Summary
The U.S. Department of Justice (DOJ) published its long-awaited Notice of Proposed Rulemaking (NPRM) on January 2, 2025, amending decades-old regulations issued under the Foreign Agents Registration Act of 1938 (FARA) and dramatically increasing the reach of the statute. Most concerning, the proposed changes significantly alter an existing exemption to FARA registration upon which global corporations, U.S. subsidiaries of foreign corporations, nonprofit organizations, and lobbying and political consultants rely.
The Upshot
- The NPRM proposes significant changes to the so-called “commercial exemption” that shift the focus from whether there is a foreign government or political party nexus to whether there is ANY foreign nexus—commercial, nonprofit, or otherwise.
- Rather than providing clarity and bright lines, the new categorical exclusions and “totality of the circumstances” tests inject additional uncertainty into compliance with the statute and afford DOJ wide discretion in enforcement.
- Given the timing, the NPRM’s fate is not clear under the Trump Administration, but individuals and organizations who are potentially affected by the NPRM should consider submitting comments—which are due by 11:59 pm ET on March 3, 2025.
The Bottom Line
Consistent with DOJ’s increasingly aggressive enforcement of FARA over the past few years, the changes proposed in the NPRM upend decades of precedent and seem to reflect DOJ’s shift to focus on “malign influence” through state-owned enterprises, sovereign wealth funds, and nonprofit organizations that receive foreign funding. Unfortunately, the regulatory changes DOJ is proposing expand well beyond that scope and grant the Department wide latitude in enforcing the statute against commercial enterprises that were exempted under the previous regulations. Ballard Spahr’s Government Affairs and Public Policy Group can help prepare and file comments on these concerning changes.
DOJ ushered in the new year with the advent of its NPRM, proposing amended regulations under FARA. In addition to the sweeping commercial exemption modifications, the rulemaking also overhauls the guidelines on informational materials, and contains other systematic updates for registration and filing procedures. Notably, DOJ proposes these changes in the nebulous regulatory context of Loper Bright and with the unknown stance of the Trump Administration (which will take over in the middle of the comment period). If the new administration chooses to move forward with the regulations, the resulting changes will be sweeping and problematic.
Enacted as a response to Nazi propaganda prior to World War II, FARA is a disclosure statute which requires agents of foreign principals to register and report certain activities. It is also a criminal statute, carrying hefty fines and jail time for agents who willfully fail to register. For most of its life, FARA sat dormant, but recently DOJ has ramped up enforcement, including the pursuit of several high-profile prosecutions. Now, in the context of unprecedented criminal liability and reputational harm, DOJ’s proposed regulations convolute an already confusing statute.
Commercial Exemption
The “commercial exemption” applies to two classes of activities: (1) private, nonpolitical activities for a foreign principal’s bona fide trade or commerce; and (2) other activities not serving predominantly a foreign interest. Under the current regulations, an agent is exempt if his or her private and nonpolitical activities do not “directly promote” the public or political interests of a foreign government or political party. DOJ proposes to delete the word “directly,” which would require an agent to register for any direct or indirect promotion of public or political interests. This change is ambiguous, opening up commercial activity on behalf of a foreign or foreign-owned enterprise to a subjective interpretation of “indirect promotion” that could now require registration.
Perhaps more concerning are DOJ’s proposed changes to the “other activities” portion of the commercial exemption. With jail time on the line, DOJ implements four categorical exclusions to the exemption, followed by a tortured “totality of the circumstances test,” forcing agents to choose between registration and the enforcer’s discretionary analysis.
First, DOJ would preclude agents from qualifying for the commercial exemption if:
- The intent or purpose of the activities benefit the political or public interests of a foreign government or political party;
- A foreign government or political party influences the activities;
- The principal beneficiary is a foreign government or political party; or
- They conduct activities on behalf of a state-owned enterprise which promote the political or public interests of that foreign government or political party.
Then, if an agent’s activities do not trigger one of the enumerated exclusions, DOJ would undertake a “totality of the circumstances test” to determine if activities serve a predominantly foreign or domestic interest, with the former requiring registration. The “non-exhaustive list” of potential factors strip foreign governments and political parties from the analysis and ask indiscriminately whether or not an activity benefits a foreign interest—ANY foreign interest. These factors include:
- Whether the public and relevant government officials already know about the relationship between the agent and the foreign principal;
- Whether the commercial activities further the commercial interests of a foreign commercial entity more than those of a domestic commercial entity;
- The degree of influence (including through financing) that foreign sources have over domestic non-commercial entities, such as nonprofits;
- Whether the activities concern U.S. laws and policies applicable to domestic or foreign interests; and
- The extent to which any foreign principal influences the activities.
It is alarmingly unclear from this test which activities on behalf of both domestic and foreign entities would require registration and which would not. Not to mention that a “totality of the circumstances” test in the context of a criminal statute raises a host of constitutional concerns under the vagueness doctrine. This new version of the commercial exemption forces an agent to choose between registration and the uncertainty of DOJ inquiry.
Other Notable Provisions
- The NPRM clarifies that the commercial exemption applies to nonprofits and other non-commercial entities. However, this clarity is immediately moot in light of the subjective tests discussed above.
- In a reversal of decades of guidance, the NPRM would expand the commercial exemption to cover persons promoting bona fide recreational or business travel to a foreign country.
- DOJ also proposes for the first time a specific definition of “informational materials,” aims to standardize the labeling requirements for such informational materials, and updates the conspicuous statement regulations to require location information.
Conclusion
Any individual or entity whose rights may be impacted by the NPRM should seriously consider submitting comments in advance of the March 3, 2025 deadline. Although Loper Bright and the Trump Administration may be a challenge to final implementation, DOJ has clearly indicated it intends to ramp up FARA enforcement. Advocating for changes now is preferable to the burden of compliance in the future. Organizations wishing to submit comments can contact Ballard Spahr’s Political and Election Law attorneys for assistance with preparation and filing.
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