[Code of Federal Regulations]
[Title 31, Volume 3]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR800AppB]

[Page 719-720]

                  TITLE 31--MONEY AND FINANCE: TREASURY

  CHAPTER VIII--OFFICE OF INTERNATIONAL INVESTMENT, DEPARTMENT OF THE
                                TREASURY

PART 800_REGULATIONS PERTAINING TO MERGERS, ACQUISITIONS, AND TAKEOVERS BY

             Subpart G_Provision and Handling of Information

     Appendix B to Part 800--Preamble to Regulations on Mergers,
 Acquisitions, and Takeovers by Foreign Persons (Published May 25, 1994)

    Note: For the convenience of the reader, this appendix contains the
text of the preamble to the final rules amending the regulations on
mergers, acquisitions, and takeovers by foreign persons beginning at the
heading ``Discussion of the Final Rule'' and ending before ``List of
Subjects in 31 CFR Part 800'' (59 FR 27178, May 25, 1994).

                      Discussion of the Final Rule

    Section 837(a) of the Defense Authorization Act creates for the
first time a mandatory investigation provision under Exon-Florio. There
are three points worth noting about this provision. First, this
provision is limited in application to certain types of acquisitions.
Specifically, the acquirer in question must be a foreign government
controlled entity, or an entity acting on behalf of a foreign
government. Furthermore, the acquisition must be one which ``could
result in control of a person engaged in interstate commerce in the
United States that could affect the national security of the United
States'' (emphasis added). Thus, even where the other specified criteria
are met, this provision does not mandate an investigation for cases that
could not ``affect the national security of the United States.''
    Second, for purposes of determining whether the acquisition results
in foreign government control, CFIUS is applying the same functional
test for control as provided in Sec. 800.204.
    Third, in contrast to the criterion for Presidential action under
Exon-Florio, i.e., that the foreign party acquiring control might take
action that ``threatens to impair the national security,'' the criterion
for undertaking an investigation of transactions involving government
controlled entities is that there could be an effect on the national
security.
    The term ``foreign government'' has been broadly defined for
purposes of these regulations to include any government or body
exercising governmental functions, and includes but is not limited to
national as well as various regional and local levels of government. It
is important to note that the definition is not limited to the
particular levels of government that are specified in the regulation,
and that other governmental bodies, including supra-national entities
such as the European Union (including its component parts), are covered
by this regulation.
    For purposes of the mandatory investigation provision, the
regulations define the term ``engage in'' as used in the phrase ``seeks
to engage in any merger, acquisition or takeover * * *'' to mean ``seeks
to acquire control through.'' The purpose of this regulation is to
clarify that the mandatory investigation provision would not be
triggered in cases where a foreign government controlled entity's
participation in an acquisition is

[[Page 720]]

solely for the purpose of investment, as defined in Sec. 800.217 of the
regulations. The Committee believes that this reading is supported by
the legislative history, and particularly floor statements made by
members of Congress who sponsored this particular amendment. See, e.g.,
Cong. Rec., Sept. 18, 1992, pages S 14050 through 14053 (comments of
Senators Exon, Sarbanes and Riegle); and Cong. Rec. Oct. 3, 1992, page H
10986 (comments of Representative Collins). Subparagraph
800.402(c)(5)(iii) has been changed in the final regulations by the
addition of the words ``for example'' to clarify that an agency or
representative role are examples of ways in which a foreign person can
act on behalf of a foreign government, but are not the only ways in
which such a relationship could be conducted.

                          Drafting Information

    The principal author of this document is the Office of the Assistant
General Counsel (International Affairs). However, personnel from other
offices of the Treasury Department and from other agencies that are
members of the Committee participated extensively in its development.

[59 FR 27180, May 25, 1994]

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