Committee on Foreign Investment in the United States (CFIUS) (Title VII)
The Committee on Foreign Investment in the United States (CFIUS) has authority delegated from the President to conduct national security reviews of foreign acquisitions of U.S.-based firms under the Exon-Florio Amendment to the Defense Production Act. Under Exon-Florio, the President has the authority to suspend or block foreign mergers and acquisitions involving U.S.-based firms if they present credible threats to national security that cannot be prevented under other provisions of law. These national security threats include unauthorized disclosure of classified information, unauthorized transfer of export controlled technology, and the loss of reliable suppliers to defense-related Federal departments and agencies.
CFIUS Process
CFIUS is chaired by the Department of the Treasury with the Departments of Defense (DoD), State, Commerce, Homeland Security and Justice as members as well as several Executive Office agencies. Once CFIUS has been notified of a foreign acquisition, the Committee has 30 days to determine whether the transaction threatens national security and, if so, to negotiate risk mitigation measures with the acquiring firm that would reduce these risks to an acceptable level.
At the end of 30 days, CFIUS must either approve the transaction conditional on the foreign firm's acceptance of any risk mitigation measures CFIUS deems necessary, or initiate a further 45-day Presidential Investigation. At the end of such an Investigation, the President has 15 additional days to determine what action, if any, is necessary to protect national security. For transactions that involve U.S. firms with facility clearances, the development of risk mitigation measures is mandated by the DoD's own industrial security regulations as outlined in the National Industrial Security Program administered by the Defense Security Service.
Firms that are planning a CFIUS filing that involves sensitive and/or extensive defense contracts are encouraged to meet informally with staff of Manufacturing and Industrial Base Policy and other relevant DoD components prior to formal CFIUS notification so that DoD analysis of the transaction can begin before the start of the 30-day initial review clock. Some foreign firms planning to acquire U.S. firms with sensitive and/or extensive defense contracts have temporarily withdrawn their CFIUS petitions when 30-days notice without prior informal consultation with DoD was not sufficient time for CFIUS to analyze and resolve all national security issues.
Risk Factors to Consider
Among the factors that are considered in determining the risks of a transaction and the needed risk mitigation measures both during the initial review and any subsequent Investigation are:
- The level of classification of any contracts with DoD and its prime contractors
- Whether the firm being acquired possesses critical defense technology or is otherwise important to the defense industrial and technology base because of unique capabilities
- The record of the acquiring firm and its host country in complying with U.S. and international export licensing regulations, international agreements governing weapons of mass destruction and missile technology, and efforts to prevent international terrorism