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Committee on Foreign Investment in the United States (CFIUS)To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®. Guidance Concerning the National Security Review Conducted by CFIUS Summary of Guidance Concerning the National Security Review Conducted by CFIUS Final Regulations, Issued November 14, 2008 Summary of Amendment of Executive Order 11858 Paulson Statement on Release of Final CFIUS Regulations 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
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.
The remainder of this web page has not been updated. EXON-FLORIO PROVISION 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:
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:
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:
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:
Last Updated: December 3, 2008 |
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