[0:05]Welcome to Embargoed, Intelligent Talk about Sanctions, Export Controls and all things International Trade for Trade Nerds and normal human beings alike. I'm your host, Tim O'Toole, and with me today, as is often the case, is Melissa Burgess. This is her 47th appearance on Embargoed. So welcome back, Melissa. Thank you, Tim. Looking forward to 50. All right. Can't wait. And and we're actually coming up on our 100th episode. We're going to have to do something interesting for that. Um, but for now, I think we're on 94, and episode 94 is going to be CPAs year in review. So it's the last of our year in review series. We've already talked about Ofac year in review and BIs year in review, and I think this might be our first Siphius year in review episode. Um, so why don't we get started talking about 2025 and Um, 2025 kind of came in with a bang with President Trump taking office and issuing policy statements on a variety of things about America First. Um, so why don't we talk first about, um, a memorandum that the President issued with respect to America First investment policy in February of 2025. Sounds great. Um, I I think the big take aways are, well, one, it's a memorandum, not an executive order. So it's definitely more of a policy statement. Um, the legal mechanisms for the most part remained to be implemented. I think we will see a lot of action there, uh, this year in 2026. Those already in Um, requests for information out from Siphius Treasury on aspects of it. But the the short version of the America First investment policy is we're looking to limit investors of concern, investors from countries of concern and adversaries. Limit what they can do, where they can invest, how they can invest, while opening up investment to friendlier allied, um, countries, investors from those countries. So we have, and on top of all of that, trying to keep moving, keep, uh, Limiting the regulatory impact, um, of any changes. So streamlining, restricting, streamlining, and opening things up at the same time. Yeah, I mean, that's what I found most interesting about it, is it essentially starts out, you know, starts off the administration with a policy statement that says from the investment standpoint, prior administration, you're getting it all wrong. Basically, it's too easy for people to invest when the investments come from countries of concern, and we're going to stop that. But then once you let investors in, particularly investors who are from, you know, countries that we're not as worried about, you're making it too hard, and it has this statement about these mitigation agreements and that they ought to be defined and short-term and have, you know, discernable goals if they come into play at all. And that if that takes place will be a big change from the past. So they did lay down a marker right upon coming in the door. And it's you could argue both ways are they really saying the last administration did it wrong in terms of too easy from countries of concern, or is it really there's been the unwritten rule or guidance, if you will, that if it's China, it's going to be hard, and now this is giving something to point to for what a Siphius practitioner would say, like, it's going to be hard, here's why, here's some data, here's some things to think about. And I think this year 2026, we'll get a bit more of here's some things to think about. Well, and we're already seeing a pre-mitigation. Right.
[4:32]The 2024 numbers definitely down. I think the 2025 Siphius annual report will be very fascinating. because it'll, it'll only actually have a few months, I believe of, no, it'll, it'll have all of 2025. But it'll have kind of the lag of last administration and cases filed prior to, um, inauguration. And then it'll have the ramp up, if you will, of post-inauguration filings. But it will, my guess, I could be very wrong. My guess is the numbers will actually be fairly light because a lot of those were going to close by December 31st type filings, ran into government shutdown. So either, either they, if it was voluntary, they skipped filing because of that, or we'll see those numbers roll into 2026 and that 2026 will be massive, perhaps for a variety of reasons. So I I do think it will be an interesting report. It'll be good to look at. I don't, I don't know if it will be really representative of what the America First policy is looking for. It may give us some indications, but they don't give us the the month by month or even the quarter by quarter breakdown in that report, which I think would be even more fascinating in a way. Yeah, and probably a lot more of the America First, um, I'm trying to think of exactly the right word, but the America First slant or the America First, um, texture will come in in the in the end because what we're seeing, you know, in this certainly in the Siphius context and in and in other contexts as well is kind of this was the opening shot. This the the early 2025, the new administration comes in and they says say, here's what we're interested in in foreign investment, here's what we're interested in in export controls. But it takes a while to actually ramp up and actually put, you know, meat on the bone of that that strategy. And and we're starting to see that at the end of 2025, the beginning of 2026. And so I think it will be fascinating to see kind of quarter by quarter, but also kind of what really happens this year because I think this year is the year where they they've figured out now how they're going to do this like the strategy for accomplishing what they set out as the goal. And so let's see, you know, what the metrics are once they start trying to put it into action. Yeah. I think I think there are some other interesting themes from the year, not necessarily entirely administration driven, but also administration driven in in terms of, every year we get that annual report that gives us some insight, not a ton. Most years, we get at least one, um, prohibited transaction. And again, why they're prohibited sometimes on the face of it, it looks, shall we say, obvious. Um, sometimes less so. Um, but I I think an interesting, interesting theme of late 2024 into 2025 was how much discussion of Siphius there was, largely in relation to one specific transaction. Um, with kind of a lot of the American public discovering or being reminded. Rediscovering. Right.
[8:11]That started a Siphius issue. Right. And it and it was finally got closed out as a Siphius issue with an executive order.
[8:29]And and a statute in between as well. And a statute in between. So in in some ways it felt like it was a kind of a quiet year, but it it's when you actually stop and look at it, it was not at all. There was a lot in the public. There were a lot of, um, things kind of finally moving, getting closed out, perhaps in novel ways. And I think that's a common theme of Siphius in general of where there's a will, there's a way. And the question is whose will is strongest often with Siphius, you know, because often if you're getting to that point of a denial, it means you're not, you're not able to find the mechanism that Siphius is comfortable with, and you from the business perspective are comfortable with, um, or that really makes a reasonable business, uh, that has a reasonable business case. Um, but it'll it'll be interesting to see whether some of the 2025 finally finding a resolution to some of these bigger tricky, um, transactions continues to have effects or whether with the America First policy and the preference to not have mitigation agreements and any mitigation agreements there are should be, uh, limited in time and scope, not forever agreements, whether that actually leads to more, not necessarily denied transactions, but more voluntarily withdrawn, because the mechanisms to get a limited mitigation could be fairly difficult. At least and institutionally Siphius will probably have a hard time getting to not forever mitigation. Unless, unless it gets to, sorry, unless it gets to it. We're going to set these rules of the road, but we won't audit them or oversee them in the same way, which could be, which could be the work around. Well, and to your point before, that's where I was seeing the at least implicit criticism of the last administration. At least when they're talking about mitigation agreements, I got the sense that what they were saying was with countries of concern, the last administration was basically like, we can, we can have these, you know, really intense mitigation agreements and mitigate the effect of countries of concern. And at least part of the what they were saying about mitigation agreements is, we don't have the same philosophy. If you're from a country of concern, you're not getting a mitigation agreement, you're getting shut out, and so don't, don't come knocking. And then, you know, with respect to non-countries of concern, saying the exact the sorts of things that you're talking about, which is, we're not, we're going to have these, you know, very concrete, closed off mitigation agreements that say, here's our problems, address them and then go on and operate your business. Not the, you know, open-ended, like, we we as a condition of our approval, we'll get to essentially have our, um, you know, nose in the tent forever, run in the company. Now, sometimes though, to to to to at least pivot a little bit to one of the things that I think you were hinting at, Melissa, um, you know, the US Steel case, um, shows kind of an alternate view of how the government can put its, maybe not its nose in the tent, but its hand in the cookie jar as part of the Siphius approval process. Um, want to talk a little bit about US Steel because I think it's, it's a really helpful discussion because it is one that straddled the two administrations. So it really, you know, starts off 2025 with a, um, you know, the President blocking the US Steel purchase by Nipon Steel. Um, and then goes from there and gets resolved in 2025 as well. And the interesting part was that the public was really along for the ride for most of it. Um, knew that it had been voluntarily withdrawn and refiled. I think part of that was probably strategic on the parts of the parties because they were trying to, um, you know, make their case to the public of why this deal made sense, um, to them and why they thought it was good and trying to get that support. Um, it's interesting because Siphius often say, you know, it's we're not a political process, we're uh, you know, all about national security and only national security, which can be defined in many ways.
[13:13]Right. But I think with, with this, it, at least publicly, um, it seemed much more of a political process, and I think it, I think it was. I, I don't know how much it's a complete aberration, but because of the election year dynamics, absolutely became a political issue, um, and also had the very interesting angle of basically the labor unions almost, again, from an outside perspective, almost being a third party to the deal. Um, and that having a lot of sway, a lot of very, what appeared to be an almost outside role in the transaction dynamics, the Siphius dynamics, um, and some of those related considerations.
[14:10]Now, I'm sure there there's a lot behind the scenes that, um, you know, did not come out in public, did not come out accurately in public and all the rest. But it, it did kind of give a lot to think about in terms of some of the less common aspects of a transaction that could become a national security. Maybe not becoming a national security concern, but it'd be reviewed for potential national security risks, and then having to do from a practitioner's perspective, having to make the case of that's not a national security risk. It may be some a business risk. It may be an employment consideration. It may be all these other things, but that doesn't make it national security. Yeah, I mean, so that is kind of an interesting question as to what is national security. It, we've been faced with it relatively recently in connection with the President's executive order on, essentially, the defense industry and the US defense sector, and essentially, they're going to start making decisions in part-based or at least primarily based on what's best for the US defense industry. And so, so that is not traditionally the role and, and I think he was talking there about export controls. That's not traditionally the role of export controls. Export controls are supposed to be kind of, you have reasons for the control, and the reasons for control usually are not, you know, US business will benefit. Like that is not usually the reason for the control. But, but you can understand even in the export controls context, why isn't that part of national security? That is, if you build a strong defense sector, why isn't that important to national security as a whole? In the same way, here, like national security can include a portion of if we build stronger industries, um, without, you know, foreign control, at least, that is better for the US National Security as a whole.
[16:16]And so it's not, traditionally, these are not interests that have traditionally come in expressly, but you certainly can make the case that maybe national security has traditionally not been defined broadly enough to include interests that relate to national security. And maybe, maybe not. Yeah, well, we are straying a bit into 2026, but Right. Yes. Sorry. No, no, I, I do think it's an interesting aspect of that The America First executive order that you just mentioned. Um, because there are hints about using foreign capital. But not, it's not committed to only in the context of sales. So I am very intrigued. I will be very interested to see whether we have more, probably non-controlling will probably be the key, but more foreign investment from NATO allied countries in essentially US manufacturing capability. Siphius has historically looked at, um, supply chain security for the defense sector. President Biden's executive order in, I believe, it was 2022 looked at supply chain security more broadly, um, but taking it from, can moving, potentially moving it from a, are you going to shut down our US supply chain to, are you actually enhancing and ensuring the stability of the US supply chain? And ensuring, you know, long-term foreign customers to help the stability of that supply chain. I think that could be one of the themes that comes out of 2026 as a, as a result of the executive order and again, perhaps building off of the America First investment policy. Well, and I, I do think that that plays right into how, you know, the US Steel acquisition was ultimately resolved by Siphius. I mean, so President Biden blocked the transaction. It was resubmitted to President Trump. Um, eventually, uh, after quite a bit of discussion, President Trump, uh, approved the transaction, um, with, you know, the dreaded national security agreement to mitigation. But the mitigation was new investment of a particular amount in the US, commitments related to governments, which is pretty normal. The golden share held by the US government, which is at least, um, it's not quite as common. Not quite as common. Um, but also domestic production commitments. And so, essentially, Siphius was being used to ensure, um, you know, the the mitigation agreements were being used to ensure, essentially, domestic production. Similar to the, to the topics of the 2026 executive order as well. And so, you know, we do see the in in that resolution, some of the same themes that show up in the later executive order that showed up in the, the memorandum right as President Trump took office. And so, The one thing I will say is that there was a national security agreement. Um, and it and it does seem to have some pretty long lasting commitments. Long time. But, but apart from that, um, you know, it was, was an interesting resolution and, and certainly along the lines of what President Trump said that he was going to do in the national or in the memorandum that he kicked off office. And I think there are a couple interesting takeaways from that in terms of if you're planning a major high profile investment in something that's likely to be sensitive, um, your game planning may need to include some off the wall ideas. So we say. And What's in it for the US. What's in it for the US and what, again, whether it's a golden chair, whether it's something else, just how far are you willing to go for this transaction? And game planning those out early, and I'm not saying the parties didn't necessarily do this, but maybe not some of the the permutations that were later presented to them. But game planning that out understanding what are your kind of points of no return. This deal will be done. Understanding where you have some flexibility, understanding the business case for and against some of that and just the actual, uh, logistics of implementation for some of that could be really important. And as if you're a US business considering strategic investment, thinking about the type of investment you're seeking controlling, non-controlling, um, really the rationale for it, and are you doing this, you know, is this, is this for you, the US business, to shore yourself up or is this we're writing off into the sunset and we don't really care as long as our paycheck comes in. That latter type might be, might actually have a harder time depending on the industry because if if the writing off into the sunset involves the business crossing a border and moving overseas, Siphius is probably less inclined between the America First, um, both the executive order and the memorandum to say yes to that.
[1:58]Um, but one, one other idea there is much easier, it's going to involve fewer, uh, fewer pages in the federal register. Starting with an automatic every agreement has to be reassessed at certain intervals to force Siphius back to the drag to the table, um, because for the most part, existing NSA's, unless you're trying some new follow on transaction, you're not getting back to the drawing table. Um, because it's really up to the CMA's to decide whether or not you get to. So even having that, a bit, a bit like you have on the, um, DCSA side, so with mitigation agreements on the for cleared facilities. There are those kind of set time limits within the agreement. Um, it doesn't mean that they automatically end then. Normally, you're coming back to renegotiate, re-discuss it. But if you have that three or five year period automatically, there's a bit of a precedent. Yeah. And maybe even a presumption that they sunset, so that essentially you come back, you assume that what needed to be mitigated was mitigated. But you don't automatically just walk off into the sunset. You have a reset. But you don't have this thing where you essentially have to persuade the CMA's that they should take another look at this, because there's nothing in the regs and there's nothing in the agreements that say that they have to. And, and I think that that is, um, potentially problematic. Especially especially when the mitigation is imposed on companies that are kind of in cutting edge areas, where what the operations looked like when they were in front of Siphius and the resulting mitigation maybe extremely burdensome or really not fit to purpose once the company was really up and running or once the technology changed, and you're trying to fit kind of old, outdated mitigation onto new procedures. And unless the CMA's get just really tired of it, they're probably not going to take the initiative to reopen and renegotiate because, well, they have a process already. But we shall see, we shall see what 2026 holds. We shall see what it brings. So, so for the normal human beings part of this podcast, I will, we we'll segway into two other quick transactions. But just to set the stage, if you're not a Siphius, um, nerd yet, You know, these are all foreign investments in particular US companies where Siphius, the Committee on Foreign Investment in the United States, has the ability to review these certain investments.
[4:50]And, and these were the types of investments that it can review. Um, to determine whether or not the investment is is within the national security interest of the United States. And or whether or not it it could be made to be within the national security interest of the United States, if it was mitigated in certain ways. So, essentially, the committee looks at these, uh, agreements, it can do so because you submitted to them. It can do so even if you don't submit it to them because they find out about it later. And so US Steel was one that we just talked about that was reviewed through submissions, and was blocked by the President, but then eventually approved with mitigation by the President. Uh, Jupiter Systems and TikTok were two other kind of big high profile 2025, um, Siphius reviews that came in front of the President last year. You want to talk about either of those? Anything you were saying? Well, um, TikTok, since I, I think it's better known by the by the populace. Right. Ben Bendy Dance.
[5:55]That was actually, that was actually a 2020 case that was, um, prohibited. So it resulted in an executive order prohibiting the transaction. Um, and then many, many things ensued. Um, including Congress trying to force the divestment of TikTok, um, and as pretty much everybody knows, one of the of the President's Trump's first acts back in office, um, was to extend the timeline for the divestment. Um, but here, uh, the, it was September of this year, after multiple extensions, they finally got to a point where they had a deal. Um, and so we had a new executive order that essentially said, all the conditions have been met, and, uh, it's now a, you know, it's a new joint venture, the foreign owner does still have some interest in it, but they determined it was no longer controlling interest. Met all sorts of other requirements. Some of those public, many of those not public. I'm sure, um, But we what we got in September 2025 was in part an amendment of the, um, 2020 executive order that had prohibited the transactions. So it, they the in President Trump's first term is when it was prohibited. So now all these years later, um, we have the new executive order that modifies those provisions and says, basically that divestment order is no longer in effect because the divestment has been, uh, completed to our satisfaction. Um, so that that's a bit different because that's not really a mitigation agreement, but in some ways it, it was getting there by other means. It wasn't an agreement, but there was mitigation. But it's again, where there's a will, there's a way. If you want to, if you really want that deal, you just have to be ready to have a variation on the theme of that deal.
[8:05]Keep going. If it's a if it's a sensitive transaction. All right. So one last thing to talk about, I think, in Siphius, and that is Siphius 2025, I think, real estate and changes to the real estate rules, are potential theme. Now, not a lot of them happened, but there were a lot of proposed rules. And just to set the stage on this. So, Siphius has the power to review foreign investment in real estate transactions, generally, when those transactions involve critical infrastructure. So property that's near critical infrastructure, property that is critical infrastructure. Um, but beyond that, there's not a ton of jurisdiction for Siphius to, to, um, look at foreign investment in real estate transactions. And so that is has at least potentially started to change in 2025.
[9:07]You want to talk about how that is changing and what it is that people are thinking about having Siphius look at more closely. Yeah, so, um, investment in real estate has been a theme for quite a few years now, actually. A lot of it stems from a transaction a few years ago in North Dakota near the, um, Air Force Base in North Grand Forks, North Dakota. Um, and there, if I recall correctly, it was a bunch of agricultural land and a Chinese entity was going to come in, um, and make a huge investment and what came out of the process was a realization that we have a lot of bases with sensitive technology on them that are not on the list of what Siphius currently has jurisdiction to review. So the, the list has, um, a bunch of mostly, mostly military bases, um, and some like bombing ranges.
[10:14]Um, and generally Siphius has authority to review real estate transactions that are within either one mile or within 100 miles of a named base location. Um, whatever it might be. So, a lot of these acts, um, take similar approaches to solving the problem, but each one has its own little tweaks. Some focus on, um, investments by countries of concern, um, kind of a usual suspect list in terms of China, the comprehensively sanctioned countries, um, Maduro regime and, um, Russia. Again, variations on a theme between all of them. Some would have, um, actually had a, uh, prohibition. So right now Siphius doesn't have any like, this type of transaction is automatically prohibited.
[11:55]But some of the proposals would have had automatic prohibitions, like just these investments from these countries of concern or these actors of concern absolutely prohibited. That would be a big change if we got that. Um, but yeah, I think the, the theme is, or one of the themes is really where there's a will, there's a way. And if you're ready to, if you really want that deal, you just have to be ready to have a variation on the theme of that deal. Keep going. If it's a sensitive transaction. All right, then we will leave it there as the last word. Melissa, thanks for coming back on Embargoed. Of course. All right. Well, we'll see you next time, if not sooner. And, uh, for those listeners, thanks for listening everybody. And stay Siphius compliant.
