Order Code RL33312
CRS Report for Congress
Received through the CRS Web
The Exon-Florio National Security
Test for Foreign Investment
Updated March 15, 2006
James K. Jackson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

The Exon-Florio National Security Test for Foreign
Investment
Summary
The proposed acquisitions of major operations in six major U.S. ports by Dubai
Ports World and of Unocal by the China National Offshore Oil Corporation
(CNOOC) sparked intense concerns among some Members of Congress and the
public and has reignited the debate over what role foreign acquisitions play in U.S.
national security. While the United States actively promotes internationally the
policy of relaxing rules concerning foreign investment, including the national
treatment of foreign firms, some Members of Congress and others are concerned with
this policy as it relates to allowing foreign, and particularly government-owned
companies, unlimited access to the Nation’s industrial base. Much of this debate
focuses on the activities of a relatively obscure committee, the Committee on Foreign
Investment in the United States (CFIUS) and the Exon-Florio provision, which gives
the President broad powers to block certain types of foreign investment.
Several Members of Congress have introduced various measures during the 2nd
Session of the 109th Congress to amend this process. These measures can be grouped
into four major areas: those that deal specifically with the proposed Dubai Ports
World acquisition; those that focus more generally on foreign ownership of U.S.
ports, especially if the foreign entity is owned or controlled by a foreign government;
those that would amend the CFIUS process; and those that would amend the Exon-
Florio process. Such measures as H.J.Res. 79, S.J.Res. 32, H.R. 4807, S. 2333, and
S. 2341 would use various methods to block either the proposed acquisition by Dubai
Ports World, or they would prevent Dubai Ports World from taking over control of
the U.S. ports involved in the acquisition. In the second area, such measures as H.R.
4817, H.R. 4842, H.R. 4880, H.R. 4885, and S, 2334 would prohibit or significantly
reduce the ability of foreign persons to operate U.S. ports.
The third and fourth areas deal broadly with the operations of the Committee on
Foreign Investment in the United States and the Exon-Florio provision. Such
measures as H.R. 4813, H.R. 4917, S. 1797, and S. 2380 would amend the CFIUS
process in various ways, including requiring the Committee to consider the impact
of proposed or pending mergers, acquisition, or takeovers on “critical industries” in
the United States or on “homeland security.” H.R. 4929 would establish CFIUS as
a matter of statute. S. 2380 would amend the CFIUS process by adding the Director
of National Intelligence and would require a review by a new Subcommittee on
Intelligence within CFIUS. S. 2400 would replace the current CFIUS with a
Committee for Secure Commerce, chaired by the Secretary of Homeland Security.
The fourth set of measures would amend the Exon-Florio process, in some
cases, quite substantially. Such measures as H.R. 4814, H.R. 4829, 4881, S. 2335,
and S. 2374 would amend the current process in a broad range of ways. H.R. 4915
would institute a national security review and a national security investigation of
proposed transactions. H.R. 4959 would institute reciprocal treatment in investment
as a condition for certain kinds of investment in the United States.
This report will be updated as warranted by events.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Exon-Florio Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Caseload . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Congressional Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dubai Ports World Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Port Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Committee on Foreign Investment in the United States . . . . . . . . . . . . . . . . 8
Exon-Florio Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Figures
Figure 1. U.S. Direct Investment Abroad and Foreign Direct Investment in the U.S.
Economy, Annual Flows 1982-2004
(in billions of dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Exon-Florio National Security Test for
Foreign Investment
Background
According to the Department of Commerce,1 foreigners invested $113 billion
in U.S. businesses and real estate in 2004, as indicated in Figure 1, which represents
nearly a tripling in the amount invested in 2003. This amount, however, is about half
as much as U.S. firms invested abroad and far below the record $300 billion
foreigners invested in 2000. The lower level of foreign direct investment flows,
although particularly sharp for the United States, is not unique. According to the
United Nation’s World Investment Report, global foreign direct investment flows
dropped by 41% in 2001 and 21% in 2002 due to slow economic growth in most of
the parts of the world, falling stock market valuations, lower corporate profitability,
a slowdown in corporate restructuring, and a slowdown in privatization efforts in
some areas.2
The cumulative amount, or stock, of foreign direct investment in the United
States on a historical cost basis3 increased in 2004 to over $1.5 trillion, still below
the $2 trillion U.S. firms have invested abroad. The United States is both the largest
recipient of foreign direct investment and the largest overseas direct investor. The
rise in the value of foreign direct investment includes an upward valuation
adjustment of existing investments and increased investment spending that was
driven by the stronger growth rate of the U.S. economy, the world-wide resurgence
in cross-border merger and acquisition activity, and investment in the U.S. financial
and insurance industries.4
1 Bach, Christopher L., “U.S. International Transactions, 2004.” Survey of Current
Business
, April 2005, p. 46.
2 World Investment Report 2004: The Shift Towards Services. New York, United Nations,
2004, p. 5.
3 The stock, or position, is the net book value of foreign direct investors’ equity in, and
outstanding loans to, their affiliates in the United States. A change in the position in a given
year consists of three components: equity and intercompany inflows, reinvested earnings
of incorporated affiliates, and valuation adjustments to account for changes in the value of
financial assets. The Commerce Department also publishes data on the foreign direct
investment position valued on a current-cost and market value bases. These estimates
indicate that foreign direct investment increased by $123 billion and $230 billion in 2003
and 2004, respectively, to $1.7 and $2.7 trillion.
4 Anderson, Thomas W., “Foreign Direct Investment in the United States: New Investment
in 2004,” Survey of Current Business, June 2005. pp. 30-31.

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Figure 1. U.S. Direct Investment Abroad and Foreign Direct
Investment in the U.S. Economy, Annual Flows 1982-2004
(in billions of dollars)
Billions of dollars
$350
$300
Foreign Direct Investment in the
United States
$250
$200
$150
U.S. Direct Investment
Abroad
$100
$50
$0
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Year
U.S. Department of Commerce
With over $252 billion invested in the United States, Great Britain is the largest
foreign direct investor. Japan has moved into the position as the second largest
foreign direct investor in the U.S. economy with over $177 billion in investments.
Following the Japanese are the Dutch ($167 billion), the Germans ($163 billion),
with the French close behind ($148 billion).
The Exon-Florio Provision
In 1988, amid concerns over foreign acquisition of certain types of U.S. firms,
particularly by Japanese firms, Congress approved the Exon-Florio provision of the
Defense Production Act.5 This statute grants the President the authority to block
proposed or pending foreign acquisitions of “persons engaged in interstate commerce
in the United States”that threaten to impair the national security. In subsequent
legislation, Congress directed that this process be applied “in any instance in which
an entity controlled by or acting on behalf of a foreign government seeks to engage
in any merger, acquisition, or takeover which could result in control of a person
engaged in interstate commerce in the United States that could affect the national
security of the United States.” Many in Congress were concerned at the time that
foreign takeovers of U.S. firms could not be stopped unless the President declared
a national emergency or regulators invoked federal antitrust, environmental, or
securities laws.
5 P.L. 100-418, title V, Subtitle A, Part II, or 50 U.S.C. app 2170.

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The Exon-Florio provision grants the President the authority to take what action
he considers to be “appropriate” to suspend or prohibit proposed or pending foreign
acquisitions, mergers, or takeovers of persons engaged in interstate commerce in the
United States which threaten to impair the national security. Congress directed,
however, that before this authority can be invoked the President is expected to
believe that other U.S. laws are inadequate or inappropriate to protect the national
security, and that he must have “credible evidence” that the foreign investment will
impair the national security. For the purposes of this legislation, Congress purposely
did not define national security, but intended to have the term interpreted broadly
without limitation to a particular industry.6
The authority to administer the Exon-Florio provision was delegated to the
Committee on Foreign Investment in the United States (CFIUS),7 which is housed
in the Department of the Treasury. The Committee had been established under a
previous Executive Order with broad responsibilities, but few powers.8 It was
originally established with six members, but has been expanded to twelve over time.
The twelve members include the Secretaries of State, the Treasury, Defense,
Homeland Security, and Commerce; the United States Trade Representative; the
Chairman of the Council of Economic Advisers; the Attorney General; the Director
of the Office of Management and Budget; the Director of the Office of Science and
Technology Policy; the Assistant to the President for National Security Affairs; and
the Assistant to the President for Economic Policy.9 The Committee has 30 days to
decide whether to investigate a case and an additional 45 days to make its
recommendation. Once the recommendation is made, the President has 15 days to
act.
In 1992, Congress amended the statute through section 837(a) of the National
Defense Authorization Act for Fiscal Year 1993. Known as the “Byrd Amendment”
after the amendment’s sponsor, the provision requires CFIUS to investigate proposed
mergers, acquisitions, or takeovers in cases where:
(1) the acquirer is controlled by or acting on behalf of a foreign government; and
(2) the acquisition results in control of a person engaged in interstate commerce
in the United States that could affect the national security of the United States.10
Through the Exon-Florio provision, Congress directed that the President or his
designee should consider a short list of factors in deciding whether to block a foreign
acquisition, merger, or takeover. This list includes the following elements:
6 Congressional Record, Daily Edition, vol. 134, April 20, 1988. p. H2118.
7 Executive Order 12661 of December 27, 1988, 54 F.R. 779.
8 Executive Order 11858 (b), May 7, 1975, 40 F.R. 20263.
9 Executive Order 11858 of May 7, 1975, 40 F.R. 20263, as amended by Executive Order
12188, January 2, 1980, 45 F.R. 969; Executive Order 12661, December 27, 1988, 54 F.R.
779; Executive Order 12860, September 3, 1993, 58 F.R. 47201; and Executive Order 13286
of February 28, 2003.
10 P.L. 102-484, October 23, 1992.

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(1) domestic production needed for projected national defense requirements;
(2) the capability and capacity of domestic industries to meet national defense
requirements, including the availability of human resources, products, technology,
materials, and other supplies and services;
(3) the control of domestic industries and commercial activity by foreign
citizens as it affects the capability and capacity of the U.S. to meet the requirements
of national security;
(4) the potential effects of the transactions on the sales of military goods,
equipment, or technology to a country that supports terrorism or proliferates missile
technology or chemical and biological weapons; and
(5) the potential effects of the transaction on U.S. technological leadership in
areas affecting U.S. national security.
In November 1991, the Treasury Department issued final regulations, after
extensive public comment, implementing the Exon-Florio provision.11 These
regulations created an essentially voluntary system of notification by the parties to
an acquisition, but they also allow for notice by agencies that are members of CFIUS.
Despite the voluntary nature of the notification, firms largely notify voluntarily
because the regulations stipulate that foreign acquisitions that are governed by the
Exon-Florio review process that do not notify the Committee remain subject
indefinitely to divestment or other appropriate actions by the President. Under most
circumstances, notice of a proposed acquisition that is given to the Committee by a
third party, including shareholders, is not considered by the Committee to constitute
an official notification. The regulations also indicate that notifications provided to
the Committee are considered to be confidential and the information is not released
by the Committee to the press or commented on publicly.
Caseload
As a consequence of the confidential nature of the CFIUS review of any
proposed transaction, there are few public sources of information concerning the
Committee’s work to date. For the most part, information concerning individual
transactions that have been reviewed by CFIUS or any final recommendations that
have been issued by CFIUS have come from announcements made by the companies
involved in a transaction and not by CFIUS. Therefore public information
concerning the outcome of CFIUS’s reviews are incomplete. According to one
source,12 CFIUS has received more than 1,500 notifications, of which it conducted
a full investigation of 25 cases. Of these 25 cases, thirteen transactions were
withdrawn upon notice that CFIUS would conduct a full review and twelve of the
11 Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons. 31
C.F.R. Part 800.
12 CFIUS, The Washington Post, July 3, 2005. p. F3.

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remaining transactions cases were sent to the President. Of these twelve transactions,
one was prohibited.13
The transaction that was prohibited by the President involved the acquisition
in 1990 of Mamco Manufacturing Company by the China National Aero-Technology
Import and Export Corporation (CATIC). Mamco was an aerospace parts
manufacturer. CATIC, which is owned by the Government of the People’s Republic
of China, acted as the purchasing agent for the Chinese Ministry of Defense.
President Reagan ordered CATIC to divest itself of Mamco under the authority of the
Exon-Florio provision because of concerns that CATIC might gain access to
technology through Mamco that it would otherwise have to obtain under an export
license.14 One recent case that involved a Chinese firm that was reviewed by CFIUS
and approved was the proposed acquisition of IBM’s Personal Computing Division
to Lenovo Group Limited, a Chinese manufacturing company. Apparently, CFIUS
has approved any number of proposed transactions if the parties involved agreed to
certain conditions.
Congressional Activity
The proposed acquisition of port terminals operated by the British-owned
Peninsular and Oriental Steam Navigation Company (P&O)15 by Dubai Ports World16
has sparked a firestorm of activity in the 2nd Session of the 109th Congress. House
Joint Resolution 79
(H.J.Res. 79) and Senate Joint Resolution 32 (S.J.Res. 32)
would express congressional disapproval of the proposed acquisition and direct
CFIUS to conduct a full 45-day review of the transaction and to brief Members of
Congress on the results of the investigation.
On March 8, 2006, the House Appropriations Committee attached an
amendment to a supplemental appropriations bill for defense activities in Afghanistan
and Iraq and emergency relief for the victims of hurricane Katrina that would
effectively nullify the actions of CFIUS regarding the DP World transaction. The
amendment withheld the use of any funds to approve or “otherwise allow the
13 Auerbach, Stuart. “President Tells China to Sell Seattle Firm.” The Washington Post,
February 3, 1990. p. A1; and Benham, Barbara. “Blocked Takeover Fuels Foreign Policy
Flap.” Investor’s Daily, February 8, 1990. p. 1.
14 Auerbach, Stuart. “President Tells China to Sell Seattle Firm.” The Washington Post,
February 8, 1990, p. A1; and Benham, Barbara. “Blocked Takeover Fuels Foreign Policy
Flap.” Investor’s Daily, February 8, 1990. p. 1.
15 Peninsular and Oriental Steam Company is a leading ports operator and transport
company with operations in ports, ferries, and property development. It operates 29
container terminals and logistics operations in over 100 ports and has a presence in 18
countries.
16 Dubai Ports World was created in November 2005 by integrating Dubai Ports Authority
and Dubai Ports International. It is one of the largest port operators in the world and now
operates facilities in the Middle East, India, Europe, Asia, Latin America, the Carribean, and
North America.

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acquisition of leases, contracts, rights, or other obligations of P&O Ports by Dubai
Ports World.” In addition, the amendment prohibited Dubai Ports World from
acquiring any leases, contracts, rights, or other obligations in the United States of
P&O Ports by Dubai Ports World or “any other legal entity affiliated with or
controlled by Dubai Ports World.” The measure passed by a vote of 62 to 2 in the
Committee.17 The following day, DP World officials announced that they will sell
off the newly-acquired U.S. port operations to an American owner.18
Dubai Ports World Acquisition
H.R. 4807 and S. 2333 would direct the President to suspend any existing
decision by CFIUS regarding the acquisition by Dubai Ports World, and they would
require a 45-day investigation of the transaction. The measures also include various
factors that must be considered during the investigation, they require the Secretary
of Homeland Security to provide CFIUS with intelligence and other information
collected by the Department, and they require CFIUS to report its findings to
Congress.
S. 2333 would have the President or his designee conduct a 45-day investigation
under the Exon-Florio provision of the proposed acquisition of P&O by Dubai Ports
World. The investigation would include (a) a review of foreign port assessments of
ports at which Dubai Ports World carries out operations; (2) background checks of
appropriate officers and security personnel of Dubai Ports World; (3) an evaluation
of the impact on port security in the United States by the acquisition of ports by
Dubai Ports World; and (4) an evaluation of the impact on the national security of the
United States by the control of the operations at ports by Dubai Ports World. After
completion of an investigation of the Dubai Ports World transaction, the President
shall submit to Congress a report that contains an analysis of the national security
concerns reviewed under the investigation and a description of any assurances that
were provided to the Federal government by Dubai Ports World. In addition, the
report provided by the President is to contain the determination by the President
under the Exon-Florio provision and provide a briefing to specified Members of
Congress. If the President determines after his investigation of the proposed
transaction that he will not block or suspend the acquisition, the transaction can be
blocked by Congress if it passes a joint resolution within 30 days of receiving a
report on the transaction by the President.
S. 2341 would require the President to exercise his authority under the Exon-
Florio amendment to prohibit the merger, acquisition, or takeover of P&O Ports by
Dubai Ports World.
17 Hulse, Carl, “In Break with While House, House Panel Rejects Port Deal,” The New York
Times
, March 9, 2006. p. A1.
18 Weisman, Jonathan, and Bradley Graham, “Dubai Firm to Sell U.S. Port Operations,” The
Washington Post
, March 10, 2006. p. A1.

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Port Security
H.R. 4817 would prohibit any entity owned or controlled by a foreign
government from conducting operations at any seaport in the United States or
entering into any contract or other agreement to conduct such operations.
H.R. 4842 would amend the Exon-Florio provision to require the President to
prohibit any entity that is owned or controlled by a foreign government from leasing,
operating, managing, or owning real property or facilities at a U.S. port, and it would
require the President to submit a report to Congress that lists all entities that currently
are owned or controlled by foreign governments that are leasing, operating,
managing, or owning real property or facilities at U.S. ports, assesses the national
security threat posed by such activities, and provides any recommendation for any
legislation in response to such threats. The measure would also require the President
to notify various leaders and committee Chairmen in the Senate and the House within
one day after beginning a 45-day investigation mandated by the Byrd Amendment.
The President would also be required to notify Governors and heads of relevant state
agencies regarding any proposed investment by an entity that is owned or controlled
by a foreign government that would involve leasing, operating, managing, or owning
property or facilities at a U.S. port.
H.R. 4880 would require the Commandant of the Coast Guard to require that
a security plan for a maritime facility be resubmitted for approval when the operation
of a facility changes ownership and that the individual responsible for implementing
security actions be a U.S. citizen.
H.R. 4885 would amend the Exon-Florio process (Section 271(d) of the
Defense Production Act of 1950 (50 U.S.C. App. 2170(d) to prohibit acquisitions,
mergers, or takeovers of persons engaged in interstate commerce in the United States
by entities controlled by or acting on behalf of foreign governments that (a) do not
recognize countries that are member states of the United Nations, (b) participate in
boycotts against countries that are friendly to the United States, or (c) provide support
for international terrorism.
S. 2334 would amend the Exon-Florio process to prohibit any merger,
acquisition, or takeover that will result in any entity that is owned by a foreign
government from owning, controlling, or taking over leasing real property and
facilities at U.S. ports. The President would be required to prepare a report for
Congress that lists all entities that are owned or controlled by foreign governments
that are leasing, operating, managing, or owning real property; an assessment of the
national security threat posed by such activities; and recommendation for any
legislation in response to such a threat. After beginning a 45-day review, the
President has one day to provide congressional leaders with a notice of the
investigation and relevant information regarding the proposed merger, acquisitions,
or takeover.

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Committee on Foreign Investment in the United States
H.R. 4813 would amend the Exon-Florio provision to require the President or
his designee to notify Congress within five days after CFIUS initiates a 45-day
investigation mandated by the Byrd amendment.
H.R. 4917 would amend the Exon-Florio provision to require a written
notification to Congress within five days of receiving a notification of a proposed
merger, acquisition, or takeover that is subject to a 45-day investigation under the
Exon-Florio provision. In addition, the measure would require the President to notify
Congress within one day after a 45-day investigation had begun and the President
would be required to provide relevant information regarding the transaction,
including “timely” responses to inquiries from certain Members of Congress and the
decision of the president upon the completion of the investigation. The measure also
expresses the sense of the Congress that the Committee on Foreign Investment in the
United States be transferred from the Department of the Treasury to the Department
of Homeland Security and that the Secretary of Homeland Security should serve as
the head of CFIUS.
H.R. 4929 would amend the Exon-Florio process to make mandatory an
investigation of any proposed or pending merger, acquisition, or takeover by any
foreign person that could result in foreign control of any person engaged in interstate
commerce in the United States. This measure would establish the Committee on
Foreign Investment in the United States in statute and formally make it responsible
for conducting the investigation within 75 days of receipt of a written notification of
a proposed or pending merger, acquisition, or takeover. The Committee would
remain as presently constituted with 12 members and with the Secretary of the
Treasury as the Chairperson of the Committee. The Director of National Intelligence
would provide appropriate intelligence analysis and briefings to the Committee.
The measure would require that no proposed or pending merger, acquisition, or
takeover of a person engage in interstate commerce in the United States by a foreign
person may occur unless the President finds that the transaction “will not threaten”
to impair the national security of the United States. The measure would change the
existing statute, which states that “the President may exercise the authority ...only if
he finds that” to indicate that the President’s ability to act is based on findings that
“shall be based on credible evidence” that leads the President to believe that a) the
foreign interest “might” take action that threatens to impair the national security, and
b) other provisions of law are appropriate to protect the national security. During an
investigation, the measure would require that those factors that the President is
required to consider in investigating a proposed or pending transactions would be the
same as those that currently are specified in the Exon-Florio provision.
The measure would require the President to transmit immediately a written
notification to the Secretary of the Senate and the Clerk of the House of
Representatives a detailed explanation of any determination by the President to
approve or disapprove of any merger, acquisition, or takeover by or with any foreign
person which could result in foreign control of any person engaged in interstate
commerce in the United States. Congress would have 30 days to enact a joint
resolution of disapproval of a transaction, which, if adopted, would then have the

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President “ take such action...as is necessary to prohibit the merger, acquisition, or
takeover.” The measure would also require the President to provide a report to the
Congress that evaluates whether there is “credible evidence of a coordinated strategy
by 1 or more countries or companies to acquire U.S. companies that are involved in
research, development, or production of critical technologies for which the United
states is a leading producer.” The report would also be required to evaluate whether
there are industrial espionage activities that are directed or directly assisted by
foreign governments against private U.S. companies.
S. 1797 would amend the Exon-Florio process by expanding to 60 days from 30
days the period in which CFIUS can decide if a pending investment requires a
mandatory 45-day investigation. In addition, the findings and recommendations of
any such investigation shall be sent immediately to the President and to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee
on Financial Services of the House. The measure would allow the Chairman and
Ranking Member of the Senate Banking Committee and the House Financial
Services Committee to request a full 45-day investigation of investments that fall
under the Byrd Amendment and provide that the results of any such investigation be
sent to the President and the Senate Banking Committee and the House Financial
Services Committee.
Under this measure, the listed factors that CFIUS considers to determine if a
transaction threatens to impair national security would change from being optional
(may) to mandatory (shall) and it would add that CFIUS must consider “the long-
term projections of the United States requirements for sources of energy and other
critical resources and materials and for economic security.” The measure also would
require the Secretary of the Treasury to provide a report quarterly to the Senate
Banking Committee and the House Financial Services Committee that contains a
detailed summary and analysis of each transaction that is being reviewed or was
reviewed during the quarter. If the President chooses not to suspend or prohibit a
transaction, the transaction may not be finalized for 10 legislative days after the
President notifies Congress. If a joint resolution disapproving of the transaction is
introduced in either House of Congress, the transaction cannot be completed for 30
legislative days. If such a joint resolution is enacted into law, the transaction cannot
be completed.
S. 2380 would increase the membership of CFIUS by adding the Directors of
National Intelligence and Central Intelligence and would have the Secretary of
Homeland Security and the Secretary of Defense server as vice chairs of the
Committee. The measure would have the President establish a Subcommittee on
Intelligence within the CFIUS structure that would be chaired by the Director of
National Intelligence and include the head of each member of the intelligence
community. The measure would amend the Exon-Florio process to provide for a pre-
investigation review by the Subcommittee on Intelligence of CFIUS during a 15-day
period that would begin following the receipt by the Committee of any proposed
merger, acquisitions, or takeover and before the commencement of any 45-day
investigation and provide written comments on that review.
The measure would also amend the Exon-Florio process to require that only the
President for himself or the Secretary of the Treasury, with the concurrence of the

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Secretary of Homeland Security and the Secretary of Defense acting on the
President’s behalf, can determine that a proposed merger, acquisition, or takeover
does not threaten to impair the national security and, therefore, would not require a
45-day investigation. In such cases, either the President acting for himself or
members of CFIUS acting on his behalf would be required to certify this conclusion
in writing. In addition, any person controlled by or acting on behalf of a foreign
government that is a party to a proposed merger, acquisition, or takeover of any U.S.
critical infrastructure (as defined in 42 U.S.C. 5195c(e)) would be required to notify
the President or his designee. The Exon-Florio provision would also be amended to
require the President or his designee to notify Congress not later than 15 days after
he receives a written notification of a proposed merger, acquisition, or takeover that
could proceed to the 45-day investigation. The measure would amend the Exon-
Florio statute to indicate that the President’s designee under the Exon-Florio
provision is the Committee on Foreign Investment in the United States.
S. 2400 would repeal that section of the defense Production Act that is known
as the Exon-Florio provision and transfer the function for reviewing mergers,
acquisitions and takeovers to the Secretary of Homeland Security. The measure
would establish the Committee for Secure Commerce, which would be comprised of
the heads of those executive departments, agencies, and offices that the President
determines to be appropriate and would include the Director of National Intelligence.
The chairperson of the Committee would be able to seek information and assistance
from any other department, agency, or office of the Federal Government as the
chairperson determines is necessary or appropriate to carry out the duties of the
Committee.
The Committee would be charged with conducting a review of proposed or
pending mergers, acquisitions, or takeovers within 30 days of being notified of such
a transaction, and could undertake an investigation of proposed or pending mergers,
acquisitions, or takeovers “to determine the effects on national security and
homeland security.” Such an investigation would need to be completed within 45
days of its commencement. Any investigation would require the Director of National
Intelligence to create a report that consolidates the intelligence findings, assessments,
and concerns of each of the relevant members of the intelligence community. The
intelligence report would be provided to all members of the Committee and would
be included as part of any recommendation by the President. An investigation would
be mandated in any instance in which an entity that is controlled by or acting on
behalf of a foreign government seeks to engage in any merger, acquisition, or
takeover which would result in the control of a person engaged in interstate
commerce in the United States.
The chairperson of the Committee would be responsible for establishing written
processes and procedures to be used by the Committee in conducting reviews and
investigations. In addition, the chairperson would be responsible for describing the
role and responsibilities of each member of the departments, agencies, and offices
that are involved in the investigation of foreign investment in the United States. The
head of each department, agency, or office that serves as a member of the Committee
would be required to establish written internal processes and procedures in
conducting reviews and investigations.

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Under the measure, the President would have the authority to “take such action
for such time as the President considers appropriate to suspend or prohibit any
acquisition, merger, or takeover.” The President would be required to announce his
decision within 15 days after the completion of the investigation by the Committee.
The President would be allowed to exercise his authority under this provision “only
of the President finds:” that there is credible evidence that leads the President to
believe that the foreign interest exercising control might take action that threatens to
impair the national security or homeland security; or that other provisions of law do
not provide adequate and appropriate authority for the President to protect the
national security or homeland security. In making his decision, the President would
be required (shall) to take into account the requirements of national security and
homeland security and consider among other factors the same set of factors that
currently exist under the Exon-Florio provision.
The measure would require the President or his designee to report immediately
upon completion of an investigation to the Congress. This reporting would be
comprised of a written report of the results of the investigation and would include a
detailed explanation of the findings that were made; details of any legally binding
assurances that were provided by the foreign entity that were negotiated as a
condition for approval; and the factors that were considered in reaching the
determination. The President would also be required to transmit to certain Members
of Congress a report in both classified and unclassified form on a quarterly basis that
provides a detailed summary and analysis of each merger, acquisition, or takeover
that would be under review or investigation at the time of the report. In addition, the
measure would require the President to furnish to Congress on a quadrennial basis
a report that a) evaluates whether there is credible evidence of a coordinated strategy
by 1 or more countries or companies to acquire critical infrastructure within the
United States or U.S. companies involved in research, development, or production
of critical technologies for which the United States is a leading producer; and b)
evaluates whether there are industrial espionage activities directed or directly assisted
by foreign governments against private U.S. companies aimed at obtaining
commercial secrets related to critical technologies or critical infrastructure.
Exon-Florio Provision
H.R. 4814 would amend the Exon-Florio provision to require that the President
or his designee must approve of all proposed mergers, acquisitions, or takeovers that
are determined to be subject to a 45-day investigation under the purview of the Exon-
Florio provision and that before the President can approve such a transaction he must
determine that, “there is no credible evidence,” that the investment would threaten
to impair the national security and that provisions of law other than the Exon-Florio
provision and the International Emergency Powers Act “provide adequate and
appropriate authority for the President to protect the national security.” The measure
also requires the President to report quarterly to Congress on actions taken under the
Exon-Florio provision.
H.R. 4820 would amend the Exon-Florio process by expanding to 60 days from
30 days the period in which CFIUS can decide if a pending investment requires a
mandatory 45-day investigation. The measure would also require a mandatory
investigation if a proposed investment, “could affect the critical infrastructure of the

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United States,” as defined by section 2(4) of the Homeland Security Act of 2002 (6
U.S.C. 101(4) and to include U.S. seaports. The measure would also require the
President to report his decision or actions he has taken to Congress within 30 days
after completing an investigation required by the Byrd Amendment.
H.R. 4881 would prohibit any corporation from owning, operating, or managing
any system or asset included on the “national defense critical infrastructure list”
unless the corporation meets the “critical infrastructure national security management
requirements.” The Secretary of Defense and the Secretary of Homeland Security are
required to prepare and maintain a list of critical infrastructure that includes military
and civilian installations. The Secretary of Defense would be required to submit a
notice to Congress if the critical infrastructure list is changed. Critical infrastructure
national security management requirements are stated as: (1) the corporations would
have to be organized under U.S. law; (2) a majority of the board of directors are U.S.
citizens; (3) the chief executive officer and chairman of the board of directors are
U.S. citizens; (4) a majority of the voting and non-voting shares are owned by U.S.
citizens; (5) a majority of the members of the board of directors have been approved
by the Secretary of Defense; (6) not less than 20 percent of the members of the board
of directors are independent directors; (7) all of the independent directors are
approved by the Secretary of Homeland Security; (8) the board of directors has a
government security committee, the members of which are approved by the Secretary
of Defense; the board of directors has a compensation committee that is comprised
of U.S. citizens; and (10) the corporation allows annual inspections of the methods
used by the firm in handling classified information. Critical infrastructure is defined
as any system or asset, whether physical or virtual, that is so vital to the United States
that the incapacity or destruction of such system or asset would have a debilitating
effect on national security, on national public health or safety, or on any combination
thereof.
H.R. 4915 would amend the Exon-Florio provision to require the President to
review any proposed or pending merger, acquisition, or takeover by or with any
foreign person which could result in foreign control of any person engaged in
interstate commerce in the United States to determine if the transaction “may
possibly have an effect on the national security of the United States.” The review
would include the factors that currently exist in the Exon-Florio provision, but would
require a specific written response with respect to the applicability of each factor to
the proposed or pending transaction. The measure also would require that any
transaction in which the foreign entity is controlled or acting on behalf of a foreign
government “shall be treated as possibly having an effect on the national security of
the United States” and therefore would require a national security investigation. The
measure would provide that any review that establishes conditions or requirements
by any person involved in a transaction would not be treated as final until the
conditions or requirements would have been approved by the President, the Secretary
of the Treasury, or the Deputy Secretary of the Treasury.
The measure would institute a national security investigation if a national
security review indicates that the transaction “may possibly have an effect on the
national security of the United States.” Such an investigation would have no more
than 45 days to be completed and would include the factors that currently exist in the
Exon-Florio provision, but the measure would require a response prepared respective

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to any concerns expressed during the investigation relative to the applicability of the
factors and any possible actions that were raised to address such concerns. If a
transaction is withdrawn before the investigation phase of the Exon-Florio provision,
the President would be required to establish a) “interim protection” to address
specific concerns that may have been raised in connection with any national security
review or a national security investigation; b) specific time frames for resubmitting
any notice of a proposed or pending merger, acquisition, or takeover; and c) a process
for tracking any actions that may be taken prior to resubmitting a written notice.
The measure would also shift the list of factors to be considered in an Exon-
Florio review from being arbitrary (may) to being required (shall), and would include
additional factors: a) whether the acquisition affects the critical infrastructure of the
United States; b) the entity is controlled by or acting on behalf of a foreign
government; and c) such other factors as the President or the President’s designee
may determine to be appropriate, “generally or in connection with a specific
investigation.” The measure also would amend the Exon-Florio provision to require
the President to report annually to the Congress on any investigations conducted
under a national security investigation during the preceding year to include a) the
national security concerns, if any, that were raised by any agency involved in any
aspect of a national security review and investigation; b) the manner in which any
such concerns were mitigated; and c) whether the merger, acquisition, or takeover
was consummated, abandoned, or remained pending at the end of the year. The
measure would require the President to report to the Congress on a quarterly basis all
transactions that were under review or under investigation.
The measure would also amend the Exon-Florio provision to make the
Committee on foreign Investment in the United States a statutory entity with the
membership of the Committee as presently constituted except that the measure would
not include the President’s Assistant for National Security Affairs as member of
CFIUS, but would provide for the President to designate any other person from the
Executive Office of the President that he chooses and it would add the Director of
National Intelligence. The Committee is given the authority to hold hearings and
gather evidence and testimony, including the authority to issue subpoenas under the
direction of the President or the chairperson of the Committee.
H.R. 4959 would limit ownership in U.S. businesses and real estate by entities
owned or controlled by a foreign government only to the same extent as the foreign
country allows U.S. persons similar privileges. In addition, the measure would allow
foreign persons to acquire or hold an interest in, control the operations, management,
or security operations of critical infrastructure in the United States to the extent that
U.S. person are accorded similar treatment by the country of the foreign person.
Critical infrastructure would include such areas as airport, air navigation facility, or
facility that is part of an air traffic control system; any bridge, any highway, and any
railroad track facilities; any port facilities; any pipeline that transports oil, natural gas,
or gasoline or other petroleum products; and any electricity generation, transmission,
or distribution facilities.
S. 2335 would amend the National Security Act of 1947 to add the Director of
National Intelligence (DNI) to the list of CFIUS members and to have the DNI certify
to the other members of CFIUS that there are no national security implications of any

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proposed merger, acquisition, or takeover reviewed by CFIUS. Firms are required
to notify the President under the Exon-Florio provision 60 days in advance before a
proposed merger, acquisition, or takeover occurs if the entity is controlled by or is
acting on behalf of a foreign government, has energy assets valued at $1 billion or
more, or that operates a critical infrastructure if the transaction could affect the
national security of the United States. In addition, the President shall hold public
hearings and provide written notification to the Secretary of the Senate and the Clerk
of the House of any proposed transaction involving such firms.
S. 2374 would amend the Homeland Security Act of 2002 to require entities
controlled by a foreign government that acquire, own, or otherwise control or manage
any critical infrastructure in the United States to do so only through the establishment
or operation of a corporation that has a majority of the board of directors who are
U.S. citizens and that the chief security officer is a U.S. citizen.