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1 1 (August 3, 2023)

handle is hein.crs/govemlf0001 and id is 1 raw text is: nf~ormnin Weson I Resedrch Service th er leas ive dibat sin'e 1914 0 Updated August 3, 2023 The Committee on Foreign Investment in the United States The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee chaired by the Secretary of the Treasury. It 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 noncontrolling investments in businesses involved in critical technologies, critical infrastructure, or sensitive personal data (so-called TID U.S. businesses); and certain real estate transactions. At the recommendation of CFIUS, the President may suspend or prohibit transactions that threaten to impair U.S. national security. For additional background, see CRS Report RL33388, The Committee on Foreign Investment in the United States (CFIUS). The United States is the world's largest foreign investor and recipient of foreign investment. U.S. policy supports a rules-based and open investment environment domestically and globally to promote U.S. economic growth and ensure that the United States remains a premier FDI destination. The Biden Administration has stated that it will retain an open U.S. investment posture, 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 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. §2170), which codified the 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 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 to address concerns involving nonpassive, noncontrolling investments in TID business 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: the Secretary of the Treasury (chair), 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. C F IUS 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 TID U.S. businesses; and (2) where a covered transaction involves a TID U.S. 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 projected national defense requirements; the control of domestic industries and commercial activity by foreign citizens; effects on potential sales of military goods, equipment, or technology to a country that supports

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