The Committee on Foreign Investment in the United States (CFIUS, ) is an inter-agency committee in the United States government that reviews the national security implications of foreign investments in the U.S. economy. 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. 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, pursuant to Section 721 of the Defense Production Act, 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. The committee was granted formal statutory authority by 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 relevant parties. It utilizes classified information from the U.S. Intelligence Community and does not publicly announce its findings. There is no statute of limitations for CFIUS to exert jurisdiction over a transaction. Companies and/or individuals that have failed to make an appropriate filing for their transactions, whether ongoing or complete, may sustain a penalty in certain circumstances; additionally, the foreign party may be forced to divest.

Process

CFIUS is legally authorized to investigate and review transactions involving foreign investment and/or real estate transactions by foreign persons and/or entities in the United States. CFIUS' primary concern in most reviews is that technology or funds from an acquired U.S. business might be transferred to a sanctioned country through its acquisition by the foreign party; close scrutiny is particularly given to acquisitions of critical infrastructure, such as public health or telecommunications. CFIUS has investigated "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran", including deals involving U.S. allies, such as the acquisition of United Defense by U.K. company BAE Systems in 2005. The vast majority of transactions submitted to CFIUS are approved without difficulty, but at least one deal involving an Israeli firm was cancelled once CFIUS began scrutinizing it. 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. Upon notification, CFIUS has 45 days 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 within the initial 45-day period without the statutory investigation. However, in 2022, roughly 56% of the 286 cases submitted to CFIUS proceeded to investigation, compared to about 40% of the 114 submitted a decade earlier. If more investigation is necessary beyond the statutory period, parties are asked to withdraw and refile. 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 authority to ultimately reject or limit the transaction within a 15-day presidential review period based on CFIUS recommendation. If the president does not take any action or needs more information than the 15-day presidential review period can provide, CFIUS can extend the presidential review period to additional 15 days or continue its investigation within its current statutory period or reset the statutory period if parties withdraw and refile. The president cannot act on a CFIUS recommendation outside the presidential review period provided by law. 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. 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.

History

In 1975, President Ford created the committee by. 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: 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. 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. The Exon-Florio Amendment granted the president the authority to block proposed mergers, acquisitions, and takeovers that threaten national security. In 1988, President Ronald Reagan added the attorney general and the director of the Office of Management and Budget by. 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. 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. In 2003, President George W. Bush added the secretary of homeland security by. 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. In 2008, President Bush added the United States trade representative and the director of the Office of Science and Technology Policy by implementing the law. 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. 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. These include real estate investing, minority investments through private equity that provide access to U.S. tech companies' business information, and U.S.-Chinese joint ventures. CFIUS also gained more appropriations, staffing, authority to enforce a longer review period, and formalizes more thorough material agreement disclosure. Trump's successor, President Joe Biden signed an executive order in September 2022 directing CFIUS to sharpen its scrutiny of foreign investment that could impact cyber security, quantum computing, biotechnology, and sensitive data. CFIUS has gained greater importance within the U.S. national security apparatus, primarily in the context of the ongoing trade war between the U.S. and China. The New York Times described the Committee as "powerful and unseen", observing its power to "kill the biggest multibillion-dollar global deals". The number of deals reviewed by CFIUS has increased markedly since 2018, as have the number of unilateral inquiries of non-notified deals.

Reception

Press reports have repeatedly criticized CFIUS for its secrecy, referring to the Committee's investigations as a "black box." Advocates for its current level of confidentiality argue that there are few alternatives, as CFIUS' work is based on classified national security information, which cannot be disclosed to the public. 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." 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. 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.

Notable cases

Notifications and investigations

CFIUS Notifications and Investigations, 1988–2022