According to this Shearman blog, it isn’t just CFIUS that foreign investors in U.S. businesses need to keep in mind, but also the potential implications of U.S. export controls on the viability of a proposed investment. Here’s an excerpt:
Export controls have been used for decades to protect U.S. technology with military applications. In recent years, however, these controls have expanded to such an extent that some investments or acquisitions in certain U.S. companies may now be precluded. The U.S. government has long sought to control the export of defense articles and services, as well as “dual-use” U.S.-origin civilian products, materials, technology, technical data and software that have potential military applications.
New legislation and regulations over the last several years have expanded that reach, making export controls an additional tool for controlling foreign direct investment. It is therefore important for foreign investors to examine this risk very early in the due diligence process by checking if an export license is required for access to a U.S. target’s technology and whether such a license is likely to be granted.
The blog reviews companion legislation to FIRRMA, the Export Control Reform Act of 2018 (ECRA), and discusses how that legislation and its implementation under both the Trump and Biden Administrations has ramped up oversight and enforcement of export control laws.
– John Jenkins