Committee on Foreign Investment in the United States


Since the 1980’s there has been a significant increase in the consolidation of defense industry, both in the United States and abroad resulting in considerable foreign investment. It is the policy of the United States to encourage foreign investment. It often can create or preserve jobs, improve productivity, help maintain U.S. competiveness, open foreign markets to American products and services and at times provide access to new technology.

CFIUS is the Committee on Foreign Investment in the United States. It 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 which 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 is chaired by the Department of the Treasury with the Departments of Defense, 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 (NISP) administered by the Defense Security Service.

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.
While notifying CFIUS of a foreign acquisition is voluntary, the Committee has the right to initiate its own review of a foreign acquisition that raises defense-related issues.

So far only approximately 25 CFIUS cases out of a total exceeding 1,570 filed cases have required a Presidential Investigation primarily because the risk mitigation measures governed by the DoD's industrial security regulations have been extensive enough to reduce national security risks to acceptable levels.

In the Army, ASA(ALT) is Army lead for CFIUS. ASA(ALT) provides a consolidated Army response on Army position. HQDA, G-2 Research and Technology Protection – Counterintelligence coordinates with Commands, Programs and ARSTAFF on threat and security implications.

Relationship of CFIUS and FOCI  

The CFIUS review process and FOCI policy start out on two separate, but often parallel, tracks. Their purposes are different. The scope of the CFIUS process is broad, ranging from the protection of domestic production needed for national defense and U.S. technology to prohibited sales to countries that support terrorism. CFIUS concern both classified and sensitive unclassified information. The scope of the FOCI process is limited to protect classified information in the hands of U.S. cleared companies that are under FOCI. To mitigate the FOCI concern, a number of security instruments are available to mitigate the FOCI and any other risks . Reporting under CFIUS is voluntary, whereas FOCI reporting is mandatory for U.S. cleared companies. By law the CFIUS process must be completed within 90 days and cases can be reviewed or investigated only once. In contrast, there is no time limit imposed on FOCI adjudication and such cases can be reopened as necessary.

U.S. Government officials that are involved in the CFIUS process realize that the security requirements imposed under FOCI mitigation can be used to reduce concerns over some of the CFIUS factors when the merger, acquisition, or take-over transaction involves an entity that possess classified information. Therefore, there is a trend toward coordination of the CFIUS and FOCI processes in situations involving cleared companies.



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