In recent years the President has vetted foreign direct investments in the U.S. for national security threats under the authority of Section 721 of the Defense Production Act of 1950 (Exon-Florio statute), and through the mechanism of the inter-agency Committee on Foreign Investment in the U.S. (CFIUS). The CFIUS has been chaired by the Treasury; here is a Treasury web site describing the process as it was: Committee on Foreign Investment in the United States (CFIUS).
However, the Foreign Investment and National Security Act of 2007 (FINSA) became effective on October 24, 2007 and amended the requirements in section 721. This Federal Register notice from the Treasury gives a summary of the law's provisions: Regulations Pertaining to Mergers, Acquisitions and Takeovers (October 11, 2007).
There are still several things that need to be done to follow-up on the legislation: revision of the executive order setting up CFIUS, rulemaking, and publication of guidance:
Executive order |
CFIUS was structured through Presidential executive orders. Congress took it over in FINSA and revamped it. The executive order is now out of date and I assume it's provisions need to be revised. Apparently there has been debate within the administration over how to do it. Documents were evidently leaked to Bill Gertz of the Washington Times who wrote articles describing alleged complaints by security agencies that the new order gives them less influence over the process than they should have (Debate over how to implement the CFIUS reforms; Administration debates best rules for FDI security reviews ) |
Rulemaking |
FINSA requires the Treasury to publish implementing regulations after submitting them to public comment. These regulations have not been published yet. Existing regulations on the vetting process are at 50 CFR 800 ( regulations). On October 23, the Treasury held a public meeting on to get ideas on how the new regulations should be structured under FINSA. Here is the Federal Register notice about the meeting, and here here are the written materials that were submitted. In its notice announcing the meeting, the Treasury said it was interested in business input on several topics: (i) Procedural issues relating to the review process, including pre-filing, filing of voluntary notice, unilateral initiation of review by CFIUS, withdrawal of notice, refiling of notice, and notice to filers of the results of a review or investigation; (ii) Definitional issues, including the definitions of "control," "foreign person," "person engaged in interstate commerce in the United States," "critical infrastructure," and "critical technologies": (iii) Mitigation agreements, including determinations of the need for risk mitigation, scope of provisions, compliance monitoring, modification, and enforcement, including civil penalties and other remedies for breach; (iv) Confidentiality issues; (v) Collection of information from filers, including personal identifier information and information to aid CFIUS in determining jurisdiction and whether the transaction raises national security considerations; and (vi) Emerging trends in international investment and their relevance to the CFIUS process, including legal structures for effecting acquisitions of U.S, businesses. This public meeting would not have been a substitute for the publication of a proposed rule for public comment. |
Guidance |
FINSA also requires the publication of guidance on the types of transactions that CFIUS has reviewed and that have presented national security considerations. The Treasury plans to do this separately from the regulations. |
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