Committee on Foreign Investment in the United States
Encyclopedia
The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced "sifius") is an inter-agency committee of the United States Government that reviews the national security
implications of foreign investments in U.S. companies or operations. Chaired by the Secretary of the Treasury, CFIUS includes representatives from 16 U.S. departments and agencies, including the Defense
, State
and Commerce
departments, as well as (most recently) the Department of Homeland Security. CFIUS was established by Gerald Ford
's in 1975. The committee gained additional authority after Ronald Reagan
delegated Presidential oversight to CFIUS by his Executive Order 12661 in 1988. This was in response to U.S. Congress giving authority to the President to review foreign investments, in the form of Exon-Florio Amendment
.
CFIUS reviews begin with a 30-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment
. Most transactions submitted to CFIUS are approved without the statutory investigation.
CFIUS has looked at the "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran." CFIUS reviews even deals with firms from U.S. allies, such as BAE Systems
' early-2005 acquisition of United Defense
. This and the vast majority of transactions submitted to CFIUS are approved without difficulty. But at least one deal has been called off when CFIUS began to take a closer look.
, Secretary of Defense, Secretary of Commerce, the Assistant to the President for Economic Affairs, and the Executive Director of the Council on International Economic Policy. The Executive Order also stipulated that the Committee would have "primary continuing responsibility within the Executive Branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment." In particular, CFIUS was directed to:
In 1980, President Jimmy Carter
added the United States Trade Representative and substituted the Chairman of the Council of Economic Advisers
for the Executive Director of the Council on International Economic Policy by .
In 1988, the Exon–Florio Amendment was the result of national security concerns in Congress caused by the proposed purchase of Fairchild Semiconductor
by Fujitsu
. The Exon-Florio Amendment granted the President the authority to to block proposed mergers, acquisitions, and takeovers that threaten national security. In 1988, President Ronald Reagan
added the Attorney General
and the Director of the Office of Management and Budget by .
In 1992, the Byrd Amendment
required CFIUS to investigate proposed mergers, acquisitions, and takeovers where the acquirer is acting on behalf of a foreign government and effects national security. In 1993, President Bill Clinton
added the Director of the Office of Science and Technology Policy, the National Security Advisor
, and the Assistant to the President for Economic Policy by . In 2003, President George W. Bush
added the Secretary of Homeland Security by .
The Foreign Investment and National Security Act of 2007
(FINSA) established the Committee by statutory authority, reduced membership to 6 cabinet members and the Attorney General, added the Secretary of Labor and the Director of National Security, and removed 7 White House appointees. In 2008, President Bush added the United States Trade Representative and the Director of the Office of Science and Technology Policy by implementing the law. FINSA requires the President to conduct a national security investigation of certain proposed investment transactions, provides a broader oversight role for Congress, and keeps the President as the only officer with the authority to suspend or prohibit mergers, acquisitions, and takeovers.
gave more insight into CFIUS when he related to CBS News
his experience on the panel during the Reagan administration, "The committee almost never met, and when it deliberated it was usually at a fairly low bureaucratic level." He also added, "I think it's a bit of a joke if we were serious about scrutinizing foreign ownership and foreign control, particularly since 9/11."
Others emphasize the crucial role that foreign direct investment
plays in the U.S. economy, and the discouraging effect that heightened scrutiny may cause. Foreign investors in the United States, much like U.S. investors elsewhere, bring expertise and infusions of capital into often-struggling sectors of the U.S. economy. In a February 2006 interview with the New York Times, another former Reagan administration official, Clyde V. Prestowitz Jr.
, noted that the United States "need[s] a net inflow of capital of $3 billion a day to keep the economy afloat.... Yet all of the body language here is 'go away.'" And, as Secretary Powell once remarked, "money, capital, is a coward; it will go nowhere where it is put in fear."
National security
National security is the requirement to maintain the survival of the state through the use of economic, diplomacy, power projection and political power. The concept developed mostly in the United States of America after World War II...
implications of foreign investments in U.S. companies or operations. Chaired by the Secretary of the Treasury, CFIUS includes representatives from 16 U.S. departments and agencies, including the Defense
United States Department of Defense
The United States Department of Defense is the U.S...
, State
United States Department of State
The United States Department of State , is the United States federal executive department responsible for international relations of the United States, equivalent to the foreign ministries of other countries...
and Commerce
United States Department of Commerce
The United States Department of Commerce is the Cabinet department of the United States government concerned with promoting economic growth. It was originally created as the United States Department of Commerce and Labor on February 14, 1903...
departments, as well as (most recently) the Department of Homeland Security. CFIUS was established by Gerald Ford
Gerald Ford
Gerald Rudolph "Jerry" Ford, Jr. was the 38th President of the United States, serving from 1974 to 1977, and the 40th Vice President of the United States serving from 1973 to 1974...
's in 1975. The committee gained additional authority after Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
delegated Presidential oversight to CFIUS by his Executive Order 12661 in 1988. This was in response to U.S. Congress giving authority to the President to review foreign investments, in the form of Exon-Florio Amendment
Exon-Florio Amendment
The Exon–Florio Amendment is a law that was enacted by the United States Congress in 1988 to review foreign investment within the United States. The amendment was passed into law under the Omnibus Trade and Competitiveness Act of 1988 and amended Section 721 of Defense Production Act of 1950...
.
Process
Companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted.CFIUS reviews begin with a 30-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment
Divestment
In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm...
. Most transactions submitted to CFIUS are approved without the statutory investigation.
CFIUS has looked at the "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran." CFIUS reviews even deals with firms from U.S. allies, such as BAE Systems
BAE Systems
BAE Systems plc is a British multinational defence, security and aerospace company headquartered in London, United Kingdom, that has global interests, particularly in North America through its subsidiary BAE Systems Inc. BAE is among the world's largest military contractors; in 2009 it was the...
' early-2005 acquisition of United Defense
United Defense
United Defense Industries was a United States defense contractor which is now part of BAE Systems Land and Armaments. This company produces combat vehicles, artillery, naval guns, missile launchers and precision munitions.-History:...
. This and the vast majority of transactions submitted to CFIUS are approved without difficulty. But at least one deal has been called off when CFIUS began to take a closer look.
History
In 1975, President Ford created the Committee by . It was composed of the Secretaries of the Secretary of the Treasury as the chairman, Secretary of StateSecretary of State
Secretary of State or State Secretary is a commonly used title for a senior or mid-level post in governments around the world. The role varies between countries, and in some cases there are multiple Secretaries of State in the Government....
, Secretary of Defense, Secretary of Commerce, the Assistant to the President for Economic Affairs, and the Executive Director of the Council on International Economic Policy. The Executive Order also stipulated that the Committee would have "primary continuing responsibility within the Executive Branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment." In particular, CFIUS was directed to:
- arrange for the preparation of analyses of trends and significant developments in foreign investments in the United States;
- provide guidance on arrangements with foreign governments for advance consultations on prospective major foreign governmental investments in the United States;
- review investments in the United States which, in the judgment of the Committee, might have major implications for United States national interests; and
- consider proposals for new legislation or regulations relating to foreign investment as may appear necessary.
In 1980, President Jimmy Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...
added the United States Trade Representative and substituted the Chairman of the Council of Economic Advisers
Council of Economic Advisers
The Council of Economic Advisers is an agency within the Executive Office of the President that advises the President of the United States on economic policy...
for the Executive Director of the Council on International Economic Policy by .
In 1988, the Exon–Florio Amendment was the result of national security concerns in Congress caused by the proposed purchase of Fairchild Semiconductor
Fairchild Semiconductor
Fairchild Semiconductor International, Inc. is an American semiconductor company based in San Jose, California. Founded in 1957, it was a pioneer in transistor and integrated circuit manufacturing...
by Fujitsu
Fujitsu
is a Japanese multinational information technology equipment and services company headquartered in Tokyo, Japan. It is the world's third-largest IT services provider measured by revenues....
. The Exon-Florio Amendment granted the President the authority to to block proposed mergers, acquisitions, and takeovers that threaten national security. In 1988, President Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
added the Attorney General
United States Attorney General
The United States Attorney General is the head of the United States Department of Justice concerned with legal affairs and is the chief law enforcement officer of the United States government. The attorney general is considered to be the chief lawyer of the U.S. government...
and the Director of the Office of Management and Budget by .
In 1992, the Byrd Amendment
Byrd Amendment
The Byrd Amendment is also known as the Continued Dumping and Subsidy Offset Act of 2000 . The act is American legislation closely associated with its chief sponsor, Democratic Senator Robert Byrd of West Virginia. The act changed the disposition of funds raised from duties on imports that the US...
required CFIUS to investigate proposed mergers, acquisitions, and takeovers where the acquirer is acting on behalf of a foreign government and effects national security. In 1993, President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
added the Director of the Office of Science and Technology Policy, the National Security Advisor
National Security Advisor (United States)
The Assistant to the President for National Security Affairs, commonly referred to as the National Security Advisor , serves as the chief advisor to the President of the United States on national security issues...
, and the Assistant to the President for Economic Policy by . In 2003, President George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
added the Secretary of Homeland Security by .
The Foreign Investment and National Security Act of 2007
Foreign Investment and National Security Act of 2007
Foreign Investment and National Security Act of 2007 is an Act of the United States Congress.The Act addresses investments made by foreign entities in the United States...
(FINSA) established the Committee by statutory authority, reduced membership to 6 cabinet members and the Attorney General, added the Secretary of Labor and the Director of National Security, and removed 7 White House appointees. In 2008, President Bush added the United States Trade Representative and the Director of the Office of Science and Technology Policy by implementing the law. FINSA requires the President to conduct a national security investigation of certain proposed investment transactions, provides a broader oversight role for Congress, and keeps the President as the only officer with the authority to suspend or prohibit mergers, acquisitions, and takeovers.
Important cases
- The 2005 acquisition by Lenovo, the largest personal computer company in China, of IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
's personal computer and laptop unit - State-owned China National Offshore Oil CorporationChina National Offshore Oil CorporationChina National Offshore Oil Corporation is one of the three major national oil companies of China....
's attempted acquisition of UNOCAL (2005) - State-owned Dubai Ports WorldDubai Ports WorldDP World is a major operator of marine ports with 49 terminals in operation and a further 9 under development across 31 countries. In 2010, DP World handled nearly 50 million TEU across its portfolio from the Americas to Asia...
's planned acquisition of P&OPeninsular and Oriental Steam Navigation CompanyThe Peninsular and Oriental Steam Navigation Company, which is usually known as P&O, is a British shipping and logistics company which dated from the early 19th century. Following its sale in March 2006 to Dubai Ports World for £3.9 billion, it became a subsidiary of DP World; however, the P&O...
, the operator of many US ports, including New York (2006) - NTT Communications' acquisition of VerioVerioVerio is a global web hosting provider headquartered in the United States. Incorporated in 1996 in Denver, Colorado, it is currently a wholly owned subsidiary of Nippon Telegraph and Telephone Communications, who acquired the company in 2000...
(2000) - The 2005 acquisition of Sequoia Voting Systems of Oakland, California, by Smartmatic, a Dutch company contracted by Hugo ChávezHugo ChávezHugo Rafael Chávez Frías is the 56th and current President of Venezuela, having held that position since 1999. He was formerly the leader of the Fifth Republic Movement political party from its foundation in 1997 until 2007, when he became the leader of the United Socialist Party of Venezuela...
's government to replace that country's elections machinery
Notifications and Investigations
CFIUS Notifications and Investigations, 1988-2010| Year | Notifications | Investigations | Notices withdrawn | Presidential decision |
|---|---|---|---|---|
| 1988 | 14 | 1 | 0 | 1 |
| 1989 | 204 | 5 | 2 | 3 |
| 1990 | 295 | 6 | 2 | 4 |
| 1991 | 152 | 1 | 0 | 1 |
| 1992 | 106 | 2 | 1 | 1 |
| 1993 | 82 | 0 | 0 | 0 |
| 1994 | 69 | 0 | 0 | 0 |
| 1995 | 81 | 0 | 0 | 0 |
| 1996 | 55 | 0 | 0 | 0 |
| 1997 | 62 | 0 | 0 | 0 |
| 1998 | 65 | 2 | 2 | 0 |
| 1999 | 79 | 0 | 0 | 0 |
| 2000 | 72 | 1 | 0 | 1 |
| 2001 | 55 | 1 | 1 | 0 |
| 2002 | 43 | 0 | 0 | 0 |
| 2003 | 41 | 2 | 1 | 1 |
| 2004 | 53 | 2 | 2 | 0 |
| 2005 | 65 | 2 | 2 | 0 |
| 2006 | 111 | 7 | 19 | 2 |
| 2007 | 138 | 6 | 15 | 0 |
| 2008 | 155 | 23 | 23 | 0 |
| 2009 | 65 | 25 | 7 | 0 |
| 2010 | 93 | 35 | 12 | 0 |
| Total | 2,155 | 121 | 89 | 14 |
Opinions on the Committee
In February 2006, Richard PerleRichard Perle
Richard Norman Perle is an American political advisor, consultant, and lobbyist who began his career in government, a senior staff member to Senator Henry “Scoop” Jackson on the Senate Armed Services Committee in the 1970’s...
gave more insight into CFIUS when he related to CBS News
CBS News
CBS News is the news division of American television and radio network CBS. The current chairman is Jeff Fager who is also the executive producer of 60 Minutes, while the current president of CBS News is David Rhodes. CBS News' flagship program is the CBS Evening News, hosted by the network's main...
his experience on the panel during the Reagan administration, "The committee almost never met, and when it deliberated it was usually at a fairly low bureaucratic level." He also added, "I think it's a bit of a joke if we were serious about scrutinizing foreign ownership and foreign control, particularly since 9/11."
Others emphasize the crucial role that foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
plays in the U.S. economy, and the discouraging effect that heightened scrutiny may cause. Foreign investors in the United States, much like U.S. investors elsewhere, bring expertise and infusions of capital into often-struggling sectors of the U.S. economy. In a February 2006 interview with the New York Times, another former Reagan administration official, Clyde V. Prestowitz Jr.
Clyde V. Prestowitz Jr.
Clyde Prestowitz, founder and President of the Economic Strategy Institute, served as counselor to the Secretary of Commerce in the Reagan Administration...
, noted that the United States "need[s] a net inflow of capital of $3 billion a day to keep the economy afloat.... Yet all of the body language here is 'go away.'" And, as Secretary Powell once remarked, "money, capital, is a coward; it will go nowhere where it is put in fear."