The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies in order to determine the effect of such transactions on the national security of the United States. Once a little-known committee, CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States, and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. In fact, in September 2017, President Trump took the rare step of actually blocking a transaction: the proposed acquisition of Lattice Semiconductor Corporation by Canyon Bridge Capital Partners LLC, a subsidiary of Chinese state-owned China Venture Capital Fund Corporation Limited. Such a move indicates that the parties were unable to allay the national security concerns of CFIUS’s agency members. It further highlights Trump’s “America First” outlook and the likelihood that CFIUS reviews will become more common and stringent under the Trump administration.
The recently released CFIUS 2015 Annual Report indicates the following trends:
- In 2015, 143 transactions were reviewed by CFIUS, continuing the upward trend in the number of notices filed with CFIUS from 65 in 2009 to 143 in 2015. Further, it is believed that filings increased again in 2016 and that 2017 may be a record year with more than 200 filings.
- In 2015, 42 percent of reviews were conducted for industries in the Manufacturing sector; 32 percent in the Finance, Information and Services Sector; 18 percent in the Mining, Utilities and Construction industries; and 8 percent in the Wholesale Trade, Retail Trade, and Transportation sectors.
- For the fourth consecutive year, China has led foreign countries in the number of CFIUS reviews, with 29 conducted in 2015. Over the three-year period from 2013 to 2015, Chinese foreign investment underwent 74 CFIUS reviews; the next closest country was Canada with 49 reviews, followed by the United Kingdom with 47 reviews.
- While the majority of reviews conclude with approval by CFIUS, in 2015 the parties to 11 transactions had to agree to and adopt mitigation measures to ensure that the parties remained in compliance with various agency requirements to remove any national security risks.
- The annual report must highlight any “perceived adverse effects” of transactions reviewed by CFIUS, and the 2015 report for the first time indicates there could be national security concerns regarding potential acquisitions of U.S. companies that hold “substantial pools of potentially sensitive data about U.S. persons and businesses that … could be in any number of sectors , including, the insurance sectors, health services, and technology services.”
While not stated in the report, the statistics on the length of time a transaction is under review reveal that in 2015 there was a significant increase in the length of time transactions remained active before CFIUS. By law, CFIUS must complete a review within 90 days, with several triggers that may require a more thorough investigation during that time. Historically, most transactions have concluded within the more informal 30-day review period; however, 2015 data indicate that nearly half of the year’s 143 transactions went into the more formal 45-day investigation period.