Updated January 14, 2020
CFIUS Reform: Foreign Investment National Security Reviews
Overview
for reviews and investigations: (1) a 30-day declaration
Some Members of Congress, the Trump Administration,
filing; (2) a 45-day national security review (from 30 days),
and some U.S. businesses have raised concerns over the
including an expanded time limit for analysis by the
risks to continued U.S. technological leadership to support
Director of National Intelligence (from 20 to 30 days); (3) a
national defense and economic security due to growing
45-day national security investigation, with an option for a
foreign direct investment (FDI), primarily by Chinese
15-day extension for “extraordinary circumstances”; and a
firms, in U.S. high-tech companies. On August 13, 2018,
15-day presidential determination (unchanged). To date,
President Trump signed into law new rules governing
prior to FIRRMA, Presidents used CFIUS to block five
foreign investment national security reviews. Known as the
foreign investment transactions.
Foreign Investment Risk Review Modernization Act
(FIRRMA) of 2018 (Title XVII, P.L. 115-232), the
Transactions Blocked by President
legislation amends the current process for the Committee on
Foreign Investment in the United States (CFIUS) (under
1990: Acquisition of Mamco Manufacturing by China
P.L. 110-49) to review, on behalf of the President, the
National Aero-Technology Import and Export Corporation.
national security implications of FDI in the United States.
2012: Acquisition of Oregon wind farm project by Ralls
CFIUS is an interagency body comprised of nine Cabinet
Corporation, owned by Chinese company Sany Group.
members, two ex officio members, and others as appointed
2016: Acquisition of Aixtron, a German-based
that assists the President in overseeing the national security
semiconductor firm with U.S. assets, by Chinese firm Fujian
risks of FDI in the U.S. economy. Since its inception in
Grand Chip Investment Fund.
1975, CFIUS has confronted shifting concepts of national
security and a changing global economic order that is
2017: Acquisition of Lattice Semiconductor Corp. by
marked by the rise of such emerging economies as China
Canyon Bridge Capital Partners, a Chinese investment fund.
and state-led firms that are playing a more active role in the
global economy. The FIRRMA-amended CFIUS process
2018: Acquisition of semiconductor chip maker Qualcomm
maintains the President’s authority to block or suspend
by Singapore-based Broadcom.
proposed or pending foreign “mergers, acquisitions, or
takeovers” of U.S. entities, including through joint
ventures, that threaten to impair the national security.
FIRRMA broadens CFIUS’s role by explicitly including for
review certain real estate transactions in close proximity to
To exercise his authority under CFIUS, the President must
a military installation or U.S. government facility or
(1) conclude that other U.S. laws are inadequate or
property of national security sensitivities; any
inappropriate to protect national security; and (2) have
noncontrolling investment in U.S. businesses involved in
“credible evidence” that the foreign interest exercising
critical technology, critical infrastructure, or collecting
control might take action that threatens to impair U.S.
sensitive data on U.S. citizens; any change in foreign
national security. In addition, final determinations by the
investor rights; transactions in which a foreign government
President are not subject to judicial review.
has a direct or indirect substantial interest; and any
transaction or arrangement designed to evade CFIUS. Final
The Foreign Investment Risk Review
regulations were published January 13, 2020.
Modernization Act of 2018
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
investments in U.S. firms, but increases the allowable time
10% voting interest) would require a written notification
https://crsreports.congress.gov
CFIUS Reform: Foreign Investment National Security Reviews
and receive greater scrutiny. Mandatory declarations may
Export Controls. Mandates separate reforms
be subject to other criteria as defined by regulations.
related to dual-use export controls, with
requirements to establish an interagency process to
FIRRMA provides a “sense of Congress” concerning six
identify so-called “emerging and foundational
additional factors that CFIUS and the President may
technologies”—such items would also fall under
consider to determine if a proposed transaction threatens to
CFIUS review of critical technologies—and
impair U.S. national security. These include
establish controls by the Department of Commerce
on the export or transfer of such technologies.
1. Transactions that involve a country of
“special concern” that has a strategic goal
Response by Other Countries
of acquiring critical technology or critical
FIRRMA also recommends that CFIUS establish a process
infrastructure that would affect U.S.
for exchanging information with U.S. allies and partners to
leadership in areas related to national
facilitate coordinated action with respect to trends in FDI
security;
and technology that pose national security risks. The United
2. The potential effects of the cumulative
States is not alone in adopting new regulations governing
control of, or pattern of recent
the review of foreign investment for national security
transactions involving, any one type of
implications. Recent actions by other countries include
critical infrastructure, energy asset,
critical material, or critical technology by
In February 2019, the European Commission
a foreign government or person;
approved a block-wide mechanism for screening
FDI to build on national review mechanisms
3. Whether any foreign person engaged in a
already in place in 12 member states.
transaction has a history of complying
with U.S. laws and regulations;
In May 2018, Canada blocked the Chinese
4. Control of U.S. industries and
acquisition of a Canadian construction company.
commercial activity that affect U.S.
In July 2018, the British government issued a draft
capability and capacity to meet the
paper proposing additional authority to review
requirements of national security,
acquisitions and to “call in” previously concluded
including the availability of human
investments for national security reviews.
resources, products, technology,
materials, and other supplies and services;
In July 2018, Germany blocked the Chinese
takeover of a German machine tool manufacturer
5. A transaction is likely to expose
and expanded its authority to block acquisitions of
personally identifiable information,
firms involved in “critical infrastructure.”
genetic information, or other sensitive
data of U.S. citizens to access by a
In July 2018, China proposed new draft
foreign government or person to exploit
regulations to expand the foreign investments
information to threaten national security;
covered under its national security review process.
and
Issues for Congress
6. A transaction is likely to exacerbate or
create new cybersecurity vulnerabilities
The FIRRMA-amended CFIUS process for reviewing
or result in a foreign government gaining
certain foreign investment transactions may raise a number
a significant new capability to engage in
of questions for Congress, including
malicious cyber-enabled activities.
How will Congress evaluate the success of the
amended review process in protecting U.S.
Other Changes
national security?
FIRRMA also mandates other changes that would provide
Does the expanded CFIUS review process balance
more resources for CFIUS, add new reporting requirements,
the traditionally open U.S. investment climate with
and reform export controls.
the requirement to protect U.S. national security?
Resources. Provides for more staff and funding
How does CFIUS compare to other countries’
for CFIUS through authorization of a $20 million
annual appropriation and a filing fee for firms of
review processes, and to what extent will
FIRRMA facilitate greater information sharing to
1% of the value of the transaction, not to exceed
advance national security?
$300,000.
Risk-Based Analysis. Formalizes CFIUS’s use of
For more information, see CRS In Focus IF10177, The
risk-based analysis by assessing the threat,
Committee on Foreign Investment in the United States, by
vulnerabilities, and consequences to national
James K. Jackson
security of transactions.
James K. Jackson, Specialist in International Trade and
Reporting. Modifies CFIUS’s annual confidential
Finance
report to specified Members of Congress and
Cathleen D. Cimino-Isaacs, Analyst in International Trade
nonconfidential reports to the public to provide for
and Finance
more information on investment transactions,
including specifically those involving China.
IF10952
https://crsreports.congress.gov
CFIUS Reform: Foreign Investment National Security Reviews
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https://crsreports.congress.gov | IF10952 · VERSION 11 · UPDATED