By Jim McShane, Export Solutions

Benjamin Franklin once stated that “Out of Adversity Comes Opportunity.”

COVID-19 is the adversity- a tremendous difficulty. Companies forced to close their doors, employees laid off, lockdowns and stay-at-home orders could not be more adverse or difficult to our way of life; yet it is an unfortunate reality.

Opportunities in Adversity

So where are the “opportunities” in this adversity? Some companies may not survive, but will become prime targets for acquisitions, mergers and investments. Other companies will recognize that their survival is in being acquired or merged with existing companies, or in receiving investments to continue.

So maybe it is a time to revisit what this exactly means to companies who are involved in regulated industries:

If the company is a manufacturer or an exporter of Defense Articles, the regulations (§122.4 – Notification of changes in information furnished by registrants) are clear and cannot be ignored, whether you are the seller or the buyer.

If the company is an exporter of ITAR-controlled items or EAR-controlled technologies, it is equally clear what is required to amend licenses from the seller to the buyer. CFIUS regulations may be less known to many companies.


Things get a whole lot more complicated with acquisitions of or investments in U.S. companies by foreign companies’ or foreign investors. That all-enticing “bail out” by a foreign investor could trigger CFIUS (Committee on Foreign Investment in the United States) requirements and these have become much more stringent since the implementation of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA).

By way of background, the President of the United States has legal authority to block or unwind any foreign investment in the United States that is deemed to pose an unmitigated national security risk. The CFIUS process, administered by the Department of Treasury, has existed for years; but for years it was tantamount to a voluntary notification focused on national security. Voluntary notifications do not exist anymore because the criteria for mandatory notification has been strengthened and the scope of what type of transaction must have a notification has broadened.


Finalized in January of 2020, FIRRMA and the CFIUS regulations provide the process by which foreign acquisitions of US companies, investments by foreign investors and the targets of foreign acquisitions and investment must jointly notify CFIUS. If the CFIUS review concludes that there are no potential national security issues or other concerns, it may allow the acquisition or investment to proceed, however, if national security harm is identified, the transaction can be blocked.

The reviews are no longer limited to just acquisitions, mergers, investments and degree of control of a foreign entity. There are now restrictions and limitations on investments in or acquisitions of investments by Foreign Persons involving real estate in the United States.

When receiving offers for acquisition or mergers or the more discreet offers of investment of capital in companies adversely affected by COVID-19, companies must look beyond that “silver lining” or “pot of gold at the end of the rainbow” to realize that such transactions may be highly regulated, prohibited or blocked.

Companies need to understand what their requirements are and how to comply before simply taking the incentives and, in turn, being taken advantage of.

CFIUS requirements are complicated and cannot be ignored. In an earlier blog, I wrote about the new CFIUS process. There was a “pilot program” but that has now ended.

Looking Ahead

In the next few days, I will publish a blog containing helpful information (to companies to be acquired or receive investments, as well as companies who wish to invest or acquire) under the final CFIUS controls implemented this past January. Please look to these blogs so you can guide your business accordingly and survive “adversity” while not becoming a target of “opportunity”.

If you would like more information on how these regulations affect your business, please contact Export Solutions for a free consultation.

Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.