By: Fred Dombo, Nossaman LLP

On Thursday, January 2, 2025, the US Department of Justice (“DOJ”) published in the Federal Register its proposed rulemaking on the Foreign Agents Registration Act (“FARA”), starting a 60-day clock for the public to comment. The concern from the DOJ’s December 13, 2021, Advance Notice of Proposed Rulemaking was it would go beyond “Clarification and Modernization” of FARA to significantly narrow the scope of the commercial exemptions from registration and reporting under FARA. The DOJ was quoted in the media as saying a company lobbying for its own financial purpose in the US would remain exempt from registering, even if their actions had incidental benefits to their foreign parent. However, our concern was validated with this proposed rule, which seems designed to cause many private businesses to file under FARA rather than the Lobbying Disclosure Act (“LDA”).
The analysis of FARA’s commercial exemptions and LDA exemption has been on whether the lobbying is for the benefit of a foreign government or political party. It focused in part on the involvement of agents of a foreign government or political party. The proposed rule would shift that focus to require an analysis of whether the lobbying activity serves a predominantly foreign interest or a domestic interest.
There are two “commercial exemptions” from FARA that have different requirements and limitations. The first is for representation of a private entity, “in furtherance of their bona fide trade or commerce,” so long as the representation is not “political” (e.g., it may not involve lobbying, among other activities). Those availing themselves of this exemption must not directly promote the public or political interests of a foreign government or political party. Since this exemption is not available to those engaged in lobbying, many NILE members rely on the second commercial exemption, for representation, “not serving predominantly a foreign interest.” It is currently available where there are “political” activities (e.g., lobbying), including where the commercial entity being represented has foreign government or political party ownership. However, for the exemption to apply, no agent of the foreign government or political party can direct the political activities (including the lobbying), and those activities must not promote the public or political interests of a foreign government or party.
Many NILE members may also rely on the exemption for those who have in fact engaged in lobbying activities and who are registered with the Senate and House under the LDA (the so-called “LDA Exemption”). That exemption may not be relied upon where a foreign government or political party is the “principal beneficiary” of the lobbying. While the term principal beneficiary is undefined in the statute, through advisory opinions the DOJ has interpreted it to include (and render the exemption unavailable) in situations where a foreign government or political party is a “principal beneficiary” of the lobbying.
With the newly proposed amendments, the DOJ would narrow the applicability of the second commercial exemption. It expressly declined proposals to make this exemption available in situations where there is no intention by the agent (lobbyist) to directly promote foreign political interests and no contact with foreign actors. It stated that doing so would contradict DOJ’s interpretation that the exemption requires the political (lobbying) activities not serve predominantly – intentionally or not – a foreign interest. The DOJ also made clear the intent of an agent/lobbyist is relevant only to the extent that it may show activities do in fact serve predominantly a foreign interest. DOJ rejected the idea of looking at the intent of the agent because it would create a subjective test that would require DOJ to rebut an agents’ subjective claims regarding the representation.
The DOJ proposed three changes to the second commercial exemption, for an agent not serving predominantly a foreign interest. It would make clear that the exemption applies to entities that are not commercial, as well as those that are, so long as the predominant interest being served is not foreign. DOJ would narrow the exemption by providing four exclusions from it. DOJ also would provide a non-exhaustive list of factors to potentially help determine, given the totality of the circumstances, when the interest being served is domestic rather than foreign and the exemption would apply.
The first step in the process proposed by DOJ is to clear each of the four exclusions from the commercial exemption available to agents ‘not serving predominantly a foreign interest.’ The exclusions focus on the relationship between the activities of the agent and a foreign government or political party, providing that certain facts will establish whether the predominant interest served is foreign. An agent would be categorically precluded from the exemption (and required to file under FARA) if a foreign government or political party is the intended beneficiary of the activities; influences the activities; is the principal beneficiary of the activities; or directs or supervises the activities the agent undertakes.
In its explanation of the first exclusion the DOJ acknowledged there may be multiple motivations in any given situation, but there is at least a rebuttable presumption that the foreign interest predominates where there is any intent at all to promote the foreign interest. In the second exclusion, the DOJ will infer that activities influenced by a foreign government or political party are predominantly for the foreign government or party, regardless of whether such influence is exerted directly or indirectly through an intermediary. The third proposed exclusion would apply to an agent/lobbyist where circumstantial evidence indicates the foreign government or party is directing or controlling the activities. The last exclusion is for circumstances where a foreign government or political party indirectly supervises, directs, controls of finances – in whole or substantial part - the activities of the agent through another person or entity.
If none of those four exclusions apply, the DOJ may still conclude the second commercial exemption is not available to an agent/lobbyist based on a list of non-exhaustive factors designed to indicate whether the interest being served is domestic of foreign. Those factors include whether:
The public and government know about the relationship/representation.
The commercial activities further the commercial interests of a foreign commercial entity more than those of a domestic commercial entity.
The degree of influence the foreign sources have over domestic non-commercial entities (e.g., non-profits).
The activities concern US laws and policies applicable to domestic or foreign interests; and,
To what extent any foreign principal influences the activities.
As mentioned above, there is a 60-day comment deadline. The Trump White House and (assuming she is confirmed as expected), incoming Attorney General Pam Bondi will likely have input. It remains to be seen whether Trump will pair this back or view it as an opportunity to gain leverage on foreign commercial interests.

Fred Dombo serves as chair of Nossaman's Government Relations & Regulation Group. He combines experience as an aide to Members of the U.S. House of Representatives Committees on Appropriations and
Energy & Commerce with 25 years of private practice to provide clients with cost-effective advice on the legal and political implications of their government relations activities. Fred advises clients on local, state and federal pay-to-play, campaign and lobby laws, gift rules, ethics compliance and investigations. His practice includes counsel to nonprofit advocacy organizations with respect to their general operations, as well as their compliance requirements with Internal Revenue Service regulations and the Foreign Corrupt Practices Act. Fred also serves as a lobbyist for private and public sector clients on authorization and appropriations issues. He speaks widely on ethics and election law reform issues
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