July 29, 2014
The Committee on Foreign Investment in the United States
Overview
What is CFIUS? The Committee on Foreign Investment in
Key CFIUS Requirements. The President can
the United States (CFIUS) is an interagency committee that
exercise his authority to suspend or prohibit a foreign
serves the President in overseeing the national security
investment, subject to a CFIUS review, if he finds that:
implications of foreign investment in the economy. It
1) credible evidence exists that the foreign investor
reviews foreign investment transactions to determine if: 1)
might take action that threatens to impair the national
they threaten to impair the national security; 2) the foreign
security; and 2) no other laws provide adequate and
investor is controlled by a foreign government; or 3) the
appropriate authority for the President to protect the
transaction could affect homeland security or would result
national security.
in control of any critical infrastructure that could impair the
national security. The President has the authority to block
The CFIUS Review Process
proposed or pending foreign investment transactions that
threaten to impair the national security.
CFIUS’s review process is a voluntary system of
notification by investors. Firms largely comply with the
What is the Source of CFIUS Authority? CFIUS initially
provision, because foreign acquisitions that do not notify
was created and operated through a series of Executive
the Committee remain subject indefinitely to divestment or
Orders. In 1988, Congress passed the “Exon-Florio”
other actions by the President. Upon receiving written
amendment to the Defense Production Act (50 USC App
notification of a proposed acquisition, merger, or takeover
sect. 2170), which codified the CFIUS review process due
of a U.S. firm by a foreign investor, the CFIUS process can
in large part to concerns over acquisitions of U.S. defense-
proceed potentially through three steps.
related firms by Japanese investors. In 2007, amid growing
concerns over the proposed foreign purchase of commercial
1) National Security Review: The Committee is required
operations of six U.S. ports, Congress passed the Foreign
to conduct a 30-day national security review if: a) the
Investment and National Security Act of 2007 (P.L. 110-49)
investment threatens to impair the national security of the
to create CFIUS in statute. In adopting this measure,
United States, including homeland security, critical
Congress did not intend to alter the generally open foreign
infrastructure, and critical technologies; and b) the
investment climate of the United States or to have it inhibit
transaction would result in foreign control of a U.S. entity.
foreign direct investments in industries that could not be
The Secretary of the Treasury can exempt a transaction
considered to be of national security interest. The United
from review if he determines that the transaction will not
States is both the largest recipient of foreign investment and
impair the national security. During the 30-day review, the
the largest foreign investor in the world.
Director of National Intelligence is required to investigate
What is the Membership of CFIUS? The Committee
the national security implications of any proposed foreign
consists of nine members, including the Secretary of the
investment transaction.
Treasury, who serves as chair, the Secretaries of State,
Defense, Homeland Security, Commerce, and Energy; the
In a national security review, CFIUS is required to consider
Attorney General; the United States Trade Representative;
12 specific factors, including: 1) domestic production
and the Director of the Office of Science and Technology
needed for current and projected national defense
Policy. The Secretary of Labor and the Director of National
requirements; 2) the control of domestic industries and
Intelligence serve as ex officio members of the Committee.
commercial activity by foreign citizens; 3) potential sales of
military goods, equipment, or technology to a country that
Executive Order 13456 (January 2008) added five White
House representatives, including the Director of the Office
supports terrorism or proliferates missile technology or
of Management and Budget and the Assistant to the
chemical and biological weapons; 4) U.S. technological
President for National Security Affairs. The President can
leadership in areas affecting U.S. national security; 5)
also appoint other Executive officers to serve on the
critical infrastructure, major energy assets and critical
Committee on a case-by-case basis.
technologies; and 6) such other factors as the President or
the Committee determine to be appropriate.
2) National Security Investigation. If any member of
CFIUS determines that a foreign investment transaction
threatens to impair the national security, the transaction
undergoes a more comprehensive 45-day national security
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The Committee on Foreign Investment in the United States
investigation. During this investigation, CFIUS and the
ventures that are built from the ground up and are not based
parties to an investment transaction can develop and adopt
on an acquisition, merger, or takeover of an existing firm.
mitigation procedures that are designed to address national
security concerns.
CFIUS is required to brief certain congressional leaders
upon request and to report annually to Congress on any
3) Presidential Determination. If CFIUS concludes that a
reviews or investigations it conducted during the year (see
proposed foreign investment transaction threatens to impair
Table 1). The data indicate that of the 538 foreign
the U.S. national security and adequate mitigation
investment transactions between 2008 and 2012, 32
procedures were not reached, it can recommend that the
transactions were halted during the review process, 168
President suspend or prohibit the proposed merger,
transactions were investigated for national security
acquisition, or takeover. The President has 15 days to make
concerns, and one transaction was blocked by the
a determination and exercise his authority to take such
President—the wind farm transaction by Ralls Corp.
action for such time as he considers appropriate to suspend
or prohibit any foreign investment transaction that threatens
Table 1. Foreign Investment Transactions
to impair the national security of the United States. Such
Reviewed by CFIUS, 2008-2012
determinations by the President are not subject to judicial
Notices
review.
With-
Recent Activity
drawn
No. of
Presi-
No. of
During
Investi-
dential
Year
Notices
Review
gations
Decisions
A number of investment transactions have attracted public
and Congressional attention. In 2012, the Chinese firm
2008
155
18
23
0
Sany Group acquired a wind farm project in Oregon by
2009
65
5
25
0
Ralls Corp. without reporting the transaction to CFIUS.
2010
93
6
35
0
Subsequently, CFIUS retroactively reviewed the transaction
and directed Ralls to desist due to objections by the U.S.
2011
111
1
40
0
Navy over the placement of wind turbines near or within
2012
114
2
45
1
restricted Naval Weapons Systems Training Facility
airspace. After a full investigation, President Obama
Total 538
32
168
1
approved CFIUS’s determination and blocked the
investment. Ralls filed a suit challenging the President’s
Source: Annual Report to Congress, Committee on Foreign
authority to block the investment; the District Court ruled
Investment in the United States, December 2013.
against Ralls. Ralls appealed the case was heard May 8,
2014, and decided on July 15, 2014. The Appeals Court
Issues for Congress
ruled that Ralls’ Due Process rights had been violated
because it had not been given access to the unclassified
The CFIUS process for reviewing certain foreign
evidence on which the President relied and an opportunity
investment transactions has raised a number of questions
to rebut the evidence before the President reached his
for Congress, including:
determination.
• How well is CFIUS balancing the traditionally
The proposed acquisition in 2013 of Smithfield Food Inc.,
open U.S. investment climate with the requirement
for $4.7 billion by China’s Shuanghui International
to protect U.S. national security?
Holdings Ltd. sparked congressional and public interest
about the issue of food security as a component of the
• Should greenfield investment be subject to the
critical infrastructure/key resources rubric. After conducting
CFIUS process?
a national security review and investigation, CFIUS
concluded that it had no national security concerns that
• Should food security play a role in a CFIUS
would prompt it to recommend that the President should
deliberation to protect U.S. critical infrastructure?
block the transaction. Smithfield’s stockholders
More Information
overwhelmingly approved the transaction on September 25,
2013.
For more information see CRS Report RL33388, The
Committee on Foreign Investment in the United States.
Another recent activity reflects efforts by the Russian space
Also, see: CRS Report 21857, Foreign Direct in the United
agency Roscosmos in 2013 to build six Global Positioning
States: An Economic Analysis, and CRS Report 21118, U.S.
System (GPS) monitor stations in the United States. This
Direct Investment Abroad: Trends and Current Issues.
case has sparked interest in amending CFIUS’s mandate
that currently does not provide for it to review greenfield
James K. Jackson, jjackson@crs.loc.gov, 7-7751
investments. Greenfield investments are new start-up
IF00027
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