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• Federation of American Scientists

Summary

The Committee on Foreign Investment in the United States (CFIUS) is comprised of 12 members representing major departments and agencies within the federal Executive Branch. While the group generally operates in relative obscurity, the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed the group's operations under intense scrutiny by Members of Congress and the public. Prompted by this case, some Members are questioning the ability of Congress to exercise its oversight responsibilities given the general view that CFIUS's operations lack transparency. Other Members are revisiting concerns about the linkage between national security and the role of foreign investment in the U.S. economy. Some Members of Congress and others argue that the nation's security and economic concerns have changed since the September 11, 2001 terrorist attacks and that these concerns are not being reflected sufficiently in the Committee's deliberations. In addition, anecdotal evidence seems to indicate that the CFIUS process may not be market neutral, instead a CFIUS investigation of an investment transaction may be perceived by some firms and by some in the financial markets as a negative factor that adds to uncertainty and may spur firms to engage in behavior that is not optimal for the economy as a whole. Since some Members of Congress focused attention on the Dubai Ports World transaction, more than two dozen measures on foreign investment have been introduced. These measures reflect various levels of unease with the broad discretionary authority Congress has granted CFIUS. As a result, most measures would place new reporting requirements on CFIUS and strengthen Congress's ability to exercise oversight over CFIUS through the federal agencies that comprise the Committee. Such measures as H.R. 4813 and H.R. 4917 would place new reporting requirements on CFIUS to inform Congress when it initiates an investigation of a proposed acquisition, merger, or takeover. Other measures would seek to reduce CFIUS's discretion in deciding whether to investigate a foreign investment transaction. H.R. 4929 would limit CFIUS's discretion by mandating that an investigation must occur for any proposed or pending merger, acquisition, or takeover. H.R. 5337 would make substantial changes to CFIUS and to the ExonFlorio process. H.R. 5337 was approved unanimously, without amendment by the full House, on July 26, 2006. S. 1797 would increase requirements for reporting to Congress, and would require CFIUS to consider the long-term projections of the United States requirements for sources of energy and other critical resources and materials and for economic security. S. 2380 would add a new national security review to the CFIUS process and add the Secretary of Homeland Security and the Secretary of Defense as vice chairs of the Committee. S. 3549 would add to the list of factors CFIUS and the President would consider in taking action against an investment and it would provide for a system of assessing countries as a factor in review or investigating investments. The measure was passed, with amendments, by the full Senate on July 26, 2006. This report will be updated as events warrant.

Related Legislation:
• H.R.4813
• H.R.4917
• H.R.4929
• H.R.5337
• S.1797
• S.2380
• S.3549

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