Foreign ownership, control or influence (FOCI) (2023)

When is it determined that a company is under foreign ownership, control or influence (FOCI)?

A US corporation is considered subject to FOCI if a foreign interest, exercised or not, has, directly or indirectly, the power to direct or decide matters affecting the management or operation of the corporation in a manner that could lead to access to classified information. or may adversely affect the performance of rated contracts. (NISPOM, paragraph 2-300a)

Can a company obtain an Installation Safety Certification (FCL) if it is under FOCI?

no A company that has been determined to be FOCI is not eligible for an FCL until the FOCI factors have been positively resolved. (NISPOM, paragraph 2-300c)

How is it determined if a company is under FOCI?

A company's FOCI factors are reviewed as part of the facility's authorization process and for the duration of the facility's security clearance. The company's FOCI factors must be documented in theCertificate of Foreign Interest (Standard Form 328)🇧🇷 Within a corporate family, SF 328 must be a consolidated response and not separate submissions from individual members of the corporate family (NISPOM, para. 2-302). In the case of an organization with multiple levels of parent-subsidiary relationships, the SF 328 must be certified by the highest level approved entity. (Note: This would not prevent a subordinate entity from creating the form, as long as the approved parent entity recognizes the form.) This principle applies equally to changed status messages. (See SF 328 and instructionson here).

How often should a company file SF 328?

NISPOM requires that an SF 328 be submitted during the initial facility clearance process and when significant changes occur to previously submitted information. (NISPOM Paragraph 2-302)

What criteria are used to determine if a company qualifies for FOCI?

  1. Corporate and government spying records against US targets,
  2. Compliance records and/or participation in an unauthorized technology transfer,
  3. Type and sensitivity of information worthy of protection,
  4. Source, nature and scope of FOCI,
  5. Records in compliance with applicable US laws, regulations and treaties,
  6. Type of bilateral and multilateral agreements on security and exchange of information and
  7. Owned or controlled, in whole or in part, by a foreign government.

Can non-US citizens serve as key people in the management of the company?

no Key management personnel must undergo a personal security clearance along with the FCL. Non-US citizens are not eligible for a personal security clearance. (NISPOM, paragraph 2-104)

Can executives and/or directors of the foreign parent company or one of its subsidiaries also act as directors and/or directors of the authorized company?

There cannot be interlocking relationships under the Proxy Agreement (PA) and the Voting Trust Agreement (VTA). However, pursuant to the Special Guarantee Agreement (SSA), the foreign shareholder may appoint one or more representatives (referred to in the SSA as the "Internal Director") to the Company's board of directors who meet the composition requirements of the directory specified in Section 1.01 of the DCSA-SSA draft. In addition to the internal director positions, there should be no other intertwined relationships.

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Is it necessary to appoint a Chief Technology Officer (TCO)?

Yes. The company must designate a TCO. The TCO is the GSC's primary adviser on the protection of controlled unclassified information and other proprietary technology and data subject to regulatory or contractual control by the US Government. The TCO can be the same person who serves as the Director of Facility Safety (FSO) .

What role does the FSO play?

Each accredited company must designate an FSO. The FSO serves as the GSC's primary advisor on the protection of classified information. The FSO's responsibility includes operational oversight of the organization's compliance with NISP requirements.

What action should a company take when discussions, consultations or agreements could reasonably result in effective foreign ownership or control?

The company must provide DCSA with the details in writing. (NISPOM § 2-302(b)). Failure to report this information to the DCSA could adversely affect the security review of the Company's facilities. The company must first notify DCSA by telephone and then in writing.

What are the methods a company can use to mitigate its FOCI factors when it is considered to be foreign owned, controlled or influenced?

The SSA, PA or VTA is used to mitigate FOCI in cases where companies are effectively owned or controlled by a foreign company.

When is the Security Control Agreement used?

The SCA is used when a company is not effectively owned or controlled by a foreign interest and the foreign interest is entitled to representation on the company's board of directors. There are no access restrictions under SCA. (NISPOM, paragraph 2-303c(1))

What is a PA and a VTA?

The PA and the VTA are essentially identical agreements in which the foreign shareholder's voting rights are transferred to US citizens approved by the DCSA. Both agreements provide for the exercise of all property rights by trustees or agents with complete freedom to act independently of the foreign shareholder, except in the areas set forth in Section 2-305 of the NISPOM. Neither agreement restricts access to classified information or restricts the Company's ability to compete for classified business. (NISPOM, paragraph 2-303b)

Does the PA or VTA require the business to be a commercially viable entity?

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Yes. The company must demonstrate that it is organized, structured and financed to operate as a viable commercial entity and independent of the foreign shareholder. (NISPOM, paragraph 2-303b(2))

What is the role of the lawyer and administrator?

Individuals acting as attorneys-in-fact or attorneys-in-fact must be US citizens, reside in the US and be eligible for personal security clearance. They must be able to assume full voting responsibility in relation to the shares and exercise management privileges in relation to the company in a way that ensures that the foreign shareholder can effectively insulate himself from the remunerated company. Proxies or trustees must be appointed to the Company's board of directors and have the same fiduciary duties as any other director.

Does SSA have access restrictions?

Yes. Classified contracts that require access to prohibited information (Top Secret, Secure Communications, Compartmentalized Confidential Information, Special Access Program Information, and Restricted Data) may require the government contracting activity to have a National Interest Determination (NID). ) positive according to NISPOM Section 2-303c, created (2).

Who should initiate the NID process?

DCSA will notify the Government Liaison Activity (GCA) of the request for a NID. The NID can be program, project, or contract specific. The NID decision is made by the GCA Program Executive Office. GCA sends the full NID to the DCSA. The DCSA need not delay implementation of a FOCI action plan until the GCA NID is complete, provided there is no indication that the NID will fail.

When can a board resolution be used to mitigate FOCI?

A board resolution is used when a foreign corporation does not have sufficient voting rights to elect directors or is not entitled to serve on the corporation's board of directors. (NISPOM, paragraph 2-303a)

Can a company merge with its foreign parent company or any of its subsidiaries and still be licensed under the auspices of a PA, VTA or SSA?

No, joint placement of FOCI is not authorized and the DCSA has sole power to determine when a company is placed. If a company is located near its parent company or foreign subsidiary, the DCSA must pre-approve a location plan (FLP). Download theFacility location map template.

Can a company receive administrative support services from its foreign parent company or one of its subsidiaries?

Normally not, and not without prior approval from the DCSA. However, if the company determines that there are specific services the company must provide from the parent company or one of its subsidiaries, the company must identify the services and provide justification to the DCSA for its consideration.

Where can I get electronic copies of the SCA, SSA, PA, or VTA draft?

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A preliminary electronic copy of the Agreements is available on the DCSA FOCI website.

What should I consider when selecting a candidate for director, attorney or outside manager?

The applicant must be a U.S. citizen residing in the U.S. and capable of exercising the management privileges associated with his or her position in a manner that ensures the foreign owner is effectively isolated from the business and qualified for FCL-level equivalent personal security clearance (NISPOM, para. 2-305)

How do you define the term "disinterested"?

The term "disinterested" is defined as having no prior contractual, financial or employment relationship with the requesting company, parent company, foreign shareholders or any entities and affiliates controlled by the requesting company. Application of the term "disinterested" extends to members of the applicant's immediate family. (NISPOM, paragraph 2-305b)

When a company appoints a director, attorney or external trustee, is the nominee automatically approved?

The nomination must not be approved by the DCSA, and approval will only be granted after the DCSA has reviewed and considered the candidate's resume and responses to a questionnaire that the candidate must complete. A copy of each applicant's resume must be submitted to DCSA headquarters along with their address, telephone number, fax number and email address when applying for approval.

Should the external director, attorney-in-fact and trustee be appointed as directors of the company?

Yes, once the DCSA approves the indication. In addition to ensuring that the Company has adequate policies and procedures in place to ensure the Company's compliance with the Agreement, the Outside Director, Proxy and Receiver must be appointed to the Board and have the same fiduciary responsibilities as other members of the Board. meeting.

How many outside advisers, proxies or trustees should be appointed?

The SSA, PA and VTA require the appointment of three directors, nominees or external trustees. However, if a corporation determines that fewer than three directors, officers, or outside trustees may be sufficient, a complete justification must be submitted to DCSA headquarters for consideration.

Does the DCSA maintain a list of authorized nominees to serve as outside directors, nominees or trustees in companies operating under an SCA, SSA, PA or VTA?

DCSA does not maintain a candidate list. Companies are responsible for determining who they wish to nominate for that position. It may be helpful to consult industry organizations such as the National Classification Management Society (NCMS), the Aerospace Industries Association (AIA), the American Society for Industrial Safety (ASIS), or your local or state chamber of commerce to help identify suitable candidates.

Who can be chosen to be an Internal Director under the SSA?

The appointment of an internal director is at the discretion of the foreign shareholder. Keep in mind, however, that the Internal Director will not have security clearance from staff at the licensed company for which he serves as the Internal Director.

What is the role of the Government Security Committee (GSC)?

The role of the GSC is to ensure that the Company maintains policies and procedures designed to protect controlled classified and unclassified information held by the Company and that violations of these policies and procedures are promptly investigated and reported to the appropriate authority when they occur. 🇧🇷 a violation has occurred. The GSC must also ensure that the company complies with US export control laws and regulations and does not take any action deemed detrimental to the performance of classified contracts. (NISPOM Paragraph 2-306)

Who is the SGC?

In accordance with the SSA, the GSC is made up of directors/pro-tempo directors and external directors. Under a PA and VTA, the GSC consists of the Proxy Holder or Trustee Directors and company directors who are also directors and hold employee security clearances at the company's FCL level.

Who should occupy the position of President of the General Secretariat?

One of the external advisers, proxy or trustee shall act as chairman of the SGC.

The SSA, PA and VTA require the GSC to do all it can to fulfill its responsibilities. What does "best efforts" mean?

The term "best effort" means performing tasks reasonably and in good faith, in a manner believed to be in the best interest of the Company, but consistent with similarly positioned US national security concerns.

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Is it necessary to appoint a Chief Technology Officer (TCO)?

Yes. The company must designate a TCO. The TCO is the GSC's primary adviser on the protection of controlled unclassified information and other proprietary technologies and data subject to regulatory or contractual control by the US Government. The TCO can be the same person who acts as the Facility Safety Officer (FSO).

What role does the FSO play?

Each accredited company must designate an FSO. The FSO serves as the GSC's primary advisor on the protection of classified information. The FSO's responsibility includes operational oversight of the organization's compliance with NISP requirements.

Is the company required to develop a technology control plan and submit it to the DCSA upon contract signature?

Yes. The draft TCP must be submitted to the designated DCSA, Industrial Safety Representative for approval within 45 days of the effective date of the SSA, PA or VTA. (NISPOM, paragraph 2-307)

Is the company required to prepare and submit to DCSA an Electronic Communications Plan upon completion of the Agreement?

Yes. The draft electronic communications plan must be submitted to your designated DCSA Industrial Security representative for review within 45 days of the effective date of the Agreement. The plan should provide for procedures to assure the General Secretariat and the government that confidential or export-controlled information is not leaked through communications such as e-mail, telephone, videoconference, facsimile, etc.

After the formalization of the SSA, PA or VTA, is the company obliged to elaborate procedures for the implementation of the agreement?

Once the contract is executed; The company must submit a written plan to implement the agreement to its designated DCSA, Industrial Safety Representative, for review within 45 days. The plan should explain the physical security and administrative controls the company intends to implement to comply with the terms of the contract. Occupational Health and Safety will review the plan and provide comments as appropriate.

Was it ist from the Committee on Foreign Investment in the United States (CFIUS)?

CFIUS is an interagency committee chaired by the Secretary of the Treasury to review proposed mergers, acquisitions, or acquisitions of Americans by foreign clients under Section 721 of the Defense Production Act. CFIUS is a voluntary process that provides foreign nationals and Americans who enter into a Covered Transaction the opportunity to submit the transaction for review by CFIUS to assess the transaction's impact on US national security.

The FOCI industrial security review of the CFIUS and DCSA is performed in two parallel but separate processes with different time constraints and considerations.

Who can I contact if I have questions about FOCI?

If you need further assistance, please contact the FOCI specialist responsible for your region at DCSA headquarters.

Please send questions about negotiating a FOCI agreement, implementing a FOCI agreement, or general questions about the FOCI agreement to the FOCI Operations Division🇧🇷 Provide your company name and CAGE code if you already have a FOCI contract.

Please forward all NID-related correspondence to the FOCA National Interest Determination🇧🇷 If correspondence requires a higher degree of secrecy, the following mailboxes are also available:;

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What does the guideline-like memo 09-019, "Foreign Ownership, Control or Influence Policy Guidance (FOCI)" PDF mean for the industry?

On September 2, 2009, the Under Secretary of Defense (Intelligence) made public theDirective Memorandum (DTM) 09-019, „Policy Guidance on Foreign Ownership, Control or Influence (FOCI)“for components of the Department of Defense; June 8, 2010, Amendment 1 was incorporated

The DTM applies to DoD components but does not impose any requirements on contractors. Contractors and companies approved in the installation safety review process must comply with the requirements established in the National Operational Manual for Industrial Safety.


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