Committee on Foreign Investment in the United States (CFIUS)
Federal Register Notice of Proposed Regulations, April 21, 2008
Comments Submitted on FINSA Proposed Regulations
Federal Register Notice on Public Meeting, October 11, 2007
Comments Submitted on FINSA Regulations in Response to October 11 Notice of Inquiry
SECTION 721 OF THE DEFENSE PRODUCTION ACT OF 1950
NOTICE (October 2007):
On October 24, 2007, the Foreign Investment and National Security Act of 2007 (FINSA), Pub. L. 110-49, became effective, amending section 721 of the Defense Production Act of 1950 (DPA). Treasury’s Office of Investment Security will soon update this web page to reflect changes effectuated by FINSA and to reflect improvements to CFIUS procedures that have been implemented since this web page was last revised. In the interim, the Office of Investment Security offers the following to help filers fulfill new certification obligations in effect as of October 24, 2007.
Certifications: Pursuant to new section 721(n) of the DPA, any notice or information submitted to CFIUS must be accompanied by a certification of compliance, accuracy and completeness. A sample certification follows, but parties should refer to section 721(n) for the requirements of this certification.
Pursuant to subsection (n) of Section 721 of the Defense Production Act of 1950, I hereby certify that I am [the Chief Executive Officer] or [the duly authorized designee] of the person(s) submitting the foregoing [Notice] or [information], and that, to the best of my knowledge and belief:
1. The foregoing [Notice] or [information] fully complies with the requirements of Section 721 of the Defense Production Act, 31 C.F.R. Part 800, and any agreement or condition entered into with the Committee on Foreign Investment in the United States or any agency acting on its behalf; and
2. The foregoing [Notice] or [information] is accurate and complete in all material respects.
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Introduction. The United States has traditionally
welcomed Foreign Direct Investment (FDI) and provided foreign investors
fair, equitable and nondiscriminatory treatment with few limited
exceptions designed to protect national security. The Exon-Florio
provision is implemented within the context of this open investment
policy. The intent of Exon-Florio is not to discourage FDI generally,
but to provide a mechanism to review and, if the President finds
necessary, to restrict FDI that threatens the national security.
The Exon-Florio provision is implemented by the Committee
on Foreign Investment in the United States ("CFIUS"), an inter-agency
committee chaired by the Secretary of Treasury. CFIUS seeks to serve
U.S. investment policy through thorough reviews that protect national
security while maintaining the credibility of our open investment
policy and preserving the confidence of foreign investors here and
of U.S. investors abroad that they will not be subject to retaliatory
discrimination.
The Statute. Section 5021 of the Omnibus Trade
and Competitiveness Act of 1988 amended Section 721 of the Defense
Production Act of 1950 to provide authority to the President to
suspend or prohibit any foreign acquisition, merger or takeover
of a U.S. corporation that is determined to threaten the national
security of the United States. The President can exercise this authority
under section 721 (also known as the "Exon-Florio provision") to
block a foreign acquisition of a U.S. corporation only if he finds:
(1) there is credible evidence that the foreign
entity exercising control might take action that threatens national
security, and
(2) the provisions of law, other than the International
Emergency Economic Powers Act do not provide adequate and appropriate
authority to protect the national security.
To assist in making this determination, Exon-Florio
provides for the President or his designee to receive written notice
of an acquisition, merger or takeover of a U.S. corporation by a
foreign entity. Once CFIUS has received a complete notification,
it begins a thorough review of the notified transaction. In some
cases, it is necessary to undertake an extended review or "investigation."
An investigation, if necessary, must begin no later than 30 days
after receipt of a notice. Any investigation is required to end
within 45 days.
Information provided by companies contemplating a
transaction subject to Exon-Florio is held confidential and is not
made public, except in the case of an administrative or judicial
action or proceeding. Nothing in section 721 shall be construed
to prevent disclosure to either House of Congress or to any duly
authorized committee or subcommittee of the Congress.
Factors To Be Considered. The Exon-Florio provision
lists the following factors that the President or his designee may
consider in determining the effects of a foreign acquisition on
national security. These factors are:
(1) domestic production needed for projected national
defense requirements;
(2) the capability and capacity of domestic industries
to meet national defense requirements, including the availability
of human resources, products, technology, materials, and other
supplies and services;
(3) the control of domestic industries and commercial
activity by foreign citizens as it affects the capability and
capacity of the U.S. to meet the requirements of national security;
(4) the potential effects of the transaction on
the sales of military goods, equipment, or technology to a country
that supports terrorism or proliferates missile technology or
chemical and biological weapons; and
(5) the potential effects of the transaction on
U.S. technological leadership in areas affecting U.S. national
security.
Amendments. Section 837(a) of the National
Defense Authorization Act for Fiscal Year 1993, called the "Byrd
Amendment," amended Section 721 of the Defense Production Act (the
"Exon-Florio provision"). It requires an investigation in cases
where:
o the acquirer is controlled by or acting on behalf
of a foreign government; and
o the acquisition "could result in control of a
person engaged in interstate commerce in the U.S. that could affect
the national security of the U.S."
Legislative Cite. Section 721 of Pub. L. 100-418,
102 Stat. 1107, made permanent law by section 8 of Pub. L. 102-99,
105 Stat. 487 (50 U.S.C. App. 2170) and amended by section 837 of
the National Defense Authorization Act for Fiscal Year 1993, Pub.
L. 102-484, 106 Stat. 2315, 2463.
CFIUS
Executive Order. The Committee on Foreign Investment
in the United States ("CFIUS") was originally established by Executive
Order 11858 in 1975 mainly to monitor and evaluate the impact of
foreign investment in the United States. In 1988, the President,
pursuant to Executive Order 12661, delegated to CFIUS his responsibilities
under Section 721. Specifically, E.O. 12661 designated CFIUS to
receive notices of foreign acquisitions of U.S. companies, to determine
whether a particular acquisition has national security issues sufficient
to warrant an investigation and to undertake an investigation, if
necessary, under the Exon-Florio provision. This order also provides
for CFIUS to submit a report and recommendation to the President
at the conclusion of an investigation.
In 1993, in response to a sense of Congress resolution,
CFIUS membership was expanded by Executive Order 12860 to include
the Director of the Office of Science and Technology Policy, the
Assistant to the President for National Security Affairs and the
Assistant to the President for Economic Policy. In February 2003,
the Department of Homeland Security was added to CFIUS. This brought
the membership of CFIUS to twelve under the chairmanship of the
Secretary of Treasury. The other members are the Secretaries of
State, Defense, and Commerce, the Attorney General, the Director
of the Office of Management and Budget, the U.S. Trade Representative,
and the Chairman of the Council of Economic Advisers.
Regulations. The Exon-Florio provision requested
that the President issue implementing regulations. These regulations
were issued in 1991. They set up a voluntary system of notification
with the possibility of CFIUS member-agency notice for non-notified
transactions. The President retains full authority to protect the
national security with respect to any acquisition covered by this
statute, regardless of whether the parties file a notification.
The Exon-Florio regulations do not define national
security. The preamble to the regulations provides guidance that
products, services and technologies important to U.S. defense requirements
would be significant to national security. Even though notification
is voluntary, CFIUS would consider notification of these transactions
appropriate.
Code of Federal Regulations Citation. Office
of International Investment, Department of Treasury -- Regulations
pertaining to mergers, acquisitions, and takeovers by foreign persons,
31 CFR Part 800.
Procedures. Treasury, acting at the staff level
through the Director of the Office of International Investment in
the Office of the Assistant Secretary of International Affairs,
acts as the secretariat for CFIUS. It receives and circulates notices
to CFIUS agencies and coordinates reviews. Reviews are conducted
on a case-by-case basis.
The Exon-Florio statute established a 30-day review
following receipt of a notification. For those transactions for
which an extended 45-day review (or "investigation") is completed,
a report must be provided to the President, who must by law announce
the final decision within 15 days. In total, the process can not
exceed 90 days. The statute requires the President to inform Congress
of his determination of whether or not to take action under section
721.
The parties to an acquisition subject to section 721
may submit a voluntary notice to CFIUS of the proposed or completed
acquisition by sending 13 copies of the information requested in
part 800.402 of the Exon-Florio regulations to:
Mr. Mark M. Jaskowiak
Staff Chair
Committee on Foreign Investment in the United States ("CFIUS")
Office of Investment Security
Department of Treasury
1500 Pennsylvania Avenue, N.W., Room 5221
Washington, DC 20220
Phone: (202) 622-5052
Also: (202) 622-1860
E-Mail: mark.jaskowiak@do.treas.gov
Last Updated:
August 29, 2008
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