The Proposed Treasury Plan to Grant Increased Authority to Foreign Investment Regulator
The Committee on Foreign Investment in the United States (CFIUS) could soon receive expanded powers to screen foreign investment in the country for national security risks. The federal government has proposed new rules that would strengthen the enforcement authority of CFIUS, which is an interagency panel led by the Treasury Department. The committee’s role is to review foreign investment in U.S. businesses and certain real estate sectors.
Under the proposed rules, CFIUS would be able to obtain more transaction information and issue subpoenas to third parties not directly involved in CFIUS-reviewed transactions. Additionally, the committee would have the authority to impose monetary penalties of up to $5 million for violations of CFIUS-related obligations, a significant increase from the current maximum fine of $250,000.
The Treasury Department’s Assistant Secretary for Investment Security, Paul Rose, stated that these proposed changes aim to “more effectively deter violations, promote compliance, and swiftly address national security risks in connection with CFIUS reviews.”
This development comes as CFIUS scrutinizes the planned $14 billion sale of U.S. Steel Corp to its Japanese competitor, Nippon Steel. President Joe Biden has expressed opposition to the takeover deal, stating that U.S. Steel must remain domestically owned and operated. The acquisition has drawn criticism from trade unions and lawmakers from both sides of the aisle. Japanese Prime Minister Fumio Kishida, on a state visit to Washington, expressed hopes that the process will unfold positively for both sides.
CFIUS has primarily focused on deals involving entities with ties to adversarial nations, particularly China. Concerns have been raised about the Chinese communist regime’s interest in American companies as a means of acquiring advanced technologies and know-how. In recent years, there have been calls to expand CFIUS’s authority to scrutinize foreign land purchases near sensitive military sites. The committee can advise the president to block or suspend deals that are deemed threats to national security.
Another high-profile case that CFIUS is currently reviewing is the national security implications of the popular social media platform TikTok. The committee has been investigating TikTok since at least 2020 and has warned of a U.S. ban if its parent company, China-based ByteDance, does not sell its shares in the app. Lawmakers in Congress are also pushing a bill that would legally require TikTok to divest from ByteDance. The legislation has already been passed by the House and awaits approval in the Senate. President Biden has indicated his willingness to sign it into law if it passes.
Treasury Secretary Janet Yellen, who chairs CFIUS, recently discussed the TikTok issue during her talks in China. She expressed support for the Biden administration’s efforts to address national security concerns related to sensitive personal data. Yellen acknowledged that many U.S. social apps are not allowed to operate in China and expressed a desire to find a way forward.
These proposed changes to CFIUS’s authority highlight the growing concerns about foreign investment and its potential impact on national security. As the United States continues to grapple with geopolitical challenges, it is crucial to have robust mechanisms in place to evaluate and mitigate potential risks associated with foreign investments. The increased enforcement authority of CFIUS could help safeguard critical industries and technologies while ensuring national security interests are protected.
