Foreign Entity of Concern Interpretive Guidance

Question: What are the main components of the Foreign Entity of Concern (FEOC) guidance?

Answer: DOE’s interpretive guidance provides clarity on how to identify entities that are FEOCs as a result of being “owned by, controlled by, or subject to the jurisdiction or direction of the government of a covered nation,” describing three main ways in which an entity may qualify under this provision. 

• First, an entity incorporated in, headquartered in, or performing the relevant activities in a covered nation is subject to the jurisdiction of a covered nation, and is therefore a FEOC.
• Second, a company with at least 25   percent voting rights, board seats, or equity interests held by the government of a covered nation (including a senior official of such a government or dominant political party), regardless of where those activities occur is a FEOC.
• Third, DOE’s guidance establishes a set of rights that an entity may reserve within contractual agreements to eliminate the potential for effective control if that entity has entered into a   license agreement or contract with a FEOC.

Question: Where can I find a FEOC list?

Answer: There is no consolidated list of all entities that are considered FEOCs under section 40207(a)(5) of the Infrastructure Investment and Jobs Act (IIJA). First, the statute identifies certain entities as FEOCs if they appear on certain lists maintained by other agencies (i.e., entities designated as foreign terrorist organizations by the Secretary of State and individuals and entities included on the Specially Designated Nationals and Blocked Persons List (SDN List) maintained by the Department of the Treasury's Office of Foreign Assets Control (OFAC)) and individuals alleged by the Attorney General to have been involved in various illegal activities, including espionage and arms exports, for which a conviction was obtained.

Second, the statute identifies as FEOCs all entities “owned by, controlled by, or subject to the jurisdiction or direction of the government of a covered nation” (defined in 10 USC § 2533c(d)(2) as North Korea, the People’s Republic of China (PRC), Russia, and Iran). DOE’s interpretive guidance provides further clarity on how to identify and categorize entities “owned by, controlled by, or subject to the jurisdiction or direction of a government” of a covered nation that may be present in battery supply chains.

Finally, the statute provides that a foreign entity may additionally be considered a FEOC if it is “determined by the Secretary [of Energy], in consultation with the Secretary of [War] and the Director of National Intelligence, to be engaged in unauthorized conduct that is detrimental to the national security or foreign policy of the United States.” 

Question: What countries are FEOCs?

Answer: The term FEOC does not refer to an entire country but rather to individuals, organizations, and businesses, particularly those with certain relationships to covered nations, that meet the definition of a FEOC within section 40207(a)(5) of the Infrastructure Investment and Jobs Act. The term “covered nation” is defined in 10 U.S.C. 4872(f)(2) to mean— (A) the Democratic People’s Republic of North Korea; (B) the People’s Republic of China (PRC); (C) the Russian Federation; and (D) the Islamic Republic of Iran."
 

Question: How does the Department of Energy define a foreign entity?

Answer: In order to be considered a FEOC, whether under DOE’s FEOC guidance or pursuant to the Secretary’s designation authority, an entity must be a “foreign entity.” DOE interprets “foreign entity” to mean: (i) A government of a foreign country; (ii) A natural person who is not a lawful permanent resident of the United States, citizen of the United States, or any other protected individual (as such term is defined in 8 U.S.C. 1324b(a)(3)); (iii) A partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country; or (iv) An entity organized under the laws of the United States that is owned by, controlled by, or subject to the direction (as interpreted in DOE’s FEOC interpretive guidance) of an entity that qualifies as a foreign entity in paragraphs (i)-(iii).

Question: Why was 25 percent the threshold for control?

Answer: The threshold was set at 25 percent because it is a widely used standard to identify control by a parent company in the private sector. Regulatory contexts in which a 25 percent ownership threshold is considered control by the parent entity include the Department of Commerce’s current CHIPS rules, the Department of State’s International Traffic in Arms Regulation (ITAR), the Treasury Department’s Bank Secrecy Act (BSA) private banking regulation, and more.
 

Question: Would a U.S. subsidiary of a foreign company be considered a non-FEOC?

Answer: DOE cannot make a determination of the FEOC status of any individual company without a full understanding of the specifics of ownership, control, and jurisdiction. 

Generally, a subsidiary of a parent company that is incorporated in a covered nation is only considered to be a FEOC if the subsidiary itself it is headquartered/incorporated in a covered nation or at least 25 percent of the voting interest, board seats, or equity interests of the subsidiary are cumulatively held by a government of a covered nation, including senior officials of such a government.

Question: What is the U.S. policy objective behind the guidance considering a U.S. entity to be a non-FEOC if its parent entity is incorporated or headquartered in a covered nation but is not controlled by the covered nation at a level of 25 percent or more?

Answer: Jurisdiction and control are written as separate indicators in statute and are defined independently in DOE’s interpretive guidance. The policy objective behind the guidance is to understand and mitigate the influence of a government of a covered nation in the battery and critical mineral supply chain by assessing each entity’s relationship to that government. In the scenario described above, the U.S. entity is outside of the jurisdiction of a government of a covered nation and that government does not have any direct or indirect ownership or control.
 

Question: The final guidance includes the “National People’s Congress” in a list of the People’s Republic of China (PRC) bodies whose membership (both current and former) qualifies as “senior foreign political figures” such that they are considered part of the government of the PRC. Was this inclusion intentional?

Answer: Yes, DOE intentionally included specific reference to the National People’s Congress as an example of an entity whose current and former members qualify as “senior foreign political figures.” 
To determine whether a particular individual is a “senior foreign political figure,” the final guidance establishes the following standard: “In order to be considered ‘senior,’ an official should be or have been in a position of substantial authority over policy, operations, or the use of government-owned resources.” In order to assist manufacturers in determining whether an individual meets this “substantial authority” standard, the guidance provides, in an explanatory section, certain examples of government and political institutions for which, in the context of the PRC, DOE has determined that all current and former members satisfy the standard and are therefore deemed “senior foreign political figures.”  This list is not intended to be exhaustive, however, and individuals who hold or have held positions in other PRC government or party institutions may still satisfy the substantial authority standard even if they are not members of one of the specifically mentioned bodies.

Current and former members of the National People’s Congress, which the PRC constitution refers to as the highest organ of state power, satisfy the substantial authority standard and therefore qualify as “senior foreign political figures.” The inclusion of a specific reference to the National People’s Congress was intended to improve the transparency and administrability of the final guidance since it is a standing body that meets annually, in full, with a transparent list of members who serve five-year terms. The final guidance omitted specific reference to the National Party Congress, which is not a standing body, but DOE anticipates that individual participants in the National Party Congress will still likely meet the substantial authority standard by virtue of their membership or role in that or other qualifying bodies.
 

Question:  Is DOE’s FEOC guidance different from the CHIPS FEOC rule? If so, why?

Answer: DOE's guidance is very similar to the CHIPS rule, with some important and intentional distinctions driven by differences between the battery and semiconductor markets and differences between the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS and Science Act (CHIPS). DOE and the Department of Commerce coordinated throughout the guidance development process and largely adopted the same interpretation of jurisdiction, ownership, and control, with some small differences due to the context of these respective industries and statutes.

Specifically, DOE’s guidance considers an entity to be a FEOC under three scenarios: (1) via jurisdiction of the government of a covered nation; (2) via 25% ownership or control by the government of a covered nation; and (3) via certain licenses or contracts with a FEOC. Inclusion of the jurisdiction and 25% control provisions aligns with the Department of Commerce’s CHIPS rule and various international trade and financial regulations administered by the Departments of State and Treasury. DOE’s third provision, which addresses effective control that may be exercised over a non-FEOC company through certain license or contract agreements with a FEOC, is not found in the CHIPS rule and is meant to address means of control specific to the battery supply chain. Despite differences in statutory purpose, industry context, and impact, DOE and Commerce both have provided clarity on the definition of FEOC in supply chains, and have the statutory authority to name specific entities that engage in certain forms of unauthorized conduct as FEOCs in the future. 
 

Question: How does DOE’s rule address companies with ties to the People’s Republic of China (PRC)?

Answer: DOE’s guidance presents a strong signal to the battery and critical mineral industries that the U.S. does not see suppliers based in the People’s Republic of China (PRC) as part of a reliable or secure energy supply chain. Under DOE’s guidance, PRC-headquartered companies, PRC state-owned enterprises, and companies controlled by the government of the PRC are among the entities treated as FEOCs. This includes any company producing an applicable mineral or battery component in China, as well as companies that are subject to 25 percent PRC government control through voting rights, board seats, or equity interests.

DOE’s guidance further establishes that individuals who hold or have held senior positions within the government or the dominant ruling party of a covered nation, may be extensions of the government and could exercise control. As such, individuals that hold or have held senior positions in the PRC government or within the Chinese Communist Party, and their family members, would be considered extensions of government control.

DOE’s guidance also addresses efforts by covered nation governments to exercise control over a company through licensing agreements. An entity not based in the PRC or directly or indirectly controlled by the government of the PRC may still be considered a FEOC based on effective control through a licensing agreement or contract with another FEOC.

In addition, DOE will continue to closely monitor the market to understand whether the PRC government is exerting influence in other ways. Subject to this ongoing monitoring, DOE may seek to incorporate consideration of control through non-ownership measures, such as direct or indirect investments by covered nation governments, to inform the Secretary’s potential exercise of his authority under IIJA Section 40207(a)(5)(E), in consultation with the Secretary of [War] and the Director of National Intelligence, to designate an entity a FEOC if it is “engaged in unauthorized conduct that is detrimental to the national security or foreign policy of the United States.”

Question: Is DOE’s FEOC guidance different from the CHIPS FEOC rule? If so, why?

Answer: DOE's guidance is very similar to the CHIPS rule, with some important and intentional distinctions driven by differences between the battery and semiconductor markets and differences between the Bipartisan Infrastructure Law (BIL) and the CHIPS and Science Act (CHIPS). DOE and the Department of Commerce coordinated throughout the guidance development process and largely adopted the same interpretation of jurisdiction, ownership, and control, with some small differences due to the context of these respective industries and statutes.

Specifically, DOE’s guidance considers an entity to be a FEOC under three scenarios: (1) via jurisdiction of the government of a covered nation; (2) via 25% ownership or control by the government of a covered nation; and (3) via certain licenses or contracts with a FEOC. Inclusion of the jurisdiction and 25% control provisions aligns with the Department of Commerce’s CHIPS rule and various international trade and financial regulations administered by the Departments of State and Treasury. DOE’s third provision, which addresses effective control that may be exercised over a non-FEOC company through certain license or contract agreements with a FEOC, is not found in the CHIPS rule and is meant to address means of control specific to the battery supply chain. Despite differences in statutory purpose, industry context, and impact, DOE and Commerce both have provided clarity on the definition of FEOC in supply chains, and have the statutory authority to name specific entities that engage in certain forms of unauthorized conduct as FEOCs in the future. 
 

Question: How does DOE’s rule address companies with ties to the People’s Republic of China?

Answer: DOE’s guidance presents a strong signal to the auto and battery industries that the U.S. does not see suppliers based in the People’s Republic of China (PRC) as part of a reliable or secure energy supply chain. Under DOE’s guidance, PRC-headquartered companies, PRC state-owned-enterprises, and companies controlled by the government of the PRC are among the entities treated as foreign entities of concern (FEOCs). This includes any company producing an applicable mineral or battery component in China, as well as companies that are subject to 25% Chinese government control through voting rights, board seats, or equity interests.

DOE’s guidance further establishes that individuals who hold or have held senior positions within the government or the dominant ruling party of a covered nation, may be extensions of the government and could exercise control. As such, individuals that hold or have held senior positions in the PRC government or within the Chinese Communist Party, and their family members, would be considered extensions of government control.

DOE’s guidance also addresses efforts by covered nation governments to exercise control over a company through licensing agreements. An entity not based in China or directly or indirectly controlled by the government of China may still be considered a FEOC based on effective control through a licensing agreement or contract with another FEOC.

In addition, DOE will continue to closely monitor the market to understand whether the PRC government is exerting influence in other ways. Subject to this ongoing monitoring, DOE may seek to incorporate consideration of control through non-ownership measures, such as direct or indirect investments by covered nation governments, to inform the Secretary’s potential exercise of her authority under BIL Section 40207(a)(5)(E), in consultation with the Secretary of Defense and the Director of National Intelligence, to designate an entity a FEOC if it is “engaged in unauthorized conduct that is detrimental to the national security or foreign policy of the United States.”