Committee on Foreign Investment in the United States
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THE LATEST: Further Efforts to Broaden the Scope and Impact for CFIUS Reviews of Foreign Acquisitions of US Businesses

We reported earlier on the Committee on Foreign Investment in the United States (CFIUS) and its legal and practical authority to review M&A transactions for possible risks to US national security posed by foreign ownership of a US business. Sens. Cornyn (R-TX) and Schumer (D-NY) reportedly are working separately on legislation to strengthen CFIUS, which could directly affect some cross-border M&A. Sen. Cornyn’s proposed changes to CFIUS would target Chinese technology investments while Sen. Schumer’s bill would encourage CFIUS to look at economic implications as part of its review.  These legislative efforts follow a bipartisan Congressional request in late Fall 2016 for the Government Accountability Office (GAO) to update its periodic analysis of CFIUS, urging the GAO to evaluate the possible expansion of factors considered by CFIUS in its M&A reviews to cover investment reciprocity and net economic benefits.

WHAT HAPPENED:
  • Now Sen. Debbie Stabenow (D-MI) and Sen. Chuck Grassley (R-IA) have introduced legislation that would add the Secretary of Agriculture and the Secretary of Health and Human Services as voting members of CFIUS. The bill would also direct CFIUS to consider matters of food security, access and safety when it reviews overseas acquisitions of US firms.
  • Though CFIUS may already consider food security as an element of national security, the new proposal would at a minimum enhance this factor. Stabenow said in a statement introducing the bill, “As foreign entities continue their aggressive acquisitions of US food and agriculture companies, it’s imperative that these transactions face additional scrutiny.”
WHAT THIS MEANS:
  • More broadly, the bipartisan legislative activity suggests an increased likelihood that CFIUS reform will gain traction in the Congress. Further support for broadening the scope and force of CFIUS may come from the Trump Administration, which would be consistent with its “America first” trade policy.
  • Any businesses with planned or pending cross-border M&A activity in the US, including those in the agribusiness sector, should monitor these developments.



THE LATEST: National Security Reviews of Foreign Ownership May Broaden

The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced “syphius”) reviews M&A transactions that may pose a risk to national security through foreign control of a US business.  (See our recent article).  CFIUS is composed of members from the Departments of Treasury (chair), Homeland Security, State, Defense and other agencies.  It has the power to recommend to the President that a transaction be stopped, and is well known for its reviews of the Dubai Ports World and IBM/Lenovo deals, both of which it approved (though the former was terminated because of strong political opposition).  By law, its process is fairly secretive, although it holds itself to tight deadlines for issuing final recommendations.

WHAT HAPPENED:
  • As reported February 21, Senators Cornyn (R-TX) and Schumer (D-NY) are separately working on legislation that would strengthen CFIUS’ hand in reviewing proposed acquisitions.
  • In the face of skyrocketing investment by Chinese companies in US firms, Senator Cornyn’s bill would require CFIUS to look harder at proposed Chinese acquisitions of US technology companies.
  • Reportedly, Senator Schumer’s bill would take a different tack, requiring CFIUS to consider economic implications in addition to national security concerns as part of its review. Currently CFIUS’ mandate is restricted to considering national security issues that may include national defense, technological leadership, critical infrastructure, foreign government influence and export controls compliance.
WHAT THIS MEANS:
  • Companies considering sensitive cross-border transactions involving US business should watch any proposed legislation closely.
  • The Trump Administration has not yet addressed these specific legislative ideas, but President Trump may be likely to support legislation that furthers his “Buy American, Hire American” theme.
  • Currently CFIUS can initiate review of a deal either by voluntary disclosure from the parties or on its own initiative, even post-closing. Thus, any legislation that broadens CFIUS’ mandate or that alters the voluntary nature of self-notifying, could add a significant regulatory burden to cross-border transactions.
  • CFIUS’ current investigative timeline of 30 days (initial review) plus 45 days (investigation if concerns exist) looks unlikely to change and will continue to provide some regulatory certainty for parties.



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