The Committee on Foreign Investment in the United States (CFIUS, /ˈsɪfiəs/) is an inter-agency committee of the United States government which reviews the national security implications of foreign investments in U.S. companies or operations, using classified information from the United States Intelligence Community.

CFIUS is chaired by the United States Secretary of the Treasury, and it includes representatives from 16 U.S. executive departments and agencies, including the Departments of Defense, State and Commerce , as well as (most recently) the Department of Homeland Security. Additionally, certain White House offices observe and participate, if needed. These offices include the Office of Management & Budget, Council of Economic Advisers, National Security Council, Homeland Security Council, and National Economic Council.[1]

CFIUS was first established in 1975 by President Gerald Ford's Executive Order 11858, initially to study foreign investment. But during the 1980s, fear of Japanese investment (and in particular a proposed purchase of Fairchild Semiconductor by Fujitsu) led Congress to pass the Exon–Florio Amendment in 1988, which empowered CFIUS to reject deals. CFIUS is further codified under law via Section 721 of the Defense Production Act and Foreign Investment and National Security Act of 2007. CFIUS does not acknowledge which deals are under review, does not require the involvement of any of the parties of a deal, and does not publicly announce its findings.[2] There is no statute of limitations for CFIUS to exert jurisdiction over a transaction. Companies/persons that failed to make an appropriate filing for old and/or new transactions may result in a penalty if done so in gross negligence or intent to evade the law.[3]

Process

All companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted.

CFIUS' primary concern in most reviews is that technology or funds from an acquired U.S. business might be transferred to a sanctioned country as a result of being acquired by a foreign acquirer.[4]

CFIUS reviews begin with a 45-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment. Most transactions submitted to CFIUS are approved without the statutory investigation.[5] However, in 2012 about 40% of the 114 cases submitted to CFIUS proceeded to investigation.[6]

CFIUS provides close scrutiny to acquisitions of critical infrastructure, including public health or telecommunications, among others.[7]

CFIUS has looked at the "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran."[8] CFIUS reviews even deals with firms from U.S. allies, such as BAE Systems' early-2005 acquisition of United Defense. This and the vast majority of transactions submitted to CFIUS are approved without difficulty. But at least one deal has been called off when CFIUS began to take a closer look.[9]

History

In 1975, President Ford created the committee by Executive Order 11858.[10][11] It was composed of the secretary of the treasury as the chairman, secretary of state, secretary of defense, secretary of commerce, the assistant to the president for economic affairs, and the executive director of the Council on Foreign Economic Policy. The executive order also stipulated that the committee would have "primary continuing responsibility within the Executive Branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment." In particular, CFIUS was directed to:[12]

  1. arrange for the preparation of analyses of trends and significant developments in foreign investments in the United States;
  2. provide guidance on arrangements with foreign governments for advance consultations on prospective major foreign governmental investments in the United States;
  3. review investments in the United States which, in the judgment of the committee, might have major implications for United States national interests; and
  4. consider proposals for new legislation or regulations relating to foreign investment as may appear necessary.

In 1980, President Jimmy Carter added the United States trade representative and substituted the chairman of the Council of Economic Advisers for the executive director of the Council on International Economic Policy by Executive Order 12188.[11][13]

In 1988, the Exon–Florio Amendment was the result of national security concerns in Congress caused by the proposed purchase of Fairchild Semiconductor by Fujitsu.[11][14][15] The Exon-Florio Amendment granted the president the authority to block proposed mergers, acquisitions, and takeovers that threaten national security.[11] In 1988, President Ronald Reagan added the attorney general and the director of the Office of Management and Budget by Executive Order 12661.[11][16] Reagan also delegated the review process to the Committee on Foreign Investment in the United States in the same executive order, utilizing the statutory authority the U.S. Congress enacted to enable the president to review foreign investments, in the form of Exon-Florio Amendment.

In 1992, the Byrd Amendment required CFIUS to investigate proposed mergers, acquisitions, and takeovers where the acquirer is acting on behalf of a foreign government and affects national security.[11] In 1993, President Bill Clinton added the director of the Office of Science and Technology Policy, the national security advisor, and the assistant to the president for economic policy by Executive Order 12860.[11][17] In 2003, President George W. Bush added the secretary of homeland security by Executive Order 13286.[11][18]

The Foreign Investment and National Security Act of 2007 (FINSA) established the committee by statutory authority, reduced membership to six cabinet members and the attorney general, added the secretary of labor and the director of national intelligence, and removed seven White House appointees.[11] In 2008, President Bush added the United States trade representative and the director of the Office of Science and Technology Policy by Executive Order 13456 implementing the law.[11][19] FINSA requires the president to conduct a national security investigation of certain proposed investment transactions, provides a broader oversight role for Congress, and keeps the president as the only officer with the authority to suspend or prohibit mergers, acquisitions, and takeovers.[11]

In 2018, President Donald Trump signed the Foreign Investment Risk Review Modernization Act (FIRRMA), which granted CFIUS new powers over particular types of FDI that mainly concern Chinese investors.[20][21] These include real estate investing, areas where minority investment through private equity provide access to US tech companies' business information, and US-Chinese joint ventures. CFIUS also gained more appropriations, staffing, authority to enforce a longer review period, and formalizes more thorough material agreement disclosure.[22]

In September 2022, President Joe Biden signed an executive order directing CFIUS to sharpen its scrutiny of foreign investment that could impact cyber security, quantum computing, biotechnology, and sensitive data.[23] The Committee has been noted in the press as quickly gaining importance and attention in the national security world, with the New York Times calling it "powerful and unseen."[24]

Opinions on the committee

Press reports have repeatedly criticized CFIUS for its secrecy, referring to the Committee's investigations as a "black box."[25] Advocates for its current level of confidentiality argue that there are few alternatives, as CFIUS's work is based on classified national security information, which cannot be disclosed to the public.

In February 2006, Richard Perle gave his opinion on CFIUS when he related to CBS News his experience with the panel during the Reagan administration: "The committee almost never met, and when it deliberated it was usually at a fairly low bureaucratic level." He also added, "I think it's a bit of a joke if we were serious about scrutinizing foreign ownership and foreign control, particularly since 9/11."[26][27]

Others emphasize the crucial role that foreign direct investment plays in the U.S. economy, and the discouraging effect that heightened scrutiny may cause. Foreign investors in the United States, much like U.S. investors elsewhere, bring expertise and infusions of capital into often-struggling sectors of the U.S. economy. In a February 2006 interview with the New York Times, another former Reagan administration official, Clyde V. Prestowitz Jr., noted that the United States "need[s] a net inflow of capital of $3 billion a day to keep the economy afloat. ... Yet all of the body language here is 'go away.'"[28]

Notable cases

  • 1990: President George H. W. Bush voided the sale of MAMCO Manufacturing to a Chinese agency, ordering China National Aero-Technology Import & Export Corporation to divest themselves of Seattle-based MAMCO[29]
  • 2000: Japanese NTT Communications' acquisition of Verio
  • 2005: The acquisition of IBM's personal computer and laptop unit by Lenovo
  • 2005: The acquisition of Sequoia Voting Systems of Oakland, California, by Smartmatic, a Dutch company contracted by Hugo Chávez's government to replace that country's elections machinery[30]
  • 2005: In June 2005 a CNOOC Group (a major Chinese state-owned oil and gas corporation) subsidiary (CNOOC limited, publicly listed on the New York NYSE and Hong Kong stock exchanges) made an $18.5 billion cash offer for American oil company Unocal Corporation, topping an earlier bid by ChevronTexaco. While this offer was not opposed by the CFIUS and the Bush Administration, it was criticized by several Congressmen and, following a vote in the United States House of Representatives, the bid was referred to President George W. Bush, on the grounds that its implications for national security needed to be reviewed. On July 20, 2005 Unocal Corporation announced that it had accepted a buyout offer from ChevronTexaco for $17.1 billion, which was submitted to Unocal stockholders on August 10. On August 2 CNOOC Limited announced that it had withdrawn its bid, citing political tensions in the United States.
  • 2006: State-owned Dubai Ports World's planned acquisition of P&O, the lessee and operator of many terminals, mostly for container ships, in several ports, including in New York-New Jersey and others in the US. This acquisition was initially approved by the CFIUS and then President G.W. Bush, but was eventually opposed by Congress (Dubai Ports World controversy).
  • 2010: Russian interests acquired a controlling interest in Uranium One, which has 20 percent of U.S. uranium extraction capacity.[31] The Nuclear Regulatory Commission approved the deal because Uranium One only has a license for uranium recovery, not uranium export.[32]
  • 2012: Ralls Corporation, owned by the Chinese Sany Group,[33] was ordered by President Barack Obama to divest itself of four small wind farm projects located too close to a U.S. Navy weapons systems training facility in Boardman, Oregon.[34]
  • 2016: President Obama blocked the buying by a Chinese company of the U.S. assets of the German company Aixtron SE.[35] Separately, the New York Times reported that "United States officials blocked" a $2.6 billion deal by Philips to sell Lumileds division to GO Scale Capital and GRS Ventures over concerns regarding Chinese applications of gallium nitride.[36]
  • 2017: President Trump blocked the acquisition by a Chinese purchaser of Lattice Semiconductor.[37]
  • 2018: President Trump blocked Singapore-based Broadcom Limited from purchasing Qualcomm in a hostile takeover, citing national security concerns raised by CFIUS.[38]
  • 2019: CFIUS requested that Chinese gaming company Beijing Kunlun Tech Co Ltd. sell Grindr, citing national security concerns regarding a database of user's location, messages, and HIV status, after the company acquired the gay dating app in 2018 without CFIUS review. A deadline for the sale has been set for June 2020.[39]
  • 2020: President Trump threatened to ban TikTok via International Emergency Economic Powers Act and the National Emergencies Act,[40] but in August declared a September 15 deadline for a sale to an American company. TikTok successfully challenged the ban via federal court, and the Biden administration asked to delay the government's appeal of a federal district court judge's December injunction against the TikTok ban as President Biden undertakes a broad review of his predecessor's efforts to address potential security risks from Chinese tech companies and to allow CFIUS to review TikTok via its previous 2017 acquisition of musical.ly.[41][42]

Notifications and investigations

CFIUS Notifications and Investigations, 1988–2021[43][44][45][46][47]


[48]


Year Notifications Investigations Notices
withdrawn		 Presidential
decision
198814101
1989204523
1990295624
1991152101
1992106211
199382000
199469000
199581000
199655000
199762000
199865220
199979000
200072101
200155110
200243000
200341211
200453220
200565220
20061117192
20071386150
200815523230
2009652570
20109335120
20111114060
201211445221
2013974880
201414751120
201514366130
201617279211
2017237172671
2018229158641
2019231113301
202018788291
2021272130740

See also

References

  1. ↑ https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius/cfius-overview#:~:text=The%20members%20of%20CFIUS%20include,Department%20of%20Homeland%20Security Archived March 30, 2023, at the Wayback Machine
  2. ↑ Granville, Kevin (March 5, 2018). "Cfius, Powerful and Unseen, Is a Gatekeeper on Major Deals". The New York Times. Archived from the original on March 31, 2019. Retrieved April 1, 2019.
  3. ↑ "CFIUS Builds on 2022 Activity, Promising More Investor Oversight". Archived from the original on March 13, 2023. Retrieved March 13, 2023.
  4. ↑ Schlager, Ivan; Beahn, John; Gafni, Jonathan; Tuesley, Malcolm; Gruenspecht, Joshua; Kabealo, John. "Implications of National Security Reviews on Foreign Acquisitions of US Businesses". Transaction Advisors. ISSN 2329-9134. Archived from the original on March 4, 2016. Retrieved April 29, 2015.
  5. ↑ Sills, Gay Hartwell (2006). "Committee on Foreign Investments in the United States (CFIUS)". U.S. Department of Treasury, Office of the Assistant Secretary International Affairs, Office of International Investment. Archived from the original on March 25, 2006. Retrieved March 26, 2006.
  6. ↑ Steptoe & Johnson LLP (January 13, 2014). "CFIUS Report: Significant Increase In Scuttled Deals". Archived from the original on February 1, 2014. Retrieved January 20, 2014.
  7. ↑ Richardson, Jeffrey. "A Modern Approach to Tackling CFIUS Concerns". Transaction Advisors. ISSN 2329-9134. Archived from the original on March 4, 2016. Retrieved July 21, 2015.
  8. ↑ Rash, Wayne (January 24, 2005). "Suppose IBM-Lenovo Deal Doesn't Happen". eWeek.com.
  9. ↑ McCarthy, Ellen (March 24, 2006). "Purchase by Israeli Firm Called Off". Washington Post. p. A06. Archived from the original on November 19, 2017. Retrieved September 20, 2017.
  10. ↑ Executive Order 11858 of May 7, 1975, 40 FR 20263
  11. 1 2 3 4 5 6 7 8 9 10 11 United States House Committee on Ways and Means (December 2010). Overview and Compilation of U.S Trade Statues. Vol. I. Government Printing Office. pp. 290–291. ISBN 978-0-16-087511-3. Archived from the original on May 7, 2017. Retrieved October 29, 2016.
  12. ↑ Jackson, James K. (July 3, 2018). The Committee on Foreign Investment in the United States (CFIUS) (PDF). Washington, DC: Congressional Research Service. p. 3. Archived (PDF) from the original on July 29, 2018. Retrieved July 8, 2018.
  13. ↑ Executive Order 12188 of January 2, 1980, 45 FR 969
  14. ↑ Omnibus Trade and Competitiveness Act of 1988, sec. 5021, Pub. L. 100–418, 102 Stat. 1425, enacted August 23, 1988
  15. ↑ "Cold Feet: Fujitsu drops its Fairchild bid". Time. March 30, 1987. Archived from the original on December 14, 2011. Retrieved October 14, 2011.
  16. ↑ Executive Order 12661 of December 27, 1988, 54 FR 779
  17. ↑ Executive Order 12860 of September 3, 1993, 58 FR 47201
  18. ↑ Executive Order 13286, sec. 57, of February 28, 2003
  19. ↑ Executive Order 13456 of January 23, 2008
  20. ↑ Rappeport, Alan (October 10, 2018). "In New Slap at China, U.S. Expands Power to Block Foreign Investments". The New York Times. ISSN 0362-4331. Archived from the original on January 4, 2020. Retrieved December 31, 2019.
  21. ↑ Yoon-Hendricks, Alexandra (August 1, 2018). "Congress Strengthens Reviews of Chinese and Other Foreign Investments". The New York Times. ISSN 0362-4331. Archived from the original on October 1, 2019. Retrieved December 31, 2019.
  22. ↑ Jalinous, Farhad; Mildorf, Karalyn; Schomig, Keith (August 13, 2018). "CFIUS Reform Becomes Law: What FIRRMA Means for Industry". White & Case. Archived from the original on April 1, 2019. Retrieved April 1, 2019.
  23. ↑ Alper, Alexandra; Holland, Steve (September 15, 2022). "Biden tells foreign investment panel to screen deals for data, cyber risks". Reuters. Archived from the original on September 16, 2022. Retrieved September 16, 2022.
  24. ↑ Granville, Kevin (March 5, 2018). "Cfius, Powerful and Unseen, Is a Gatekeeper on Major Deals". The New York Times. ISSN 0362-4331. Archived from the original on March 31, 2019. Retrieved January 31, 2023.
  25. ↑ "All About CFIUS, the Watchdog Biden May Use to Review Musk's Ventures". Bloomberg.com. October 21, 2022. Retrieved January 31, 2023.
  26. ↑ "Bush, Congress In Dark About Port Deal". CBS News. February 22, 2006. Archived from the original on March 10, 2006.
  27. ↑ Matthews, Chris (February 23, 2006). "Bush kep in the dark about ports deal". MSNBC. Archived from the original on July 29, 2017. Retrieved July 29, 2017.
  28. ↑ Porter, Eduardo (March 10, 2006). "Dubai Deal's Collapse Prompts Fears Abroad on Trade With U.S." The New York Times. Archived from the original on January 11, 2014. Retrieved February 21, 2017. (free registration required to access content)
  29. ↑ Bush, George (February 1, 1990). "Message to the Congress on the China National Aero-Technology Import and Export Corporation Divestiture of MAMCO Manufacturing, Incorporated". Federation of American Scientists. Archived from the original on April 27, 2014. Retrieved September 28, 2012.
  30. ↑ Golden, Tim (October 31, 2006). "Voting Machine Company Submits to Inquiry". The New York Times. Archived from the original on October 23, 2016. Retrieved April 30, 2010.
  31. ↑ Qiu, Linda (June 30, 2016). "Donald Trump inaccurately suggests Clinton got paid to approve Russia uranium deal". Politifact. Archived from the original on August 3, 2017. Retrieved July 29, 2017.
  32. ↑ "NRC Approves Transfer of Control of Uranium Recovery Licenses to Russian Firm" (PDF). January 29, 2017. Archived from the original (PDF) on January 29, 2017. Retrieved October 17, 2017.
  33. ↑ Banerjee, Neela, and Don Lee, "Obama blocks Chinese firm's Oregon wind farm projects" Archived October 2, 2012, at the Wayback Machine, Los Angeles Times, September 29, 2012. Retrieved October 2, 2012.
  34. ↑ "Obama blocks Chinese purchase of small Oregon wind farm project". The Oregonian. Associated Press. September 28, 2012. Archived from the original on October 4, 2012. Retrieved September 28, 2012.
  35. ↑ McLaughlin, David (December 2, 2016). "Obama Blocks Chinese Takeover of Aixtron as U.S. Security Risk". Bloomberg News. Archived from the original on February 2, 2017. Retrieved February 27, 2017.
  36. ↑ Paul Mozur; Jane Perlez (February 5, 2016). "Concern Grows in U.S. Over China's Drive to Make Chips". The New York Times. p. B1. Archived from the original on February 27, 2017. Retrieved February 27, 2017.
  37. ↑ Swanson, Ana (September 13, 2017). "Trump Blocks China-Backed Bid to Buy U.S. Chip Maker". The New York Times. Archived from the original on December 11, 2017. Retrieved December 4, 2017.
  38. ↑ "Trump Blocks Broadcom Takeover of Qualcomm on Security Risks". Bloomberg.com. March 12, 2018. Archived from the original on March 13, 2018. Retrieved March 13, 2018.
  39. ↑ "China's Kunlun Tech agrees to U.S. demand to sell Grindr gay dating app". Reuters.com. May 10, 2019. Archived from the original on October 10, 2019. Retrieved November 25, 2019.
  40. ↑ "Executive Order on Addressing the Threat Posed by TikTok – the White House". Archived from the original on March 3, 2021. Retrieved March 23, 2023.
  41. ↑ "Biden revokes and replaces Trump executive orders that banned TikTok". CNBC. June 9, 2021. Archived from the original on March 23, 2023. Retrieved March 23, 2023.
  42. ↑ Leary, John D. McKinnon and Alex (February 10, 2021). "WSJ News Exclusive | TikTok Sale to Oracle, Walmart Is Shelved as Biden Reviews Security". Wall Street Journal. Archived from the original on April 20, 2021. Retrieved April 20, 2021.
  43. ↑ Graham, Edward M; David M. Marchick (May 2006). US National Security and Foreign Direct Investment. Peterson Institute. p. 57. ISBN 978-0-88132-391-7.
  44. ↑ CFIUS, "Covered Transactions, Withdrawals, and Presidential Decisions 2006-2008" Archived 2009-08-06 at the Wayback Machine, Accessed March 27, 2009.
  45. ↑ CFIUS, "Covered Transactions, Withdrawals, and Presidential Decisions 2008-2010" Archived September 21, 2012, at the Wayback Machine, Accessed August 25, 2011.
  46. ↑ Jackson, James (October 23, 2019). "The Committee on Foreign Investment in the United States (CFIUS)" (PDF). No. RL33388. Congressional Research Service. p. 35. Archived (PDF) from the original on July 29, 2018. Retrieved November 1, 2019.
  47. ↑ CFIUS Annual Report to Congress, Calendar Year 2018, https://home.treasury.gov/system/files/206/CFIUS-Public-Annual-Report-CY-2018.pdf Archived June 11, 2020, at the Wayback Machine Accessed May 25, 2020
  48. ↑ CFIUS Annual Report to Congress, Calendar Year 2021, https://home.treasury.gov/system/files/206/CFIUS-Public-AnnualReporttoCongressCY2021.pdf Archived November 2, 2022, at the Wayback Machine, Accessed October 21, 2022.
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