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1 1 (July 25, 2023)

handle is hein.crs/govemib0001 and id is 1 raw text is: Congressional Research Service Informing the IegisI9tive debate since 1914 Updated July 25, 2023 The Committee on Foreign Investment in the United States Overview The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee that is chaired by the Secretary of the Treasury and serves the President in overseeing the national security risks of certain foreign direct investment (FDI) in the U.S. economy. CFIUS jurisdiction includes the review of mergers, acquisitions, and takeovers that could result in foreign control of a U.S. business; certain nonpassive, noncontrolling investments in U.S. businesses involved in critical technologies, critical infrastructure, or sensitive personal data (so-called TID businesses); and certain real estate transactions. At the recommendation of CFIUS, the President has the authority to suspend or prohibit transactions that threaten to impair U.S. national security. The United States is both the world's largest recipient of foreign investment and largest foreign investor. The United States traditionally has supported a rules-based and open investment environment domestically and internationally to promote U.S. economic growth and other policy objectives, such as ensuring that the United States remains a premier destination for FDI. The Biden Administration has stated that the United States is committed to open investment, while ensuring the CFIUS review process remains responsive to an evolving national security landscape and the nature of the investments that pose related risks. Congressional and stakeholder debate over CFIUS activities has intensified amid growing concern that certain foreign investments by firms directed, controlled, or funded by a foreign government, notably the People's Republic of China (PRC), raise additional national security risks. These debates involve oversight of CFIUS reforms mandated by Congress in 2018. The 118th Congress is considering various legislation to address perceived jurisdiction gaps and evolving priorities. Source of CFIUS Authority. CFIUS derives its authorities from Section 721 of the Defense Production Act (DPA), as amended (50 U.S.C. § 4565), and implementing regulations (31 C.F.R. Chapter VIII). CFIUS initially was created and operated through a series of Executive Orders. In 1988, Congress passed the Exon-Florio amendment to the DPA (50 U.S.C. App sect. 2170), which codified the foreign investment review process, at the time largely driven by concerns over Japanese acquisitions of U.S. defense-related firms. In 2007, amid concerns over the proposed foreign purchase of commercial operations of six U.S. ports, Congress passed the Foreign Investment and National Security Act of 2007 (P.L. 110-49), which formally gave CFIUS statutory authority. In 2018, Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA, Title XVII, P.L. 115-232), which expanded CFIUS' jurisdiction and review process in key ways. FIRRMA was intended to strengthen and modernize CFIUS and enhance its ability in particular to address concerns involving noncontrolling investments in TID businesses and real estate transactions in proximity to military installations, or part of maritime ports or airports. Membership of CFIUS. The committee consists of nine members, including the Secretary of the Treasury (chair), the Secretaries of State, Defense, Homeland Security, Commerce, and Energy; Attorney General; U.S. Trade Representative; and Director of the Office of Science and Technology Policy. The Secretary of Labor and Director of National Intelligence (DNI) serve as ex-officio members. Five White House offices are observers or participate in CFIUS, as appropriate, e.g., the Council of Economic Advisers and National Security Council. The President can appoint other officials to serve on a case-by-case basis. CFIUS Review Process The review process begins with notification by the parties to the transaction, which is a voluntary step except in certain cases. Even when notification is not mandatory, firms have an incentive to do so to receive potential safe harbor from CFIUS, which limits future action after a transaction is cleared. Non-notified transactions remain subject indefinitely to future CFIUS review and possible divestment or other actions mandated by the President. As directed by FIRRMA, CFIUS has increased attention and resources to monitoring non-notified transactions of concern. CFIUS may also unilaterally initiate a review. The President can exercise authority to suspend or prohibit a foreign investment, subject to a CFIUS review, if he/she finds that (I) credible evidence exists that the foreign person might take action that threatens to impair national security; and (2) no other laws provide adequate and appropriate authority to protect the national security risks. Notification. A party's notification of a transaction to CFIUS can follow two-tracks: a declaration, an abbreviated, short-form filing (30-day assessment); or a traditional written notice (45-day review). Declarations and notices are generally distinguished by: submission length, timeline for CFIUS' consideration, and CFIUS' options for disposition of the submission. A declaration is mandatory in two cases: (1) where a foreign government is acquiring a substantial interest in U.S. TID businesses; and (2) where a covered transaction involves a U.S. TID business that produces, designs, manufactures, develops, etc. a critical technology subject to export licensing/controls. National Security Review. Treasury and a co-lead agency conduct a 45-day review to determine the effects of the transaction on U.S. national security, informed by a DNI threat analysis. CFIUS' risk-based assessment considers the threat, vulnerabilities, and consequences to national security related to the transaction. In its assessment, CFIUS is to consider an illustrative list of national security factors. Factors include: the domestic production needed for

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