Order Code RL33312
CRS Report for Congress
Received through the CRS Web
The Exon-Florio National Security
Test for Foreign Investment
Updated July 28, 2006
James K. Jackson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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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. The United States actively promotes internationally the national
treatment of foreign firms. Some Members of Congress and others are concerned
with this policy, however, particularly with how it applies to allowing 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 that 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 block the now
defunct proposed acquisition by Dubai Ports World. 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, S. 2380, S. 2442, and S. 3549 would
amend the CFIUS process in various ways. S. 3549 was approved by the full Senate
on July 26, 2006. H.R. 4929 and H.R. 5337 would establish CFIUS as a matter of
statute. H.R. 5337 was approved unanimously by the full House on July 26, 2006.
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. 4820, H.R. 4881, S.
2335, S. 2374, and S. 2442 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. S. 2410 would add new restrictions on foreign investment for the Department
of Homeland Security. This report will be updated as warranted by events.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Exon-Florio Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Caseload . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Congressional Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dubai Ports World Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Port Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Committee on Foreign Investment in the United States . . . . . . . . . . . . . . . . 8
Exon-Florio Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
List of Figures
Figure 1. U.S. Direct Investment Abroad and Foreign Direct Investment in the
United States, Annual Flows, 1990-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

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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 United States, Annual Flows, 1990-2005
Billions of dollars
$350
$300
Foreign Direct Investment in
the United States
$250
$200
$150
U.S. Direct Investment
Abroad
$100
$50
$0
1990
1992
1994
1996
1998
2000
2002
2004
Year
Source: 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.
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
5 P.L. 100-418, title V, Subtitle A, Part II, or 50 U.S.C. app 2170.

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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:
(1) domestic production needed for projected national defense requirements;
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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(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 is 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 (H.Amdt. 702) to a supplemental appropriations bill for defense
activities in Afghanistan and Iraq and emergency relief for the victims of hurricane
Katrina (H.R. 4939) that would effectively nullify the actions of CFIUS regarding the
DP World transaction. The amendment withheld the use of any funds to approve or
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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“otherwise allow the 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 On March
16, 2006, the measure passed the full House by a margin of 348 to 71 after an attempt
the previous day failed by a vote of 377 to 38 to remove the ban on Dubai Ports
World from the measure.19 The measure was dropped from the Senate version of the
bill, however, and was not included in the final bill or the subsequent Public Law.
Since the beginning of March 2006, seven hearings have been held by various
committees representing both the House and the Senate that touched on the Dubai
Ports World transaction either directly or indirectly. These hearings include:
! House Appropriations Subcommittee on Homeland Security held a
hearing on March 9, 2006, on FY2007 appropriations for the U.S.
Coast Guard that also included a discussion of the Dubai Ports
World acquisition and port security issues affecting the Coast Guard.
! House Armed Services held a hearing on March 2, 2006, that
focused on the Dubai Ports World acquisition.
! House Financial Services Subcommittee on Domestic and
International Monetary Policy, Trade, and Technology held a hearing
on March 1, 2006, on the Dubai Ports World purchase of U.S. port
facilities.
! House Homeland Security Subcommittee on Economic Security,
Infrastructure Protection, and Cybersecurity held a hearing on March
16, 2006, on port security and accountability that focused on the
impact of foreign ownership of U.S. port facilities.
! House Transportation and Infrastructure Subcommittee on Coast
Guard and Maritime Transportation held a hearing on March 1,
2006, on the budget for the Coast Guard and the Maritime
transportation system that focused on the role of the Coast Guard in
carrying out its responsibility for port security and the impact of
foreign ownership of port facilities.
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.
19 Washington Trade Daily, March 17, 2006. p. 3.

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! House Transportation and Infrastructure Subcommittee on Coast
Guard and Maritime Transportation held a hearing on March 9,
2006, on the impact of foreign ownership of U.S. ports.
! Senate Committee on Banking, Housing, and Urban Affairs held a
hearing on March 2, 2006, on the Exon-Florio process and the Dubai
Ports World acquisition of U.S. port facilities.
Dubai Ports World Acquisition
H.R. 4807 (King) and S. 2333 (Schumer) 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 (Dorgan) 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.
Port Security
H.R. 4817 (Hayworth) 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.

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H.R. 4842 (Wasserman Schultz) 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 (Lobiondo) 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 (Berkley) 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 (Menendez) 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.
Committee on Foreign Investment in the United States
H.R. 4813 (Foley) 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 (Barrow) 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

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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 (Sabo) 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
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.

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H.R. 5337 (Blunt) was approved unanimously without amendment by the full
House on July 26, 2006. The measure would establish the Committee on Foreign
Investment in the United States as a matter of statute and would amend the current
procedures for a CFIUS review and investigation. The measure would strike out the
first two sections of the current statute that deal with investigations and replace them
with provisions that would provide for the same 30-day review and 45-day
investigation stages that exist under the current provision, but would alter the
provision in a number of ways. First, the measure would explicitly indicate that the
investigation would be conducted by the Committee on Foreign Investment in the
United States, which is referred to only as the President’s designee in the current
statute. Next, the measure would amend and broaden the language in the current
statute regarding national security by indicating that national security for this
provision would be construed “so as to include those issues relating to ‘homeland
security,’ including its application to critical infrastructure.”
The measure also would provide for a “National Security Review and
Investigation.” In those cases in which the Committee determined that the foreign
entity involved in a merger, acquisition, or takeover of any person engaged in
interstate commerce in the United States threatens to impair the national security of
the United States, the Committee would be required (shall) to review the transaction.
In addition, if the Committee determined that an entity controlled by a foreign
government (with the term “control” to be defined by the Committee), the Committee
would be required (shall) to conduct an investigation of the transaction, without also
being required to determine during a 30-day review that the transaction threatens to
impair the national security. Any party to the transaction would be able to submit a
written notice to the Committee to initiate a review of a transaction. In a change,
however, a notification would not be able to be withdrawn unless a request had been
submitted by a party to the transaction and the request had been approved in writing
by the Chairperson of CFIUS in consultation with the Vice Chairperson.
In addition to any entity that is a party to a merger, acquisition, or takeover
being able to initiate a review, the President, the Committee, or any member of the
Committee would be able to require that a transaction be reviewed. These
individuals would also be able to initiate a review of a transaction that had been
reviewed but in which false or misleading information had been submitted to CFIUS,
or any transaction that had been reviewed in which it later was determined that any
party to the transaction had failed to adhere to any mitigating agreements or
conditions upon which the original approval had been granted.
The measure also would require the President, acting through CFIUS, to conduct
a National Security investigation of the effects of a transaction on the national
security of the United States and to take any “necessary” actions in connection with
the transaction to protect the national security of the United States under certain
conditions. These conditions would be: (1) as a result of a review of the transaction,
CFIUS determined that the transactions threatened to impair the national security of
the United States and that the threat had not been mitigated during or prior to a
review of the transaction; (2) the foreign person was controlled by a foreign
government; (3) the Director of National Intelligence had identified “particularly
complex national security or intelligence issues” that threatened to impair the
national security of the United States. The investigation would be required to be

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completed within 45 days, but the measure would provide for an extension of the
deadline of up to an additional 45 days if the extension had been requested by the
President or by a roll call vote of two-thirds of the CFIUS members.
The measure also would require that both the Secretary of the Treasury and the
Secretary of Homeland Security approve and sign a determination on any review or
investigation for the CFIUS process to be considered final or complete. For those
cases in which the foreign entity was being controlled by a foreign government, the
CFIUS process would not be considered to be completed until a majority of the
members of CFIUS had voted their approval. In those instances in which at least one
member of CFIUS did not vote in favor of approval, the President, in addition to the
Chairperson and the Vice Chairperson of the Committee, would be required to sign
the Committee report to indicate his approval.
The bill would also require the Director of National Intelligence to carry out
“expeditiously” a thorough analysis of “any threat to the national security of the
United States” of any merger, acquisition, or takeover. This analysis specifically
would include a request for information be made from the Department of the
Treasury’s Director of the Office of Foreign Assets Control and the Director of the
Financial Crimes Enforcement Network. The Director of National Intelligence,
however, would not be included as a member of CFIUS and would be prohibited
from serving in a policy role within CFIUS other than to provide analysis in
connection with an investment transaction.
Firms would not be prohibited under this measure from submitting additional
information or modifying any agreement in connection with a transaction while the
transaction was being reviewed or investigated. Firms also would be able to request
a review or investigation after a review had been finalized if the firms believed that
they had additional information that would be material to the review that had not
been submitted to CFIUS, or if there had been material changes in circumstances that
would affect a review or investigation.
The measure would establish the members of CFIUS as a matter of statute,
compared with the present situation in which CFIUS is a creation of various
presidential orders. CFIUS would be composed of the same twelve members that
currently constitute the Committee, but they could be joined by “any other designee
of the President from the Executive Office of the President.” The Secretary of the
Treasury would continue to serve as the Chairperson of the Committee, but a new
Vice Chairperson position would be created and held by the Secretary of Homeland
Security. The Committee would be empowered to “take such testimony, receive such
evidence, administer such oaths,” in order to carry out a review or investigation. The
Committee would also be able to require the attendance and testimony of “such
witnesses and production of such books, records, correspondence memoranda,
papers, and documents” as the Chairperson of the Committee determines to be
“advisable.”
The bill also would amend the current factors the President and the Committee
use to evaluate mergers, acquisitions, or takeovers. In particular, the statute would
change the status of the factors to be considered from being discretionary (may) to
being required (shall) in evaluating a transaction. Also, this measure would add three

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more factors to the five that currently exist. These factors are: security-related impact
on critical infrastructure of an investment transaction; the entity involved was being
controlled by a foreign government; and such other factors as the President or his
designee “may determine to be appropriate, generally or in connection with a specific
review or transaction.” The bill would make the United States immune from any
liability for any losses or expenses incurred by the parties to an investment
transaction as a result of actions taken by CFIUS if the entities did not submit a
written notification to CFIUS or if the transaction was completed prior to the
completion of a CFIUS review.
The measure would also address one concern about CFIUS’s actions by granting
CFIUS the authority to negotiate, impose, or enforce any agreement or condition with
the parties to a transaction in order to mitigate any threat to the national security of
the United States. Such agreements would be required to be based on a “risk-based
analysis” of the threat posed by the transaction. Also, if a notification of a
transaction is withdrawn before any review or investigation by CFIUS can be
completed, the measure would grant the Committee the authority to take a number
of actions. In particular, the Committee would be able to develop (1) interim
protections to address specific concerns about the transaction pending a re-
submission of a notice by the parties; (2) a time frame for re-submitting the notice;
and (3) a process for tracking any actions taken by any party to the transaction.
CFIUS also would be granted the authority to designate an appropriate federal
department or agency to negotiate, modify, monitor, and enforce agreements in order
to mitigate any threat to national security. The agency or department would be
required to provide periodic reports to CFIUS and the parties to an agreement would
be required to report on the implementation of any material change in circumstances.
Furthermore, the federal entity would be required to report to CFIUS on any
modification to any agreement or condition that would have been imposed and to
ensure that “any significant” modification was reported to the Director of National
Intelligence and to any other federal department or agency that “may have a material
interest in such modification.”
The measure also would increase oversight by the Congress. Not later than five
days after CFIUS completed an investigation, or 15 days after the end of an
investigation if the President had determined to take actions under the Exon-Florio
provision, the Committee would be required to provide a written report to leaders in
both houses of Congress and to the Chairman and Ranking Member of committees
in both houses with jurisdiction over any aspect of the transaction and its possible
effects on national security. CFIUS would also be required to brief certain
congressional leaders if they requested such a briefing. Members of Congress and
their staff would be subject to disclosure limitations and proprietary information
would be shared with congressional committees only under conditions that would
assure the confidentiality of the information.
CFIUS would be required to report semi-annually to Congress on any reviews
or investigations that CFIUS had conducted during the prior six-month period. Each
report would include a list of all reviews and investigations that had been conducted,
information on the nature of the business activities of the parties involved in an
investment transaction, information about the status of the review or investigation,

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and information on any withdrawal from the process, any roll call votes by the
Committee, any extension of time for any investigation, and any presidential decision
or action taken under the Exon-Florio provision. In addition, CFIUS would be
required to report on trend information on the number of filings, investigations,
withdrawals, and presidential decisions or actions that were taken. The report would
also include cumulative information on the business sectors involved in filings and
the countries from which the investments originated, information on the status of the
investments of companies that withdrew notices and the types of security
arrangements and conditions CFIUS used to mitigate national security concerns, and
a detailed discussion of all perceived adverse effects of investment transactions on
the national security or critical infrastructure of the United States.
Relative to critical technologies, the semi-annual CFIUS report would be
required to include an evaluation of any credible evidence of a coordinated strategy
by one or more countries or companies to acquire U.S. companies involved in
research, development, or production of critical technologies in which the United
States is a leading producer. The report would also include an evaluation of possible
industrial espionage activities directed or directly assisted by foreign governments
against private U.S. companies aimed at obtaining commercial secrets related to
critical technologies.
The measure would require the Inspector General of the Department of the
Treasury to investigate any failure of CFIUS to comply with requirements for
reporting that were imposed prior to the passage of this measure and to report the
findings of this report to the Congress. The measure would also require the chief
executive officer of any party to a merger, acquisition, or takeover to certify in
writing that the information contained in the written notification to CFIUS fully
complied with the requirements of the Exon-Florio provision and that the information
was accurate and complete.
S. 1797 (Inhofe) 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

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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 (Dodd) 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
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 (Collins) 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,

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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.
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)

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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.
S. 3549 (Shelby) was introduced on June 21, 2006 and passed by the full
Senate, with amendments, on July 26, 2006. It would amend the Exon-Florio
provision to provide for greater congressional oversight over the review process and
reduce the discretion of CFIUS to review certain types of investments. The measure
would require CFIUS to review any proposed or pending transaction that results in
a) the control of a person (business) engaged in interstate commerce if the foreign
person is a foreign government or is acting on behalf of a foreign government or b)
if the transactions could result in control of any “critical infrastructure” if CFIUS
determined that there would be “any possible impairment to national security.” For
this measure, critical infrastructure would mean that provided by P.L. 107-56 (P.L.
107-56, USA PATRIOT Act; 42 U.S.C. 5195c) which means any system and assets,
whether physical or cyber-based, that are so vital to the United States that the
degradation or destruction of such systems or assets would have a debilitating impact
on national security, including national economic security and national public health
or safety.
CFIUS would have the same 30 days and 45 days to complete a review and an
investigation, respectively, as under the current process, but any member of CFIUS
would be able to ask for an extension of the deadline up to 30 days for a review and
up to 45 days for an investigation. Once initiated, an investigation would have to
proceed until it is completed, even if the parties involved in the transaction withdrew
from the proposed investment.
The measure would replace the current system of voluntary notification with one
that would require certain entities to notify CFIUS. In particular, any entity that is
owned by or operated on behalf of a foreign government would be required to notify
CFIUS of any proposed or pending transaction that involved a U.S. entity that was
involved in “critical infrastructure” related to U.S. national security. The Secretary
of the Treasury would be required to promulgate regulations to implement this
provision.
S. 3549 also would establish CFIUS as a matter of statute in a manner that
closely resembles the current make-up of the Committee. The Secretary of the
Treasury would continue to serve as the chairman of the Committee with the
Secretary of Defense serving as the vice-chairman. The other members would include
the Secretaries of State, Homeland Security, and Commerce; the Attorney General;
the Director of the Office of Management and Budget; and the Director of National
Intelligence. The Committee would not expressly include 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 as exists
under the current system, but the President could appoint the heads of other executive
agencies or departments as he determines to be appropriate on a case-by-case basis
to serve on CFIUS. The measure also would direct staff members of CFIUS to report
directly to the Deputy Secretary of the Treasury and to perform no other official
functions other than as CFIUS staff.

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The Director of National Intelligence (DNI) would be required to direct the
members of the intelligence community to collect and analyze information related to
the transaction and to report the findings to the members of CFIUS within 15 days
after beginning the review. After completing its initial report, The DNI would be
required to ensure that the intelligence community kept involved in the process by
continuing to analyze ans disseminate any additional information it collected during
the remainder of the review.
The chairman and vice-chairman of CFIUS, in consultation with the Secretaries
of State, Commerce, Energy, the Chairman of the Nuclear Regulatory Commission,
and the DNI would be required to develop and implement a system of assessing
individual countries according to three standards: 1) adherence to nonproliferation
control regimes, including treaties and multilateral supply guidelines; 2) record on
cooperating in counter-terrorism efforts; and 3) potential for transshipment or
diversion of technologies with military applications, including an analysis of national
export control laws and regulations. The measure also would direct that the
assessment and any information developed under this provision be used solely by
those agencies involved in reviewing and investigating investment transactions, not
be made publicly available, and be exempt from disclosure from Title 5 Section 552
of the U.S. Code regarding the public disclosure of information by federal agencies.
Similar to the current statute, the measure would grant the President the
authority to take what action he deems to be appropriate to suspend or to prohibit any
transaction which would result in the control of any “critical infrastructure” of a
person (entity) engaged in interstate commerce in the United States by or with a
foreign person or government that threatens to impair the national security. The
President would be required to announce his decision within 15 days after CFIUS
completed an investigation of a transaction. Similar to the current Exon-Florio
provision, the President would be prohibited from exercising the authority granted
under this provision unless he determined: 1) that there “is credible evidence” that
the transaction “threatens to impair the national security;” and 2) provisions of law
other than the International Emergency Economic Powers Act do not provide
“adequate and appropriate” authority for the President to protect the national security.
The members of CFIUS and the President would be required (shall) to consider
a list of factors in determining to take action under this provision. The list includes
nine factors, including the five that exist under the current provision (listed on page
4). The four new factors that would be added by this measure are: 1) potential effects
on critical infrastructure, including major energy assets; 2) potential effects on
“critical technologies;” 3) the long term projection of United States requirements for
sources of energy and other critical resources and materials; and 4) the country
ranking system developed under this provision.
This measure would protect the confidentiality of the information by exempting
it from federal statutes that govern the public disclosure if information by federal
agencies. Nevertheless, CFIUS would be required to notify the governor of any state
regarding a transaction that involved critical infrastructure in order to discuss any
security concerns that arise or may arise from the transaction. Information provided
to a governor would not be made public, including under any law of a state that
pertained to freedom of information. This provision, however, would not prevent

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disclosure to either House of Congress or to any duly authorized committee or
subcommittee of Congress.
The measure also would require that any assurances or other commitments
reached during a review or an investigation between CFIUS and the investing parties
be included in a formal agreement. The measure would regard the continued
observance of any such assurance or commitment as a necessary condition for the
investment and would be required to monitor the commitments to insure compliance.
Presently, such assurances are kept confidential and are not monitored after the
completion of the transaction. In addition, the measure would specify that the U.S.
District Court for the District of Columbia have jurisdiction to enforce any
agreements and would provide for such remedies as divestiture, injunctive relief,
enforcing the terms of such agreement, and monetary damages.
This measure also would require CFIUS to provide certain reports and notices
to Congress. CFIUS would be required to notify Congress within 10 days of the
initiation of a review of a proposed or pending foreign investment, including the
identities of all the parties involved and any foreign government ownership or
control. CFIUS would also be required to notify Congress when it initiates a full 45-
day investigation and the final results of the investigation, unless the investment
under investigation had been sent to the President. Each notice would be required
to include information on whether an investigation had occurred and had been
completed, a description of the actions that were taken by CFIUS, including details
of any legally binding assurances or commitments that were negotiated as a condition
for approval of the investment, and an identification of the factors specified in this
provision that CFIUS considered in reviewing or investigating the investment. The
notices and reports would be required to be sent to the Majority Leader and Minority
Leader of the Senate, the Speaker and the Minority Leader of the House, to the chair
and ranking members of the Committee on Financial Services of the House and any
other relevant committee. The notices and reports would also be required to be sent
to the Senators and Representatives from the States where the investments involved
critical infrastructures.
CFIUS would be required to provide an annual report to Congress on the U.S.
policy of preserving the Nation’s defense production and critical infrastructure, and
the Secretary of the Treasury would be required to appear before Congress to provide
testimony on the report. Each annual report would be required to include information
on eight areas:
! 1) an analysis of each transaction that affects the national security,
including the nature of the investment and the effect or potential
impact of the investment on the U.S. defense industrial base and
critical infrastructure;
! 2) an updated analysis of any transaction that occurred during the
preceding four years, including an analysis of the impact of
transactions involving foreign governments or persons acting on
behalf of or in concert with foreign governments;

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! 3) a detailed discussion of all the perceived risks to national security
or critical infrastructure that CFIUS would intend to consider in its
deliberations during the year;
! 4) a table showing on a cumulative basis, by sector, and country of
foreign ownership, the number of investments reviewed or
investigated by CFIUS to provide a census of production
“potentially relevant” to the Nation’s defense industrial base that is
owned or controlled by foreign persons or foreign governments;
! 5) an evaluation of whether there is credible evidence of a
coordinated strategy by one or more countries or companies to
acquire critical infrastructure of or within the United States or U.S.
companies involved in research, development, or production of
critical technologies in which the United States is a leading
producer;
! 6) an evaluation of 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; and
! 7) such other matters as are necessary to give a complete disclosure
and analysis of the work of CFIUS
The measure would allow for the evaluations provided in response to areas 5 of
the annual report to be classified, but it would require an unclassified form of the
report to be provided to the public. In addition, the measure would allow CFIUS to
withhold any information from the pubic that it determines to be proprietary
information. This provision, however, does not apply to CFIUS in its requirements
to provide information to Congress.
Exon-Florio Provision
H.R. 4814 (Garrett) would amend the Exon-Florio provision to require that the
President or his designee must approve of any 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 (Markey) 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 United States,” as defined by section 2(4) of the Homeland

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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 (Hunter) 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 (Maloney) 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 (Turner) 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.
H.R. 5337 (Blunt). See this measure under the previous section on the
Committee on Foreign Investment in the United States.

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S. 2335 (Bayh) 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 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 (Coleman) 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.
S. 2410 (Coleman) would amend the Homeland Security Act of 2002 to place
certain requirements on entities that are owned or controlled by a foreign government
in order for such entities to own, acquire, or otherwise control or manage any critical
infrastructure in the United States. These entities must: 1) have a board of directors,
the majority of which is comprised of U.S. citizens; 2) have a chief security officer
who is a U.S. citizen, responsible for safety and security issues related to the critical
infrastructure; and 3) maintain all records related to operations, personnel, and
security of the U.S. general business corporation in the United States. Entities
operating in the United States that are owned or controlled by a foreign government
would have six months to comply with these requirements after they are adopted.
S. 2442 (Durbin) would amend the Exon-Florio provision to require the
President or his designee to notify Congress by providing a draft report within seven
days of the completion of any investigation of a proposed merger, acquisition, or
takeover and before any final determination becomes effective. For each
investigation, the members of CFIUS would be required to certify in writing their
recommendations or any dissent to the President and to Congress at the conclusion
of the investigation. In addition, the measure would require an investigation of any
proposed merger, acquisition, or takeover if the entity is controlled by or acting on
behalf of a foreign person other than a foreign government only in those cases in
which the proposed merger, acquisition, or takeover involves a U.S. entity engaged
in interstate commerce in the United States, or critical infrastructure or if it could
affect the national security of the United States.
In addition, the measure would amend the Exon-Florio provision to broaden
somewhat the ability of the President to exercise his authority to block or suspend
any proposed merger, acquisition, or takeover. The measure would grant the
President such authority not only when a foreign interest might take action that
threatens to impair the national security of the United States but also those that
“might fail to prevent impairment of the national security of the country.” The
measure would also establish as a matter of statute that the President’s designee

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under the Exon-Florio provision is the Committee on Foreign Investment in the
United States.

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