The Committee on Foreign Investment in the United States (CFIUS, /ˈsɪfiəs/) is an inter-agency committee in the United States government that reviews the national security implications of foreign investments in the U.S. economy.[1]
CFIUS is chaired by the U.S. Secretary of the Treasury and includes representatives from 16 federal executive departments and agencies, including the Departments of Defense, State, Commerce, and Homeland Security. Additionally, certain White House offices observe and participate as needed, such as the Office of Management & Budget, Council of Economic Advisers, National Security Council, Homeland Security Council, and National Economic Council.[2] CFIUS' jurisdiction includes any transaction that could result in foreign control of a U.S. business, such as a merger, acquisition, or takeover; certain noncontrolling investments in businesses involved in critical technologies, infrastructure, or the handling of sensitive personal data; and certain real estate transactions. At CFIUS' recommendation, the President may suspend or prohibit transactions deemed threatening to U.S. national security.
CFIUS was established in 1975 by President Gerald Ford's Executive Order 11858 initially to study and provide policy recommendations regarding foreign investment. Subsequent fears of Japanese investment—particularly a proposed purchase of Fairchild Semiconductor by Fujitsu—led Congress to pass the Exon–Florio Amendment in 1988, which empowered the President to reject deals pursuant to a review by CFIUS. Deriving its authority Section 721 of the Defense Production Act, the committee was granted a formal statutory basis through the Foreign Investment and National Security Act of 2007 and further strengthened in 2018 by the Foreign Investment Risk Review and Modernization Act.
CFIUS does not acknowledge which deals are under review nor require the involvement of any of the parties of a deal.[3] It utilizes classified information from the U.S. Intelligence Community and does publicly announce its findings. There is no statute of limitations for CFIUS to exert jurisdiction over a transaction.[4] Companies and/or individuals that have failed to make an appropriate filing for their transactions, whether old or new, may sustain a penalty if they did so in gross negligence of, or with intent to evade, the law.[5]
CIFIUS is authorized by law to investigate and review transactions involving foreign investment and/or real estate transactions by foreign persons and/or entities in the United States.[6] 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;[7] close scrutiny is given to acquisitions of critical infrastructure, including public health or telecommunications, among others. CFIUS has investigated "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran",[8] as well as deals from U.S. allies, such as the British BAE Systems' acquisition of United Defense in 2005. The vast majority of transactions submitted to CFIUS are approved without difficulty, but at least one deal involving an Israeli firm was called off when CFIUS began scrutinizing it.[9]
All companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, although the committee may also unilaterally initiate a review and maintains jurisdiction over "non-notified transactions" indefinitely, including those that have since been completed.[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.[10] However, in 2012 about 40% of the 114 cases submitted to CFIUS proceeded to investigation.[11] If more investigation period is necessary beyond allowed by the law, parties are asked to withdraw and refile.
Civil penalties may result in up to $250,000 per violation or the value of the transaction, whichever is greater, on any persons and/or entities that willfully violated CFIUS regulations, and any mitigation orders, conditions, or agreements imposed by CFIUS. The actual penalties depend on CFIUS rules and the specifics of the violation.
The CFIUS serves as an administrative body to refer and advise the president should the transaction need to be rejected or limited. The law only grants the president the authorization and decision to reject or limit the transaction within a 15-day presidential review period based on CFIUS recommendation.[12][13][14][15] If CFIUS approves the transaction, the parties involved will receive a safe harbor with respect to that transaction being investigated provided no CFIUS regulations and any mitigation orders, conditions, or agreements imposed by CFIUS are violated.
In 1975, President Ford created the committee by Executive Order 11858.[16][17] 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:[18]
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.[17][19]
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.[17][20][21] The Exon-Florio Amendment granted the president the authority to block proposed mergers, acquisitions, and takeovers that threaten national security.[17] In 1988, President Ronald Reagan added the attorney general and the director of the Office of Management and Budget by Executive Order 12661.[17][22] 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.[17] 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.[17][23] In 2003, President George W. Bush added the secretary of homeland security by Executive Order 13286.[17][24]
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.[17] 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.[17][25] 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.[17]
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.[26][27] 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.[28]
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.[29] 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."[30]
Press reports have repeatedly criticized CFIUS for its secrecy, referring to the Committee's investigations as a "black box."[31] 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.[citation needed]
In February 2006, prior to the implementation of two major regulatory expansions (FINSA, 2007; FIRRMA, 2018), Richard Perle -- a neoconservative in the Bush Administration's Department of Defense that falsely alleged an Iraqi WMD program -- 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."[32] However, expansions in power and heightened public interest in foreign direct investment since 2006 have reportedly required significantly elevated input from senior U.S. government officials across CFIUS agencies, reaching the highest tiers of government. [33][34]
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.'"[35]
CFIUS Notifications and Investigations, 1988–2022[50][51][52][53][54]
Year | Notifications | Investigations | Notices withdrawn |
Presidential decision |
---|---|---|---|---|
1988 | 14 | 1 | 0 | 1 |
1989 | 204 | 5 | 2 | 3 |
1990 | 295 | 6 | 2 | 4 |
1991 | 152 | 1 | 0 | 1 |
1992 | 106 | 2 | 1 | 1 |
1993 | 82 | 0 | 0 | 0 |
1994 | 69 | 0 | 0 | 0 |
1995 | 81 | 0 | 0 | 0 |
1996 | 55 | 0 | 0 | 0 |
1997 | 62 | 0 | 0 | 0 |
1998 | 65 | 2 | 2 | 0 |
1999 | 79 | 0 | 0 | 0 |
2000 | 72 | 1 | 0 | 1 |
2001 | 55 | 1 | 1 | 0 |
2002 | 43 | 0 | 0 | 0 |
2003 | 41 | 2 | 1 | 1 |
2004 | 53 | 2 | 2 | 0 |
2005 | 65 | 2 | 2 | 0 |
2006 | 111 | 7 | 19 | 2 |
2007 | 138 | 6 | 15 | 0 |
2008 | 155 | 23 | 23 | 0 |
2009 | 65 | 25 | 7 | 0 |
2010 | 93 | 35 | 12 | 0 |
2011 | 111 | 40 | 6 | 0 |
2012 | 114 | 45 | 22 | 1 |
2013 | 97 | 48 | 8 | 0 |
2014 | 147 | 51 | 12 | 0 |
2015 | 143 | 66 | 13 | 0 |
2016 | 172 | 79 | 21 | 1 |
2017 | 237 | 172 | 67 | 1 |
2018 | 229 | 158 | 64 | 1 |
2019 | 231 | 113 | 30 | 1 |
2020 | 187 | 88 | 29 | 1 |
2021 | 272 | 130 | 74 | 0 |
2022 | 286 | 162 | 87 | 0 |