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![handle is hein.crs/govepnb0001 and id is 1 raw text is: Con res&on I Research Serviu
infon mu I rn lati - dent ;o 1914
Updated May 17, 2024
CFIUS Executive Order on Evolving National Security Risks
and CFIUS Enforcement Guidelines
On September 15, 2022, the Biden Administration issued
the first-ever presidential directive defining additional
national security factors for the Committee on Foreign
Investment in the United States (CFIUS) to consider in
evaluating foreign investment transactions. Executive Order
14083 reaffirms a commitment to open investment, while
seeking to ensure CFJUS remains responsive to an
evolving national security landscape and the nature of the
investments that pose related risks. The E.O. informs how
CFJUS reviews strategic transactions-in general and with
regard to key sectors and factors-and could potentially
enhance scrutiny of investments from countries of concern,
such as the People's Republic of China (PRC or China).
Also, in October 2022, the U.S. Department of the Treasury
published CFJUS Enforcement and Penalty Guidelines
(Guidelines) that describe how it approaches enforcement
and penalty determinations for violations by parties subject
to CFJUS action. Some see the Guidelines as a signal that
CFJUS may more proactively seek enforcement actions and
civil monetary penalties. In April 2024, Treasury proposed
regulatory updates intended to further sharpen [CFIUS]
penalty and enforcement authorities.
CFIUS Background
CFIUS is an interagency body, chaired by the U.S. Treasury
Secretary, that serves the President in overseeing the
potential U.S. national security implications of certain foreign
investment in the U.S. economy. It has associated authorities
(50 U.S.C. §4565; 31 C.F.R. Chapter VIII) to review, clear, and,
if required, impose terms of mitigation to address national
security risks before allowing transactions to proceed. CFIUS
also has authority to refer transactions to the President for
action, including prohibiting or compelling divestiture of
transactions that present risks CFIUS determines it cannot
sufficiently mitigate. See CRS In Focus IF 10177, The Committee
on Foreign Investment in the United States.
Executive Order 14083
CFIUS decisionmaking is not public, in part to protect the
confidentiality of parties to a transaction. E.O. 14083 gives
insight into issues CFIUS may be navigating. The E.O.
requires CFIUS to adopt specified approaches and
direction. While the E.O. does not name China, it targets
behaviors common to PRC investments that seek U.S.
capabilities in strategic areas prioritized and funded by
China's industrial policies (see CRS In Focus IF10964).
The E.O. focuses on countries that have a strategic goal of
acquiring critical technology or critical infrastructure that
affects U.S. leadership in areas related to national security.
It also addresses foreign investors' use of U.S. entities and
persons to act as third parties. This focus may signal U.S.
government concerns that China among others may be
using U.S. workarounds to evade scrutiny.
E.O. 14083 makes explicit certain national security factors
that CFIUS is required to consider in reviewing investment
transactions, but does not otherwise change its authorities
or jurisdiction. The E.O. elaborates on two existing
factors in the CFIUS statute:
* Critical U.S. supply chains resiliency-both inside
and outside the defense industrial base. Key sectors
include microelectronics, artificial intelligence,
biotechnology, quantum computing, advanced clean
energy, climate technologies, critical materials,
agriculture, and food security. The E.O. requires CFIUS
to consider U.S. supply chains broadly, not only U.S.
Department of Defense supply chains.
* U.S. technological leadership-with a focus on areas
affecting national security. The E.O. directs the Office
of Science and Technology Policy (OSTP) to publish
periodically a list of sectors, in addition to those the
E.O. identified, fundamental to U.S. technological
leadership. This provision may broaden the scope of
technologies and risk areas CFIUS considers. CFIUS is
also to consider relevant third-party ties of the foreign
person, and whether a transaction could lead to future
advancements and applications in such technologies for
the foreign actor that could undermine U.S. national
security. This framing directs CFIUS to not only
consider how the transfer of a capability to a foreign
acquirer could affect a loss of certain U.S. national
capabilities (with respect to manufacturing capabilities,
services, critical mineral resources, or technologies) but
also how an acquisition could enhance aforeign
acquirer's gain in capabilities. With China's use of U.S.
acquisitions to fill technology gaps, this provision may
require CFIUS to more fully consider how a transaction
advances PRC national capabilities.
CFIUS is also to consider three additional factors:
* Aggregate industry investment trends-whether a
transaction may affect U.S. national security with
regard to the broader industry, and the effect of a series
of investment transactions in which a foreign investor
might gain control of a technology or sector over time.
* Cybersecurity-whether a transaction may provide
foreign persons or third parties access to capabilities or
information databases and systems to conduct cyber](ViewImageLocal?handle=hein.crs/govepnb0001&div=1&collection=&method=preview&ext=.png&size=3)