization Act (FIRRMA) was the most significant change in U.S. foreign investment regulation since the establishment in 1975 of the Committee on Foreign Investment Foreign investment in the United States (CFIUS) – but changes in foreign direct investment in the United States Laws and regulations (FDI) continue.

If enacted, the Foreign Adversary Risk Management Bill (“FARM Act”) will expand CFIUS’s definition of “critical infrastructure” to include agricultural production facilities and real estate. Likewise, recent changes by the US Department of Commerce, Bureau of Industry and Safety (BIS) now control certain genetic assemblers and synthesizer software, subjecting them to “emerging technologies” subject to CFIUS.

Protecting FDI in the U.S. Agricultural Supply Chain

The FARM law could become the last extension of CFIUS. The FARM Act is a bipartisan bill co-sponsored by Senator Tommy Tuberville (R-Ala.), Senator Ronny Jackson (R-Tex.) And Senator Filemon Vela (D-Tex.). If passed, the FARM Act would designate the U.S. agricultural supply chain as “critical infrastructure,” extending CFIUS review to any merger, acquisition, transfer, joint venture, or other transaction that could result in foreign control of a business. American engaged in agricultural production. and / or uses agricultural products. The bill also proposes to add the Secretary of Agriculture to the CFIUS and requires the CFIUS to report to Congress on foreign investments in US agriculture.

However, the FARM Act would not be the first protection against FDI in the US agricultural supply chain. Rather, the FIRRMA included provisions that establish the jurisdiction of the CFIUS when invoking the Defense Production Act (DPA). More specifically, the FIRMMA list of “critical infrastructures” included the following language:

manufacture any industrial resource other than articles available on the market…. or exploit any industrial resource which is an installation, in each case, it was financed, in whole or in part, by […] (a) Program of the Defense Production Act of 1950 Title III … .. ”

In addition, the FIRRMA definition of “covered transactions” includes the following language:

“(D) Any other transaction, transfer, agreement or arrangement, the structure of which is designed or intended to escape or circumvent the application of section 721.

Title III of the DPA “allows the president to provide economic incentives to secure national industrial capabilities essential to meet the requirements of national defense and internal security.” DPA was invoked by former President Trump’s COVID-19-related executive orders regarding medical supplies and food production. As a result, even unchecked foreign investments in U.S. medical or food producers that have received DPA funding are subject to CFIUS review and continue to be reviewed for a period of 60 months following receipt of any DPA funding.

Controlled genomic tools as “critical technologies”

On October 5, 2021, the BIS amended the Export Administration Regulations (EAR) to require licenses for the export of certain genomic software and tools that can be used for the design or manufacture of biological weapons. In doing so, the BIS amended the Commerce Checklist to add two new U.S. Export Control Classification (ECCN) numbers that target software used for certain nucleic acid assemblers and synthesizers capable of “designing and building”. functional genetic elements from digital sequence data ”. as tools used to develop software and assemblers.

Specifically, an export license for certain countries will be required for software determined to be part of ECCN 2D352 on the basis of chemical and biological weapons (CB) and counterterrorism (TA) risks. Likewise, ECCN 2E001 will require an export license for some countries for “technology” used for the development of software controlled by 2D352. In short, technology classified under ECCN 2E001 is controlled for the same CB and AT risks as ECCN 2D352 – requiring an export license for designated countries.

Based on the above, genomics software and development tools identified as part of ECCN 2D352 and 2E001 will also be considered “critical technologies” under CFIUS. Therefore, US companies that design, develop or produce certain genomics development software and tools will be subject to CFIUS if they accept the IDE.

The recent export reclassification of genomics development software and tools and the proposed FARM law reinforce the need to keep in mind US FDI requirements for transactions involving changes in ownership, control or foreign influence, and the need for early diligence in any transaction. involving international investments.

© 2021 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 292

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