Just the Facts

Five Facts on the Bipartisan Bill Designed to Monitor Foreign Investment in the U.S.

By No Labels
August 17, 2018 | Blog

On Monday, President Trump signed into law a bipartisan bill designed to modernize and strengthen the Committee on Foreign Investment in the United States (CFIUS), a government body that works to ensure that foreign investment in U.S. companies is not detrimental to American interests.  This bill represents an important bipartisan victory in both the House and the Senate that its authors hope will serve to protect American interests for years to come.  Here are five facts on the bipartisan bill designed to monitor foreign investment in the United States.

The Committee on Foreign Investment in the United States is an interagency committee that reviews foreign direct investments in American companies to ensure that they do not pose a risk to national security

Led by U.S. Treasury Secretary Steven Mnuchin, the committee consists of members of the Defense, Commerce, Justice, State, Homeland Security, and Energy Departments. CFIUS often investigates the mergers of various companies to ensure that they do not result in a foreign power controlling an American business in a way that would harm American interests. This committee has the authority to review all deals, regardless of whether a party to the merger has submitted the deal to be reviewed. Although it reviews transactions across a wide variety of industries, involving companies from several countries, CFIUS most frequently reviews deals involving Chinese companies, as China is America’s greatest economic competitor.

In 1975 President Gerald R. Ford signed an executive order creating CFIUS to study the implications of foreign investment in American companies

The powers of the committee were subsequently expanded during the Reagan administration when Fujitsu, a Japanese technology company, attempted to buy Fairchild Semiconductor, an American chip-making company based in Silicon Valley.  At the time, the American government was concerned that Japanese companies were too influential in the global technology marketplace and Fujitsu’s interest in the acquisition prompted Congress to pass the Exon-Florio Amendment of 1988, which allowed CFIUS to actually review and, if necessary, stop mergers that threatened to harm American interests. This amendment also granted the president the authority to stop a transaction if there were “credible evidence” that a “foreign interest exercising control might take action that threatens to impair the national security.”

Lawmakers recently re-focused their attention on CFIUS in October 2016 due to historically high Chinese investments in U.S. companie

Sen. John Cornyn (R-TX) first started speaking with Treasury Department officials in the fall of 2016 as Chinese investment in U.S. companies was growing at a significant rate — by the year’s end it had reached a record $46 billion.  While Cornyn’s initial idea received bipartisan support, there was concern from some Republicans that Democrats would ask for the bill to go beyond regulating deals based on national security and to include issues such as economic competitiveness, a bridge too far for many Republicans.  In addition, the bill faced stiff opposition from businesses such as IBM and General Electric, which argued that the proposed legislation was overly broad and instituted too many regulations.  However, despite these initial concerns, lawmakers from across the political spectrum were able to unite behind a compromise version of the bill that satisfied many of these initial concerns.

In November of 2017, Sens. John Cornyn (R-TX) and Dianne Feinstein (D-CA) introduced a bill that would greatly expand CFIUS’s jurisdiction

Rep. Robert Pittenger (R-NC) proposed a similar bill in the House. Both bills included measures that increased the number of deals CFIUS reviews to include sales of minority stakes, joint ventures, and real estate deals near sensitive facilities such as military bases. Sen. Cornyn said that “By exploiting gaps in the existing CFIUS review process, potential adversaries, such as China, have been effectively degrading our country’s military technological edge by acquiring, and otherwise investing in U.S. companies.” These reforms provide significant improvements to the U.S. investment screening process and allocate increased funds to implement these changes.

The final version of the bill, known as The Foreign Investment Risk Review Modernization Act (FIRRMA), was passed by both the House and the Senate in an overwhelming bipartisan majority on August 1

On July 23 the House and the Senate reconciled their versions of the bill. The bill was incorporated into the National Defense Authorization Act (NDAA) for the 2019 Fiscal Year on July 26. The House passed the bill by a vote of 400-2 later that day. It was then passed in the Senate by a vote of 85-10 on August 1. On Monday, President Trump signed FIRRMA into law.

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