Updated August 6, 2019
CFIUS Reform: Foreign Investment National Security Reviews
Overview
investments in U.S. firms, but increases the allowable time
Some Members of Congress, the Trump Administration,
for reviews and investigations: (1) a 30-day declaration
and some U.S. businesses have raised concerns over the
filing; (2) a 45-day national security review (from 30 days),
risks to continued U.S. technological leadership to support
including an expanded time limit for analysis by the
national defense and economic security due to growing
Director of National Intelligence (from 20 to 30 days); (3) a
foreign direct investment (FDI), primarily by Chinese
45-day national security investigation, with an option for a
firms, in U.S. high-tech companies. On August 13, 2018,
15 day extension for “extraordinary circumstances;” and a
President Trump signed into law new rules governing
15-day Presidential determination (unchanged). To date,
foreign investment national security reviews. Known as the
prior to FIRRMA, Presidents used CFIUS to block five
Foreign Investment Risk Review Modernization Act
foreign investment transactions.
(FIRRMA) of 2018 (Title XVII, P.L. 115-232), the
legislation amends the current process for the Committee on
Transactions Blocked by President
Foreign Investment in the United States (CFIUS) (under
P.L. 110-49) to review, on behalf of the President, the
1990: Acquisition of Mamco Manufacturing by China
national security implications of FDI in the United States.
National Aero-Technology Import and Export Corporation.
CFIUS is an interagency body comprised of nine Cabinet
2012: Acquisition of Oregon wind farm project by Ralls
members, two ex officio members, and others as appointed
Corporation, owned by Chinese company Sany Group.
that assists the President in overseeing the national security
risks of FDI in the U.S. economy. Since its inception in
2016: Acquisition of Aixtron, a German-based
semiconductor firm with U.S. assets, by Chinese firm Fujian
1975, CFIUS has confronted shifting concepts of national
Grand Chip Investment Fund.
security and a changing global economic order that is
marked by the rise of such emerging economies as China
2017: Acquisition of Lattice Semiconductor Corp. by
and state-led firms that are playing a more active role in the
Canyon Bridge Capital Partners, a Chinese investment fund.
global economy. The FIRRMA-amended CFIUS process
maintains the President’s authority to block or suspend
2018: Acquisition of semiconductor chip maker Qualcomm
proposed or pending foreign “mergers, acquisitions, or
by Singapore-based Broadcom.
takeovers” of U.S. entities, including through joint
ventures, that threaten to impair the national security.
FIRRMA broadens CFIUS’ role by explicitly including for
To exercise his authority under CFIUS, the President must:
review certain real estate transactions in close proximity to
(1) conclude that other U.S. laws are inadequate or
a military installation or U.S. government facility or
inappropriate to protect national security; and (2) have
“credible evidence” that the foreign interest exercising
property of national security sensitivities; any non-
controlling investment in U.S. businesses involved in
control might take action that threatens to impair U.S.
critical technology, critical infrastructure, or collecting
national security. In addition, final determinations by the
sensitive data on U.S. citizens; any change in foreign
President are not subject to judicial review.
investor rights; transactions in which a foreign government
The Foreign Investment Risk Review
has a direct or indirect substantial interest; and any
Modernization Act of 2018
transaction or arrangement designed to evade CFIUS.
FIRRMA aims to “strengthen and modernize” the current
Without mentioning specific countries, FIRRMA allows
CFIUS process for reviewing potential effects of foreign
CFIUS potentially to discriminate among foreign investors
investment transactions on U.S. national security, last
by country of origin and transactions tied to certain
updated in 2007. Certain provisions are immediately to take
countries in reviewing certain investment transactions,
effect, while others, including some related to the expanded
pending specific criteria defined by regulations.
scope of CFIUS, are to be subject to further regulations.
Some experts have suggested that the broad changes under
FIRRMA also shifts the filing requirement for foreign firms
FIRRMA could potentially lead CFIUS to take a more
from voluntary to mandatory in certain cases and provides a
assertive role that emphasizes both U.S. economic and
two-track method for reviewing transactions. Some firms
national security interests, particularly relative to the
are permitted to file a declaration to CFIUS and could
development of emerging or leading-edge technology.
receive an expedited review process, while transactions
involving a foreign person in which a foreign government
FIRRMA maintains core components of the current CFIUS
has, directly or indirectly, a substantial interest (to be
three-step process for evaluating proposed or pending
defined by regulations, but not including stakes of less than
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CFIUS Reform: Foreign Investment National Security Reviews
10% voting interest) would require a written notification
more information on investment transactions,
and receive greater scrutiny. Mandatory declarations may
including specifically those involving China.
be subject to other criteria as defined by regulations.
Export Controls. Mandates separate reforms
related to dual-use export controls, with
FIRRMA provides a “sense of Congress” concerning six
requirements to establish an interagency process to
additional factors that CFIUS and the President may
identify so-called “emerging and foundational
consider to determine if a proposed transaction threatens to
technologies”—such items would also fall under
impair U.S. national security. These include:
CFIUS review of critical technologies—and
establish controls by the Department of Commerce
1. Transactions that involve a country of
“
on the export or transfer of such technologies.
special concern” that has a strategic goal
of acquiring critical technology or critical
Response by Other Countries
infrastructure that would affect U.S.
FIRRMA also recommends that CFIUS establish a process
leadership in areas related to national
for exchanging information with U.S. allies and partners to
security;
facilitate coordinated action with respect to trends in FDI
2. The potential effects of the cumulative
and technology that pose national security risks. The United
control of, or pattern of recent
States is not alone in adopting new regulations governing
transactions involving, any one type of
the review of foreign investment for national security
critical infrastructure, energy asset,
implications. Recent actions by other countries include:
critical material, or critical technology by
a foreign government or person;
In February 2019, the European Commission
3. Whether any foreign person engaged in a
approved a block-wide mechanism for screening
transaction has a history of complying
FDI to build on national review mechanisms
with U.S. laws and regulations;
already in place in 12 member states.
4. Control of U.S. industries and
In May 2018, Canada blocked the Chinese
commercial activity that affect U.S.
acquisition of a Canadian construction company.
capability and capacity to meet the
requirements of national security,
In July 2018, the British government issued a draft
including the availability of human
paper proposing additional authority to review
resources, products, technology,
acquisitions and to “call in” previously-concluded
materials, and other supplies and services;
investments for national security reviews.
5. A transaction is likely to expose
In July 2018, Germany blocked the Chinese
personally identifiable information,
takeover of a German machine tool manufacturer
genetic information, or other sensitive
and expanded its authority to block acquisitions of
data of U.S. citizens to access by a
firms involved in “critical infrastructure.”
foreign government or person to exploit
In July 2018, China proposed new draft
information to threaten national security;
regulations to expand the foreign investments
and
covered under its national security review process.
6. A transaction is likely to exacerbate or
create new cybersecurity vulnerabilities
Issues for Congress
or result in a foreign government gaining
The FIRRMA-amended CFIUS process for reviewing
a significant new capability to engage in
certain foreign investment transactions may raise a number
malicious cyber-enabled activities.
of questions for Congress, including:
Other Changes
How will Congress evaluate the success of the amended
review process in protecting U.S. national security?
FIRRMA also mandates other changes that would provide
more resources for CFIUS, add new reporting requirements,
Does the expanded CFIUS review process balance the
and reform export controls.
traditionally open U.S. investment climate with the
requirement to protect U.S. national security?
Resources. Provides for more staff and funding
for CFIUS through authorization of a $20 million
How does CFIUS compare to other countries’ review
annual appropriation and a filing fee for firms of
processes, and to what extent will FIRRMA facilitate
1% of the value of the transaction, not to exceed
greater information sharing to advance national security?
$300,000.
For more information, see CRS In Focus IF10177, The
Committee on Foreign Investment in the United States, by
Risk-Based Analysis. Formalizes CFIUS’ use of
risk-based analysis by assessing the threat,
James K. Jackson.
vulnerabilities, and consequences to national
James K. Jackson, Specialist in International Trade and
security of transactions.
Finance
Reporting. Modifies CFIUS’ annual confidential
Cathleen D. Cimino-Isaacs, Analyst in International Trade
report to specified Members of Congress and non-
and Finance
confidential reports to the public to provide for
IF10952
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CFIUS Reform: Foreign Investment National Security Reviews
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https://crsreports.congress.gov | IF10952 · VERSION 6 · UPDATED