CFIUS was first established in 1975 by President
Gerald Ford's
Executive Order11858, initially to study foreign investment. But during the 1980s, fear of Japanese investment (and in particular a proposed purchase of
Fairchild Semiconductor by
Fujitsu) led Congress to pass the
Exon–Florio Amendment in 1988, which empowered CFIUS to reject deals. CFIUS is further codified under law via Section 721 of the
Defense Production Act and
Foreign Investment and National Security Act of 2007. CFIUS does not acknowledge which deals are under review, does not require the involvement of any of the parties of a deal, and does not publicly announce its findings.[3] There is no statute of limitations for CFIUS to exert jurisdiction over a transaction. Companies and/or persons that have failed to make an appropriate filing for their transactions, whether old or new, may sustain a penalty if they did so in gross negligence of, or with intent to evade, the law.[4]
Process
All companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted.
CFIUS' primary concern in most reviews is that technology or funds from an acquired U.S. business might be transferred to a sanctioned country as a result of being acquired by a foreign acquirer.[5]
CFIUS reviews begin with a 45-day decision 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 without the statutory investigation.[6] However, in 2012 about 40% of the 114 cases submitted to CFIUS proceeded to investigation.[7]
CFIUS provides close scrutiny to acquisitions of critical infrastructure, including public health or telecommunications, among others.[8]
CFIUS has looked at the "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran."[9] CFIUS reviews even deals with firms from U.S. allies, such as
BAE Systems' early-2005 acquisition of
United Defense. This and the vast majority of transactions submitted to CFIUS are approved without difficulty. But at least one deal has been called off when CFIUS began to take a closer look.[10]
History
In 1975, President Ford created the committee by
Executive Order11858.[11][12] 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:[13]
arrange for the preparation of analyses of trends and significant developments in foreign investments in the United States;
provide guidance on arrangements with foreign governments for advance consultations on prospective major foreign governmental investments in the United States;
review investments in the United States which, in the judgment of the committee, might have major implications for United States national interests; and
consider proposals for new legislation or regulations relating to foreign investment as may appear necessary.
In September 2022, President
Joe Biden signed an executive order directing CFIUS to sharpen its scrutiny of foreign investment that could impact cyber security, quantum computing, biotechnology, and sensitive data.[24] The Committee has been noted in the press as quickly gaining importance and attention in the national security world, with the New York Times calling it "powerful and unseen."[25]
Opinions on the committee
Press reports have repeatedly criticized CFIUS for its secrecy, referring to the Committee's investigations as a "black box."[26] Advocates for its current level of confidentiality argue that there are few alternatives, as CFIUS's 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."[27] 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. [28][29]
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.'"[30]
2005: In June 2005 a
CNOOC Group (a major Chinese state-owned oil and gas corporation) subsidiary (CNOOC limited, publicly listed on the New York NYSE and Hong Kong stock exchanges) made an $18.5 billion cash offer for American oil company
Unocal Corporation, topping an earlier bid by
ChevronTexaco. While this offer was not opposed by the CFIUS and the Bush Administration, it was criticized by several Congressmen and, following a vote in the United States House of Representatives, the bid was referred to President
George W. Bush, on the grounds that its implications for national security needed to be reviewed. On July 20, 2005
Unocal Corporation announced that it had accepted a buyout offer from
ChevronTexaco for $17.1 billion, which was submitted to Unocal stockholders on August 10. On August 2 CNOOC Limited announced that it had withdrawn its bid, citing political tensions in the United States.
2006: State-owned
Dubai Ports World's planned acquisition of
P&O, the lessee and operator of many terminals, mostly for container ships, in several ports, including in New York-New Jersey and others in the US. This acquisition was initially approved by the CFIUS and then President G.W. Bush, but was eventually opposed by Congress (
Dubai Ports World controversy).
2010: Russian interests acquired a controlling interest in
Uranium One, which has 20 percent of U.S. uranium extraction capacity.[33] The Nuclear Regulatory Commission approved the deal because Uranium One only has a license for uranium recovery, not uranium export.[34]
2012: Ralls Corporation, owned by the Chinese
Sany Group,[35] was ordered by President
Barack Obama to divest itself of four small
wind farm projects located too close to a U.S. Navy weapons systems training facility in
Boardman, Oregon.[36]
2016: President Obama blocked the buying by a Chinese company of the U.S. assets of the German company Aixtron SE.[37] Separately, the New York Times reported that "United States officials blocked" a $2.6 billion deal by
Philips to sell
Lumileds division to GO Scale Capital and GRS Ventures over concerns regarding Chinese applications of
gallium nitride.[38]
2018: President Trump blocked Singapore-based
Broadcom Limited from purchasing
Qualcomm in a hostile takeover, citing national security concerns raised by CFIUS.[40]
2019: CFIUS requested that Chinese gaming company Beijing Kunlun Tech Co Ltd. sell
Grindr, citing national security concerns regarding a database of user's location, messages, and HIV status, after the company acquired the gay dating app in 2018 without CFIUS review. A deadline for the sale has been set for June 2020.[41]
2020: President Trump threatened to ban
TikTok via International Emergency Economic Powers Act and the National Emergencies Act,[42] but in August declared a September 15 deadline for a sale to an American company. TikTok successfully challenged the ban via federal court, and the Biden administration asked to delay the government's appeal of a federal district court judge's December injunction against the TikTok ban as President Biden undertakes a broad review of his predecessor's efforts to address potential security risks from Chinese tech companies and to allow CFIUS to review TikTok via its previous 2017 acquisition of
musical.ly.[43][44]
Notifications and investigations
This section needs to be updated. Please help update this article to reflect recent events or newly available information.(October 2021)