CFIUS: BACKGROUND & PROCESS
The Committee on Foreign Investment in the United States (CFIUS) conducts national security reviews of foreign investments in U.S. companies and properties. In so doing, CFIUS balances sometimes conflicting public policies of encouraging foreign investment in the United States and safeguarding U.S. national security. CFIUS can exercise jurisdiction over a broad range of transactions and effectively can block transactions or even force divestment after a transaction has closed. Under legislation enacted in August 2018, penalties for failure to make a CFIUS filing for certain types of transactions can be imposed.
CFIUS was established by executive order in 1975 to monitor the effect of foreign investment in the United States. For more than a decade, CFIUS had no enforcement capabilities. In 1988, in response to rising concerns over the effects of foreign direct investment on U.S. national security, Congress amended the Defense Production Act of 1950. This "Exon-Florio Amendment" authorized the President to examine and block transactions resulting in foreign "control" (subsequently broadly defined) of any U.S. business when such a transaction could threaten national security. The President then delegated to CFIUS the task of reviewing such transactions.
In 2007, the Foreign Investment and National Security Act (FINSA) conferred authority directly on CFIUS, codified CFIUS processes, and regularized congressional oversight regarding these processes.
On August 13, 2018, President Trump signed the Foreign Investment Risk Review Modernization Act (FIRRMA). FIRRMA significantly expands CFIUS' jurisdiction to include an array of non-controlling investments and property transactions, makes CFIUS filings obligatory for certain types of transactions, and infuses CFIUS with greater resources. Many provisions of FIRRMA require implementing regulations, and promulgating these regulations may take months or more.
On October 10, 2018, the Department of the Treasury issued two new sets of regulations as the first stage in the implementation of FIRRMA. The first set of rules include a series of amendments to the existing CFIUS regulations generally intended to conform the existing regulations with certain aspects of FIRRMA. The second set of rules establishes a so-called "pilot program" that expands CFIUS jurisdiction to many non-controlling investments, and then makes the filing of those investments, as well as many controlling investments, mandatory.
Please check this page for updates as the new CFIUS rules develop.