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1 1 (October 3, 2019)

handle is hein.crs/govbbgh0001 and id is 1 raw text is: Congressional Research Service I ft r rgthcIegittiv~debate~anco 1914 S Updated October 3, 2019 CFIUS Reform: Foreign Investment National Security Reviews Overview Some Members of Congress, the Trump Administration, and some U.S. businesses have raised concerns over the risks to continued U.S. technological leadership to support national defense and economic security due to growing foreign direct investment (FDI), primarily by Chinese firms, in U.S. high-tech companies. On August 13, 2018, President Trump signed into law new rules governing foreign investment national security reviews. Known as the Foreign Investment Risk Review Modernization Act (FIRRMA) of 2018 (Title XVII, P.L. 115-232), the legislation amends the current process for the Committee on Foreign Investment in the United States (CFIUS) (under P.L. 110-49) to review, on behalf of the President, the national security implications of FDI in the United States. CFIUS is an interagency body comprised of nine Cabinet members, two ex officio members, and others as appointed that assists the President in overseeing the national security risks of FDI in the U.S. economy. Since its inception in 1975, CFIUS has confronted shifting concepts of national security and a changing global economic order that is marked by the rise of such emerging economies as China and state-led firms that are playing a more active role in the global economy. The FIRRMA-amended CFIUS process maintains the President's authority to block or suspend proposed or pending foreign mergers, acquisitions, or takeovers of U.S. entities, including throughjoint ventures, that threaten to impair the national security. To exercise his authority under CFIUS, the President must (1) conclude that other U.S. laws are inadequate or inappropriate to protect national security; and (2) have credible evidence that the foreign interest exercising control might take action that threatens to impair U.S. national security. In addition, final determinations by the President are not subject to judicial review. The Foreign Investment Risk Review Modernization Act of 2018 FIRRMA aims to strengthen and modernize the current CFIUS process for reviewing potential effects of foreign investment transactions on U.S. national security, last updated in 2007. Certain provisions are immediately to take effect, while others, including some related to the expanded scope of CFIUS, are to be subject to further regulations. Some experts have suggested that the broad changes under FIRRMA could potentially lead CFIUS to take a more assertive role that emphasizes both U.S. economic and national security interests, particularly relative to the development of emerging or leading-edge technology. FIRRMA maintains core components of the current CFIUS three-step process for evaluating proposed or pending investments in U.S. firms, but increases the allowable time for reviews and investigations: (1) a 30-day declaration filing; (2) a 45-day national security review (from 30 days), including an expanded time limit for analysis by the Director of National Intelligence (from 20 to 30 days); (3) a 45-day national security investigation, with an option for a 15 day extension for extraordinary circumstances; and a 15-day Presidential determination (unchanged). To date, prior to FIRRMA, Presidents used CFIUS to block five foreign investment transactions. Transactions Blocked by President 1990: Acquisition of Mamco Manufacturing by China National Aero-Technology Import and Export Corporation. 2012: Acquisition of Oregon wind farm project by Rails Corporation, owned by Chinese company Sany Group. 2016: Acquisition of Aixtron, a German-based semiconductor firm with U.S. assets, by Chinese firm Fujian Grand Chip Investment Fund. 2017: Acquisition of Lattice Semiconductor Corp. by Canyon Bridge Capital Partners, a Chinese investment fund. 2018: Acquisition of semiconductor chip maker Qualcomm by Singapore-based Broadcom. FIRRMA broadens CFIUS' role by explicitly including for review certain real estate transactions in close proximity to a military installation or U.S. government facility or property of national security sensitivities; any noncontrolling investment in U.S. businesses involved in critical technology, critical infrastructure, or collecting sensitive data on U.S. citizens; any change in foreign investor rights; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS. Proposed regulations were published September 17, 2019. Without mentioning specific countries, FIRRMA allows CFIUS potentially to discriminate among foreign investors by country of origin and transactions tied to certain countries in reviewing certain investment transactions, pending specific criteria defined by regulations. FIRRMA also shifts the filing requirement for foreign firms from voluntary to mandatory in certain cases and provides a two-track method for reviewing transactions. Some firms are permitted to file a declaration to CFIUS and could receive an expedited review process, while transactions involving a foreign person in which a foreign government has, directly or indirectly, a substantial interest (to be defined by regulations, but not including stakes of less than https://crsreportscorg ressgo

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