The US House of Representatives and Senate recently passed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) as part of the reconciled conference report for the Fiscal Year 2018 National Defense Authorization Act (NDAA). The president signed the bill on August 13 and new legislation will take effect on a rolling basis. Although several broad based changes will affect all industries, the nuclear industry will be relieved that the final bill addresses the concerns the industry raised at the outset when the original bill created challenges for US companies’ ability to compete in international trade. However, the industry still needs to monitor the anticipated regulatory implementation as the US Department of Treasury drafts new regulations. Other agencies, including the US departments of Commerce (DOC) and Energy (DOE) will implement their policy and regulatory changes to address FIRRMA. Morgan Lewis discussed the potential steps nuclear companies could take to be ready for any changes resulting from FIRRMA in a previous Up & Atom post.
Originally, FIRRMA would have required CFIUS review of certain types of technology transfers, dubbed “critical technologies.” Among other things, all nuclear technologies were included in the definition of critical technologies. As a result, FIRRMA likely would have required CFIUS review of technology exports already reviewed under the DOC’s Export Administration Regulations (EAR) (15 CFR Subchapter C), the DOE’s regulations (10 CFR Part 810), and the US Nuclear Regulatory Commission’s (NRC’s) regulations (10 CFR Part 110). This additional CFIUS review likely would have been viewed as an additional layer of review, and would potentially be repetitive of the comprehensive interagency reviews that are currently performed by DOC, DOE, NRC, the US State Department, and the US Department of Defense before nuclear technology may be exported.
Congress apparently heeded the concerns raised, because the final bill no longer requires CFIUS review of every nuclear technology transfer in the same manner. However, FIRRMA will likely impact the nuclear industry based, in part, on the factors that CFIUS will examine and the new DOC process established to identify emerging technologies, which could include nuclear technologies.
In addition, as enacted by Congress, FIRRMA expands the authority of the CFIUS and increases the scrutiny of foreign investments in “critical technologies,” which still specifically includes nuclear technology. In fact, FIRRMA lists as a critical technology the technology controlled by DOC, DOE, and the NRC by referencing those agencies’ export control regulations. Thus, pursuant to FIRRMA, many different transactions, including investments in partnerships, must be reported to and reviewed by CFIUS, if it relates to an investment in a nuclear technology.
Second, FIRRMA also directs DOC to implement an expanded export control regime to cover “dual use” items, those that while used for normal purposes in various industries and processes may also be used for weapons and nuclear proliferation purposes. And as mentioned earlier, FIRRMA also adds a new procedure for identifying “emerging and foundational technologies” under the EAR, which DOC then notifies to CFIUS. A specific technology will be designated as an “emerging and foundational technology” by an interagency review process to determine whether it is essential to the national security but not a “critical technology” under the NDAA.
In the coming months, CFIUS, DOC, DOE, and the rest of the interagency review team will begin to implement FIRRMA. Morgan Lewis will be watching closely to see, among other things, what regulations CFIUS and DOC issue as a result of this legislation, what new controls of dual-use items and technologies are imposed with respect to certain countries, and precisely how CFIUS and DOC coordinate on emerging technologies, and will continue to provide updates on Up & Atom.