For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34082
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Prepared for Members and Committees of Congress
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During the First Session of the 110th Congress, several Members of Congress have introduced
measures in the House and the Senate to address various concerns with foreign investment,
especially the proposed purchase of the British-owned P&O Ports by Dubai Ports World in early
2006. Congresswoman Maloney introduced H.R. 556, the National Security Foreign Investment
Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The measure was
approved by the House Financial Services Committee on February 13, 2007 with amendments,
and was approved with amendments by the full House on February 28, 2007 by a vote of 423 to
0. On June 13, 2007, Senator Dodd introduced S. 1610, the Foreign Investment and National
Security Act of 2007. On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by
unanimous consent. On July 11, 2007, the House accepted the Senate's version of H.R. 556 by a
vote of 370-45 and sent the measure to the President, who signed it on July 26, 2007. It is
designated as P.L. 110-49.
Both the House bill and the Senate bill attempt to address six perceived problems with the current
statutes that many Members identified during the 109th Congress: 1) that the principal members of
the interagency Committee on Foreign Investment in the United States (CFIUS) at times seem not
to be well informed of the outcomes of reviews and investigations regarding proposed or pending
investment transactions; 2) that CFIUS has interpreted incorrectly the requirements under current
statutes for investigations of transactions that involve firms that are owned or controlled by a
foreign government; 3) that reporting requirements under current statutes do not provide
Congress with enough information about the operations and actions of CFIUS for Members to
fulfill their oversight responsibilities; 4) that CFIUS exercises too much discretion in its ability to
choose which transactions it investigates; 5) that the definition of national security used by
CFIUS is no longer adequate in a post-September 11th world; and 6) that deadlines placed on
CFIUS to complete reviews and investigations of investment transactions do not provide adequate
time in some instances for the Committee to complete its reviews and investigations.
This report provides background information on the Committee on Foreign Investment in the
United States and on the Exon-Florio provision. In addition, the report provides an overview of
H.R. 556 and S. 1610 and a side-by-side comparison of the two measures. This report will be
updated as warranted by events.
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Overview ......................................................................................................................................... 1
The Committee on Foreign Investment in the United States (CFIUS) ..................................... 2
The Exon-Florio Provision........................................................................................................ 2
The "Byrd Amendment" ........................................................................................................... 4
Exon-Florio Provision After September 11, 2001..................................................................... 7
Overview of H.R. 556 and S. 1610 ................................................................................................. 9
Side-by-Side Comparison of H.R. 556 and S. 1610.......................................................................11
CFIUS National Security Investigations ..................................................................................11
Composition of CFIUS ........................................................................................................... 20
Presidential Actions................................................................................................................. 23
Findings................................................................................................................................... 24
Factors Used in Findings......................................................................................................... 24
Confidentiality......................................................................................................................... 27
Mitigation and Tracking.......................................................................................................... 27
Congressional Oversight ......................................................................................................... 30
Conclusions ................................................................................................................................... 36
Author Contact Information .......................................................................................................... 38
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During the 109th Congress, numerous Members of Congress introduced over two dozen measures
to address various concerns with foreign investment that arose from the proposed purchase of the
British-owned P&O Ports1 by Dubai Ports World2 in early 2006.3 In particular, the transaction
spurred some Members to question the effectiveness of the relatively obscure interagency group,
the Committee on Foreign Investment in the United States (CFIUS). The group has been charged
with developing and implementing the Administration's policy on foreign investment and with
conducting national security reviews under the Exon-Florio provision of the Defense Production
Act (50 U.S.C. Sec. 2170). Of the measures that were introduced, H.R. 5337 and S. 3549 from the
House and Senate, respectively, garnered significant support and passed their respective bodies on
July 26, 2006. The 109th Congress ended before a Conference Committee was convened on H.R.
5337 or S. 3549 and both measures lapsed. In the 110th Congress, Congresswoman Maloney
introduced H.R. 556 (H.Rept. 110-24), the National Security Foreign Investment Reform and
Strengthened Transparency Act of 2007, which was adopted by the full House on February 28,
2007. On June 13, 2007, Senator Dodd introduced S. 1610 (S.Rept. 110-80), the Foreign
Investment and National Security Act of 2007. On June 29, 2007, the Senate substituted S. 1610
for H.R. 556 and adopted the revised measure by unanimous consent. On July 11, 2007, the
House accepted the Senate's version of H.R. 556 by a vote of 370-45 and sent the measure to the
President, who signed it on July 26, 2007. It is designated as P.L. 110-49.
H.R. 556 and S. 1610 represent efforts to correct perceived problems with the current process that
arose during consideration of the Dubai Ports World transaction. In particular, many Members
generally expressed concerns about six areas. First, some Members were concerned that the
principal members of CFIUS at times seem not to be well informed of the outcomes of reviews
and investigations made by CFIUS regarding proposed or pending investment transactions,
because the duty for reviewing such transactions has been delegated in most agencies to lower-
level personnel. Second, some Members argued that CFIUS was interpreting incorrectly the
requirements under current statutes for investigations of transactions that involve firms that are
owned or controlled by a foreign government. Third, some Members argued that the current
statutes do not provide Congress with enough information about the operations and actions of
CFIUS for them to fulfill their oversight responsibilities. Fourth, some Members argued that
CFIUS exercises too much discretion in its ability to choose which transactions it investigates and
that it needs to be held more accountable to Congress for its decisions regarding reviews and
investigations of investment transactions. Fifth, some Members questioned the definition of
national security used by the Committee as being too narrowly interpreted and out of sync with
the post September 11th view of national security. Last, some Members expressed their concerns
that the time constraints placed on CFIUS to complete reviews and investigations of investment
1
Peninsular and Oriental Steam Company is a leading ports operator and transport company with operations in ports,
ferries, and property development. It operates container terminals and logistics operations in over 100 ports and has a
presence in 18 countries.
2
Dubai Ports World was created in November 2005 by integrating Dubai Ports Authority and Dubai Ports
International. It is one of the largest commercial port operators in the world with operations in the Middle East, India,
Europe, Asia, Latin America, the Carribean, and North America.
3
For additional information, see CRS Report RL33614, Exon-Florio Foreign Investment Provision: Comparison of
H.R. 5337 and S. 3549, by James K. Jackson; and CRS Report RL33388, The Committee on Foreign Investment in the
United States (CFIUS), by James K. Jackson.
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transactions does not provide adequate time in some instances for the Committee to complete its
reviews and investigations.
The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee
that serves the President in overseeing the national security implications of foreign investment in
the economy. CFIUS was established by an Executive Order of President Ford in 1975 with broad
responsibilities and few specific powers.4 P.L. 110-49 established the Committee as a matter of
statute, rather than as a creation of various Executive Orders. The Committee is housed in the
Department of the Treasury and until recently generally has operated in relative obscurity.
Initially, CFIUS was established with six members, but the membership was expanded to twelve
through various Executive Orders. Under P.L. 110-49, the Committee membership was reduced to
seven members, including the Secretaries of State, the Treasury, Defense, Homeland Security, and
Commerce; Energy; and the Attorney General. The Secretary of Labor and the Director of
National Intelligence serve as ex officio members of the Committee. The President can appoint
temporary members as he determines. Prior to passage of P.L. 110-49, seven other individuals
were permanent members of CFIUS: 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.5
�
The Exon-Florio provision (Section 2170 of the 1988 Defense Production Act), as amended by
P.L. 110-49, grants the President broad discretionary authority to take what action he considers to
be "appropriate" to suspend or prohibit proposed or pending foreign acquisitions, mergers, or
takeovers "of persons engaged in interstate commerce in the United States" which "threaten to
impair the national security." The statute indicates that the President must make an investigation
to determine the effects on national security of such investments. Most importantly, however,
Congress directed that the President can exercise this discretionary authority "only if" he
determines that two conditions exist: 1) other U.S. laws are inadequate or inappropriate to protect
the national security; and 2) 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
4
Executive Order 11858 (b), May 7, 1975, 40 F.R. 20263.
5
Executive Order 11858 of May 7, 1975, 40 F.R. 20263 established the Committee with six members: the Secretaries
of State, the Treasury, Defense, Commerce, and the Assistant to the President for Economic Affairs, and the Executive
Director of the Council on International Economic Policy. Executive Order 12188, January 2, 1980, 45 F.R. 969, added
the United States Trade Representative and substituted the Chairman of the Council of Economic Advisors for the
Executive Director of the Council on International Economic Policy. Executive Order 12661, December 27, 1988, 54
F.R. 779, added the Attorney General and the Director of the Office of Management and Budget. Executive Order
12860, September 3, 1993, 58 F.R. 47201, added 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.
Executive Order 13286, Section 57, February 28, 2003, added the Secretary of Homeland Security. P.L. 110-49
reduced the membership of CFIUS to six Cabinet members and the Attorney General, it added the Secretary of Labor
and the Director of National Security as ex officio members, and removed seven White House appointees.
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define national security, but intended to have the term interpreted broadly without limitation to a
particular industry.6
In 1988, Congress approved the Exon-Florio provision as part of the Omnibus Trade Act.7
Through Executive Order 12661, President Reagan implemented provisions of the Omnibus
Trade Act, and he delegated his authority to administer the Exon-Florio provision to CFIUS,8
particularly to conduct reviews of foreign investment, to undertake investigations, and to make
recommendations, although the statute itself does not specifically mention CFIUS. As a result of
President Reagan's action, CFIUS was transformed from a purely administrative body with
limited authority to review and analyze data on foreign investment to one with a broad mandate
and significant authority to advise the President on foreign investment transactions and to
recommend that some transactions be suspended or prohibited. 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.
Regulations developed by the Treasury Department in November 1991 implemented the Exon-
Florio provision.9 These regulations created a system of voluntary notification by the parties to an
investment transaction and they allow for notices of acquisitions by agencies that are members of
CFIUS. Despite the voluntary nature of the notification, firms largely comply with these
provisions because the regulations stipulate that foreign acquisitions that are governed by the
Exon-Florio review process, but that do not notify the Committee, remain subject indefinitely to
divestment or other appropriate actions by the President. This process has become one in a
number of regulatory steps that firms consider as they undertake a merger, acquisition, or
takeover.
According to the Exon-Florio provision, as amended by P.L. 110-49, CFIUS has 30 days to
decide after it receives the initial formal notification by the parties to a merger, acquisition, or a
takeover, whether to investigate a case as a result of its determination that the investment
"threatens to impair the national security of the United States." National security also includes,
"those issues relating to `homeland security,' including its application to critical infrastructure,"
and "critical technologies." In addition, CFIUS is required to conduct an investigation of a
transaction if the Committee determines that the transaction would result in foreign control of any
person engaged in interstate commerce in the United States.
The President, acting through CFIUS, is also required 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, or 2) the foreign person was controlled by a foreign government. If during this
30 day period all of the members of CFIUS conclude that the investment does not threaten to
impair the national security, the review is terminated. If, however, at least one member of the
Committee determines that the investment does threaten to impair the national security CFIUS
6
Congressional Record, Daily Edition, vol. 134, April 20, 1988. p. H2118.
7
P.L. 100-418, title V, Subtitle A, Part II, or 50 U.S.C. app 2170.
8
Executive Order 12661 of December 27, 1988, 54 F.R. 779.
9
Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons. 31 C.F.R. Part 800.
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can proceed to a 45-day investigation. At the conclusion of the investigation or the 45-day review
period, whichever comes first, the Committee can decide to offer no recommendation or it can
recommend that the President suspend or prohibit the investment. The President is under no
obligation to follow the recommendation of the Committee to suspend or prohibit an investment.
The Director of National Intelligence, although not a member of CFIUS, must be given "adequate
time" to carry out a thorough analysis of "any threat to the national security of the United States"
of any merger, acquisition, or takeover. This analysis would include a request for information
from the Department of the Treasury's Director of the Office of Foreign Assets Control and the
Director of the Financial Crimes Enforcement Network. In addition, the Director of National
Intelligence is required to seek and to incorporate the views of "all affected or appropriate"
intelligence agencies.
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In 1992, Congress amended the Exon-Florio 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
Under P.L. 110-49, these investigative requirements were strengthened. The definition of national
security was broadened by P.L. 110-49 to include, "those issues relating to `homeland security,'
including its application to critical infrastructure," and "critical technologies." In addition, CFIUS
is required to conduct an investigation of a transaction if the Committee determines that the
transaction would result in foreign control of an entity engaged in interstate commerce in the
United States. The President, acting through CFIUS, is required 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 if the foreign party to an investment transaction is controlled by a foreign
government. CFIUS is not required to conduct an investigation, even if it had determined during a
review that the party to a transaction was controlled by a foreign government, if: it also
determines that the transaction "will not affect" the national security of the United States.
This amendment came under particularly intense scrutiny by the 109th Congress as a result of the
DP World transaction. Many Members of Congress and others believed that this amendment
required CFIUS to undertake a full 45-day investigation of the transaction, because DP World was
"controlled by or acting on behalf of a foreign government." The DP World acquisition, however,
exposed a sharp rift between what some Members apparently believed the amendment directed
CFIUS to do and how the members of CFIUS were interpreting the amendment. In particular,
some Members of Congress apparently interpreted the amendment to require CFIUS to conduct a
mandatory 45-day investigation without exception if the foreign firm involved in a transaction is
owned or controlled by a foreign government.
10
P.L. 102-484, October 23, 1992.
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Representatives of CFIUS, however, argued that there were two factors that controlled their
decision not to conduct a 45-day investigation of the transaction. First, they argued that the
requirements of the Exon-Florio provision itself precluded them from engaging in a 45-day
investigation, because their initial review did not find "credible evidence" that the transaction
would impair national security, a basic threshold for CFIUS to meet in order to invoke the Exon-
Florio provision. Secondly, representatives indicated that they interpret the amendment to mean
that a 45-day investigation is discretionary and not mandatory, again because of the requirement
that a transaction must be found to cause an impairment to national security before the Exon-
Florio provision can be invoked.
CFIUS representatives also argued that their decision not to launch a full 45-day investigation of
the DP World was the result of an extensive informal review of the transaction prior to the case
being officially filed with CFIUS and as a result of a formal 30-day review. During these two
reviews, CFIUS members believed that all concerns that had been expressed by members of
CFIUS had been adequately resolved so that by the time of the review no member of CFIUS had
any unresolved concerns about the impact of the transaction on national security. They conceded
that the case met the first criterion under the Byrd amendment, because DP World was controlled
by a foreign government, but that it did not meet the second part of the requirement, because
CFIUS had concluded during the 30-day review that the transaction "could not affect the national
security."11
As a result of the attention by both the public and Congress, DP World officials indicated that
they would sell off the U.S. port operations to an American owner.12 On December 11, 2006, DP
World officials announced that a unit of AIG Global Investment Group, a New York-based asset
management company with $683 billion in assets, but no experience in port operations, would
acquire the U.S. port operations for an undisclosed amount.13
Through the Exon-Florio provision, Congress directed that the President or his designee must
consider a short list of factors in deciding whether to block a foreign acquisition, merger, or
takeover. Again, the President has broad discretion under the current statute to decide the basis on
which he determines whether a transaction might impair the national security. This list includes
the following factors:
(1) domestic production needed for projected national defense requirements;
(2) the capability and capacity of domestic industries to meet national defense requirements,
including the availability of human resources, products, technology, materials, and other
supplies and services;
(3) the control of domestic industries and commercial activity by foreign citizens as it affects
the capability and capacity of the U.S. to meet the requirements of national security;
(4) the potential effects of the transactions on the sales of military goods, equipment, or
technology to a country that supports terrorism or proliferates missile technology or chemical
11
Briefing on the Dubai Ports World Deal before the Senate Armed Services Committee, February 23, 2006.
12
Weisman, Jonathan, and Bradley Graham, "Dubai Firm to Sell U.S. Port Operations," The Washington Post, March
10, 2006. p. A1.
13
King, Neil Jr., and Greg Hitt, Dubai Ports World Sells U.S. Assets--AIG Buys Operations that Ignited Controversy
As Democrats Plan Changes. The Wall Street Journal, December 12, 2006. p. A1.
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and biological weapons; transactions identified by the Secretary of Defense as "posing a
regional military threat" to the interests of the United States;
(5) the potential effects of the transaction on U.S. technological leadership in areas affecting
U.S. national security;
(6) whether the transaction has a security-related impact on critical infrastructure in the
United States:
(7) the potential effects on United States critical infrastructure, including major energy
assets;
(8) the potential effects on United States critical technologies;
(9) whether the transaction is a foreign government-controlled transaction;
(10) in those cases involving a government-controlled transaction, a review of (A) the
adherence of the foreign country to nonproliferation control regimes, (B) the foreign
country's record on cooperating in counter0terrorism efforts, (C) the potential for
transshipment or diversion of technologies with military applications;
(11) the long-term projection of the United States requirements for sources of energy and
other critical resources and materials; and
(12) such other factors as the President or the Committee determine to be appropriate.14
CFIUS and a designated lead agency are authorized 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 are 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, CFIUS can take a number of actions,
including 1) interim protections to address specific concerns about the transaction pending a re-
submission of a notice by the parties; 2) specific time frames for re-submitting the notice; and 3)
a process for tracking any actions taken by any party to the transaction.
In addition, CFIUS is required to develop a method for evaluating the compliance of firms that
have entered into a mitigation agreement or condition that was imposed as a requirement for
approval of the investment transaction. Such measures, however, are required to be developed in
such a way that they allow CFIUS to determine that compliance is taking place without also: 1)
"unnecessarily diverting" CFIUS resources from assessing any new covered transaction for which
a written notice had been filed; and 2) placing "unnecessary" burdens on a party to a investment
transaction.
Part of Congress's motivation in adopting the Exon-Florio provision apparently arose from
concerns 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.
Through the Exon-Florio provision, Congress attempted to strengthen the President's hand in
conducting foreign investment policy, while providing a cursory role for itself as a means of
emphasizing that, as much as possible, the commercial nature of investment transactions should
14
The last requirement under factor 4 and factors 6-12 were added by P.L. 110-49.
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be free from political considerations. Congress also attempted to balance public concerns about
the economic impact of certain types of foreign investment with the nation's long-standing
international commitment to maintain an open and receptive environment for foreign investment.
Furthermore, Congress did not intend to have the Exon-Florio provision alter the generally open
foreign investment climate of the country or to have it inhibit foreign direct investments in
industries that could not be considered to be of national security interest. The basic approach of
the provision, therefore, was to presume that foreign investment generally has a positive effect on
the economy and that it should be encouraged and restricted only in those cases in which a
specific transaction had met a burden of proof that the proposed investor "might take action that
threatens to impair the national security."
At the time the Exon-Florio provision was adopted, some analysts believed the provision could
potentially widen the scope of industries that fell under the national security rubric. CFIUS,
however, is not free to establish an independent approach to reviewing foreign investment
transactions, but operates under the authority of the President and reflects his attitudes and
policies. As a result, the discretion CFIUS uses to review and to investigate foreign investment
cases reflects policy guidance from the President. In addition, Congress did not adopt a specific
definition of national security when it approved the Exon-Florio provision. Instead, during a
review or investigation of a foreign investment, each member of CFIUS is expected to apply that
definition of national security that is consistent with the legislative mandate of the CFIUS
member. As a result, the CFIUS process relies on each member applying their own particular
definition of national security and making any concerns that arise from such a review known to
the other members of CFIUS.
Foreign investors are also constrained by legislation that bars foreign direct investment in such
industries as maritime operations, aircraft, banking, resources and power.15 Generally, these
sectors were closed to foreign investors, primarily for national defense purposes, prior to passage
of the Exon-Florio provision to prevent these areas from being subject to foreign control.
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Arguably, the events of September 11, 2001, reshaped Congressional attitudes toward the Exon-
Florio provision and the manner in which it should be used. During discussion about the Exon-
Florio provision prior to its passage in 1988, the Reagan Administration opposed a definition of
national security that included "essential commerce and national security," because the
administration argued that the definition was too broad. Ultimately, the Reagan Administration
succeeded in getting the term "essential commerce" dropped from the provision. After the
September 11th terrorist attacks, however, Congress passed and President Bush signed the USA
PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism).16 In this act, Congress provided for special support
for "critical industries," which it defined as:
systems and assets, whether physical or virtual, so vital to the United States that the
incapacity or destruction of such systems and assets would have a debilitating impact on
15
CRS Report RL33103, Foreign Investment in the United States: Major Federal Statutory Restrictions, by Michael V.
Seitzinger.
16
P.L. 107-56, title X, Sec. 1014, October 26, 2001; 42 U.S.C. Sec. 5195c(e).
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security, national economic security, national public health or safety, or any combination of
those matters.17
This broad definition is enhanced to some degree by other provisions of the act, which
specifically identify certain sectors of the economy, therefore, as likely candidates for
consideration as critical infrastructure, including telecommunications, energy, financial services,
water, transportation sectors,18 and the "cyber and physical infrastructure services critical to
maintaining the national defense, continuity of government, economic prosperity, and quality of
life in the United States."19 The following year, Congress adopted the language in the USA
PATRIOT Act on critical infrastructure into The Homeland Security Act of 2002.20
By adopting the terms "critical infrastructure" and "homeland security," following the events of
September 11, 2001, Congress demonstrated that the attacks fundamentally altered the way many
Members of Congress and many in the public view the concept of national security. As a result,
many in Congress and in the public have come to believe that economic activities are a separately
identifiable component of national security. In addition, many in Congress and elsewhere
apparently perceive greater risks to the economy arising from foreign investments in which the
foreign investor is owned or controlled by foreign governments as a result of the terrorist attacks.
The Dubai Ports World case, in particular, demonstrated that there was a difference between the
post-September 11 expectations held by many in Congress about the role of foreign investment in
the economy and of economic infrastructure issues as a component of national security and the
operations of CFIUS. For some Members of Congress, CFIUS seemed to be out of touch with the
post-September 11, 2001 view of national security, because it remains founded in the late 1980s
orientation of the Exon-Florio provision, which views national security primarily in terms of
national defense and downplays or even excludes a broader notion of economic national security.
Activity within Congress and the intense public and congressional reaction that arose from the
proposed Dubai Ports World acquisition spurred the Bush Administration in late 2006 to make an
important administrative change in the way CFIUS reviews foreign investment transactions.
CFIUS and President Bush approved the acquisition of Lucent Technologies, Inc. by the French-
based Alcatel SA, which was completed on December 1, 2006. Before the transaction was
approved by CFIUS, however, Alcatel-Lucent was required to agree to a national security
arrangement, known as a Special Security Arrangement, or SSA, that restricts Alcatel's access to
sensitive work done by Lucent's research arm, Bell Labs, and the communications infrastructure
in the United States.
The most controversial feature of this arrangement is that it allows CFIUS to reopen a review of
the deal and to overturn its approval at any time if CFIUS believes the companies "materially fail
to comply" with the terms of the arrangement. This marks a significant change in the CFIUS
process. Prior to this transaction, CFIUS reviews and investigations had been portrayed, and had
been considered, to be final. As a result, firms were willing to subject themselves voluntarily to a
CFIUS review, because they believed that once an investment transaction was scrutinized and
approved by the members of CFIUS the firms could be assured that the investment transaction
would be exempt from any future reviews or actions. This administrative change, however, means
17
Ibid.
18
42 U.S.C. Sec. 5195c(b)(2).
19
42 U.S.C. Sec. 5195c(b)(3).
20
6 U.S.C. Sec. 101(4).
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that a CFIUS determination may no longer be a final decision and it adds a new level of
uncertainty to foreign investors seeking to acquire U.S. firms. A broad range of U.S. and
international business groups are objecting to this change in the Administration's policy.21
H.R. 556 was approved by the House Financial Services Committee on February 13, 2007, with
amendments. The amendment offered by Committee Chairman Frank and Representative Price
included six changes to the bill as it was introduced on January 18, 2007. These changes
responded to concerns that were expressed by the Bush Administration that some of the
procedures that would have been established under H.R. 556 would have created new levels of
bureaucracy and administrative bottlenecks that potentially could have delayed and discouraged
foreign investment. The changes would 1) allow a Deputy Secretary or an Under Secretary of an
agency to approve an investment transaction on behalf of the respective agency instead of
requiring the Secretary to approve the transaction; 2) require the Deputy Secretary of an agency
to certify investment transactions by companies that are owned by a foreign government; 3) give
the Director of National Intelligence "adequate time" to consider national security implications
instead of requiring a minimum of 30 days to examine security implications; 4) clarify that
agencies act on behalf of CFIUS in administering agreements to mitigate security concerns that
are raised about a foreign investor during a CFIUS review; 5) strike a provision that would have
allowed CFIUS to reopen approvals; and would have required the Attorney General to report to
Congress.22
On February 28, 2007, H.R. 556 was approved with amendments by the full House. The three
amendments that were adopted clarified the language of the measure in some cases and added a
number of new sections. In particular, the measure added a new factor that requires CFIUS and
the President to consider the impact of an investment transaction on U.S. efforts to curtail human
smuggling in approving a transaction. Another change would require CFIUS to notify Senators
and Members of Congress if the Committee determines that the areas represented by the Senator
or Member would be "significantly" affected by an investment transaction.
On June 13, 2007, Senator Dodd introduced S. 1610, which was referred to the Senate Committee
on Banking, Housing, and Urban affairs. On June 29, 2007, the full Senate considered S. 1610
and adopted the measure by unanimous consent as a substitute for H.R. 556. On July 11, 2007,
the House accepted the Senate's version of H.R. 556 by a vote of 370-45 and sent the measure to
the President, who signed it on July 26, 2007. It is designated as P.L. 110-49.
Both H.R. 556 and S. 1610 (P.L. 110-49) attempt to address congressional concerns by
establishing CFIUS by statutory authority, thereby giving Congress a direct role in determining
the make-up and operations of the Committee. The measures would have the Secretary of the
Treasury continue to serve as the Chairman of CFIUS, despite the misgivings of some Members.
The House measure would have had the Secretary of Homeland Security and the Secretary of
21
Kirchgaessner, Stephanie, US Threat to Reopen Terms of Lucent and Alcatel Deal Mergers, Financial Times,
December 1, 2006. P. 19; Pelofsky, Jeremy, Businesses Object to US move on foreign Investment, Reuters News,
December 5, 2006.
22
House Financial Services Committee Clears Amended CFIUS Reform Bill by Voice Vote, International Trade
Daily, February 14, 2007.
�
Defense serve as Vice Chairmen. In other respects, the House bill retained the basic structure of
the Committee as it presently exists, except that it would add the Secretary of Energy as a
permanent member of CFIUS. The Senate measure reduced the official number of members of
CFIUS, but grants the President the authority to appoint temporary members on a case-by-case
basis.
According to the two measures, the Committee operates under the same time frame that currently
exists with 30 days allotted for a review, 45 days for an investigation and 15 days for the
President to make his determination. The President retains his authority as the only officer with
the authority to suspend or prohibit certain types of foreign investments. The measures place
additional requirements on firms that resubmitted a filing after previously withdrawing a filing
before a full review is completed.
In H.R. 556, no review or investigation would have been considered to be complete until it had
been approved by a majority of the members of CFIUS and signed by the Secretary of the
Treasury and the Secretary of Homeland Security to insure that principal members of CFIUS
were aware of all reviews and investigations completed by CFIUS. Both measures require CFIUS
to investigate all "covered" foreign investment transactions to determine whether a transaction
threatens to impair the national security, or the foreign entity is controlled by a foreign
government. A covered foreign investment transaction is defined as any merger, acquisition, or
takeover which results in "foreign control of any person engaged in interstate commerce in the
United States." S. 1610 requires an investigation if the transaction would result in control of any
"critical infrastructure that could impair the national security."
Both measures place increased requirements on CFIUS to review investment transactions in
which the foreign person is owned or controlled by a foreign government. Both measures provide
for exceptions from the requirement to investigate transactions in which the foreign party is
controlled by a foreign government. The measures would allow CFIUS to exclude a transaction
from an investigation if the Secretary of the Treasury and certain other specified officials
determine that the transaction will not impair the national security. It is somewhat unclear,
however, how this change will mesh with the current process. The measures seem to strengthen
the role of CFIUS in determining which transactions it will investigate. The measures also do not
amend or alter the current statute in the area that has been the source of recent differences
between CFIUS and Congress. In particular, the current statute states that the President, and
through him CFIUS, can use the Exon-Florio process "only if" he finds that there is "credible
evidence" that a foreign investment will impair national security. As a result, CFIUS has
determined, as was the case in the Dubai Ports transaction, that if the Committee does not have
credible evidence that an investment will impair the national security that it is not required to
undertake a full 45-day investigation.
The extent to which CFIUS increases its investigations of transactions that involve a foreign
government may cause foreign investors to regard this as an important policy change by the
United States toward foreign investment. As previously stated, the current system presumes that
foreign investment transactions are acceptable and that they provide a positive contribution to the
economy. As a result, the burden is on the members of CFIUS to prove that a particular
transaction is a threat to national security. The measures, however, might be interpreted to
presume that investment transactions in which the foreign person is owned or controlled by a
foreign government are a threat to the nation's security simply because of the relationship to the
foreign government and, therefore, might require the firms to prove that they are not a threat.
Although the number of investment transactions a year in which the foreign investor is associated
�
with a foreign government is small compared with the total number of foreign investment
transactions, foreign investors and foreign governments likely will view this as a significant
change in the traditional U.S. approach to foreign investment.
Both bills increase the role of congressional oversight by requiring greater reporting by CFIUS on
its actions either during or after it completes reviews and investigations and by increasing
reporting requirements on CFIUS. H.R. 556 would have required the Secretary of the Treasury,
the Secretary of Homeland Security, and the Secretary of Commerce to sign and approve any
review or investigation. In those cases in which the foreign person involved in an investment
transaction is owned or controlled by a foreign government, a majority of the members of CFIUS
would have been required to approve the transaction and the President and the chair and vice
chairs of CFIUS would have been required to sign off on investments in which at least one
member of CFIUS did not agree with the decision of the majority to approve the transaction. H.R.
556 also would have required the President to approve of any review or investigation in which a
foreign entity is from a country that has been determined to support acts of international
terrorism.
Both measures require CFIUS to provide Congress with a greater amount of detailed information
about its operations. H.R. 556 would have required CFIUS to notify specified Members at the
conclusion of any investment investigation and to report annually to Congress. Both measures
provide for greater reporting on and increased authority for CFIUS to negotiate provisions with
the foreign firms involved in investment transactions to mitigate the impact of the transaction.
Under current statutes, CFIUS has no authority to negotiate such agreements with firms and it is
not clear that it has any authority to enforce such agreements. H.R. 556 and S. 1610 provide for a
process to track the agreements and to report the progress of such agreements and any changes to
the agreements to the members of CFIUS and to the President.
The measures also amend the current statute regarding the meaning of national security and place
additional requirements on CFIUS regarding national security reviews. The bills explicitly require
the Director of National Intelligence to conduct reviews of any investment that posed a threat to
the national security. The bills also provide for additional factors the President and CFIUS are
required to use in assessing foreign investments. In particular, the bills add implications for the
nation's critical infrastructure as a factor for reviewing or investigating an investment transaction.
�
The following section provides a more detailed comparison of the two bills as they passed their
respective bodies and the current provisions.
�
According to the Exon-Florio provision and subsequent regulations issued by the Treasury
Department, CFIUS has 30 days after it receives the initial formal notification by the parties to a
merger, acquisition, or a takeover, to decide whether to investigate a case as a result of its
determination that the investment "threatens to impair the national security of the United States."
If during this 30-day period all the members of CFIUS conclude that the investment does not
threaten to impair the national security or if the concerns of any member are resolved, the review
is terminated. If, however, at least one member of the Committee determines that the investment
�
does threaten to impair the national security and if those concerns are not resolved, CFIUS can
proceed to a 45-day investigation. At the conclusion of the investigation or the 45-day review
period, whichever comes first, the Committee can decide to offer no recommendation or it can
recommend that the President suspend or prohibit the investment. The President is under no
obligation to follow the recommendation of the Committee to suspend or prohibit an investment.
A subsequent amendment, the Byrd Amendment, requires CFIUS to conduct a 45-day
investigation of a transaction in any instance in which the foreign entity is controlled by or acting
on behalf of a foreign government which could result in the foreign entity gaining control of the
U.S. entity and that could affect the national security of the United States. Such an investigation
is required to begin no later than 30 days after CFIUS receives written notice of the proposed or
pending merger, acquisition, or takeover and be completed in no more than 45 days.
H.R. 556 and S. 1610 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 measures 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 measures explicitly indicate that the investigation will be conducted by
the Committee on Foreign Investment in the United States, which was referred to only as the
President's designee prior to passage of P.L. 110-49. Next, the measures amend and broaden the
language in the current statute regarding national security by indicating that national security for
this provision is construed "so as to include those issues relating to `homeland security,' including
its application to critical infrastructure," and "critical technologies."
The measures provide for "National Security Reviews and Investigations," which are not a part of
the current CFIUS process, although the Director of National Intelligence often is asked to
participate in CFIUS reviews and investigations. In an important departure from the current
procedure, CFIUS is required ("shall") to review any merger, acquisition, or takeover to
determine the effects of the transaction on the national security of the United States. In addition,
CFIUS is required (shall) to conduct an investigation of a transaction if the Committee determines
that the transaction would result in foreign control of any person engaged in interstate commerce
in the United States. Once a review has been initiated, a firm cannot withdraw its notice unless it
provides a written request for such a withdrawal and the request is approved in writing by the
Chairperson, in consultation with the Vice Chairpersons of the Committee. The term "control" for
this section is defined in the Code of Federal Regulation (31CFR800.204) as the power to affect
the principal assets of the entity, the power to dissolve the entity, to close and/or relocate the
production or research and development facilities, to terminate contracts, or to amend the Articles
of Incorporation.
In addition to any entity that is a party to a merger, acquisition, or takeover being able to initiate a
review, the measures would provide that the President, the Committee can request that CFIUS
review a transaction. This authority could not be delegated by any member of CFIUS to any
person other than to an appropriate Deputy Secretary or Under Secretary. These individuals
would be able to review a transaction that previously had been reviewed and approved under
certain circumstances: 1) a transaction in which it was later discovered that false or misleading
material information had been submitted to CFIUS; 2) or material information, including
documents, had been omitted from information submitted to CFIUS; 3) or if a party to a
transaction had intentionally failed to adhere to any mitigating agreements or conditions upon
�
which the original approval had been granted and no other remedy or enforcement tool was
available to address such a breach of the mitigating agreement.
The measures 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, or the foreign person was controlled by a foreign government. H.R. 556 would
have required an investigation if: during a roll call vote of the members of CFIUS at least one
member had voted against approving the transaction; the Director of National Intelligence had
identified "particularly complex national security or intelligence issues" that threaten to impair
the national security of the United States and CFIUS members had not been able to develop and
agree on measures to mitigate the threat during a review. S. 1610 requires an investigation if the
transaction results in the control of "any critical infrastructure" that would impair the national
security. The investigation is required to be completed within 45 days, but the House measure
would have provided 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.
Both measures provide an important exception to the requirement that CFIUS conduct an
investigation of any transaction if it determines during a review that a party to a transaction is
owned or controlled by a foreign government. Instead, the measures would not require such an
investigation, even if CFIUS had determined during a review that the party to a transaction was
controlled by a foreign government if: it also determined that the transaction "will not affect" the
national security of the United States. The House measure also would have waived the
requirement for an investigation if no agreement or condition was required, relative to the
transaction, to mitigate any threat to the national security.
The House measure would have required the approval of a majority of the members of CFIUS
and the approval of, and a signed determination by, the Secretary of the Treasury, the Secretary of
Homeland Security, and the Secretary of Commerce on any review or investigation in order for
the CFIUS process to be considered final or complete. In those cases in which the foreign entity
was determined to be controlled by a foreign government and at least one member of CFIUS did
not vote in favor of approval, the CFIUS investigation process would not be considered to be
complete until the President and the Chairperson, and the Vice Chairperson of the Committee
signed the Committee report to indicate their approval.
H.R. 556 would have required action by the President in certain cases. Specifically, the measure
would have required the President to approve and to sign his approval of an investment
transaction in which the party to a transaction is an entity or a country that has been determined
by the Secretary of State under the Export Administration Act or other provisions of law
repeatedly to have provided support for acts of terrorism. S. 1610, requires the Secretary of the
Treasury to publish in the Federal Register guidance on the types of transactions that the
Committee had reviewed and that had national security considerations. The Senate measure also
requires the Committee to notify specified Members of Congress at the completion of a review or
investigation of any foreign investment transaction.
.noissimbuser elbissop
gnidrager rebmem eettimmoC yna ro eettimmoC
eht htiw snoissucsid lamrofni gniunitnoc gnidulcerp sa
.emaS deurtsnoc eb ot ton si tseuqer lawardhtiw a fo lavorppA
.snoissucsid gniunitnoC .snoissucsid gniunitnoC
.eettimmoC eht fo ,snosrepriahC
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.eettimmoC eht yb devorppa dna gnitirw ni devorppa si tseuqer eht )2 dna ;noitcasnart eht
eettimmoC eht ot dettimbus eb tsum eciton lawardhtiW ot ytrap yna yb dettimbus )1 eb tsum tseuqer nettirW
.eciton fo lawardhtiW .eciton fo lawardhtiW
.eettimmoC eht fo nosrepriahC eht ot noitcasnart eht fo
eciton nettirw a gnittimbus yb noitcasnart eht fo weiver
.emaS a etaitini yam noitcasnart derevoc yna ot ytrap ynA
.eciton nettirW .eciton nettirW
.noitcasnart dellortnoc-tnemnrevog ngierof a
si noitcasnart tnemtsevni eht taht senimreted eettimmoC
.emaS eht fi noitagitsevni na tcudnoc ot deriuqer si SUIFC
.tnemnrevog ngierof a yb lortnoC .tnemnrevog ngierof a yb lortnoC
".etairporppa" sa ,noitagitsevni dna
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eht redisnoc ot tnediserP eht seriuqer yllacificeps oslA .noisivorp elbarapmoc oN
.setatS detinU eht fo ytiruces
lanoitan eht no noitcasnart eht fo stceffe eht enimreted
ot )setatS detinU eht ni ecremmoc etatsretni ni degagne
nosrep yna fo lortnoc ngierof ni tluser dluoc hcihw
nosrep ngierof yna htiw ro yb revoekat ro ,noitisiuqca
,regrem yna( noitcasnart "derevoc" a weiver ot deriuqer
.emaS eb dluow ,SUIFC eht hguorht gnitca ,tnediserP ehT
.snoitagitsevni dna sweiver ytiruces lanoitaN .snoitagitsevni dna sweiver ytiruces lanoitaN
:snoitcesbus wen gniwollof eht gnitresni dna )b( dna
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0161 .S 655 .R.H
with a transaction while the transaction is being reviewed or investigated.
prohibited from submitting additional information or modifying any agreement in connection
other than to provide analysis in connection with an investment transaction. Firms are not be
from CFIUS by not serving as an official member of CFIUS and by not serving in a policy role
agencies. The Director of National Intelligence, however, maintains a role that is independent
required to seek and to incorporate the views of "all affected or appropriate" intelligence
the Financial Crimes Enforcement Network. In addition, the Director of National Intelligence is
Department of the Treasury's Director of the Office of Foreign Assets Control and the Director of
takeover. This analysis specifically includes a request for information be made from the
analysis of "any threat to the national security of the United States" of any merger, acquisition, or
Both bills grant the Director of National Intelligence "adequate time" to carry out a thorough
�
.)yraterceS
rednU ro yraterceS ytupeD a ot noitisop tnelaviuqe na
gnidloh nosrep a yb ro( rebmem hcus yb ro eettimmoc
eht no detneserper ycnega ro tnemtraped eht fo
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ro tnemtraped eht fo yraterceS rednU etairporppa na ro ot ylno detageled eb yam weiver a etaitini ot eettimmoC
yraterceS ytupeD eht ot ylno detageled eb nac ytirohtuA eht fo rebmem yna ro eettimmoC eht fo ytirohtuA
.ytirohtua fo noitageled no timiL .ytirohtua fo noitageled no timiL
.)D( hpargarapbus rednu
noitom a htiw ecnadrocca ni weiver eht fo noitaitini eht
fo etad eht ro ,eettimmoC eht fo nosrepriahC eht yb )C(
hpargarapbus rednu eciton nettirw fo tpiecer eht fo etad
eht no gninnigeb doirep yad-03 eht fo dne eht erofeb
.emaS detelpmoc eb llahs hpargarap siht rednu weiver ynA
.gnimiT .gnimiT
.hcaerb .hcaerb hcus
hcus sserdda ot elbaliava sloot tnemecrofne ro seidemer sserdda ot elbaliava loot tnemecrofne ro ydemer rehto
rehto on era ereht taht senimreted eettimmoC eht )2 on si ereht taht seifitrec ycnega ro tnemtraped hcus )2
dna
;hcaerb lairetam lanoitnetni na sa noitidnoc ro tnemeerga dna ;hcaerb lairetam lanoitnetni na sa noitidnoc
hcus gnicrofne dna gnirotinom ycnega ro tnemtraped ro tnemeerga hcus gnicrofne dna gnirotinom ycnega
dael eht yb eettimmoC eht ot deifitrec si hcaerb hcus )1 ro tnemtraped dael eht yb deifitrec si hcaerb hcus )1
:dna ,)A()1()l( noitcesbus
ni debircsed noitidnoc ro tnemeerga noitagitim
a sehcaerb yllairetam yllanoitnetni noitcasnart eht
fo noitammusnoc morf gnitluser ytitne eht ro noitcasnart
eht ot ytrap yna fi ,noitces siht rednu detagitsevni
ro deweiver neeb ylsuoiverp sah taht noitcasnart
derevoc yna )iii( ro ;eettimmoC eht ot dettimbus
noitamrofni morf ,stnemucod lairetam gnidulcni
,noitamrofni lairetam dettimo ro noitagitsevni ro weiver
eht htiw noitcennoc ni eettimmoC eht ot noitamrofni
lairetam gnidaelsim ro eslaf dettimbus noitcasnart eht ot
ytrap yna fi ,noitces siht rednu detagitsevni ro deweiver
.emaS neeb ylsuoiverp sah taht noitcasnart derevoc yna )ii(
.emaS ;noitcasnart derevoc yna )i(
:fo weiver a etaitini ot evom yam eettimmoC
:fo weiver a etaitini yam eettimmoC eht ro tnediserP ehT eht fo rebmem yna ro ,eettimmoC eht ,tnediserP ehT
.weiver fo noitaitini laretalinU .weiver fo noitaitini laretalinU
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fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.setatS detinU eht fo ytiruces lanoitan eht riapmi
ot netaerht dluoc taht noitcasnart eht fo tceffe yna
dna ;noitcasnart eht ot seitrap ro noitcasnart derevoc
eht ot gnitaler noitamrofni etaulave ylluf dna tcelloc
ot redro ni ,syad 54 deecxe ot ton ,noisnetxe eht fo
emit eht ta eettimmoC eht ro tnediserP eht yb deificeps
emit fo tnuoma eht yb eettimmoC eht fo srebmem
eht fo 3/2 tsael ta fo etov llac llor a yb ro tnediserP
eht yb dednetxe eb yam noitagitsevni yna rof doirep ehT
.noisivorp elbarapmoc oN .emiT fo noisnetxE
.decnemmoc noitagitsevni
eht fo etad eht no gninnigeb doirep yad-54 eht
.emaS fo dne eht erofeb detelpmoc eb tsum noitagitsevni ynA
.gnimiT .gnimiT
.setatS detinU eht fo ytiruces lanoitan eht tcetorp
ot noitcasnart eht htiw noitcennoc ni snoitca yrassecen
yna ekat dna setatS detinU eht fo ytiruces lanoitan
eht no noitcasnart eht fo stceffe eht fo noitagitsevni
na tcudnoc ot deriuqer eb dluow tnediserP eht ,doirep
weiver laitini eht gnirud staerht esoht ylirotcafsitas
etagitim ot serusaem nopu eerga dna poleved
ot elba ton erew srebmem eettimmoC dna setatS
detinU eht fo ytiruces lanoitan eht riapmi ot netaerht
dluoc taht snrecnoc ecnegilletni xelpmoc ylralucitrap
.noisivorp elbarapmoc oN seifitnedi ecnegilletnI lanoitaN fo rotceriD ehT
ro ;noitcasnart eht gnivorppa tsniaga rebmem
.noisivorp elbarapmoc oN eettimmoC a yb etov 1 tsael ta ni stluser etov llac llor A
.nekatrednu eb noitagitsevni na taht ,srucnoc eettimmoC
eht dna ,sdnemmocer ycnega dael eht ,doirep
weiver eht gnirud dewener ro dedivorp secnarussa
yb detagitim neeb ton sah tnemriapmi hcus taht
dna ,ytiruces lanoitan eht riapmi dluoc taht erutcurtsarfni
lacitirc yna fo lortnoc ni tluser dluow noitcasnart eht )3 .noisivorp elbarapmoc oN
;noitcasnart
.emaS dellortnoc-tnemnrevog ngierof a si noitcasnart eht )2
ro weiver eht ot roirp ro gnirud detagitim neeb
ton sah taerht taht dna setatS detinU eht fo ytiruces
.emaS lanoitan eht riapmi ot snetaerht noitcasnart eht )1
:taht noitanimreted a ni stluser
.emaS noitcasnart derevoc a fo weiver a hcihw ni esac hcae nI
.noitagitsevni ytiruces lanoitaN .noitagitsevni ytiruces lanoitaN
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fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.)eettimmoC
eht fo snosrepriahC eciV eht dna nosrepriahC eht
ot noitidda ni( tnediserP eht yb dengis era noitagitsevni
eht morf gnitluser troper dna sgnidnif eht litnu
etelpmoc ro lanif sa detaert eb ton llahs noitagitsevni eht
,noitcasnart eht gnivorppa tsniaga rebmem eettimmoC
a yb etov 1 tsael ta si ereht hcihw ni noitcasnart
dellortnoc-tnemnrevog ngierof yna fo noitagitsevni
na htiw noitcennoc ni etov llac llor yna fo esac eht nI
.noisivorp elbarapmoc oN .sesac niatrec ni deriuqer noitca lanoitiddA
.tnemnrevog
ngierof a fo flaheb no gnitca ro yb dellortnoc ytitne na ro
tnemnrevog ngierof a yb ytiruces lanoitan setatS detinU
ot gnitaler erutcurtsarfni lacitirc fo lortnoc ni tluser
dluow taht snoitcasnart derevoc etutitsnoc yam taht
snoitcasnart gnidulcni ,snoitaredisnoc ytiruces lanoitan
detneserp evah taht dna deweiver sah eettimmoC
eht taht snoitcasnart fo sepyt eht no ecnadiug
retsigeR laredeF eht ni hsilbup llahs nosrepriahC ehT
.snoitacilpmi ytiruces
lanoitan htiw snoitcasnart niatrec no ecnadiuG .noisivorp elbarapmoc oN
.ecremmoC fo yraterceS eht
dna ,ytiruceS dnalemoH fo yraterceS eht ,yrusaerT eht fo
yraterceS eht yb dengis dna etov llac llor a ni eettimmoC
eht fo srebmem eht fo ytirojam a yb devorppa era
noitagitsevni ro weiver eht fo stluser eht litnu etelpmoc
ro lanif sa detaert eb ton nac noitagitsevni ro weiver A
.noisivorp elbarapmoc oN .snosrepriahC eciV dna nosrepriahC fo lavorppA
.ylevitcepser ,ycnega dael
eht fo )foereht tnelaviuqe eht ro( daeh ytuped eht ro
yrusaerT eht fo yraterceS ytupeD eht ot ylno detageled
eb dluow ytirohtuA .ytirohtua fo noitageled-noN .noisivorp elbarapmoc oN
.)ylevitcepser ,ecremmoC fo ro ,ytiruceS dnalemoH
fo ,yrusaerT eht fo yraterceS ytupeD eht naht rehto
nosrep yna ot detageled eb ton yam yraterceS hcus hcae
fo ytirohtua hcus dna( ytiruces lanoitan eht ot taerht yna
.setatS detinU eht fo ytiruces lanoitan etagitim ot deriuqer si noitidnoc ro tnemeerga on dna
eht riapmi ton lliw noitcasnart eht taht enimreted setatS detinU eht fo ytiruces lanoitan eht tceffa ton lliw
yltnioj ycnega dael eht fo daeh eht dna yrusaerT noitcasnart eht taht enimreted ecremmoC fo yraterceS
eht fo yraterceS eht fi deriuqer ton si erutcurtsarfni eht dna ,ytiruceS dnalemoH fo yraterceS eht ,yrusaerT
lacitirc gnivlovni noitcasnart a ro noitcasnart eht fo yraterceS eht fi deriuqer ton si noitcasnart
dellortnoc-tnemnrevog ngierof a fo noitagitsevni nA dellortnoc-tnemnrevog ngierof a fo noitagitsevni nA
.noitpecxE .noitpecxE
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.ycnega dael eht revo thgisrevo
gnivah sevitatneserpeR fo esuoH eht fo eettimmoc yna
fo dna sevitatneserpeR fo esuoH eht fo secivreS laicnaniF
no eettimmoC eht fo rebmem gniknar dna riahc eht
)4 dna ;sevitatneserpeR fo esuoH eht fo redaeL ytironiM
eht dna rekaepS eht )3 ;ycnega dael eht revo thgisrevo
gnivah etaneS eht fo eettimmoc yna fo dna etaneS eht fo
sriaffA nabrU dna ,gnisuoH ,gniknaB no eettimmoC eht
fo rebmem gniknar dna riahc eht )2 ;etaneS eht fo redaeL
ytironiM eht dna redaeL ytirojaM eht )1 :ot dettimsnart
eb ot deriuqer eb dluow troper dna eciton deifitrec hcaE
.ssergnoC fo srebmeM .noisivorp elbarapmoc oN
.troper ro eciton
eht fo tcejbus eht si taht noitcasnart eht htiw snrecnoc
ytiruces lanoitan devlosernu on era ereht ,eettimmoC
eht fo noitanimreted eht ni ,taht etats llahs dna ,ycnega
dael eht fo daeh eht dna nosrepriahc eht yb dengis
eb ot deriuqer eb dluow troper dna eciton deifitrec hcaE
.noitacifitrec fo tnetnoC .noisivorp elbarapmoc oN
.srotcaf evitanimreted eht fo noitacifitnedi
)2 dna ;noitcasnart eht ot tcepser htiw eettimmoC
eht yb nekat snoitca eht fo noitpircsed a )1 edulcni
ot deriuqer eb dluow troper dna eciton deifitrec hcaE
.serudecorp noitacifitreC .noisivorp elbarapmoc oN
.noisiced rof tnediserP eht ot tnes neeb sah noitagitsevni
rednu rettam eht sselnu ,noitagitsevni eht fo stluser
eht no troper nettirw deifitrec a ssergnoC fo srebmem
deificeps ot timsnart ot deriuqer eb dluow ycnega
dael eht fo daeh eht dna nosrepriahc eht noitagitsevni
na fo noitelpmoc retfa elbacitcarp si sa noos sA
.noitagitsevni retfa troper deifitreC .noisivorp elbarapmoc oN
.ssergnoC fo srebmem deificeps ot eciton deifitrec
a timsnart ot deriuqer eb dluow ycnega dael eht fo daeh
eht dna nosrepriahc eht weiver a fo noitelpmoc nopU
.ssergnoC ot snoitacifitreC .noisivorp elbarapmoc oN
.tnemnrevog hcus yna yb ,yltceridni
ro yltcerid ,dellortnoc nosrep ro tnemnrevog a )2
;msirorret
lanoitanretni fo stca rof troppus dedivorp yldetaeper sah
taht tnemnrevog a si denimreted sah etatS fo yraterceS
eht hcihw fo tnemnrevog eht yrtnuoc a fo nosrep a )1
:si noitcasnart eht ot ytrap yna
hcihw ni esac yna ni noitagitsevni ro weiver a fo stluser
eht ngis dna evorppa ot deriuqer eb dluow tnediserP ehT
.noisivorp elbarapmoc oN .sesac niatrec ni deriuqer noitca laitnediserP
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.noitagitsevni
yna fo esruoc eht gnirud elbaliava emoceb yam taht
noitamrofni tnaveler lanoitidda yna fo eettimmoC eht
ot noitanimessid dna ,sisylana ,noitcelloc eht ni degagne
sniamer ytinummoc ecnegilletni eht taht erusne ot
deriuqer eb dluow ecnegilletnI lanoitaN fo rotceriD ehT
.ytinummoc ecnegilletni htiw noitcaretnI .noisivorp elbarapmoc oN
.eciton
eht fo tpiecer ot roirp emit yna ta sisylana eht nigeb yam
rotceriD eht tub ,)C()1( hpargarap rednu eettimmoC
eht yb detpecca si noitcasnart eht fo eciton hcihw
no etad eht retfa syad 02 naht retal ton eettimmoC .)A( hpargarapbus rednu deriuqer
eht ot ecnegilletnI lanoitaN fo rotceriD eht yb dedivorp sisylana eht etelpmoc ot emit etauqeda edivorp ot
eb tsum )A( hpargarapbus rednu deriuqer sisylana ehT deriuqer eb dluow ecnegilletnI lanoitaN fo rotceriD ehT
.gnimiT .gnimiT
.seicnega ecnegilletni etairporppa ro detceffa lla
fo sweiv eht etaroprocni dna kees ot deriuqer eb dluow
osla ecnegilletnI lanoitaN fo rotceriD ehT .krowteN
.noitcasnart eht ot tcepser htiw seicnega tnemecrofnE semirC laicnaniF eht fo rotceriD eht dna
ecnegilletni etairporppa ro detceffa lla fo sweiv eht yrusaerT eht fo tnemtrapeD eht nihtiw lortnoC stessA
etaroprocni dna kees ot deriuqer eb dluow ecnegilletnI ngieroF fo eciffO eht fo rotceriD eht ot noitamrofni
lanoitaN fo rotceriD ehT .noitcasnart derevoc yna yb rof stseuqer gnikam gnidulcni ,noitcasnart derevoc
desop setatS detinU eht fo ytiruces lanoitan eht ot taerht yna fo setatS detinU eht fo ytiruces lanoitan eht ot taerht
yna fo sisylana hguoroht a tuo yrrac ylsuoitidepxe ot yna fo sisylana hguoroht a tuo yrrac ylsuoitidepxe ot
deriuqer eb dluow ecnegilletnI lanoitaN fo rotceriD ehT deriuqer eb dluow ecnegilletnI lanoitaN fo rotceriD ehT
.ecnegilletni lanoitan fo rotcerid yb sisylanA .ecnegilletni lanoitan fo rotcerid yb sisylanA
.)ycnega dael eht fo esac eht ni( ycnega dael eht ta
foereht tnelaviuqe eht ro noitisop ytupeD eht ni gnivres
nosrep a ro )yrusaerT eht fo yraterceS eht fo esac eht
ni( yrusaerT eht fo yraterceS ytupeD a ot ylno ro ,etaneS
eht fo tnesnoc dna ecivda eht htiw dna yb ,tnediserP
eht yb detnioppa saw ohw )ycnega dael eht fo esac
eht ni( ycnega dael eht fo eeyolpme na ot ro )yrusaerT
eht fo yraterceS eht fo esac eht ni( yrusaerT eht
fo tnemtrapeD eht fo eeyolpme na ot detageled eb ylno
yam hcihw ,ycnega dael eht fo daeh eht dna nosrepriahc
eht yb dengis eb tsum troper dna eciton deifitrec hcaE
.noitageled no timil ,serutangiS .noisivorp elbarapmoc oN
.detacol si
erutcurtsarfni lacitirc eht hcihw ni tcirtsiD lanoissergnoC
a morf rebmem a ot ,sevitatneserpeR fo esuoH
eht fo esac eht ni )2 dna ;detacol si erutcurtsarfni lacitirc
hcus hcihw ni etatS eht morf etaneS eht fo srebmem
ot ,etaneS eht fo esac eht ni )1 :erutcurtsarfni lacitirc
gnivlovni noitcasnart a gnidrager stroper dna seciton
deifitrec eht edivorp yam ,sevitatneserpeR fo esuoH
eht ni ,redaeL ytironiM eht ro rekaepS eht dna ,etaneS
eht ni redaeL ytironiM eht ro redaeL ytirojaM ehT
.ssergnoC fo srebmeM rehto ot lattimsnarT .noisivorp elbarapmoc oN
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
25
Executive Order 11858 (b), May 7, 1975, 40 F.R. 20263.
The term "representative" was dropped by Executive Order 12661, December 27, 1988, 54 F.R. 780. 24
Executive Order 11858 (b), May 7, 1975, 40 F.R. 20263. 23
for coordinating the implementation of United States policy on such investment."25 Presently, the
monitoring the impact of foreign investment in the United States, both direct and portfolio, and
Committee would have "the primary continuing responsibility within the Executive Branch for
of the Treasury be the chairman of the Committee. The Executive Order also stipulated that the
established the basic structure of CFIUS, and directed that the "representative"24 of the Secretary
implications of foreign investment in the economy. President Ford's 1975 Executive Order
Order of President Ford in 197523 to serve the President in overseeing the national security
The Committee on Foreign Investment in the United States (CFIUS) was created by Executive
.noitces siht rednu noitca lla fo noitelpmoc nopu
,noitcasnart derevoc eht ot seitrap eht ot noitagitsevni
ro weiver a fo stluser eht fo eciton gnidivorp )D .noisivorp elbarapmoc oN
.weiver morf nwardhtiw ylsuoiverp saw taht noitcasnart
.emaS derevoc gnidnep ro desoporp fo eciton a gnittimbuser )C
dna ;weiver morf noitcasnart derevoc gnidnep
.emaS ro desoporp a wardhtiw ot tseuqer a gnittimbus )B
;eettimmoC eht ot noitcasnart derevoc
.emaS gnidnep ro desoporp a fo eciton yna gnittimbus )A
:rof serudecorp dradnats
edulcni llahs noitces siht rednu debircserp snoitalugeR
.snoitalugeR .snoitalugeR
.noitca lla fo noitelpmoc nopu yltpmorp ,noitagitsevni
ro weiver a fo stluser eht fo noitcasnart derevoc a ot
seitrap eht yfiton ot deriuqer eb dluow eettimmoC ehT
.stluser fo ecitoN .noisivorp elbarapmoc oN
.gniog-no si noitcasnart eht fo noitagitsevni
ro weiver yna elihw ,noitcasnart eht htiw noitcennoc
ni stnemeerga yna ot snoitacifidom yna ro noitcasnart
eht fo gnirutcurtser desoporp yna gnidulcni ,noitcasnart
eht gninrecnoc noitamrofni lanoitidda gnittimbus
morf noitcasnart derevoc a ot ytrap yna gnitibihorp
.emaS sa deurtsnoc eb nac noitcesbus siht fo noisivorp oN
.noitamrofni lanoitidda fo noissimbuS .noitamrofni lanoitidda fo noissimbuS
.noitcasnart derevoc a htiw noitcennoc
ni sisylana edivorp ot naht rehto ,eettimmoC eht no elor
ycilop on evres llahs tub ,snoitcasnart derevoc gnidrager .noitcasnart derevoc a htiw noitcennoc ni
eettimmoC eht yb deviecer seciton lla htiw dedivorp sisylana edivorp ot naht rehto eettimmoC eht htiw elor
eb llahs dna ,eettimmoC eht fo rebmem oiciffo ycilop on evres llahs dna eettimmoC eht fo rebmem
xe na eb llahs ecnegilletnI lanoitaN fo rotceriD ehT a eb ton llahs ecnegilletnI lanoitaN fo rotceriD ehT
.rotcerid eht fo elor tnednepednI .rotcerid eht fo elor tnednepednI
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
�
Committee consists of twelve members, including 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.26
Both H.R. 556 and S. 1610 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. Under the House
measure, CFIUS would have included the same twelve members that currently constitute the
Committee, and it would have added the Secretary of Energy to CFIUS. S. 1610, includes the
same cabinet members as currently included as members of CFIUS, but it does not include the
other seven members of the Administration. In addition, the Senate measure adds the Secretary of
Labor and the Director of National Intelligence as ex officio members. In both measures, the
Secretary of the Treasury would continue to serve as the Chairperson of the Committee, but the
House measure would have created a new Vice Chairperson position that would have been held
by the Secretary of Homeland Security and the Secretary of Commerce. The Senate measure
requires that a particular member of CFIUS be designated as the lead agency in cases in which a
mitigation agreement has been negotiated or in those cases in which CFIUS has determined to
monitor the conditions agreed to as part of a mitigation agreement to ensure that the conditions
are being met. The House measure would have empowered the Committee to "take such
testimony, receive such evidence, administer such oaths," in order to carry out a review or
investigation. The House measure also would have empowered the Committee 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
determined to be "advisable."
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
no eettimmoC eht fo tnemhsilbatse yrotutatS no eettimmoC eht fo tnemhsilbatse yrotutatS
.setatS detinU eht ni tnemtsevnI ngieroF .setatS detinU eht ni tnemtsevnI ngieroF
05( 0591 fo tcA noitcudorP esnefeD eht fo 127 noitceS .emaS
dednema si )0712 .ppA .C.S.U
.tnemhsilbatsE .tnemhsilbatsE
detinU eht ni tnemtsevnI ngieroF no eettimmoC ehT .emaS
.oN redrO evitucexE ot tnausrup dehsilbatse setatS
tuo yrrac ot eettimmoc ycnega-itlum a eb llahs 85811
tnediserP eht sa stnemngissa rehto hcus dna noitces siht
.etangised yam
26
Executive Order 11858 of May 7, 1975, 40 F.R. 20263 established the Committee with six members: the Secretaries
of State, the Treasury, Defense, and Commerce, and the Assistant to the President for Economic Affairs, and the
Executive Director of the Council on International Economic Policy. Executive Order 12188, January 2, 1980, 45 F.R.
969, added the United States Trade Representative and substituted the Chairman of the Council of Economic Advisors
for the Executive Director of the Council on International Economic Policy. Executive Order 12661, December 27,
1988, 54 F.R. 779, added the Attorney General and the Director of the Office of Management and Budget. Executive
Order 12860, September 3, 1993, 58 F.R. 47201, added 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.
Executive Order 13286, Section 57, February 28, 2003 added the Secretary of Homeland Security.
.)elbacilppa esiwrehto fi( edoC setatS detinU
,5 eltit fo b255 noitces ot drager tuohtiw eettimmoC
eht fo nosrepriahC eht fo llac eht nopu ro tnediserP
.emaS eht fo noitcerid eht nopu teem llahs eettimmoC ehT
.sgniteeM .sgniteeM
.)daeh ycnega .)daeh ycnega ro tnemtraped hcus yna fo eengised eht
ro tnemtraped hcus yna fo eengised eht ro( noitagitsevni ro( noitagitsevni rednu noitcasnart eht fo secnatsmucric
ro weiver rednu noitcasnart eht fo secnatsmucric dna dna stcaf eht fo sisab eht no etairporppa eb ot
stcaf eht fo sisab eht no ,etairporppa eb ot senimreted senimreted ,snosrepriahC eciV eht htiw gnitlusnoc retfa
nosrepriahc eht sa ,)a( noitcesbus rednu noitagitsevni ,nosrepriahC eht sa )b( noitcesbus rednu noitagitsevni ro
ro weiver yna ni stnemhsilbatse tnednepedni weiver yna ni stnemhsilbatse tnednepedni dna ,seicnega
dna ,seicnega ,stnemtraped laredeF rehto hcus fo sdaeh ,stnemtraped laredeF rehto hcus fo sdaeh eht evlovni ot
eht htiw tlusnoc ot deriuqer eb dluow nosrepriahc ehT deriuqer eb dluow eettimmoC eht fo nosrepriahC ehT
.srebmem rehtO .srebmem rehtO
.snoitidnoc ro stnemeerga
hcus htiw ecnailpmoc erusne ot ,noitcasnart detelpmoc
eht fo gnirotinom eht ot detaler srettam lla rof )B
dna ;ytiruces lanoitan tcetorp
ot yrassecen snoitidnoc rehto ro stnemeerga noitagitim
yna gnitaitogen rof dna ,noitcasnart hcae rof )A
:eettimmoC eht fo flaheb
no seicnega ro ycnega dael eht eb ot eettimmoC eht fo
,etairporppa sa ,srebmem ro rebmem rehtona etangised
ot deriuqer eb dluow yrusaerT eht fo yraterceS ehT
.ycnega dael fo noitangiseD .noisivorp elbarapmoc oN
.eettimmoC
eht fo snosrepriahC eciV eht eb llahs ecremmoC
.noisivorp elbarapmoc oN fo yraterceS eht dna ytiruceS dnalemoH fo yraterceS ehT
.eettimmoC eht fo
.emaS nosrepriahC eht eb llahs yrusaerT eht fo yraterceS ehT
.nosrepriahC .nosrepriahC
.tnediserP eht fo eciffO
evitucexE eht morf tnediserP eht fo eengised rehto ynA
.sriaffA ytiruceS lanoitaN rof tnatsissA s'tnediserP ehT
.yciloP
.sisab esac-yb-esac a no ro ygolonhceT dna ecneicS fo eciffO eht fo rotceriD ehT
yllareneg ,etairporppa senimreted tnediserP eht sa ,eciffo .licnuoC cimonocE lanoitaN eht fo rotceriD ehT
ro ,ycnega ,tnemtraped evitucexe rehto yna fo sdaeh ehT .tegduB dna tnemeganaM fo eciffO eht fo rotceriD ehT
.)oiciffo xe( ecnegilletnI lanoitaN fo rotceriD ehT .evitatneserpeR edarT setatS detinU ehT
.)oiciffo xe( robaL fo yraterceS ehT .srosivdA cimonocE fo licnuoC eht fo namriahC ehT
.emaS .ygrenE fo yraterceS ehT
.emaS .lareneG yenrottA ehT
.emaS .etatS fo yraterceS ehT
.emaS .esnefeD fo yraterceS ehT
.emaS .ecremmoC fo yraterceS ehT
.emaS .ytiruceS dnalemoH fo yraterceS ehT
.emaS .yrusaerT eht fo yraterceS ehT
.pihsrebmeM .pihsrebmeM
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.detelpmoc si noitagitsevni na hcihw no etad
eht retfa syad 51 naht retal ton noitca ekat ot ton ro
rehtehw no noisiced eht ecnuonna tsum tnediserP ehT
.tnediserP eht yb tnemecnuonnA .noisivorp elbarapmoc oN
.setatS detinU eht fo
ytiruces lanoitan eht riapmi ot snetaerht taht tnemnrevog
ro nosrep ngierof a htiw ro yb noitcasnart derevoc yna
tibihorp ro dnepsus ot etairporppa sredisnoc tnediserP
eht sa emit hcus rof noitca hcus ekat yam tnediserP ehT
.tnediserP eht yb noitcA .noisivorp elbarapmoc oN
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
decision by the President.
divestment relief, in the district courts of the United States in order to implement and enforce this
the President the authority to direct the Attorney General to seek appropriate relief, including
investigation of a proposed transaction. Both measures also follow current statute, which grants
which requires the President to announce his decision within 15 days after CFIUS completes its
impair the national security of the United States. Both measures follow the current procedure,
concerning "any covered transaction by or with a foreign person or government" that threatens to
Senate measure empowers the President to take such action as the President considers appropriate
in interstate commerce in the United States" that threaten to impair the national security. The
suspend or prohibit" any acquisition, merger, or takeover by a foreign entity of "persons engaged
President the authority to "take such action for such time as the President considers appropriate to
H.R. 556 would have left unaltered the current Exon-Florio provision, which granted the
.000,000,01$ fo mus eht ,yraterceS
eht yb detcudnoc era taht eettimmoC eht fo snoitarepo
eht rof ylelos dna ylsserpxe 1102 dna ,0102 ,9002
,8002 sraey lacsif fo hcae rof yrusaerT eht fo yraterceS
eht ot detairporppa eb ot dezirohtua era erehT
.noisivorp elbarapmoc oN .snoitairporppa fo noitazirohtuA
.elbasivda
enimreted yam eettimmoC eht fo nosrepriahC eht
sa stnemucod dna ,srepap ,adnaromem ,ecnednopserroc
,sdrocer ,skoob hcus fo noitcudorp eht dna sessentiw
hcus fo ynomitset dna ecnadnetta eht eriuqer )B
dna
;shtao hcus retsinimda ,ecnedive hcus eviecer ,ynomitset
hcus ekat ,secalp dna semit hcus ta tca dna tis )A
:noitces
siht tuo gniyrrac fo esoprup eht rof ,yam eettimmoC ehT
.noisivorp elbarapmoc oN .ecnedive fo noitcelloC
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
considered in deciding to block a foreign investment. These factors were also considered by the
As it was written, the Exon-Florio provision included a list of five factors the President may have
.weiver
laiciduj ot tcejbus ton era tnediserP eht fo sgnidnif eht
dna noitcesbus siht rednu tnediserP eht fo snoitca ehT
.elbaweivernon sgnidnif dna snoitcA .noisivorp elbarapmoc oN
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
President are not subject to any judicial review.
investment will impair the national security. S. 1610 also indicates that the findings of the
to protect the national security. Secondly, he must have "credible evidence" that the foreign
two tests, or findings. First, he must believe that other U.S. laws are inadequate or inappropriate
however, that before the President can invoke this authority he must believe that the case meets
commerce in the United States" that threaten to impair the national security. Congress directed,
authority to block proposed or pending foreign acquisitions of "persons engaged in interstate
Both measures leave unchanged the current Exon-Florio provision, which grants the President the
.erusaem siht ni debircsed srotcaf
eht fo hcae srotcaf rehto gnoma ,redisnoc llahs tnediserP
eht ,noitca ekat ot rehtehw gninimreted fo sesoprup roF
.deredisnoc eb ot srotcaF .noisivorp elbarapmoc oN
.tnediserP eht erofeb rettam eht ni ytiruces lanoitan
eht tcetorp ot tnediserP eht rof ytirohtua etairporppa
dna etauqeda edivorp ,tnediserP eht fo tnemgduj eht ni
,ton od ,tcA srewoP cimonocE ycnegremE lanoitanretnI
eht dna noitces siht naht rehto ,wal fo snoisivorp )B
dna
;ytiruces lanoitan eht riapmi ot snetaerht taht noitca ekat
thgim lortnoc gnisicrexe tseretni ngierof eht taht eveileb
ot tnediserP eht sdael taht ecnedive elbiderc si ereht )A
:taht sdnif tnediserP eht fi ylno ,)1( hpargarap
yb derrefnoc ytirohtua eht esicrexe yam tnediserP ehT
.tnediserP eht fo sgnidniF .noisivorp elbarapmoc oN
.noitcesbus
siht ecrofne dna tnemelpmi ot redro ni ,setatS
detinU eht fo struoc tcirtsid eht ni ,feiler tnemtsevid
gnidulcni ,feiler etairporppa kees ot setatS detinU
eht fo lareneG yenrottA eht tcerid yam tnediserP ehT
.tnemecrofnE .noisivorp elbarapmoc oN
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
�
individual members of CFIUS as part of their own review process to determine if a particular
transaction threatens to impair the national security. This list included the following elements:
(1) domestic production needed for projected national defense requirements;
(2) the capability and capacity of domestic industries to meet national defense requirements,
including the availability of human resources, products, technology, materials, and other
supplies and services;
(3) the control of domestic industries and commercial activity by foreign citizens as it affects
the capability and capacity of the U.S. to meet the requirements of national security;
(4) the potential effects of the transactions on the sales of military goods, equipment, or
technology to a country as identified by the Secretary of States under the Export
Administration Act that supports terrorism or under the Nuclear Non-Proliferation Act that
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.
Both H.R. 556 and S. 1610 amend the current factors the President and the Committee use to
evaluate mergers, acquisitions, or takeovers. In particular, the measures changed the status of the
factors to be considered from being discretionary (may) to being required (shall) in evaluating a
transaction. The Senate measure adds transactions identified under the fourth factor by the
Secretary of Defense as "posing a regional military threat" to the interests of the United States.
Also, H.R. 556 would have added four more factors to the five that currently exist. These new
factors are:
(1) whether the transaction has a security-related impact on critical infrastructure in the
United States;
(2) the potential effects of the transaction on the efforts of the United States to curtail human
smuggling and to curtail drug smuggling.
(3) whether the entity involved is being controlled by a foreign government;
(4) 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."
S. 1610 adds seven new factors to the five that currently exist. These new factors are:
(1) whether the transaction has a security-related impact on critical infrastructure in the
United States;
(2) the potential effects on United States critical infrastructure, including major energy
assets;
(3) the potential effects on United States critical technologies;
(4) whether the transaction is a foreign government-controlled transaction;
(5) in those cases involving a government-controlled transaction, a review of (A) the
adherence of the foreign country to nonproliferation control regimes, (B) the foreign
setatS detinU fo noitcejorp mret-gnol eht )11
;snoitaluger dna swal lortnoc tropxe lanoitan fo sisylana
na gnidulcni ,snoitacilppa yratilim htiw seigolonhcet
fo noisrevid ro tnempihssnart rof laitnetop eht )C
dna ;4002 fo tcA noitneverP msirorreT
dna mrofeR ecnegilletnI eht fo 0217 noitces rednu
ssergnoC ot tnediserP eht fo troper eht ,ot detimil eb
ton tub ,no ward llahs hcihw ,stroffe msirorret-retnuoc
ni gnitarepooc no drocer sti no yllacificeps ,setatS
detinU eht htiw yrtnuoc hcus fo pihsnoitaler eht )B
;tcA tnemamrasiD
dna lortnoC smrA eht fo 304 noitces yb deriuqer
'stnemtimmoC dna stnemeergA tnemamrasiD dna
noitarefilorpnoN ,lortnoC smrA htiw ecnailpmoC dna
ot ecnerehdA` no troper launna eht ,ot detimil eb ton
tub ,no ward llahs hcihw ,senilediug ylppus laretalitlum
dna seitaert gnidulcni ,semiger lortnoc noitarefilorpnon
ot yrtnuoc tcejbus eht fo ecnerehda eht )A .noitagitsevni ro weiver cificeps a htiw noitcennoc ni
:fo tnemssessa tnerruc eht ro yllareneg ,etairporppa eb ot enimreted yam eengised
fo weiver a ,ylno )B()1()b( noitcesbus rednu noitagitsevni s'tnediserP eht ro tnediserP eht sa srotcaf rehto hcus )9
na gniriuqer snoitcasnart ot tcepser htiw )01 dna ;noitcasnart dellortnoc-tnemnrevog
;)B()1()b( noitcesbus ngierof a si noitcasnart derevoc eht rehtehw )8
rednu denimreted sa ,noitcasnart dellortnoc-tnemnrevog ;tcA tropxE
ngierof a si noitcasnart derevoc eht rehtehw )9 dna tropmI secnatsbuS dellortnoC eht fo )a(3001 noitces
;seigolonhcet fo )2( dna )1( shpargarap ni debircsed ton si hcihw
lacitirc setatS detinU no stceffe laitnetop eht )8 yrtnuoc yna ot drager htiw gnilggums gurd liatruc ot dna
;stessa ygrene rojam gnidulcni ,erutcurtsarfni gnilggums namuh liatruc ot setatS detinU eht fo stroffe
lacitirc setatS detinU no stceffe laitnetop eht )7 eht no noitcasnart derevoc eht fo stceffe laitnetop eht )7
;setatS
detinU eht ni erutcurtsarfni lacitirc no tcapmi detaler
.emaS -ytiruces a sah noitcasnart derevoc eht rehtehw )6
;setatS detinU
eht fo stseretni eht ot taerht yratilim lanoiger laitnetop
a gnisop sa esnefeD fo yraterceS eht yb deifitnedi )B .noisivorp elbarapmoc oN
:deredisnoc eb
ot srotcaf gniwollof eht gnidda yb dna yrotadnam srotcaf
gnidda yb dednema si ))f(0712 .ppA .C.S.U 05( eht gnikam yb dednema si ))f(0712 .ppA .C.S.U 05(
0591 fo tcA noitcudorP esnefeD eht fo )f(127 noitceS 0591 fo tcA noitcudorP esnefeD eht fo )f(127 noitceS
.deredisnoc eb ot deriuqer srotcaf lanoitiddA .deredisnoc eb ot deriuqer srotcaf lanoitiddA
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
completion of a CFIUS review or investigation.
not submit a written notification to CFIUS or if the transaction is completed prior to the
by the parties to an investment transaction as a result of actions taken by CFIUS if the entities do
Both bills make the United States immune from any liability for any losses or expenses incurred
(7) such other factors as the President or the Committee determine to be appropriate.
other critical resources and materials; and
(6) the long-term projection of the United States requirements for sources of energy and
transshipment or diversion of technologies with military applications;
country's record on cooperating in counter-terrorism efforts, (C) the potential for
�
�
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
lacitirc rehto dna ygrene fo secruos rof stnemeriuqer
dna ;lairetam dna secruoser
eht ro tnediserP eht sa srotcaf rehto hcus )21
yllareneg ,etairporppa eb ot enimreted yam eettimmoC
.noitagitsevni ro weiver cificeps a htiw noitcennoc ni ro
�
The Exon-Florio provision codified confidentiality requirements that are similar to those that
appeared in Executive Order 11858 by stating that any information or documentary material filed
under the provision may not be made public "except as may be relevant to any administrative or
judicial action or proceeding."27 The provision does state, however, that this confidentiality
provision "shall not be construed to prevent disclosure to either House of Congress or to any duly
authorized committee or subcommittee of the Congress." The Exon-Florio provision requires the
President to provide a written report to the Secretary of the Senate and the Clerk of the House
detailing his decision and his actions relevant to any transaction that was subject to a 45-day
investigation.28 As presently written, there is no requirement for CFIUS or the President to notify
or otherwise inform Congress of cases it reviews or of the outcome of any investigation.
Both H.R. 556 and S. 1610 provide for the release of proprietary information "which can be
associated with a particular party" to committees only with assurances that the information would
remain confidential. Members of Congress and their staff members are accountable under current
provisions of law governing the release of certain types of information.
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
.snoisivorp ytilaitnedifnoC .snoisivorp ytilaitnedifnoC
llahs noitcesbus siht rednu noitamrofni fo erusolcsid ehT .emaS
.)c( noitcesbus fo stnemeriuqer eht htiw tnetsisnoc eb
yna ro esuoH rehtie fo ffats dna ssergnoC fo srebmeM
emas eht ot tcejbus eb llahs ssergnoC eht fo eettimmoc
elbacilppa era sa noitamrofni fo erusolcsid no snoitatimil
.noitcesbus hcus rednu
Since the implementation of the Exon-Florio provision, CFIUS has developed several practices
that likely were not envisioned when the statute was drafted. For instance, members of CFIUS
negotiate conditions with firms at times either to mitigate or to remove matters that raise national
security concerns among the members of CFIUS. Such agreements often are informal
arrangements that have an uncertain basis in statute and have not been tested in court. These
27
50 U.S.C. Appendix Sec. 2170(c).
28
50 U.S.C. Appendix Sec. 2170(g).
�
arrangements have been negotiated during the formal 30-day review period, or even during an
informal process prior to the formal filing of a notice of an investment transaction.
H.R. 556 and S. 1610 address one concern about CFIUS's actions by granting CFIUS and a
designated lead agency 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 are 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 Committee the authority to take a number of
actions. In particular, the Committee can develop (1) interim protections to address specific
concerns about the transaction pending a re-submission of a notice by the parties; (2) specific
time frames for re-submitting the notice; and (3) a process for tracking any actions taken by any
party to the transaction. The federal entity or entities involved in any mitigating agreement must
report to CFIUS on any modification to any agreement or condition that had been imposed and
must ensure that "any significant" modification is reported to the Director of National
Intelligence and to any other federal department or agency that "may have a material interest in
such modification." Such reports must also be filed with the Attorney General.
In addition, CFIUS is required to develop a method for evaluating the compliance of firms that
had entered into a mitigation agreement or condition that was imposed as a requirement for
approval of the investment transaction. Such measures, however, would be required to be
developed in such a way that they would allow CFIUS to determine that compliance is taking
place without also: 1) "unnecessarily diverting" CFIUS resources from assessing any new
covered transaction for which a written notice had been filed; and 2) placing "unnecessary"
burdens on a party to a investment transaction.
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
.gnikcart dna noitagitiM .gnikcart dna noitagitiM
.noitagitiM .noitagitiM
eht yb detangised ycnega yna ro eettimmoC ehT retne ,etaitogen yam ycnega dael a ro eettimmoC ehT
retne ,etaitogen yam snosrepriahC eciV dna nosrepriahC noitidnoc ro tnemeerga yna ecrofne dna ,esopmi ro otni
noitidnoc ro tnemeerga yna ecrofne dna ,esopmi ro otni ot redro ni noitcasnart derevoc eht ot ytrap yna htiw
ot redro ni noitcasnart derevoc a ot ytrap yna htiw detinU eht fo ytiruces lanoitan eht ot taerht yna etagitim
detinU eht fo ytiruces lanoitan eht ot taerht yna etagitim .noitcasnart derevoc eht fo tluser a sa sesira taht setatS
.noitcasnart eht fo tluser a sa sesira taht setatS
.sisylana desab-ksiR .sisylana desab-ksiR
rednu desopmi noitidnoc ro otni deretne tnemeerga ynA .emaS
,sisylana desab-ksir a no desab eb llahs )A( hpargarapbus
lanoitan ot taerht eht fo ,eettimmoC eht yb detcudnoc
.noitcasnart derevoc eht fo ytiruces
.ytirohtua gnikcarT .ytirohtua gnikcarT
saw taht noitcasnart derevoc a fo eciton nettirw yna fI .emaS
yna erofeb nwardhtiw si eettimmoC eht ot dettimbus
,detelpmoc si eettimmoC eht yb noitagitsevni ro weiver
sa ,hsilbatse ot deriuqer eb dluow eettimmoC eht
-etairporppa
htiw snrecnoc cificeps sserdda ot snoitcetorp miretni )1
noitcennoc ni desiar neeb evah taht noitcasnart hcus
yna gnidnep noitagitsevni ro weiver hcus yna htiw
.secnatsmucric
ni egnahc lairetam yna ro noitatnemelpmi eht no )daeh
ycnega ro tnemtraped hcus fo eengised eht ro( ycnega
ro tnemtraped hcus fo daeh eht ot troper ot noitcasnart
derevoc eht ot ytrap yna ,etairporppa sa ,eriuqer )2
dna ;noitidnoc ro tnemeerga hcus fo
noitatnemelpmi eht no eettimmoC eht fo snosrepriahC
eciV dna nosrepriahC eht ot ,doirep htnom-xis
hcae ni ecno naht ssel ton tub etairporppa sa ,troper )1
:llahs noitcasnart derevoc a ot tcepser
htiw desopmi noitidnoc ro otni deretne tnemeerga
yna htiw noitcennoc ni ycnega dael a sa eettimmoC
eht yb detangised ycnega ro tnemtraped laredeF hcaE
.noisivorp elbarapmoc oN .stroper noitatnemelpmI
.ycnega detangised yb gnitropeR .ycnega detangised yb gnitropeR
.hpargarap
siht fo sesoprup eht tuo gniyrrac ni ycnega dael
eht gnitsissa ni seicnega ro stnemtraped rehto tibihorp .ycnega ro tnemtraped detangised eht
llahs hpargarap siht ni gnihtoN .ycnega ro tnemtraped fo trap eht no noitcasnart hcus ot detaler seussi eht fo
detangised eht fo trap eht no noitcasnart hcus egdelwonk dna htiw esitrepxe eht no desab noitcasnart
ot detaler seussi eht fo egdelwonk dna htiw esitrepxe derevoc a ot tcepser htiw )1( hpargarap rednu desopmi
eht no desab ,noitcasnart derevoc a ot tcepser htiw noitidnoc ro otni deretne tnemeerga yna ,eettimmoC
)1( hpargarap rednu desopmi noitidnoc ro otni deretne eht fo flaheb no ,ecrofne dna ,rotinom ,yfidom
tnemeerga yna ,eettimmoC eht fo flaheb no ,ecrofne ,etaitogen ot ycnega dael eht sa seicnega ro stnemtraped
dna ,rotinom ,yfidom ,etaitogen llahs ycnega dael ehT laredeF erom ro 1 etangised llahs eettimmoC ehT
.tnemecrofne .tnemecrofne
dna ,gnirotinom ,noitacifidom ,noitaitogeN dna ,gnirotinom ,noitacifidom ,noitaitogeN
.)A( hpargarapbus ot tcejbus si taht noitcasnart
.tem era hpargarapbus hcus ot tcejbus si taht noitcasnart derevoc yna ot tcepser htiw stnemeriuqer eht
derevoc yna ot tcepser htiw )A( hpargarapbus tuo yrrac ot ycnega dael a sa ytinummoc ecnegilletni eht
fo stnemeriuqer eht taht erusne llahs ytinummoc fo ytitne yna naht rehto ,seicnega ro stnemtraped laredeF
ecnegilletni eht fo ytitne yna naht rehto ,ycnega dael ehT etairporppa erom ro 1 etangised yam eettimmoC ehT
.ycnega fo noitangiseD .ycnega fo noitangiseD
.dettimbuser
si )2( esualc ni ot derrefer eciton eht erofeb ,noitcasnart
eht htiw noitcennoc ni ,noitcasnart eht ot ytrap yna yb
nekat eb yam taht snoitca yna gnikcart rof ssecorp a )3
dna ;eciton
nettirw hcus yna gnittimbuser rof semarf emit cificeps )2
;noitces siht rednu tnediserP eht
yb noitca rehtruf dna noitcasnart hcus ot tcepser htiw
noitces siht rednu eciton nettirw yna fo noissimbuser
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
credible evidence of a coordinated strategy by one or more countries or companies to acquire
provide Congress with a quadrennial report which evaluates two issues: 1) whether there is
investment transactions under the Exon-Florio provision. In addition, the President is required to
assessment be provided to any other individual responsible for reviewing or investigating
technology posed by an investment transaction if such an assessment is performed and that the
The President also is required to provide an assessment of the risk of diversion of defense critical
and of the factors the President used to make his determination.
the transaction. The President's report is required to contain a detailed explanation of the findings
investment transaction after CFIUS has completed a 30-day review and a 45-day investigation of
President is required to report to Congress on his determination to take action on a proposed
particular investment transactions, such as the Dubai Ports World transaction. Currently, the
Members with enough information to address public concerns that occasionally arise concerning
In addition, some Members apparently believed that the current requirements do not provide
under the current statutes that their ability to fulfill their oversight responsibilities was hampered.
became public, various Members expressed concern that they were provided so little information
In hearings that were held during the 109th Congress after the Dubai Ports World transaction
.noitcasnart
.emaS derevoc a ot ytrap a no snedrub yrassecennu gnicalp )2
ro ;nosaer yna rof denepoer neeb sah weiver a hcihw
rof noitcasnart derevoc yna ro noitcasnart derevoc hcus
ot ytrap a no noitidnoc a gnisopmi ro htiw tnemeerga
noitagitim a gnihcaer yrassecen fi dna ,)C()1()b(
noitcesbus ot tnausrup delif neeb sah eciton nettirw
a hcihw rof noitcasnart derevoc wen yna gnissessa
.emaS morf secruoser eettimmoC gnitrevid ylirassecennu )1
-tuohtiw ecnailpmoc erussa
yletauqeda ot eettimmoC eht wolla lliw taht noitcasnart
derevoc a ot tcepser htiw desopmi noitidnoc ro otni
deretne tnemeerga yna htiw ecnailpmoc gnitaulave rof
.emaS sdohtem nopu eerga dna poleved llahs eettimmoC ehT
.ecnailpmoC .ecnailpmoC
.noitacifidom hcus ni tseretni lairetam a evah yam .noitacifidom hcus ni
taht ycnega ro tnemtraped laredeF rehto yna dna ,setatS tseretni lairetam a evah yam taht ycnega ro tnemtraped
detinU eht fo lareneG yenrottA eht ,ecnegilletnI lanoitaN laredeF rehto yna ot dna ecnegilletnI lanoitaN
fo rotceriD eht ot detroper si noitidnoc ro tnemeerga fo rotceriD eht ot detroper si noitidnoc ro tnemeerga
hcus yna ot noitacifidom lairetam yna taht erusne )2 hcus yna ot noitacifidom tnacifingis yna taht erusne )2
dna ;noitcasnart eht ot
tcepser htiw desopmi noitidnoc ro tnemeerga hcus yna
dna ;noitcasnart eht ot tcepser htiw desopmi ot noitacifidom yna no eettimmoC eht fo snosrepriahC
noitidnoc ro tnemeerga hcus yna ot noitacifidom lairetam eciV dna nosrepriahC eht ot stroper cidoirep edivorp )1
yna no eettimmoC eht ot stroper cidoirep edivorp )1 :llahs noitcasnart derevoc a ot tcepser
llahs noitcasnart derevoc htiw desopmi noitidnoc ro otni deretne tnemeerga
a ot tcepser htiw desopmi noitidnoc ro otni deretne yna htiw noitcennoc ni ycnega dael a sa eettimmoC
tnemeerga yna htiw noitcennoc ni ycnega dael ehT eht yb detangised ycnega ro tnemtraped laredeF ynA
.stroper noitacifidoM .stroper noitacifidoM
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
�
U.S. companies involved in research, development, or production of critical technologies for
which the United States is a leading producer; and 2) 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.
Both H.R. 556 and S. 1610 increase oversight by the Congress. H.R. 556 would have required
that 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 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, specifically, at a minimum, the
Committee on Foreign Affairs, the Committee on Financial Services, and the Committee on
Energy and Commerce in the House. Both measures require CFIUS to brief certain congressional
leaders if they requested such a briefing. Members of Congress and their staff are subject to
disclosure limitations and proprietary information would be shared with congressional
committees only under conditions that would assure the confidentiality of the information.
H.R. 556 and S. 1610 require CFIUS to report annually to Congress on any reviews or
investigations that it had conducted during the prior year. Each report must 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, 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 must report on trend
information on the number of filings, investigations, withdrawals, and presidential decisions or
actions that were taken. The report also must 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; the methods the
Committee used to determine that firms were complying with mitigation agreements or
conditions; 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, both H.R. 556 and S. 1610 require CFIUS to include in its
annual report 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
must 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. For the purposes of this section, the House measure would have
defined critical technologies as technology defined in the National Science and Technology
Policy Organization and Priorities Act of 197629, or "other critical technology, critical
components, or critical technology items essential to national defense or national security."
29
P.L. 94-282 (May 11, 1976) which states that the priority needs of the Nation relative to investment in science and
technology are: (1) promoting conservation and efficient utilization of natural and human resources; (2) protecting the
oceans and coastal zones; (3) strengthening the economy and promoting full employment; (4) assuring adequate
supplies of food, materials, and energy; (5) improving the quality of health care; and (6) improving the nation's
housing, transportation, and communication systems.
�
In addition, both measures require the Secretary of the Treasury, in consultation with the
Secretary of State and the Secretary of Commerce to conduct a study on investment in the United
States, particularly in critical infrastructure and industries affecting national security by: 1)
foreign governments, entities controlled by or acting on behalf of a foreign government, or
persons of foreign countries which comply with any boycott of Israel; 2) foreign governments,
entities controlled by or acting on behalf of a foreign government, or persons of foreign countries
which do not ban organizations designated by the Secretary of State as foreign terrorist
organizations.
Both measures 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. In particular, the
report must be sent to the chairman and ranking member of each committee of the House and the
Senate with jurisdiction over any aspect of the report, including the Committee on International
Relations, the Committee on Financial Services, and the Committee on Energy and Commerce of
the House.
H.R. 556 and S. 1610 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 is accurate and complete. This written notification includes any mitigation agreement
or condition that was part of a CFIUS approval.
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
.ssergnoC eht yb thgisrevo desaercnI .ssergnoC eht yb thgisrevo desaercnI
.snoitagitsevni detelpmoc no stropeR .noisivorp elbarapmoc oN
a fo noitelpmoc eht retfa syad evif naht retal toN .noisivorp elbarapmoc oN
na setacidni tnediserP eht fi ,ro noitagitsevni eettimmoC
,noitcasnart eht ot tcepser htiw noitca yna ekat ot tnetni
noitcesbus ni ot derrefer doirep yad-51 fo dne eht retfa
eht fo nosrepriahC eciV a ro nosrepriahC eht ,)d(
nettirw a timbus ot deriuqer eb dluow eettimmoC
htiw eettimmoC eht fo snoitca ro sgnidnif eht no troper
fo noitanimreted eht ,noitagitsevni hcus ot tcepser
na ,)d( noitcesbus rednu noitca ekat ot ton ro rehtehw
eht dna ,)e( noitcesbus rednu sgnidnif eht fo noitanalpxe
ot tcepser htiw ,)f( noitcesbus rednu deredisnoc srotcaf
:ot ,noitcasnart hcus
eht fo redaeL ytironiM eht dna redaeL ytirojaM eht )1
eht fo redaeL ytironiM eht dna rekaepS eht )2 ;etaneS
gniknar dna namriahc eht )3 ;sevitatneserpeR fo esuoH
fo esuoH eht fo eettimmoc hcae fo rebmem
yna revo noitcidsiruj htiw etaneS eht dna sevitatneserpeR
stceffe elbissop sti dna noitcasnart derevoc eht fo tcepsa
eht ,muminim a ta ,gnidulcni ,ytiruces lanoitan no
no eettimmoC eht ,sriaffA ngieroF no eettimmoC
dna ygrenE no eettimmoC eht dna ,secivreS laicnaniF
)4 dna ;sevitatneserpeR fo esuoH eht fo ecremmoC
ssergnoC fo srebmeM dna setatS gnitneserper srotaneS
eb dluow taht stcirtsid lanoissergnoc gnitneserper
.noitcasnart derevoc eht yb detceffa yltnacifingis
.noitces siht
rednu snoitca ro snoisiced laitnediserp dna ,slawardhtiw
,snoitagitsevni ,sgnilif fo srebmun eht no noitamrofni
.emaS dnert ,etairporppa sa ,dna ,evitalumuc ,cificepS )2
.noitces siht rednu
noitca ro noisiced laitnediserp yna dna ,noitagitsevni
yna rof emit fo noisnetxe yna ,noitces siht rednu
.noitces siht rednu tnediserP eettimmoC eht yb setov llac llor yna ,ssecorp eht morf
eht yb noitca ro noisiced yna dna ,ssecorp eht morf lawardhtiw yna no noitamrofni ,noitagitsevni ro weiver
lawardhtiw yna tuoba noitamrofni htiw gnola ,snosrep eht fo sutats eht tuoba noitamrofni htiw gnola ,snosrep
tnenitrep lla fo stcudorp ro seitivitca ssenisub eht fo tnenitrep lla fo stcudorp ro seitivitca ssenisub eht fo
erutan eht ,noitcasnart eht ot ytrap hcae no noitamrofni erutan eht ,noitcasnart eht ot ytrap hcae no noitamrofni
cisab htiw ,doirep eht gnirud detelpmoc snoitagitsevni cisab htiw doirep eht gnirud detelpmoc snoitagitsevni
ro sweiver lla dna delif seciton lla fo tsil A )1 ro sweiver lla dna delif seciton lla fo tsil A )1
.troper fo stnetnoC .troper fo stnetnoC
.troper eht yb derevoc doirep htnom-21 eht gnirud
)b( noitcesbus rednu detelpmoc snoitcasnart derevoc
fo snoitagitsevni dna sweiver eht lla no raey hcae fo 13
yluJ erofeb ,sevitatneserpeR fo esuoH eht fo ecremmoC
.troper eht yb derevoc doirep dna ygrenE no eettimmoC eht dna ,secivreS laicnaniF
htnom-21 eht gnirud )b( noitcesbus rednu detelpmoc no eettimmoC eht ,sriaffA ngieroF no eettimmoC
snoitcasnart derevoc fo snoitagitsevni dna sweiver eht ,muminim a ta ,gnidulcni ,troper eht fo tcepsa
eht fo lla no raey hcae fo 13 yluJ erofeb ,sevitatneserpeR yna revo noitcidsiruj htiw etaneS eht dna sevitatneserpeR
fo esuoH eht dna etaneS eht ni noitcidsiruj fo fo esuoH eht fo eettimmoc hcae fo rebmem
eettimmoc eht fo rebmem gniknar dna namriahc eht ot gniknar dna namriahc eht ot troper a timsnart ot
troper a timsnart ot deriuqer eb dluow nosrepriahc ehT deriuqer eb dluow eettimmoC eht fo nosrepriahC ehT
.troper launnA .troper launnA
.ecnaraelc ytiruces evah
ohw srebmem ffats etairporppa dna ,sevitatneserpeR
fo esuoH eht fo ecremmoC dna ygrenE no eettimmoC
eht dna ,secivreS laicnaniF no eettimmoC eht ,sriaffA
ngieroF no eettimmoC eht ,muminim a ta ,gnidulcni
,ytiruces lanoitan no stceffe elbissop sti dna noitcasnart
derevoc eht fo tcepsa yna revo noitcidsiruj htiw )eb
yam esac eht sa( etaneS eht ro sevitatneserpeR fo esuoH
eht fo eettimmoc hcae fo rebmem gniknar dna namriahc
eht )eb yam esac eht sa( ,sevitatneserpeR fo esuoH
eht fo redaeL ytironiM eht dna rekaepS eht ,etaneS eht
fo redaeL ytironiM eht dna redaeL ytirojaM eht ot ylno
nepo eb llahs taht noitacol dna ezis etairporppa fo ytilicaf
.ecnaraelc ytiruces etairporppa gnivah ssergnoC eruces a ni setanigiro tseuqer gnifeirb hcus yna hcihw
fo rebmeM a hcus fo ffats lanoissergnoc eht ot dedivorp morf ssergnoC eht fo esuoH hcae ot gnifeirb deifissalc
eb yam hpargarap siht rednu sgnifeirB .noitamrofni 1 edivorp llahs )etangised yam nosrepriahC eciV a ro
eht fo ytivitisnes eht yb yrassecen demeed fi ,sisab nosrepriahC eht sa nosrep rehto hcus ro( nosrepriahC
deifissalc a no ,noitcasnart hcus ot tcepser htiw desopmi eciV a ro nosrepriahC eht ,noitcasnart eht no
noitidnoc ro tnemeerga noitagitim a htiw ecnailpmoc troper a seviecer ohw ssergnoC fo rebmeM ro rotaneS
no ro ,noitces siht rednu dedulcnoc sah noitca yna yb eettimmoC eht ot dettimbus si ,noitcasnart
lla hcihw rof noitcasnart derevoc a no sgnifeirb edivorp hcus ot tcepser htiw desopmi noitidnoc ro tnemeerga
yltpmorp ,)iii()C()3()b( noitcesbus ni deificeps ssergnoC noitagitim a htiw ecnailpmoc no ro ,noitcasnart
fo rebmeM yna morf tseuqer nopu ,llahs eettimmoC ehT derevoc a no gnifeirb a rof tseuqer nettirw a fI
.tnemeriuqer gnifeirb dna ecitoN .tnemeriuqer gnifeirb dna ecitoN
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.noitces siht ot tnausrup deifitnedi
ytiruces lanoitan ro esnefed lanoitan ot laitnesse smeti
ygolonhcet lacitirc ro ,stnenopmoc lacitirc ,ygolonhcet
lacitirc rehto ro 6791 fo tcA seitiroirP dna ,noitazinagrO
,yciloP ygolonhceT dna ecneicS lanoitaN eht fo IV eltit
rednu deifitnedi seigolonhcet snaem seigolonhcet lacitirC
.noisivorp elbarapmoc oN .seigolonhcet lacitirC
.seigolonhcet lacitirc ot
detaler sterces laicremmoc gniniatbo ta demia seinapmoc
setatS detinU etavirp tsniaga stnemnrevog ngierof
yb detsissa yltcerid ro detcerid seitivitca eganoipse
.emaS lairtsudni era ereht rehtehw fo noitaulave nA )2
.recudorp
gnidael a si setatS detinU eht hcihw rof seigolonhcet
lacitirc fo noitcudorp ro ,tnempoleved ,hcraeser ni
devlovni seinapmoc setatS detinU eriuqca ot seinapmoc
ro seirtnuoc erom ro 1 yb ygetarts detanidrooc a
.emaS fo ecnedive elbiderc si ereht rehtehw fo noitaulave nA )1
:gniwollof eht )1(
hpargarap rednu dettimbus troper launna eht ni edulcni
llahs etangised llahs tnediserP eht sa seicnega hcus dna
tnediserP eht ,noitces siht ot tcepser htiw seitilibisnopser
.emaS thgisrevo sti ni ssergnoC eht tsissa ot redro nI
.seigolonhcet .seigolonhcet
lacitirc ot gnitaler troper fo stnetnoC lacitirc ot gnitaler troper fo stnetnoC
.elbissop tnetxe eht ot ,troper
hcus txen eht fo yreviled erofeb doirep eht gnirud
snoitarebiled sti ni tnuocca otni ekat lliw eettimmoC
eht taht setatS detinU eht fo erutcurtsarfni lacitirc
ro ytiruces lanoitan eht no snoitcasnart derevoc fo
.emaS stceffe esrevda deviecrep lla fo noissucsid deliated A )6
.snoitidnoc
ro stnemegnarra hcus htiw ecnailpmoc enimreted
ot gnisu era )l( noitcesbus rednu detangised seicnega ro
stnemtraped dael yna dna eettimmoC eht sdohtem eht
fo noissucsid a gnidulcni ,noitcasnart a tuoba snrecnoc
ytiruces lanoitan etagitim ot desu sah eettimmoC
.emaS eht snoitidnoc dna stnemegnarra ytiruces fo sepyt ehT )5
.noitcasnart eht denodnaba ,ylevitanretla
,ro ,seciton hcus delif-er retal evah )ii()C()1()b(
noitcesbus htiw ecnadrocca ni eettimmoC eht ot seciton
.emaS werdhtiw taht seinapmoc rehtehw no noitamrofnI )4
.detanigiro evah stnemtsevni
eht hcihw morf seirtnuoc eht dna ,edam neeb
evah hcihw sgnilif eht ni devlovni srotces ssenisub eht
.emaS no noitamrofni dnert ,etairporppa sa ,dna evitalumuC )3
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
.lareneG rotcepsnI eht fo snoisulcnoc dna sgnidnif
eht gniniatnoc )1( hpargarap rednu noitagitsevni eht no
,sevitatneserpeR fo esuoH eht fo ecremmoC dna ygrenE
no eettimmoC eht dna ,secivreS laicnaniF no eettimmoC
eht ,sriaffA ngieroF no eettimmoC eht ,muminim
a ta ,gnidulcni ,troper eht fo tcepsa yna revo noitcidsiruj
htiw etaneS eht dna sevitatneserpeR fo esuoH eht fo
eettimmoc hcae fo rebmem gniknar dna namriahc eht ot
troper a timbus llahs yrusaerT eht fo tnemtrapeD eht fo
lareneG rotcepsnI eht ,tca siht fo tnemtcane eht fo etad
.emaS eht no gninnigeb doirep yad-072 eht fo dne eht erofeB
.ssergnoC eht ot tropeR .ssergnoC eht ot tropeR
.)tca siht fo tnemtcane eht fo etad eht erofeb tceffe ni
sa( 0591 fo tcA noitcudorP esnefeD eht fo )k(127 noitces
rednu deriuqer saw taht ssergnoC eht ot troper yna
ekam ot yrusaerT eht fo tnemtrapeD eht fo eruliaf hcae
gninrecnoc secnatsmucric dna stcaf eht fo lla enimreted
ot noitagitsevni tnednepedni na tcudnoc llahs yrusaerT
.emaS eht fo tnemtrapeD eht fo lareneG rotcepsnI ehT
.lareneG rotcepsnI yb noitagitsevnI .lareneG rotcepsnI yb noitagitsevnI
.stceffe esoht sserdda ot stroffe yna no dna setatS
detinU eht fo ytiruces lanoitan eht no tnemtsevni hcus
fo stceffe eht fo sisylana na htiw rehtegot ,)1( hpargarap
ni debircsed yduts eht ot tcepser htiw yraterceS eht fo
snoisulcnoc dna sgnidnif eht gniniatnoc ,sevitatneserpeR
fo esuoH eht dna etaneS eht fo seettimmoc
etairporppa lla ot lattimsnart rof ,ssergnoC eht
.emaS ot troper a timbus llahs yrusaerT eht fo yraterceS ehT
.tropeR .tropeR
.snoitazinagro tsirorret ngierof sa etatS fo yraterceS eht
yb detangised snoitazinagro nab ton od hcihw seirtnuoc
ngierof fo snosrep ro ,tnemnrevog ngierof a fo flaheb no
.emaS gnitca ro yb dellortnoc seititne ,stnemnrevog ngierof )B
ro ;learsI fo ttocyob yna htiw ylpmoc hcihw seirtnuoc
ngierof fo snosrep ro ,tnemnrevog ngierof a fo flaheb no
.emaS gnitca ro yb dellortnoc seititne ,stnemnrevog ngierof )A
-yb ,ytiruces lanoitan gnitceffa seirtsudni
dna erutcurtsarfni lacitirc ni stnemtsevni yllaicepse
,setatS detinU eht ni stnemtsevni no yduts a tcudnoc
llahs ,ecremmoC fo yraterceS eht dna etatS fo yraterceS
eht htiw noitatlusnoc ni ,yrusaerT eht fo yraterceS eht
,retfaereht yllaunna dna tca siht fo tnemtcane eht fo etad
.emaS eht no gninnigeb doirep yad-021 eht fo dne eht erofeB
.troper dna ydutS .troper dna ydutS
.cilbup eht ot elbaliava edam eb llahs ,ycavirp
dna ytiruces lanoitan gnidraugefas htiw tnetsisnoc .'.cilbup eht ot elbaliava edam
,etairporppa sa ,troper eht fo noisrev deifissalcnu eb llahs troper eht fo noitrop taht fo noisrev deifissalcnu
nA .deifissalc eb yam hpargarap siht yb deriuqer si taht nA .deifissalc eb yam hpargarap siht yb deriuqer si taht
)1( hpargarap rednu troper launna eht fo noitrop tahT )1( hpargarap rednu troper launna eht fo noitrop tahT
.yduts deifissalcnu fo esaeleR .yduts deifissalcnu fo esaeleR
7002 7002 fo tcA ycnerapsnarT denehtgnertS dna
fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN
0161 .S 655 .R.H
�
�
655 .R.H 0161 .S
mrofeR tnemtsevnI ngieroF ytiruceS lanoitaN fo tcA ytiruceS lanoitaN dna tnemtsevnI ngieroF
7002 fo tcA ycnerapsnarT denehtgnertS dna 7002
.seciton fo noitacifitreC .seciton fo noitacifitreC
.secnarussA dna secitoN fo noitacifitreC .secnarussA dna secitoN fo noitacifitreC
a ot ytrap a yb ,dettimbus eb ot deriuqer eciton hcaE .emaS
s'tnediserP eht ro tnediserP eht ot ,noitcasnart derevoc
debircserp snoitaluger dna noitces siht rednu eengised
yb dettimbus noitamrofni yna dna ,noitces hcus rednu
a hcihw rof noitca yna htiw noitcennoc ni ytrap hcus yna
fo )ii()B()3( hpargarap ot tnausrup deriuqer si troper
yna fo noitatnemelpmi eht ot tcepser htiw )l( noitcesbus
ni debircsed noitidnoc ro tnemeerga noitagitim
lairetam yna ro ,noitcesbus hcus fo )A()1( hpargarap
a yb deinapmocca eb llahs ,secnatsmucric ni egnahc
eht ro reciffo evitucexe feihc eht yb tnemetats nettirw
ro eciton hcus timbus ot deriuqer nosrep eht fo eengised
s'nosrep eht fo tseb eht ot ,taht gniyfitrec noitamrofni
--feileb dna egdelwonk
seilpmoc ylluf dettimbus noitamrofni ro eciton eht )1(`
,noitaluger hcus ro noitces siht fo stnemeriuqer eht htiw
dna ;noitidnoc ro ,tnemeerga
ni etelpmoc dna etarucca si noitamrofni ro eciton eht )2(`
'.stcepser lairetam lla
The proposed DP World acquisition of P&O, while arguably of little economic impact on the U.S.
economy, could affect public policy on foreign investment that relates to issues of corporate
ownership, foreign investment, and national security in the U.S. economy. The transaction
revealed significant differences between Congress and the Administration over the operations of
CFIUS and over the objectives the Committee should be pursuing. In addition, the transaction
demonstrated that neither Congress nor the Administration has been able so far to define clearly
the national security implications of foreign direct investment or the national security
implications of foreign investment activity in the economy. These issues likely reflects differing
assessments of the economic impact of foreign investment on the U.S. economy and differing
political and philosophical convictions among Members and between the Congress and the
Administration.
The incident also focused attention on the informal process firms use to have their investment
transactions reviewed by CFIUS prior to a formal review. According to anecdotal evidence, some
firms apparently believe that the CFIUS process is not market neutral, but that it adds to market
uncertainty that can negatively affect a firm's stock price and lead to economic behavior by some
firms that is not optimal for the economy as a whole. Such behavior might involve firms
expending a considerable amount of resources to avoid a CFIUS investigation, or deciding to
terminate a transaction that would improve the optimal performance of the economy in order to
avoid a CFIUS investigation. While such anecdotal evidence may not serve as the basis for
developing public policy, it does raise a number of concerns about the possible impact of the
CFIUS process on the market and the potential costs of redefining the concept of national security
relative to foreign investment.
�
The recent focus by Congress on the Committee has also shown that the DP World transaction, in
combination with other recent unpopular foreign investment transactions, has exacerbated
dissatisfaction among some Members of Congress over the operations of CFIUS. In particular,
some Members are displeased with the way the Committee uses its discretionary authority under
the Exon-Florio provision to investigate certain foreign investment transactions. As a result, some
Members of Congress are proposing changes to the CFIUS process through legislation that is
progressing through the 1st Session of the 110th Congress. The changes could mandate more
frequent contact between the Committee, which generally operates without much public or
congressional attention, and the Congress and enhance Congress's oversight role over the
Committee.
The DP World transaction also revealed that the September 11, 2001 terrorist attacks may have
fundamentally altered the viewpoint of some Members of Congress regarding the role of foreign
investment in the economy and over the impact of such investment on the national security
framework. Some argue that this changed perspective requires a reassessment of the role of
foreign investment in the economy and of the implications of corporate ownership of activities
that fall under the rubric of critical infrastructure. As a result, some Members of Congress are
looking to amend the CFIUS process to enhance Congress's oversight role while reducing
somewhat the discretion of CFIUS to review and investigate foreign investment transactions in
order to have CFIUS investigate a larger number of foreign investment cases. In addition, the DP
World transaction has focused attention on long-unresolved issues concerning the role of foreign
investment in the nation's overall security framework and the methods that are being used to
assess the impact of foreign investment on the nation's defense industrial base, homeland
security, and national economic infrastructure.
Changes to the CFIUS process being proposed in the House and Senate bills would alter the
current CFIUS process, but it remains to be seen how the changes would affect the outcome of
the CFIUS process. In the final analysis, the President retains sole authority to apply the Exon-
Florio provisions and he has complete discretion to accept or reject a CFIUS recommendation to
block a proposed foreign investment transaction. As a result, CFIUS reflects the President's
priorities and policies relative to foreign investment. To date, Presidents have been highly
reluctant to use the authority of the Exon-Florio provision to block investment transactions, which
has happened just once since the measure was adopted. In part, this reluctance may stem from the
narrow range of policy options that are provided for in the provision, which seems at odds with
the often highly complex nature of foreign investment transactions. As a result, CFIUS has slowly
developed an informal process that essentially expands the policy options available to the
President by allowing CFIUS members to review proposed investment transactions ahead of any
formal review and, most importantly, to negotiate informal agreements that mitigate aspects of
the investment that otherwise would spur CFIUS members to oppose the transaction. By
formalizing this process through proposed legislation, Congress likely would expand the range of
policy options available to the President and possibly broaden the scope of measures foreign
firms may be asked to comply with in order to gain approval. Depending on how foreign firms
view these changes, they may regard them as signaling a less tolerant attitude in the United States
toward foreign investment and the changes potentially could add support to the renewed
willingness of some foreign governments to impose additional restrictions on foreign investors.
Most economists agree that there is little economic evidence to conclude that foreign ownership,
whether by a private entity or by an entity that is owned or controlled by a foreign government,
has a measurable impact on the U.S. economy as a whole. Others may argue on non-economic
grounds that such firms pose a risk to national security or to homeland security. Similar issues
�
concerning corporate ownership were raised during the late 1980s and early 1990s when foreign
investment in the U.S. economy increased rapidly. There are little new data, however, to alter the
conclusion reached at that time that there is no definitive way to assess the economic impact of
foreign ownership or of foreign investment on the economy. Although some observers have
expressed concerns about foreign investors who are owned or controlled by foreign governments
acquiring U.S. firms, there is little confirmed evidence that such a distinction in corporate
ownership has any measurable effect on the economy as whole.
For most economists, the distinction between domestic- and foreign-owned firms, whether the
foreign firms are privately owned or controlled by a foreign government, is sufficiently small that
they would argue that it does not warrant placing restrictions on the inflow of foreign investment.
Nevertheless, foreign direct investment does entail various economic costs and benefits. On the
benefit side, such investments bring added capital into the economy and potentially could add to
productivity growth and innovation. Such investment also represents one repercussion of the U.S.
trade deficit. The deficit transfers dollar-denominated assets to foreign investors, who then decide
how to hold those assets by choosing among various investment vehicles, including direct
investment. Foreign investment also removes a stream of monetary benefits from the economy in
the form of repatriated capital and profits that reduces the total amount of capital in the economy.
Such costs and benefits likely occur whether the foreign owner is a private entity or a foreign
government.
James K. Jackson
Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751
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