Exon-Florio Foreign Investment Provision: Comparison of H.R. 556 and S. 1610

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

During the First Session of the 110^th Congress, several Members of Congress have introduced
measures in the House and the Senate to address various concerns with foreign investment,
especially the proposed purchase of the British-owned P&O Ports by Dubai Ports World in early
2006. Congresswoman Maloney introduced H.R. 556, the National Security Foreign Investment
Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The measure was
approved by the House Financial Services Committee on February 13, 2007 with amendments,
and was approved with amendments by the full House on February 28, 2007 by a vote of 423 to
0. On June 13, 2007, Senator Dodd introduced S. 1610, the Foreign Investment and National
Security Act of 2007. On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by
unanimous consent. On July 11, 2007, the House accepted the Senate’s version of H.R. 556 by a
vote of 370-45 and sent the measure to the President, who signed it on July 26, 2007. It is
designated as P.L. 110-49.
Both the House bill and the Senate bill attempt to address six perceived problems with the current ^th
statutes that many Members identified during the 109 Congress: 1) that the principal members of
the interagency Committee on Foreign Investment in the United States (CFIUS) at times seem not
to be well informed of the outcomes of reviews and investigations regarding proposed or pending
investment transactions; 2) that CFIUS has interpreted incorrectly the requirements under current
statutes for investigations of transactions that involve firms that are owned or controlled by a
foreign government; 3) that reporting requirements under current statutes do not provide
Congress with enough information about the operations and actions of CFIUS for Members to
fulfill their oversight responsibilities; 4) that CFIUS exercises too much discretion in its ability to
choose which transactions it investigates; 5) that the definition of national security used by ^th
CFIUS is no longer adequate in a post-September 11 world; and 6) that deadlines placed on
CFIUS to complete reviews and investigations of investment transactions do not provide adequate
time in some instances for the Committee to complete its reviews and investigations.
This report provides background information on the Committee on Foreign Investment in the
United States and on the Exon-Florio provision. In addition, the report provides an overview of
H.R. 556 and S. 1610 and a side-by-side comparison of the two measures. This report will be
updated as warranted by events.

Overvi ew ....................................................................................................................... .................. 1
The Committee on Foreign Investment in the United States (CFIUS).....................................2
The Exon-Florio Provision........................................................................................................2
The “Byrd Amendment”...........................................................................................................4
Exon-Florio Provision After September 11, 2001.....................................................................7
Overview of H.R. 556 and S. 1610.................................................................................................9
Side-by-Side Comparison of H.R. 556 and S. 1610.......................................................................11
CFIUS National Security Investigations..................................................................................11
Composition of CFIUS...........................................................................................................20
Presidential Actions.................................................................................................................23
Findings ....................................................................................................................... ............ 24
Factors Used in Findings.........................................................................................................24
Confidenti al it y......................................................................................................................... 27
Mitigation and Tracking..........................................................................................................27
Congressional Oversight.........................................................................................................30
Conclusions ................................................................................................................................... 36
Author Contact Information..........................................................................................................38

During the 109^th Congress, numerous Members of Congress introduced over two dozen measures
to address various concerns with foreign investment that arose from the proposed purchase of the ¹²³
British-owned P&O Ports by Dubai Ports World in early 2006. In particular, the transaction
spurred some Members to question the effectiveness of the relatively obscure interagency group,
the Committee on Foreign Investment in the United States (CFIUS). The group has been charged
with developing and implementing the Administration’s policy on foreign investment and with
conducting national security reviews under the Exon-Florio provision of the Defense Production
Act (50 U.S.C. Sec. 2170). Of the measures that were introduced, H.R. 5337 and S. 3549 from the
House and Senate, respectively, garnered significant support and passed their respective bodies on ^th
July 26, 2006. The 109 Congress ended before a Conference Committee was convened on H.R. ^th
5337 or S. 3549 and both measures lapsed. In the 110 Congress, Congresswoman Maloney
introduced H.R. 556 (H.Rept. 110-24), the National Security Foreign Investment Reform and
Strengthened Transparency Act of 2007, which was adopted by the full House on February 28,
2007. On June 13, 2007, Senator Dodd introduced S. 1610 (S.Rept. 110-80), the Foreign
Investment and National Security Act of 2007. On June 29, 2007, the Senate substituted S. 1610
for H.R. 556 and adopted the revised measure by unanimous consent. On July 11, 2007, the
House accepted the Senate’s version of H.R. 556 by a vote of 370-45 and sent the measure to the
President, who signed it on July 26, 2007. It is designated as P.L. 110-49.
H.R. 556 and S. 1610 represent efforts to correct perceived problems with the current process that
arose during consideration of the Dubai Ports World transaction. In particular, many Members
generally expressed concerns about six areas. First, some Members were concerned that the
principal members of CFIUS at times seem not to be well informed of the outcomes of reviews
and investigations made by CFIUS regarding proposed or pending investment transactions,
because the duty for reviewing such transactions has been delegated in most agencies to lower-
level personnel. Second, some Members argued that CFIUS was interpreting incorrectly the
requirements under current statutes for investigations of transactions that involve firms that are
owned or controlled by a foreign government. Third, some Members argued that the current
statutes do not provide Congress with enough information about the operations and actions of
CFIUS for them to fulfill their oversight responsibilities. Fourth, some Members argued that
CFIUS exercises too much discretion in its ability to choose which transactions it investigates and
that it needs to be held more accountable to Congress for its decisions regarding reviews and
investigations of investment transactions. Fifth, some Members questioned the definition of
national security used by the Committee as being too narrowly interpreted and out of sync with ^th
the post September 11 view of national security. Last, some Members expressed their concerns
that the time constraints placed on CFIUS to complete reviews and investigations of investment

¹^P^e^nins^ula^r^aⁿ^{d O}^r^ie^nta^l^Ste^a^m^C^o^m^p^aⁿ^y^is^a^le^a^d^ing^por^ts^ope^r^a^t^o^r^a^{nd tr}^aⁿ^s^por^{t c}^o^m^p^aⁿ^y^w^{ith ope}^r^a^tionsⁱⁿ^por^ts^,
^f^e^r^rⁱ^es^{, a}^{nd pr}^ope^r^t^y^de^v^e^lopm^eⁿ^{t. I}^t^o^p^e^r^a^t^e^s^c^ontaⁱ^ne^r^te^r^m^ina^l^s^{and l}^o^gⁱ^s^tic^s^ope^r^a^ti^onsⁱⁿ^ov^e^r¹⁰^{0 p}^o^r^t^s^aⁿ^{d ha}^s^a
^p^r^esen^{ce i}ⁿ¹⁸^couⁿ^t^rⁱ^es.
²^D^ubaⁱ^Por^t^s^W^o^r^l^{d w}^a^s^c^r^e^a^t^e^d^{in N}^o^v^e^m^b^e^r²⁰⁰⁵^by^inte^g^r^a^ting^D^ubaⁱ^Por^t^s^A^u^thor^ity^a^{nd D}^ubaⁱ^Por^t^s
^Inte^rna^tio^na^{l. It}^{is o}ⁿ^e^of^the^la^rg^e^s^{t c}^o^m^m^e^rc^ia^{l port o}^p^e^r^a^t^{ors i}ⁿ^t^h^e^w^o^{rld w}^{ith ope}^ra^tio^{ns i}ⁿ^the^Mi^ddle^Ea^{st, I}ⁿ^dⁱ^a^,
^E^u^rop^e^,^A^sⁱ^a^,^L^a^tⁱⁿ^Ameri^ca,^t^h^{e Carri}^b^ean^,^an^{d No}^rt^h^Am^eri^ca.
³^For^a^dditi^ona^l^inf^o^r^m^a^{tion, s}^e^e^C^R^S^R^e^por^t^R^L³³⁶¹⁴^,^Ex^oⁿ^-^F^l^o^rⁱ^{o For}^eⁱ^{gn I}ⁿ^v^e^s^tm^eⁿ^{t Pr}^ov^isⁱ^on:^C^o^m^par^is^on^of
^H.^R^.⁵³³⁷^an^{d S}^.³⁵⁴⁹^,^by^J^a^m^e^s^K^.^J^a^c^k^s^{on; a}^{nd C}^R^S^R^e^por^{t R}^L³³³⁸^8,^T^h^{e C}^o^mmi^t^t^{ee on}^F^o^rei^gⁿ^In^vest^m^en^tⁱⁿ^t^h^e
^Uⁿ^ite^{d State}^s⁽^C^FI^U^S⁾^,^b^y^Ja^mes^K.^Jacksoⁿ^.

transactions does not provide adequate time in some instances for the Committee to complete its
reviews and investigations.
The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee
that serves the President in overseeing the national security implications of foreign investment in
the economy. CFIUS was established by an Executive Order of President Ford in 1975 with broad ⁴
responsibilities and few specific powers. P.L. 110-49 established the Committee as a matter of
statute, rather than as a creation of various Executive Orders. The Committee is housed in the
Department of the Treasury and until recently generally has operated in relative obscurity.
Initially, CFIUS was established with six members, but the membership was expanded to twelve
through various Executive Orders. Under P.L. 110-49, the Committee membership was reduced to
seven members, including the Secretaries of State, the Treasury, Defense, Homeland Security, and
Commerce; Energy; and the Attorney General. The Secretary of Labor and the Director of
National Intelligence serve as ex officio members of the Committee. The President can appoint
temporary members as he determines. Prior to passage of P.L. 110-49, seven other individuals
were permanent members of CFIUS: the United States Trade Representative; the Chairman of the
Council of Economic Advisers; the Attorney General; the Director of the Office of Management
and Budget; the Director of the Office of Science and Technology Policy; the Assistant to the ⁵
President for National Security Affairs; and the Assistant to the President for Economic Policy.
The Exon-Florio provision (Section 2170 of the 1988 Defense Production Act), as amended by
P.L. 110-49, grants the President broad discretionary authority to take what action he considers to
be “appropriate” to suspend or prohibit proposed or pending foreign acquisitions, mergers, or
takeovers “of persons engaged in interstate commerce in the United States” which “threaten to
impair the national security.” The statute indicates that the President must make an investigation
to determine the effects on national security of such investments. Most importantly, however,
Congress directed that the President can exercise this discretionary authority “only if” he
determines that two conditions exist: 1) other U.S. laws are inadequate or inappropriate to protect
the national security; and 2) that he must have “credible evidence” that the foreign investment
will impair the national security. For the purposes of this legislation, Congress purposely did not

⁴^Ex^e^c^u^tiv^e^O^r^de^r¹¹⁸⁵⁸⁽^b⁾^,^Ma^y^{7, 1}⁹⁷⁵^,⁴⁰^F.R^.²⁰²^63.
⁵^Ex^e^c^u^tiv^e^O^r^de^r¹¹⁸⁵⁸^of^Ma^y^{7, 19}⁷⁵^{, 4}⁰^F.R^.²⁰²⁶^{3 e}^s^ta^blis^he^d^the^C^o^m^m^itte^e^w^{ith s}ⁱ^x^m^e^m^b^e^r^{s: the}^Se^c^r^e^t^a^r^ie^s
^o^f^S^t^at^e,^t^h^{e T}^r^easu^r^y^,^De^f^eⁿ^s^e,^Co^mm^er^ce,^an^d^t^h^{e A}^ssi^st^an^t^t^o^t^h^e^P^r^esi^d^en^t^f^o^{r E}^c^oⁿ^o^mⁱ^c^Aff^aⁱ^r^s,^an^d^t^h^{e E}^x^ecu^tⁱ^v^e
^Dⁱ^r^e^c^t^or^of^the^C^o^unc^il^on^Iⁿ^te^rⁿ^a^tiona^l^Ec^on^om^ic^P^o^lic^y^.^Ex^ec^utiv^e^O^r^de^r¹²¹⁸^{8, J}^aⁿ^u^a^r^y^{2, 19}^80,⁴⁵^F.R^.⁹^69,^a^dde^d
^t^h^{e Un}ⁱ^t^e^{d S}^t^at^{es T}^r^ad^{e Rep}^r^esen^t^a^tⁱ^v^{e an}^d^su^b^s^tⁱ^t^u^t^e^d^t^h^{e C}^h^ai^rman^o^f^t^h^{e Cou}ⁿ^cⁱ^l^o^f^E^c^oⁿ^o^mⁱ^c^Ad^vi^so^{rs f}^o^{r t}^h^e
^E^x^ecu^tⁱ^v^{e Di}^rect^o^r^o^f^t^h^{e Co}^un^ci^l^oⁿ^In^t^e^rn^atⁱ^oⁿ^a^l^E^c^oⁿ^o^mⁱ^c^P^o^lⁱ^c^y^.^E^x^ecu^tⁱ^v^{e Ord}^e^{r 1}²⁶⁶¹^,^Decem^b^e^{r 2}⁷^,¹⁹⁸⁸^,⁵⁴
^F^.^R.⁷⁷^9,^add^e^d^t^h^{e A}^t^t^o^rn^ey^G^eⁿ^e^ral^an^d^t^h^{e Di}^rect^o^r^o^f^t^h^{e Of}^fⁱ^ce^o^f^M^aⁿ^a^ge^m^eⁿ^t^an^d^Bud^g^et^.^E^x^ecu^tⁱ^v^{e Ord}^e^r
¹²⁸⁶⁰^{, Se}^p^t^e^m^be^r^{3, 19}⁹³^{, 5}⁸^F^.^R^.⁴⁷²⁰^{1, a}^dde^d^the^Dⁱ^r^e^c^t^or^of^t^h^e^O^f^fⁱ^c^e^of^Sc^ie^nc^e^a^{nd T}^e^c^hnology^Polic^y^,^the
^A^s^sistaⁿ^{t to t}^h^e^P^r^e^s^ideⁿ^{t f}^o^{r Na}^tiona^{l Se}^c^u^ri^ty^Aff^a^irs,^a^{nd the}^A^ssistaⁿ^{t to}^the^Pre^s^ideⁿ^{t f}^o^{r Ec}^on^om^ic^Polic^y^.
^Ex^e^c^u^tiv^e^O^r^de^r¹³²^86,^Se^c^tio^{n 5}⁷^{, Fe}^b^r^ua^r^y^{28, 2}⁰⁰³^{, a}^dde^d^the^S^e^c^r^e^t^a^r^y^o^f^H^o^m^e^la^{nd Se}^c^u^r^ity^{. P}^.^L^.^110-⁴⁹
^red^u^ced^t^h^{e m}^e^m^b^ershⁱ^p^o^f^CF^IUS^t^o^si^{x Cab}ⁱⁿ^e^t^m^e^m^b^{ers an}^d^t^h^e^A^t^t^o^rn^ey^Gen^e^ral^,ⁱ^t^ad^d^e^{d t}^h^e^S^ecret^ar^y^o^f^L^a^b^o^r
^a^{nd t}^h^e^Dⁱ^r^e^c^t^or^of^N^a^tio^na^{l Se}^c^u^r^ity^a^s^ex^of^fⁱ^cⁱ^o^m^e^m^b^e^r^s^,^a^{nd r}^e^m^ove^{d s}^e^v^e^{n W}^h^ite^H^ous^e^a^ppoⁱⁿ^te^e^s^.

define national security, but intended to have the term interpreted broadly without limitation to a ⁶
particular industry.
In 1988, Congress approved the Exon-Florio provision as part of the Omnibus Trade Act.⁷
Through Executive Order 12661, President Reagan implemented provisions of the Omnibus ⁸
Trade Act, and he delegated his authority to administer the Exon-Florio provision to CFIUS,
particularly to conduct reviews of foreign investment, to undertake investigations, and to make
recommendations, although the statute itself does not specifically mention CFIUS. As a result of
President Reagan’s action, CFIUS was transformed from a purely administrative body with
limited authority to review and analyze data on foreign investment to one with a broad mandate
and significant authority to advise the President on foreign investment transactions and to
recommend that some transactions be suspended or prohibited. The Committee has 30 days to
decide whether to investigate a case and an additional 45 days to make its recommendation. Once
the recommendation is made, the President has 15 days to act.
Regulations developed by the Treasury Department in November 1991 implemented the Exon-⁹
Florio provision. These regulations created a system of voluntary notification by the parties to an
investment transaction and they allow for notices of acquisitions by agencies that are members of
CFIUS. Despite the voluntary nature of the notification, firms largely comply with these
provisions because the regulations stipulate that foreign acquisitions that are governed by the
Exon-Florio review process, but that do not notify the Committee, remain subject indefinitely to
divestment or other appropriate actions by the President. This process has become one in a
number of regulatory steps that firms consider as they undertake a merger, acquisition, or
takeover.
According to the Exon-Florio provision, as amended by P.L. 110-49, CFIUS has 30 days to
decide after it receives the initial formal notification by the parties to a merger, acquisition, or a
takeover, whether to investigate a case as a result of its determination that the investment
“threatens to impair the national security of the United States.” National security also includes,
“those issues relating to ‘homeland security,’ including its application to critical infrastructure,”
and “critical technologies.” In addition, CFIUS is required to conduct an investigation of a
transaction if the Committee determines that the transaction would result in foreign control of any
person engaged in interstate commerce in the United States.
The President, acting through CFIUS, is also required to conduct a National Security
investigation of the effects of a transaction on the national security of the United States and to
take any “necessary” actions in connection with the transaction to protect the national security of
the United States under certain conditions. These conditions would be: 1) as a result of a review
of the transaction, CFIUS determined that the transactions threatened to impair the national
security of the United States and that the threat had not been mitigated during or prior to a review
of the transaction, or 2) the foreign person was controlled by a foreign government. If during this
30 day period all of the members of CFIUS conclude that the investment does not threaten to
impair the national security, the review is terminated. If, however, at least one member of the
Committee determines that the investment does threaten to impair the national security CFIUS

⁶^Co^ng^ressioⁿ^a^l^Reco^rd^{, Da}^ily^Edition^,^v^o^l.¹³^{4, A}^p^ril²⁰^{, 1}⁹⁸⁸^.^p.^H211^8.
⁷^P^.^L^.¹⁰^0-⁴¹⁸^,^tit^le^V^,^S^ubti^tle^A^,^P^a^r^t^I^I^{, or}⁵⁰^U^.^S^.^C^.^a^p^p²¹^70.
⁸^Ex^e^c^u^tiv^e^O^r^de^r¹²⁶⁶¹^of^D^e^c^e^m^b^e^r^{27, 1}⁹⁸⁸^,⁵⁴^F.R^.⁷⁷^9.
⁹^R^e^g^u^la^tions^P^e^r^t^aⁱ^ning^t^o^Me^r^g^e^r^s^,^A^c^quis^itions^,^aⁿ^d^T^a^k^e^ove^r^s^b^y^For^e^igⁿ^P^e^r^s^oⁿ^s^.³¹^C^.^F.R^.^P^a^r^t⁸⁰⁰^.

can proceed to a 45-day investigation. At the conclusion of the investigation or the 45-day review
period, whichever comes first, the Committee can decide to offer no recommendation or it can
recommend that the President suspend or prohibit the investment. The President is under no
obligation to follow the recommendation of the Committee to suspend or prohibit an investment.
The Director of National Intelligence, although not a member of CFIUS, must be given “adequate
time” to carry out a thorough analysis of “any threat to the national security of the United States”
of any merger, acquisition, or takeover. This analysis would include a request for information
from the Department of the Treasury’s Director of the Office of Foreign Assets Control and the
Director of the Financial Crimes Enforcement Network. In addition, the Director of National
Intelligence is required to seek and to incorporate the views of “all affected or appropriate”
intelligence agencies.
In 1992, Congress amended the Exon-Florio statute through section 837(a) of the National
Defense Authorization Act for Fiscal Year 1993. Known as the “Byrd Amendment” after the
amendment’s sponsor, the provision requires CFIUS to investigate proposed mergers,
acquisitions, or takeovers in cases where:
⁽¹⁾^t^h^e^a^c^q^ui^r^e^rⁱ^s^c^o^nt^r^o^l^l^e^d^{by o}^r^a^c^tⁱ^{ng o}ⁿ^b^e^ha^l^f^o^f^a^fo^r^eⁱ^gn^go^ve^rⁿ^m^e^nt^;^and
⁽²⁾^th^{e acq}^uⁱ^sitioⁿ^r^e^su^{lts i}ⁿ^coⁿ^t^r^o^{l o}^f^{a p}^e^r^s^oⁿ^en^g^a^g^e^dⁱⁿⁱⁿ^te^r^s^t^a^t^e^c^o^m^m^e^r^c^eⁱⁿ^t^h^e^Uⁿⁱ^t^e^d¹⁰
^States^t^h^{at cou}^l^{d aff}^{ect t}^h^{e n}^a^tⁱ^on^{al s}^e^c^u^rit^y^o^f^th^{e U}ⁿ^{ited St}^ates^.
Under P.L. 110-49, these investigative requirements were strengthened. The definition of national
security was broadened by P.L. 110-49 to include, “those issues relating to ‘homeland security,’
including its application to critical infrastructure,” and “critical technologies.” In addition, CFIUS
is required to conduct an investigation of a transaction if the Committee determines that the
transaction would result in foreign control of an entity engaged in interstate commerce in the
United States. The President, acting through CFIUS, is required to conduct a National Security
investigation of the effects of a transaction on the national security of the United States and to
take any “necessary” actions in connection with the transaction to protect the national security of
the United States if the foreign party to an investment transaction is controlled by a foreign
government. CFIUS is not required to conduct an investigation, even if it had determined during a
review that the party to a transaction was controlled by a foreign government, if: it also
determines that the transaction “will not affect” the national security of the United States.
This amendment came under particularly intense scrutiny by the 109^th Congress as a result of the
DP World transaction. Many Members of Congress and others believed that this amendment
required CFIUS to undertake a full 45-day investigation of the transaction, because DP World was
“controlled by or acting on behalf of a foreign government.” The DP World acquisition, however,
exposed a sharp rift between what some Members apparently believed the amendment directed
CFIUS to do and how the members of CFIUS were interpreting the amendment. In particular,
some Members of Congress apparently interpreted the amendment to require CFIUS to conduct a
mandatory 45-day investigation without exception if the foreign firm involved in a transaction is
owned or controlled by a foreign government.

¹⁰^P^.^L^.¹⁰^2-⁴⁸⁴^,^O^c^to^be^r²³^,¹⁹^92.

Representatives of CFIUS, however, argued that there were two factors that controlled their
decision not to conduct a 45-day investigation of the transaction. First, they argued that the
requirements of the Exon-Florio provision itself precluded them from engaging in a 45-day
investigation, because their initial review did not find “credible evidence” that the transaction
would impair national security, a basic threshold for CFIUS to meet in order to invoke the Exon-
Florio provision. Secondly, representatives indicated that they interpret the amendment to mean
that a 45-day investigation is discretionary and not mandatory, again because of the requirement
that a transaction must be found to cause an impairment to national security before the Exon-
Florio provision can be invoked.
CFIUS representatives also argued that their decision not to launch a full 45-day investigation of
the DP World was the result of an extensive informal review of the transaction prior to the case
being officially filed with CFIUS and as a result of a formal 30-day review. During these two
reviews, CFIUS members believed that all concerns that had been expressed by members of
CFIUS had been adequately resolved so that by the time of the review no member of CFIUS had
any unresolved concerns about the impact of the transaction on national security. They conceded
that the case met the first criterion under the Byrd amendment, because DP World was controlled
by a foreign government, but that it did not meet the second part of the requirement, because
CFIUS had concluded during the 30-day review that the transaction “could not affect the national ¹¹
security.”
As a result of the attention by both the public and Congress, DP World officials indicated that ¹²
they would sell off the U.S. port operations to an American owner. On December 11, 2006, DP
World officials announced that a unit of AIG Global Investment Group, a New York-based asset
management company with $683 billion in assets, but no experience in port operations, would ¹³
acquire the U.S. port operations for an undisclosed amount.
Through the Exon-Florio provision, Congress directed that the President or his designee must
consider a short list of factors in deciding whether to block a foreign acquisition, merger, or
takeover. Again, the President has broad discretion under the current statute to decide the basis on
which he determines whether a transaction might impair the national security. This list includes
the following factors:
⁽¹⁾^d^o^m^e^{stic p}^r^o^d^u^ctioⁿⁿ^eed^e^d^f^o^r^p^r^o^j^ectedⁿ^a^tioⁿ^a^{l d}^e^f^eⁿ^s^{e r}^e^q^u^ir^e^m^en^t^s^;
⁽²⁾^th^{e cap}^ab^ility^an^d^cap^acit^y^o^f^d^o^m^e^s^{tic in}^d^u^strⁱ^e^s^to^m^{eet n}^a^tioⁿ^a^{l d}^e^f^eⁿ^s^{e r}^e^q^uⁱ^r^em^en^t^s^,
ⁱⁿ^cl^u^dⁱⁿ^g^t^h^{e av}^ai^lab^ilit^y^o^f^h^u^m^aⁿ^r^e^so^u^r^{ces, p}^r^o^d^u^{cts, tec}^hⁿ^o^lo^g^y^,^m^a^terⁱ^{als, a}ⁿ^d^o^t^h^e^r
^su^p^p^{lies a}ⁿ^d^ser^v^ice^s^;
⁽³⁾^t^h^e^c^oⁿ^t^r^o^l^o^f^d^o^m^e^s^tⁱ^cⁱⁿ^d^u^s^t^rⁱ^e^s^aⁿ^d^c^o^m^m^e^r^cⁱ^a^l^a^c^tⁱ^vⁱ^t^y^b^y^f^o^r^e^igⁿ^citizeⁿ^s^as^it^af^f^ect^s
^th^{e cap}^ab^ilit^y^aⁿ^d^cap^acit^y^o^f^th^{e U.S. to}^m^{eet t}^h^{e r}^e^q^u^ir^e^m^eⁿ^{ts o}^fⁿ^a^tioⁿ^a^{l sec}^u^rⁱ^t^y^;
^{(4) th}^{e poten}^{tial eff}^ects^of^t^h^e^tran^s^actions^on^t^h^{e s}^a^le^s^of^m^ilitar^y^g^oods^{, equ}ⁱ^p^m^eⁿ^{t, or}
^t^echⁿ^o^l^o^gy^t^o^{a cou}ⁿ^t^r^y^t^h^at^support^s^t^e^rr^o^rⁱ^s^m^o^r^p^r^o^lⁱ^f^e^r^a^t^e^s^mⁱ^s^sⁱ^l^e^t^e^c^hⁿ^o^l^o^g^y^o^r^c^h^emⁱ^c^al

¹¹^B^r^ie^fⁱ^ng^{on the}^D^ubaⁱ^Por^t^s^W^o^r^l^{d D}^e^a^l^be^f^o^r^e^the^Se^na^te^A^r^m^e^{d Se}^r^v^ic^e^s^C^o^m^m^itte^e^,^Fe^br^ua^r^y^{23, 20}⁰⁶^.
¹²^W^e^ism^a^{n, J}^ona^thaⁿ^{, a}^{nd B}^r^a^d^le^y^G^r^a^h^am^{, “}^D^uba^{i Fir}^m^{to Se}^{ll U}^.^S.^Por^t^O^p^e^r^a^tⁱ^ons^,”^T^h^{e Wa}^shⁱⁿ^gtoⁿ^Po^st^{, M}^a^r^c^h
^10,²⁰⁰⁶^{. p}^.^A¹^.
¹³^King^{, Ne}^{il Jr., a}^{nd G}^r^e^g^{Hitt, Du}^baⁱ^P^o^r^t^{s W}^o^rld^Se^{lls U.S.}^A^sse^ts^—A^I^G^Bu^y^s^Ope^r^a^{tions tha}^t^Ig^nit^e^{d Con}^t^rov^e^rsy
^A^s^D^e^m^o^crat^{s P}^l^an^C^h^an^ges.^T^h^e^Wa^l^l^S^t^reet^Jou^r^na^l^,^Decem^b^e^{r 1}²^,²⁰⁰⁶^.^p^.^A¹^.

^an^{d bi}^ol^ogⁱ^cal^w^eapon^s^;^t^r^aⁿ^sactⁱ^oⁿ^sⁱ^d^en^tⁱ^fⁱ^{ed b}^y^th^{e Secr}^etar^y^of^Def^eⁿ^s^{e as}^“^pos^ing^a
^r^e^gⁱ^oⁿ^al^m^ilitar^y^th^r^{eat” to}^t^h^eⁱⁿ^ter^e^st^{s o}^f^th^{e U}ⁿ^ited^Sta^t^es;
^{(5) th}^{e poten}^{tial ef}^f^ect^s^of^th^{e t}^r^an^s^action^on^U.^{S. tec}^hⁿ^o^lo^gⁱ^c^a^{l lead}^er^sh^{ip in}^areas^aff^e^c^tⁱⁿ^g
^{U.S. n}^a^tioⁿ^a^l^secu^rⁱ^t^y^;
^{(6) w}^h^et^h^e^{r th}^{e tran}^s^a^c^tion^has^{a s}^ecu^rit^y^-^r^elat^{ed i}^m^{pact o}ⁿ^{critical inf}^r^as^tr^u^c^tu^{re i}ⁿ^th^e
^Un^ited^State^s^:
^{(7) th}^{e poten}^{tial eff}^ect^s^on^Uⁿ^{ited State}^s^{critical i}ⁿ^f^r^as^tru^c^tu^{re, in}^cl^u^dⁱⁿ^g^m^a^j^o^{r en}^erg^y
^assets^;
⁽⁸⁾^th^{e p}^o^t^en^{tial ef}^f^{ects o}ⁿ^Uⁿ^ited^{States cr}^{itical tec}^hⁿ^o^lo^gⁱ^e^s^;
⁽⁹⁾^w^h^et^h^e^r^th^{e tr}^an^sactioⁿ^is^{a f}^o^r^e^igⁿ^g^o^v^e^rⁿ^m^eⁿ^t^-^c^oⁿ^t^r^o^lled^tr^an^sactioⁿ^;
⁽¹⁰⁾ⁱⁿ^th^o^s^{e ca}^sesⁱⁿ^v^o^l^vⁱⁿ^g^{a g}^o^v^e^rⁿ^m^eⁿ^t^-^c^oⁿ^tr^o^lled^tr^an^sactioⁿ^,^{a r}^e^vⁱ^e^w^o^f⁽^A⁾^t^h^e
^ad^h^e^r^eⁿ^{ce o}^f^th^e^f^o^r^e^igⁿ^co^uⁿ^tr^y^toⁿ^oⁿ^p^r^o^lif^er^atioⁿ^coⁿ^t^r^o^{l r}^e^gⁱ^m^e^{s, (}^B⁾^th^{e f}^o^r^e^igⁿ
^couⁿ^t^r^y^’s^{record on}^cooperatⁱⁿ^gⁱⁿ^co^uⁿ^t^er0t^errori^sm^eff^o^rt^s^,^(C⁾^t^h^e^pot^en^tⁱ^a^l^f^o^r
^tr^an^ss^hⁱ^p^m^en^{t o}^r^dⁱ^v^e^r^s^ioⁿ^o^f^t^echⁿ^o^lo^gⁱ^es^wⁱ^t^h^m^ilitar^y^ap^p^licatioⁿ^s^;
^{(11) t}^h^{e l}^oⁿ^g^-^t^e^r^m^proj^ectⁱ^oⁿ^of^t^h^{e U}ⁿⁱ^t^e^{d S}^t^at^e^s^requⁱ^r^e^m^en^t^s^f^o^{r s}^o^u^r^ces^of^eⁿ^ergy^aⁿ^d
^oth^e^{r critical res}^o^u^r^ces^an^d^m^a^terials^;^an^d
^{(12) s}^u^ch^oth^e^{r f}^actors^as^t^h^e^P^r^es^iden^{t or th}^{e C}^o^m^m^{ittee de}^ter^mⁱⁿ^{e to be appr}^opriate.¹⁴
CFIUS and a designated lead agency are authorized to negotiate, impose, or enforce any
agreement or condition with the parties to a transaction in order to mitigate any threat to the
national security of the United States. Such agreements are based on a “risk-based analysis” of
the threat posed by the transaction. Also, if a notification of a transaction is withdrawn before any
review or investigation by CFIUS can be completed, CFIUS can take a number of actions,
including 1) interim protections to address specific concerns about the transaction pending a re-
submission of a notice by the parties; 2) specific time frames for re-submitting the notice; and 3)
a process for tracking any actions taken by any party to the transaction.
In addition, CFIUS is required to develop a method for evaluating the compliance of firms that
have entered into a mitigation agreement or condition that was imposed as a requirement for
approval of the investment transaction. Such measures, however, are required to be developed in
such a way that they allow CFIUS to determine that compliance is taking place without also: 1)
“unnecessarily diverting” CFIUS resources from assessing any new covered transaction for which
a written notice had been filed; and 2) placing “unnecessary” burdens on a party to a investment
transaction.
Part of Congress’s motivation in adopting the Exon-Florio provision apparently arose from
concerns that foreign takeovers of U.S. firms could not be stopped unless the President declared a
national emergency or regulators invoked federal antitrust, environmental, or securities laws.
Through the Exon-Florio provision, Congress attempted to strengthen the President’s hand in
conducting foreign investment policy, while providing a cursory role for itself as a means of
emphasizing that, as much as possible, the commercial nature of investment transactions should

¹⁴^T^h^e^la^s^t^r^e^quir^e^m^e^{nt unde}^r^f^a^c^t^or^{4 a}ⁿ^{d f}^a^c^t^or^s^6-¹²^w^e^r^e^a^dde^{d by}^P^.^L^.¹¹^0-⁴⁹^.

be free from political considerations. Congress also attempted to balance public concerns about
the economic impact of certain types of foreign investment with the nation’s long-standing
international commitment to maintain an open and receptive environment for foreign investment.
Furthermore, Congress did not intend to have the Exon-Florio provision alter the generally open
foreign investment climate of the country or to have it inhibit foreign direct investments in
industries that could not be considered to be of national security interest. The basic approach of
the provision, therefore, was to presume that foreign investment generally has a positive effect on
the economy and that it should be encouraged and restricted only in those cases in which a
specific transaction had met a burden of proof that the proposed investor “might take action that
threatens to impair the national security.”
At the time the Exon-Florio provision was adopted, some analysts believed the provision could
potentially widen the scope of industries that fell under the national security rubric. CFIUS,
however, is not free to establish an independent approach to reviewing foreign investment
transactions, but operates under the authority of the President and reflects his attitudes and
policies. As a result, the discretion CFIUS uses to review and to investigate foreign investment
cases reflects policy guidance from the President. In addition, Congress did not adopt a specific
definition of national security when it approved the Exon-Florio provision. Instead, during a
review or investigation of a foreign investment, each member of CFIUS is expected to apply that
definition of national security that is consistent with the legislative mandate of the CFIUS
member. As a result, the CFIUS process relies on each member applying their own particular
definition of national security and making any concerns that arise from such a review known to
the other members of CFIUS.
Foreign investors are also constrained by legislation that bars foreign direct investment in such ¹⁵
industries as maritime operations, aircraft, banking, resources and power. Generally, these
sectors were closed to foreign investors, primarily for national defense purposes, prior to passage
of the Exon-Florio provision to prevent these areas from being subject to foreign control.
Arguably, the events of September 11, 2001, reshaped Congressional attitudes toward the Exon-
Florio provision and the manner in which it should be used. During discussion about the Exon-
Florio provision prior to its passage in 1988, the Reagan Administration opposed a definition of
national security that included “essential commerce and national security,” because the
administration argued that the definition was too broad. Ultimately, the Reagan Administration
succeeded in getting the term “essential commerce” dropped from the provision. After the ^th
September 11 terrorist attacks, however, Congress passed and President Bush signed the USA
PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools ¹⁶
Required to Intercept and Obstruct Terrorism). In this act, Congress provided for special support
for “critical industries,” which it defined as:
^s^y^ste^m^{s a}ⁿ^d^asset^s^,^w^h^eth^e^r^p^h^y^sⁱ^{cal o}^r^vⁱ^r^t^u^a^{l, so}^v^{ital t}^o^th^{e U}ⁿ^ited^State^s^t^h^{at t}^h^e
ⁱⁿ^cap^acit^y^o^r^d^e^str^u^c^tioⁿ^o^f^s^u^ch^s^y^ste^m^{s a}ⁿ^d^asse^ts^w^o^u^l^d^h^a^v^e^{a d}^e^b^ilitatⁱⁿ^gⁱ^m^p^a^c^t^oⁿ

¹⁵^C^R^S^R^e^por^t^R^L³³¹^03,^For^eⁱ^{gn I}ⁿ^v^e^s^tm^eⁿ^{t in t}^h^e^Uⁿⁱ^t^e^d^S^t^ate^s^:^M^a^jor^Fe^de^r^a^l^Stat^ut^or^y^Re^s^t^rⁱ^c^tion^s^,^b^y^Mⁱ^ch^ael^V^.
^Se^itz^ing^e^r.
¹⁶^P^.^L^.¹⁰^7-5⁶^{, title}^X^,^Se^c^.¹⁰¹⁴^{, Oc}^tobe^r²⁶^{, 20}^01;⁴²^U.S.C^.^Se^c^.⁵¹⁹^5c^(e^).

^s^ecu^rit^y^{, n}^a^tion^a^{l eco}ⁿ^o^mⁱ^c^s^e^cu^rit^y^,ⁿ^a^tioⁿ^a^{l pu}^blic^h^ealt^h^o^r^s^a^f^e^t^y^{, or any}^co^m^bⁱⁿ^ation^o^f¹⁷
^th^o^s^{e m}^a^tter^s^.
This broad definition is enhanced to some degree by other provisions of the act, which
specifically identify certain sectors of the economy, therefore, as likely candidates for
consideration as critical infrastructure, including telecommunications, energy, financial services, ¹⁸
water, transportation sectors, and the “cyber and physical infrastructure services critical to
maintaining the national defense, continuity of government, economic prosperity, and quality of ¹⁹
life in the United States.” The following year, Congress adopted the language in the USA ²⁰
PATRIOT Act on critical infrastructure into The Homeland Security Act of 2002.
By adopting the terms “critical infrastructure” and “homeland security,” following the events of
September 11, 2001, Congress demonstrated that the attacks fundamentally altered the way many
Members of Congress and many in the public view the concept of national security. As a result,
many in Congress and in the public have come to believe that economic activities are a separately
identifiable component of national security. In addition, many in Congress and elsewhere
apparently perceive greater risks to the economy arising from foreign investments in which the
foreign investor is owned or controlled by foreign governments as a result of the terrorist attacks.
The Dubai Ports World case, in particular, demonstrated that there was a difference between the
post-September 11 expectations held by many in Congress about the role of foreign investment in
the economy and of economic infrastructure issues as a component of national security and the
operations of CFIUS. For some Members of Congress, CFIUS seemed to be out of touch with the
post-September 11, 2001 view of national security, because it remains founded in the late 1980s
orientation of the Exon-Florio provision, which views national security primarily in terms of
national defense and downplays or even excludes a broader notion of economic national security.
Activity within Congress and the intense public and congressional reaction that arose from the
proposed Dubai Ports World acquisition spurred the Bush Administration in late 2006 to make an
important administrative change in the way CFIUS reviews foreign investment transactions.
CFIUS and President Bush approved the acquisition of Lucent Technologies, Inc. by the French-
based Alcatel SA, which was completed on December 1, 2006. Before the transaction was
approved by CFIUS, however, Alcatel-Lucent was required to agree to a national security
arrangement, known as a Special Security Arrangement, or SSA, that restricts Alcatel’s access to
sensitive work done by Lucent’s research arm, Bell Labs, and the communications infrastructure
in the United States.
The most controversial feature of this arrangement is that it allows CFIUS to reopen a review of
the deal and to overturn its approval at any time if CFIUS believes the companies “materially fail
to comply” with the terms of the arrangement. This marks a significant change in the CFIUS
process. Prior to this transaction, CFIUS reviews and investigations had been portrayed, and had
been considered, to be final. As a result, firms were willing to subject themselves voluntarily to a
CFIUS review, because they believed that once an investment transaction was scrutinized and
approved by the members of CFIUS the firms could be assured that the investment transaction
would be exempt from any future reviews or actions. This administrative change, however, means

¹⁷^Ibid^.
¹⁸⁴²^U^.^S^.^C.^S^ec.⁵¹⁹⁵^c(b⁾⁽²^).
¹⁹⁴²^U^.^S^.^C.^S^ec.⁵¹⁹⁵^c(b⁾⁽³^).
²⁰^{6 U}^.^S^.^C^.^Se^c^.¹⁰¹⁽⁴⁾^.

that a CFIUS determination may no longer be a final decision and it adds a new level of
uncertainty to foreign investors seeking to acquire U.S. firms. A broad range of U.S. and ²¹
international business groups are objecting to this change in the Administration’s policy.

H.R. 556 was approved by the House Financial Services Committee on February 13, 2007, with
amendments. The amendment offered by Committee Chairman Frank and Representative Price
included six changes to the bill as it was introduced on January 18, 2007. These changes
responded to concerns that were expressed by the Bush Administration that some of the
procedures that would have been established under H.R. 556 would have created new levels of
bureaucracy and administrative bottlenecks that potentially could have delayed and discouraged
foreign investment. The changes would 1) allow a Deputy Secretary or an Under Secretary of an
agency to approve an investment transaction on behalf of the respective agency instead of
requiring the Secretary to approve the transaction; 2) require the Deputy Secretary of an agency
to certify investment transactions by companies that are owned by a foreign government; 3) give
the Director of National Intelligence “adequate time” to consider national security implications
instead of requiring a minimum of 30 days to examine security implications; 4) clarify that
agencies act on behalf of CFIUS in administering agreements to mitigate security concerns that
are raised about a foreign investor during a CFIUS review; 5) strike a provision that would have
allowed CFIUS to reopen approvals; and would have required the Attorney General to report to ²²
Congress.
On February 28, 2007, H.R. 556 was approved with amendments by the full House. The three
amendments that were adopted clarified the language of the measure in some cases and added a
number of new sections. In particular, the measure added a new factor that requires CFIUS and
the President to consider the impact of an investment transaction on U.S. efforts to curtail human
smuggling in approving a transaction. Another change would require CFIUS to notify Senators
and Members of Congress if the Committee determines that the areas represented by the Senator
or Member would be “significantly” affected by an investment transaction.
On June 13, 2007, Senator Dodd introduced S. 1610, which was referred to the Senate Committee
on Banking, Housing, and Urban affairs. On June 29, 2007, the full Senate considered S. 1610
and adopted the measure by unanimous consent as a substitute for H.R. 556. On July 11, 2007,
the House accepted the Senate’s version of H.R. 556 by a vote of 370-45 and sent the measure to
the President, who signed it on July 26, 2007. It is designated as P.L. 110-49.
Both H.R. 556 and S. 1610 (P.L. 110-49) attempt to address congressional concerns by
establishing CFIUS by statutory authority, thereby giving Congress a direct role in determining
the make-up and operations of the Committee. The measures would have the Secretary of the
Treasury continue to serve as the Chairman of CFIUS, despite the misgivings of some Members.
The House measure would have had the Secretary of Homeland Security and the Secretary of

²¹^Ki^rch^g^aessn^er,^S^t^ep^h^aⁿⁱ^e,^U^S^T^h^reat^t^o^Reo^p^eⁿ^T^e^r^m^{s o}^f^L^u^cen^t^an^d^A^l^cat^el^Deal^M^e^rgers,^Financⁱ^a^{l Tim}^e^s^,
^D^e^c^e^m^b^e^r^{1, 20}^06.^P^.¹⁹^;^P^e^lof^s^k^y^{, J}^e^r^e^m^y^{, B}^u^sⁱ^ne^s^s^e^s^O^b^je^c^t^{to U}^S^m^o^v^e^{on f}^o^r^e^ig^{n I}ⁿ^v^e^s^t^m^e^nt,^Reu^t^{ers News}^,
^D^e^c^e^m^b^e^r^{5, 20}^06.
²²^House^Fi^na^nc^ia^{l Se}^rv^ic^e^s^Com^m^itte^e^Cle^a^r^{s Am}^e^nde^{d CFIUS Re}^f^o^rm^{Bill by}^V^o^ic^e^Vote^,^Iⁿ^te^rna^tⁱ^ona^{l Tra}^d^e
^Daily^{, Fe}^br^ua^r^y^{14, 2}⁰⁰⁷^.

Defense serve as Vice Chairmen. In other respects, the House bill retained the basic structure of
the Committee as it presently exists, except that it would add the Secretary of Energy as a
permanent member of CFIUS. The Senate measure reduced the official number of members of
CFIUS, but grants the President the authority to appoint temporary members on a case-by-case
basis.
According to the two measures, the Committee operates under the same time frame that currently
exists with 30 days allotted for a review, 45 days for an investigation and 15 days for the
President to make his determination. The President retains his authority as the only officer with
the authority to suspend or prohibit certain types of foreign investments. The measures place
additional requirements on firms that resubmitted a filing after previously withdrawing a filing
before a full review is completed.
In H.R. 556, no review or investigation would have been considered to be complete until it had
been approved by a majority of the members of CFIUS and signed by the Secretary of the
Treasury and the Secretary of Homeland Security to insure that principal members of CFIUS
were aware of all reviews and investigations completed by CFIUS. Both measures require CFIUS
to investigate all “covered” foreign investment transactions to determine whether a transaction
threatens to impair the national security, or the foreign entity is controlled by a foreign
government. A covered foreign investment transaction is defined as any merger, acquisition, or
takeover which results in “foreign control of any person engaged in interstate commerce in the
United States.” S. 1610 requires an investigation if the transaction would result in control of any
“critical infrastructure that could impair the national security.”
Both measures place increased requirements on CFIUS to review investment transactions in
which the foreign person is owned or controlled by a foreign government. Both measures provide
for exceptions from the requirement to investigate transactions in which the foreign party is
controlled by a foreign government. The measures would allow CFIUS to exclude a transaction
from an investigation if the Secretary of the Treasury and certain other specified officials
determine that the transaction will not impair the national security. It is somewhat unclear,
however, how this change will mesh with the current process. The measures seem to strengthen
the role of CFIUS in determining which transactions it will investigate. The measures also do not
amend or alter the current statute in the area that has been the source of recent differences
between CFIUS and Congress. In particular, the current statute states that the President, and
through him CFIUS, can use the Exon-Florio process “only if” he finds that there is “credible
evidence” that a foreign investment will impair national security. As a result, CFIUS has
determined, as was the case in the Dubai Ports transaction, that if the Committee does not have
credible evidence that an investment will impair the national security that it is not required to
undertake a full 45-day investigation.
The extent to which CFIUS increases its investigations of transactions that involve a foreign
government may cause foreign investors to regard this as an important policy change by the
United States toward foreign investment. As previously stated, the current system presumes that
foreign investment transactions are acceptable and that they provide a positive contribution to the
economy. As a result, the burden is on the members of CFIUS to prove that a particular
transaction is a threat to national security. The measures, however, might be interpreted to
presume that investment transactions in which the foreign person is owned or controlled by a
foreign government are a threat to the nation’s security simply because of the relationship to the
foreign government and, therefore, might require the firms to prove that they are not a threat.
Although the number of investment transactions a year in which the foreign investor is associated

with a foreign government is small compared with the total number of foreign investment
transactions, foreign investors and foreign governments likely will view this as a significant
change in the traditional U.S. approach to foreign investment.
Both bills increase the role of congressional oversight by requiring greater reporting by CFIUS on
its actions either during or after it completes reviews and investigations and by increasing
reporting requirements on CFIUS. H.R. 556 would have required the Secretary of the Treasury,
the Secretary of Homeland Security, and the Secretary of Commerce to sign and approve any
review or investigation. In those cases in which the foreign person involved in an investment
transaction is owned or controlled by a foreign government, a majority of the members of CFIUS
would have been required to approve the transaction and the President and the chair and vice
chairs of CFIUS would have been required to sign off on investments in which at least one
member of CFIUS did not agree with the decision of the majority to approve the transaction. H.R.
556 also would have required the President to approve of any review or investigation in which a
foreign entity is from a country that has been determined to support acts of international
terrorism.
Both measures require CFIUS to provide Congress with a greater amount of detailed information
about its operations. H.R. 556 would have required CFIUS to notify specified Members at the
conclusion of any investment investigation and to report annually to Congress. Both measures
provide for greater reporting on and increased authority for CFIUS to negotiate provisions with
the foreign firms involved in investment transactions to mitigate the impact of the transaction.
Under current statutes, CFIUS has no authority to negotiate such agreements with firms and it is
not clear that it has any authority to enforce such agreements. H.R. 556 and S. 1610 provide for a
process to track the agreements and to report the progress of such agreements and any changes to
the agreements to the members of CFIUS and to the President.
The measures also amend the current statute regarding the meaning of national security and place
additional requirements on CFIUS regarding national security reviews. The bills explicitly require
the Director of National Intelligence to conduct reviews of any investment that posed a threat to
the national security. The bills also provide for additional factors the President and CFIUS are
required to use in assessing foreign investments. In particular, the bills add implications for the
nation’s critical infrastructure as a factor for reviewing or investigating an investment transaction.

The following section provides a more detailed comparison of the two bills as they passed their
respective bodies and the current provisions.
According to the Exon-Florio provision and subsequent regulations issued by the Treasury
Department, CFIUS has 30 days after it receives the initial formal notification by the parties to a
merger, acquisition, or a takeover, to decide whether to investigate a case as a result of its
determination that the investment “threatens to impair the national security of the United States.”
If during this 30-day period all the members of CFIUS conclude that the investment does not
threaten to impair the national security or if the concerns of any member are resolved, the review
is terminated. If, however, at least one member of the Committee determines that the investment

does threaten to impair the national security and if those concerns are not resolved, CFIUS can
proceed to a 45-day investigation. At the conclusion of the investigation or the 45-day review
period, whichever comes first, the Committee can decide to offer no recommendation or it can
recommend that the President suspend or prohibit the investment. The President is under no
obligation to follow the recommendation of the Committee to suspend or prohibit an investment.
A subsequent amendment, the Byrd Amendment, requires CFIUS to conduct a 45-day
investigation of a transaction in any instance in which the foreign entity is controlled by or acting
on behalf of a foreign government which could result in the foreign entity gaining control of the
U.S. entity and that could affect the national security of the United States. Such an investigation
is required to begin no later than 30 days after CFIUS receives written notice of the proposed or
pending merger, acquisition, or takeover and be completed in no more than 45 days.
H.R. 556 and S. 1610 establish the Committee on Foreign Investment in the United States as a
matter of statute and would amend the current procedures for a CFIUS review and investigation.
The measures strike out the first two sections of the current statute that deal with investigations
and replace them with provisions that would provide for the same 30-day review and 45-day
investigation stages that exist under the current provision, but would alter the provision in a
number of ways. First, the measures explicitly indicate that the investigation will be conducted by
the Committee on Foreign Investment in the United States, which was referred to only as the
President’s designee prior to passage of P.L. 110-49. Next, the measures amend and broaden the
language in the current statute regarding national security by indicating that national security for
this provision is construed “so as to include those issues relating to ‘homeland security,’ including
its application to critical infrastructure,” and “critical technologies.”
The measures provide for “National Security Reviews and Investigations,” which are not a part of
the current CFIUS process, although the Director of National Intelligence often is asked to
participate in CFIUS reviews and investigations. In an important departure from the current
procedure, CFIUS is required (“shall”) to review any merger, acquisition, or takeover to
determine the effects of the transaction on the national security of the United States. In addition,
CFIUS is required (shall) to conduct an investigation of a transaction if the Committee determines
that the transaction would result in foreign control of any person engaged in interstate commerce
in the United States. Once a review has been initiated, a firm cannot withdraw its notice unless it
provides a written request for such a withdrawal and the request is approved in writing by the
Chairperson, in consultation with the Vice Chairpersons of the Committee. The term “control” for
this section is defined in the Code of Federal Regulation (31CFR800.204) as the power to affect
the principal assets of the entity, the power to dissolve the entity, to close and/or relocate the
production or research and development facilities, to terminate contracts, or to amend the Articles
of Incorporation.
In addition to any entity that is a party to a merger, acquisition, or takeover being able to initiate a
review, the measures would provide that the President, the Committee can request that CFIUS
review a transaction. This authority could not be delegated by any member of CFIUS to any
person other than to an appropriate Deputy Secretary or Under Secretary. These individuals
would be able to review a transaction that previously had been reviewed and approved under
certain circumstances: 1) a transaction in which it was later discovered that false or misleading
material information had been submitted to CFIUS; 2) or material information, including
documents, had been omitted from information submitted to CFIUS; 3) or if a party to a
transaction had intentionally failed to adhere to any mitigating agreements or conditions upon

which the original approval had been granted and no other remedy or enforcement tool was
available to address such a breach of the mitigating agreement.
The measures require the President, acting through CFIUS, to conduct a National Security
investigation of the effects of a transaction on the national security of the United States and to
take any “necessary” actions in connection with the transaction to protect the national security of
the United States under certain conditions. These conditions would be: (1) as a result of a review
of the transaction, CFIUS determined that the transactions threatened to impair the national
security of the United States and that the threat had not been mitigated during or prior to a review
of the transaction, or the foreign person was controlled by a foreign government. H.R. 556 would
have required an investigation if: during a roll call vote of the members of CFIUS at least one
member had voted against approving the transaction; the Director of National Intelligence had
identified “particularly complex national security or intelligence issues” that threaten to impair
the national security of the United States and CFIUS members had not been able to develop and
agree on measures to mitigate the threat during a review. S. 1610 requires an investigation if the
transaction results in the control of “any critical infrastructure” that would impair the national
security. The investigation is required to be completed within 45 days, but the House measure
would have provided for an extension of the deadline of up to an additional 45 days if the
extension had been requested by the President or by a roll call vote of two-thirds of the CFIUS
members.
Both measures provide an important exception to the requirement that CFIUS conduct an
investigation of any transaction if it determines during a review that a party to a transaction is
owned or controlled by a foreign government. Instead, the measures would not require such an
investigation, even if CFIUS had determined during a review that the party to a transaction was
controlled by a foreign government if: it also determined that the transaction “will not affect” the
national security of the United States. The House measure also would have waived the
requirement for an investigation if no agreement or condition was required, relative to the
transaction, to mitigate any threat to the national security.
The House measure would have required the approval of a majority of the members of CFIUS
and the approval of, and a signed determination by, the Secretary of the Treasury, the Secretary of
Homeland Security, and the Secretary of Commerce on any review or investigation in order for
the CFIUS process to be considered final or complete. In those cases in which the foreign entity
was determined to be controlled by a foreign government and at least one member of CFIUS did
not vote in favor of approval, the CFIUS investigation process would not be considered to be
complete until the President and the Chairperson, and the Vice Chairperson of the Committee
signed the Committee report to indicate their approval.
H.R. 556 would have required action by the President in certain cases. Specifically, the measure
would have required the President to approve and to sign his approval of an investment
transaction in which the party to a transaction is an entity or a country that has been determined
by the Secretary of State under the Export Administration Act or other provisions of law
repeatedly to have provided support for acts of terrorism. S. 1610, requires the Secretary of the
Treasury to publish in the Federal Register guidance on the types of transactions that the
Committee had reviewed and that had national security considerations. The Senate measure also
requires the Committee to notify specified Members of Congress at the completion of a review or
investigation of any foreign investment transaction.

Both bills grant the Director of National Intelligence “adequate time” to carry out a thorough
analysis of “any threat to the national security of the United States” of any merger, acquisition, or
takeover. This analysis specifically includes a request for information be made from the
Department of the Treasury’s Director of the Office of Foreign Assets Control and the Director of
the Financial Crimes Enforcement Network. In addition, the Director of National Intelligence is
required to seek and to incorporate the views of “all affected or appropriate” intelligence
agencies. The Director of National Intelligence, however, maintains a role that is independent
from CFIUS by not serving as an official member of CFIUS and by not serving in a policy role
other than to provide analysis in connection with an investment transaction. Firms are not be
prohibited from submitting additional information or modifying any agreement in connection
with a transaction while the transaction is being reviewed or investigated.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Section 721 of t}^{he Defe}^{nse Prod}^{uction Act of 1}⁹⁵⁰⁽⁵⁰^Same.
^U.S.C^{. App. 217}^{0) is amended}^by^{striking sub}^{sections (a)}
^{and (b) and inse}^{rting the}^followin^{g new s}^ubsections:
^{National security reviews and investigations.}^{National security reviews and investigations.}
^{The President, acting th}^{rough t}^h^e^{CFIUS, would be}^Same.
^{required to re}^{view a “covered” t}^{ransaction (any}^merger,
^{acquisition, or takeover by or wit}^{h any}^{foreign pe}^rson
^{which could res}^{ult in foreign con}^{trol of any perso}ⁿ
^{engaged in interstate}^{commerce i}ⁿ^{the U}^{nited States) to}
^{determine the}^effects^{of the t}^rans^{action on the}^national
^{security of t}^{he United States.}
^{No com}^para^{ble provision.}^{Also specifically requires the}^Pres^{ident to consider the}
^{factors specified elsewhe}^{re in t}^{his measur}^{e in th}^{e review}
^{and investigation, as “approp}^riate.”
^{Control by a}^fo^{reign g}^overn^ment.^{Control by a}^fo^{reign g}^overn^ment.
^{CFIUS is required to conduct a}ⁿⁱ^{nvestigation if the}^Same.
^{Committee determines that t}^{he i}^nvestme^{nt tra}^{nsaction is}
^{a foreign governme}^{nt-controlled transaction.}
^{Written notice.}^{Written notice.}
^{Any pa}^{rty to any}^{covered tra}^nsac^{tion may initiate a}^Same.
^{review of the tra}^nsaction^{by s}^u^b^{mitting a written notice}
^{of the tra}^{nsaction to the C}^hairpe^{rson of the Committee.}
^{Withdrawal of notice.}^{Withdrawal of notice.}
^{Written req}^{uest m}^ust^{be 1)}^su^b^{mitted by any}^party^to^{Withdrawal notice must be}^su^bm^{itted to the Committee}
^{the tra}^{nsaction; and 2) t}^{he re}^qu^e^{st is approved in w}^riting^{and app}^{roved by t}^{he Committee.}
^{by the}^Chairpe^{rson, in cons}^{ultation with the Vice}
^{Chairpersons, of t}^{he Committee.}
^{Continuing dis}^cussions.^{Continuing dis}^cussions.
^{Approval of a withdrawal re}^quest^{is not to be const}^rued^Same.

^{as precluding co}^{ntinuing in}^{formal discussions with the}
^{Committee or any Committee m}^ember^regarding
^{possible resu}^bmission.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Unilateral initia}^{tion of review.}^{Unilateral initia}^{tion of review.}
^{The President, the Committee, or any me}^mbe^{r of the}^{The President or the}^{Committee may initiate a review of:}
^{Committee may move to initiate a review of:}
^{(i) any covered transaction;}^Same.
^{(ii) any covered transaction that}^{has p}^{reviously bee}ⁿ^Same.
^{reviewed or investigated under}^t^{his section, if any pa}^rty
^{to the transa}^{ction su}^{bmitted false or misleading material}
^{information to the Committee in}^{connection with t}^he
^{review or investigation or omitted material information,}
^{including material documents, fro}^{m information}
^{submitted to the Committee; or}⁽ⁱⁱ^{i) any covered}
^{transaction that}^has^previously^be^{en reviewed or}
^{investigated under t}^{his section, if any pa}^{rty to the}
^{transaction or t}^{he entity}^resulting^{from cons}^{ummation of}
^{the tra}^{nsaction intentionally mate}^{rially breaches a}
^mitigati^{on agreement or}^conditio^{n described in}
^subsec^{tion (l)(1)(A)}^{, and:}
^{1) suc}^{h b}^reach^{is certified by t}^he^{lead department or}^{1) suc}^{h b}^reach^{is certified to the}^{Committee by the lead}
^{agency monitoring and e}^nforcing^{such ag}^reeme^{nt or}^department^{or agency}^{monitoring and enforcing}^suc^h
^{condition as an intentional materi}^{al breach; a}^nd^{agreement or}^{condition as an int}^{entional material breach;}
^and
^{2) suc}^{h depar}^{tment or ag}^ency^ce^{rtifies that the}^{re is no}^{2) the Committee determine}^{s th}^{at there a}^{re no othe}^r
^{other remedy or e}^nforce^{ment to}^{ol available t}^o^address^{remedies or enforce}^{ment tools available to address such}
^{such breac}^h.^breac^h.
^Timing.^Timing.
^{Any review}^{under t}^{his pa}^ragrap^h^{shall be completed}^Same.
^{before th}^{e end of t}^{he 3}^{0-day pe}^{riod beginning on t}^he
^{date of the receipt}^{of written}^{notice under s}^u^b^paragra^ph
^{(C) by the C}^hairperson^{of the C}^{ommittee, or the date of}
^{the initiation of the review in acc}^{ordance with a motion}
^{under s}^u^b^paragra^ph^(D).
^{Limit on delegation of autho}^rity.^{Limit on delegation of autho}^rity.
^{Authority of the}^{Committee or any mem}^{ber of t}^he^{Authority can}^{be delegated only t}^o^{the Deput}^{y Secretary}
^{Committee to initiate a review may be delegated only to}^{or an ap}^{propriate U}^{nder Secreta}^{ry of the de}^partme^{nt or}
^{the Dep}^{uty Secretar}^{y or an a}^p^p^r^{opriate Under Secretar}^y^{agency re}^prese^{nted on t}^{he Com}^mittee.

^{of the depart}^{ment or age}^ncy^rep^{resented on t}^he
^{committee or by s}^uch^membe^{r (}^{or by a}^person^holding
^{an eq}^{uivalent position to a Deput}^{y Secretary or U}^nder
^Secretary).

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{National security invest}^igation.^{National security invest}^igation.
^{In eac}^{h case in}^{which a}^{review of}^{a covered transa}^ction^Same.
^{results in a deter}^{mination that:}
^{1) the tra}^{nsaction t}^hreate^{ns to impair the}^national^Same.
^{security of t}^{he United States and}^{that th}^{reat has}^not
^{been mitigated during or}^{prior to}^{the review or}
^{2) the tra}^{nsaction is a foreign}^governme^{nt-controlled}^Same.
^transaction;
^{No com}^para^{ble provision.}^{3) the tra}^{nsaction would res}^{ult in}^{control of any critical}
^infrastr^uctu^{re that}^{could impair the national secu}^{rity, and}
^{that suc}^{h impairme}^nt^{has not}^bee^{n mitigated by}
^assura^nces^{provided or renewed}^{during the}^review
^{period, the lead agency recomme}^{nds, and the}
^{Committee concurs, that}^{an inve}^{stigation be undertak}^en.
^{A roll call v}^{ote results in at least}^{1 vote by a}^Committee^{No com}^para^{ble provision.}
^{member again}^{st ap}^{proving t}^{he tr}^{ansaction; or}
^{The Director of National Intelligence identifies}^{No com}^para^{ble provision.}
^{particularly complex in}^{telligence concerns}^{that co}^uld
^threaten^{to impair the}^{national se}^{curity of the}^United
^{States and Committee membe}^rs^{were not able to}
^{develop and agree u}^{pon mea}^sure^{s to mitigate}
^{satisfactorily those threats d}^uring^{the initial review}
^{period, the President would be r}^{equired to conduct}^an
^{investigation of the effect}^{s of the}^{transaction on t}^he
^{national security of th}^{e United States and take a}^ny
^necessar^{y actions in con}^nection^{with the tra}^{nsaction to}
^{protect the}^{national secu}^{rity of t}^{he United States.}
^Timing.^Timing.
^{Any investigation must}^{be com}^{pleted before t}^{he end of}^Same.
^{the 4}^{5-day period begin}^{ning on t}^{he date of the}
^{investigation commenced.}
^{Extension of Time.}^{No com}^para^{ble provision.}

^{The period for any}^{investigation may be e}^xtended^{by th}^e
^{President or by a}^{roll call vote of}^{at least 2/3 of t}^he
^members^{of the Committee}^{by t}^{he amou}^{nt of time}
^{specified by t}^{he President or t}^he^{Committee at the time}
^{of the exte}^{nsion, not to exceed}⁴⁵^{days, in order to}
^{collect and fully evaluate informat}^{ion relating to the}
^{covered transaction or}^{parties to}^{the tra}^{nsaction; and}
^{any effe}^{ct of the}^transa^{ction that}^{could threaten to}
^{impair the national sec}^{urity of th}^{e United States.}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^Exception.^Exception.
^{An investigation of a foreign gove}^rnme^{nt-controlled}^{An investigation of a foreign gove}^rnme^{nt-controlled}
^{transaction is not re}^{quired if t}^he^{Secretary of the}^{transaction or a tra}^{nsaction involving critical}
^{Treasury, the}^{Secretary of}^Home^{land Security, and the}^infrastr^uctu^{re is not re}^{quired if t}^{he Secretary}^{of the}
^{Secretary of Commerce dete}^{rmine that t}^{he tra}^nsaction^{Treasury a}^{nd the}^{head of th}^{e lead agency jointly}
^{will not affect the national sec}^{urity of the United States}^{determine that t}^{he tra}^{nsaction wi}^{ll not impair the}
^{and no agreeme}^{nt or condition is req}^{uired to mitigate}^{national security of th}^{e United States.}
^{any th}^{reat to the}^{national securit}^{y (and suc}^{h aut}^{hority of}
^{each s}^{uch Secr}^{etary may}^{not b}^e^{delegated to any person}
^{other tha}^{n the}^Deput^{y Secretary}^{of the Treasu}^{ry, of}
^{Homeland Security, or of Commerce, respe}^ctively).
^{No com}^para^{ble provision.}^{Non-delegation of authority. Authority would be}
^{delegated only to the Deputy Sec}^{retary of t}^{he Treasu}^ry
^{or the dep}^{uty h}^{ead (or the e}^quiv^{alent thereof) of t}^he
^{lead agency, respectively.}
^Appr^{oval of}^Chairpers^on^and^{Vice Chairpers}^ons.^{No com}^para^{ble provision.}
^{A review or investigation can}^{not be treated as}^{final or}
^{complete until the}^{results of t}^he^{review or investigation}
^{are ap}^{proved by a}^{majority of the}^member^{s of the}
^{Committee in a roll call v}^{ote and signed by t}^{he Secretar}^y
^{of the Treasu}^{ry, the Sec}^{retary of}^{Homeland Security, and}
^{the Secretary}^{of Commerce.}
^{No com}^para^{ble provision.}^{Guidance o}ⁿ^{certain tra}^nsact^{ions with national}
^{security implications.}
^{The Chairpe}^{rson s}^{hall publish in}^{the Federal Register}
^{guidance on th}^{e type}^{s of tra}^nsact^{ions that the}
^{Committee has reviewed and t}^h^a^t^have^prese^nted
^{national security considerations, including tran}^sactions
^{that may con}^{stitute covered t}^ran^{sactions that would}
^{result in cont}^{rol of critical infrastructu}^{re relating to}
^{United States national security b}^y^{a foreign govern}^ment
^{or an entity cont}^{rolled by or acting on be}^{half of a foreign}
^government.
^{Additional action}^{required in}^{certain cases.}^{No com}^para^{ble provision.}

^{In the}^{case of a}^{ny roll call vote in connection with a}ⁿ
^{investigation of any foreign gover}^nment-cont^rolled
^{transaction in w}^{hich t}^{here is at le}^{ast 1 vote b}^y^a
^{Committee member against}^ap^pr^{oving the tra}^nsaction,
^{the investigation shall not be}^trea^{ted as final or complete}
^{until the findings a}^{nd re}^{port res}^{ulting from the}
^{investigation are signed by t}^{he Pr}^{esident (in addition to}
^{the Chairp}^{erson a}^{nd the Vice Ch}^{airpersons of t}^he
^Committee).

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Presidential action required in certain cases.}^{No com}^para^{ble provision.}
^{The President would be r}^e^q^{uired to approve a}^{nd sign t}^he
^{results of a re}^{view or investigation in an}^{y case in w}^hich
^{any pa}^{rty to the t}^ransa^{ction is:}
^{1) a per}^{son of a cou}^{ntry t}^{he gove}^rnme^{nt of which}^the
^{Secretary of State has}^determine^{d is a government}^that
^{has re}^{peatedly provided sup}^port^{for acts of inter}^national
^terrorism;
^{2) a governme}^{nt or}^person^contr^olled^{, directly or}
^{indirectly, by any s}^{uch gove}^rnme^nt.
^{No com}^para^{ble provision.}^{Certifications to Con}^gress.
^{Upon completion of a review t}^h^e^chairpe^{rson and t}^he
^{head of the lead agen}^{cy would be}^req^{uired to transmit a}
^{certified notice to specified members of Congr}^ess.
^{No com}^para^{ble provision.}^{Certified report after investi}^gation.
^{As soon as is practica}^{ble after co}^{mpletion of an}
^{investigation the chair}^{person a}ⁿ^d^{the head of t}^{he lead}
^{agency would be}^req^{uired to tran}^{smit to specified}
^members^{of Congress a}^{certified written re}^{port on th}^e
^{results of th}^{e investigation, unless}^{the matter}^u^nder
^{investigation has bee}^{n se}^{nt to the}^{President for decision.}
^{No com}^para^{ble provision.}^{Certification pro}^cedures.
^{Each c}^{ertified notice and re}^port^{would be req}^{uired to}
^{include 1) a description of t}^{he act}^{ions taken by}^the
^{Committee with respect to t}^{he t}^{ransaction; and}²⁾
^{identification of the determinative factors.}
^{No com}^para^{ble provision.}^{Content of}^{certification.}
^{Each c}^{ertified notice and re}^port^{would be req}^{uired to be}
^{signed by t}^{he chair}^person^{and th}^{e head of the lead}
^{agency, and s}^{hall state that, in the}^{determination of the}
^{Committee, there are no}^un^{resolved national security}
^concerns^{with the}^tran^{saction th}^{at is the su}^{bject of the}
^{notice or report.}
^{No com}^para^{ble provision.}^{Members of Co}^ngress.
^{Each c}^{ertified notice and re}^port^{would be req}^{uired to be}
^{transmitted to: 1) the}^{Majority Leader and the}^Minority
^{Leader of the Se}^{nate; 2) t}^{he chair}^{and ranking}^mem^{ber of}
^{the Committee on Banking, Hous}^{ing, and Urban}^Affairs
^{of the Senate a}^{nd of any}^{committee of the Senate}^having
^{oversight over the}^{lead agency; 3}⁾^{the Speaker a}^{nd the}
^{Minority Leader of the}^{House of}^{Representatives; a}^{nd 4)}
^{the chair a}^{nd ra}^{nking mem}^{ber of}^{the Committee on}
^{Financial Services of the House}^{of Represe}^{ntatives and of}
^{any committee of the}^{House of R}^eprese^{ntatives having}
^{oversight over the}^{lead agency.}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{No com}^para^{ble provision.}^{Transmittal to other Members of}^Con^gress.
^{The Majority Leader or the}^Mino^{rity Leader in t}^he
^{Senate, and the Speak}^{er or t}^{he M}^{inority Leader, in the}
^{House of Repre}^{sentatives, may}^p^{rovide the certified}
^{notices and report}^{s regarding a}^t^{ransaction involving}
^{critical infrastruct}^{ure: 1) in t}^{he ca}^{se of the Senate, to}
^members^{of the Se}^{nate from t}^he^{State in which s}^uch
^{critical infrastruct}^{ure is located; and 2) in t}^{he case of t}^he
^{House of Repre}^{sentatives, to a m}^ember^{from a}
^{Congressional District in which t}^{he critical infrastr}^uctu^re
^{is located.}
^{No com}^para^{ble provision.}^{Signatures, limit on delegati}^on.
^{Each c}^{ertified notice and re}^port^{must b}^e^{signed b}^y^the
^chairperso^{n and t}^{he h}^{ead of the l}^{ead agency, which}^may
^{only be delegated to an employe}^{e of the Depa}^rtment^of
^{the Treasu}^{ry (in t}^{he case of t}^{he S}^{ecretary of t}^he
^{Treasury) or to an}^{employee of t}^{he lead agency (in t}^he
^{case of the lead agen}^{cy) who was}^{appointed by}^the
^{President, by and with t}^{he advice}^{and conse}^{nt of the}
^{Senate, or only to a Deputy Secr}^{etary of the Tr}^easur^{y (in}
^{the case of t}^{he Secreta}^{ry of th}^e^{Treasury) or a}^person
^{serving in t}^{he Dep}^{uty position or}^{the eq}^{uivalent t}^hereof
^{at the lead agency (in t}^{he cas}^{e of}^{the lead agency).}
^{Analysis by director}^of^{national intell}^igence.^{Analysis by director}^of^{national intell}^igence.
^{The Director of National Intelligence would be}^req^uired^{The Director of National Intelligence would be}^req^uired
^{to expeditiously carry out a t}^hor^{ough analysis of an}^y^{to expeditiously carry out a t}^hor^{ough analysis of an}^y
^{threat to the}^{national secu}^{rity of}^{the United States of any}^{threat to the}^{national secu}^{rity of}^{the United States posed}
^{covered transaction, including ma}^{king req}^{uests for}^{by any}^{covered tra}^{nsaction. The}^{Director of National}
^{information to the Director of th}^{e Office of Foreign}^{Intelligence would be re}^{quired to}^{seek and incor}^porate
^{Assets Control within the De}^par^{tment of th}^{e Treasu}^ry^{the views of all affected or ap}^pro^{priate intelligence}
^{and the Director of t}^{he Financial}^{Crimes En}^forcement^{agencies with res}^{pect to t}^{he tra}ⁿ^saction.
^{Network. The Director of National Intelligence also}
^{would be req}^{uired to seek and in}^{corporate the}^{views of}
^{all affected or approp}^{riate intellig}^{ence age}^ncies.
^Timing.^Timing.
^{The Director of National Intelligence would be}^req^uired^{The analysis req}^{uired u}^{nder s}^u^b^p^aragrap^{h (A) must}^be
^{to provide adequate time to com}^{plete the a}^nalysis^{provided by the Director of}^{National Intelligence to the}
^required^under^su^bparag^rap^{h (A).}^{Committee not later than}^{20 day}^{s after t}^{he date on}
^{which notice of t}^{he tra}^{nsaction is accepted}^{by the}
^{Committee under}^paragra^{ph (}^{1)(C), but the Director}
^{may begin t}^{he analysis at a}^{ny tim}^{e prior to receipt of t}^he
^notice.
^{No com}^para^{ble provision.}^{Interaction with intelligence}^commu^nity.
^{The Director of National Intelligence would be}^req^uired
^{to ensure}^{that t}^{he intelligence co}^mmunity^remains
^{engaged in the}^{collection, analysis}^{, and dissemination to}
^{the Committee of any additional relevant information}
^{that may}^{become available during}^{the cour}^{se of an}^y
^{investigation.}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Independent role of the dire}^ctor.^{Independent role of the dire}^ctor.
^{The Director of National Intelligence s}^{hall not be a}^{The Director of National Intelligence s}^{hall be an}^ex
^member^{of the Committee and}^{shall serve no}^policy^officio^member^{of th}^{e Committee, and shall be}
^{role with the Committee other t}^{han to p}^{rovide analysis}^{provided with all notices received by the Committee}
^{in connection with a}^{covered tra}^nsaction.^{regarding covered tra}^{nsactions, b}^{ut shall serve}^{no policy}
^{role on the Committee, other th}^{an to provide analysis in}
^{connection with a cove}^{red transa}^ction.
^{Submission of}^{additional inf}^o^rmation.^{Submission of}^{additional inf}^o^rmation.
^{No provision of this su}^{bsection c}^{an be}^constr^{ued as}^Same.
^{prohibiting any}^party^{to a covere}^{d transaction from}
^{submitting additional information concerning}^the
^{transaction, including any}^propos^{ed restruct}^{uring of}^the
^{transaction or a}^{ny modifications to any agreeme}^{nts in}
^{connection with t}^{he tra}^{nsaction, while any review or}
^{investigation of the tran}^{saction is on-going.}
^{No com}^para^{ble provision.}^{Notice of results.}
^{The Committee would be req}^uir^{ed to notify the pa}^rties
^{to a covered transaction of t}^{he r}^{esults of a review or}
^{investigation, promptly upon}^com^{pletion of all action.}
^Regulations.^Regulations.
^{Regulations prescribed}^under^this^{section shall include}
^{standard proced}^{ures for:}
^{A) submitting an}^{y notice of a}^{proposed or pending}^Same.
^{covered transaction to t}^{he Committee;}
^{B) submitting a re}^que^{st to withdr}^{aw a proposed or}^Same.
^{pending covered t}^ransaction^{from review; and}
^{C) resubmitting a}^{notice of prop}^{osed or pending covered}^Same.
^{transaction that}^{was p}^{reviously w}^{ithdrawn from}^review.
^{No com}^para^{ble provision.}^{D) providing notice of the res}^{ults of a review or}
^{investigation to the parties to th}^e^{covered transa}^ction,
^{upon com}^{pletion of all action under this section.}
The Committee on Foreign Investment in the United States (CFIUS) was created by Executive ²³
Order of President Ford in 1975 to serve the President in overseeing the national security
implications of foreign investment in the economy. President Ford’s 1975 Executive Order ²⁴
established the basic structure of CFIUS, and directed that the “representative” of the Secretary
of the Treasury be the chairman of the Committee. The Executive Order also stipulated that the
Committee would have “the primary continuing responsibility within the Executive Branch for
monitoring the impact of foreign investment in the United States, both direct and portfolio, and ²⁵
for coordinating the implementation of United States policy on such investment.” Presently, the

²³^Ex^e^c^u^tiv^e^O^r^de^r¹¹⁸⁵⁸⁽^b⁾^,^Ma^y^{7, 1}⁹⁷⁵^,⁴⁰^F.R^.²⁰²^63.
²⁴^T^h^e^te^r^m^“^r^e^p^r^e^s^e^nta^tiv^e”^w^a^s^dr^oppe^{d by}^Ex^e^c^u^tiv^e^O^r^de^r¹²⁶⁶¹^,^D^e^c^e^m^b^e^r^{27, 1}⁹⁸⁸^,⁵⁴^F.R^.⁷^80.
²⁵^Ex^e^c^u^tiv^e^O^r^de^r¹¹⁸⁵⁸⁽^b⁾^,^Ma^y^{7, 1}⁹⁷⁵^,⁴⁰^F.R^.²⁰²^63.

Committee consists of twelve members, including the Secretaries of State, the Treasury, Defense,
Homeland Security, and Commerce; the United States Trade Representative; the Chairman of the
Council of Economic Advisers; the Attorney General; the Director of the Office of Management
and Budget; the Director of the Office of Science and Technology Policy; the Assistant to the ²⁶
President for National Security Affairs; and the Assistant to the President for Economic Policy.
Both H.R. 556 and S. 1610 establish the members of CFIUS as a matter of statute, compared with
the present situation in which CFIUS is a creation of various presidential orders. Under the House
measure, CFIUS would have included the same twelve members that currently constitute the
Committee, and it would have added the Secretary of Energy to CFIUS. S. 1610, includes the
same cabinet members as currently included as members of CFIUS, but it does not include the
other seven members of the Administration. In addition, the Senate measure adds the Secretary of
Labor and the Director of National Intelligence as ex officio members. In both measures, the
Secretary of the Treasury would continue to serve as the Chairperson of the Committee, but the
House measure would have created a new Vice Chairperson position that would have been held
by the Secretary of Homeland Security and the Secretary of Commerce. The Senate measure
requires that a particular member of CFIUS be designated as the lead agency in cases in which a
mitigation agreement has been negotiated or in those cases in which CFIUS has determined to
monitor the conditions agreed to as part of a mitigation agreement to ensure that the conditions
are being met. The House measure would have empowered the Committee to “take such
testimony, receive such evidence, administer such oaths,” in order to carry out a review or
investigation. The House measure also would have empowered the Committee to require the
attendance and testimony of “such witnesses and production of such books, records,
correspondence memoranda, papers, and documents” as the Chairperson of the Committee
determined to be “advisable.”
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Statutory establishmen}^{t of the Committee on}^{Statutory establishmen}^{t of the Committee on}
^{Foreign Investment in the United Stat}^es.^{Foreign Investment in the United Stat}^es.
^{Section 721 of t}^{he Defe}^{nse Prod}^{uction Act of 1}⁹⁵⁰⁽⁵⁰^Same.
^U.S.C^{. App. 217}^{0) is amended}
^{Establishment.}^{Establishment.}
^{The Committee on Foreign Inve}^s^{tment in t}^{he United}^Same.
^{States established p}^ursua^{nt to E}^x^{ecutive Order}^No.
¹¹⁸⁵⁸^{shall be a}^{multi-agency co}^{mmittee to carry out}
^{this section and s}^{uch ot}^{her assign}^{ments as t}^{he President}
^{may designate.}

²⁶^Ex^e^c^u^tiv^e^O^r^de^r¹¹⁸⁵⁸^of^Ma^y^{7, 19}⁷⁵^{, 4}⁰^F.R^.²⁰²⁶^{3 e}^s^ta^blis^he^d^the^C^o^m^m^itte^e^w^{ith s}ⁱ^x^m^e^m^b^e^r^{s: the}^Se^c^r^e^t^a^r^ie^s
^o^f^S^t^at^e,^t^h^{e T}^r^easu^r^y^,^De^f^eⁿ^s^e,^aⁿ^d^C^o^mm^er^ce,^an^d^t^h^{e A}^ssi^st^an^t^t^o^t^h^e^P^r^esi^d^en^t^f^o^{r E}^c^oⁿ^o^mⁱ^c^Affai^r^s,^an^d^t^h^e
^Ex^e^c^u^tiv^e^Dⁱ^r^e^c^t^or^of^the^C^o^uⁿ^cⁱ^l^on^Iⁿ^te^rⁿ^a^tⁱ^ona^l^Ec^on^om^ic^P^o^lic^y^.^Exe^c^u^tiv^e^O^r^de^r¹²¹^88,^J^a^nua^r^y^{2, 198}^0,⁴⁵^F.R^.
⁹⁶⁹^{, a}^d^de^{d t}^h^e^Uⁿ^ite^{d Sta}^t^e^s^T^r^a^d^e^R^e^pr^e^s^eⁿ^ta^tiv^e^a^{nd s}^ubs^ti^tute^d^t^h^e^C^h^aⁱ^r^m^aⁿ^of^the^C^o^uⁿ^c^il^of^Ec^onom^ic^A^d^vⁱ^s^o^r^s
^f^o^r^the^Ex^e^c^u^tiv^e^Dⁱ^r^e^c^t^or^of^the^C^ounc^il^oⁿ^Iⁿ^te^rⁿ^a^tio^na^{l Ec}^o^nom^ic^Polic^y^.^Ex^e^c^u^tiv^e^O^r^de^r¹²⁶⁶^1,^D^e^c^e^m^b^e^r^27,
¹⁹⁸^8,⁵⁴^F.R^.⁷^79,^a^dde^{d t}^h^e^A^ttorⁿ^e^y^G^e^ne^r^a^{l a}^{nd the}^Dⁱ^r^e^c^t^or^of^t^h^e^O^f^fⁱ^c^e^of^Ma^na^gem^e^{nt a}^{nd B}^u^dg^e^t^{. Ex}^e^c^u^tiv^e
^O^r^de^r¹²⁸⁶^0,^Se^pte^m^be^r^{3, 1}⁹⁹³^,⁵⁸^F.R^.⁴⁷²⁰^{1, a}^d^de^d^the^Dⁱ^r^e^c^t^o^r^of^the^O^f^fⁱ^c^e^of^Sc^ie^nc^e^a^{nd T}^e^chno^log^y^P^o^lic^y^,
^the^A^ssistaⁿ^{t to the}^Pre^s^ideⁿ^{t f}^o^r^Na^tiona^{l Se}^c^u^ri^ty^Aff^a^{irs, a}^{nd the}^A^ssistaⁿ^t^{to the}^P^r^e^s^ideⁿ^{t f}^o^{r Ec}^o^nom^ic^Polic^y^.
^Ex^e^c^u^tiv^e^O^r^de^r¹³²^86,^Se^c^tio^{n 5}⁷^{, Fe}^b^r^ua^r^y^{28, 2}⁰⁰³^a^d^de^d^the^S^e^c^r^e^t^a^r^y^o^f^H^o^m^e^la^{nd Se}^c^u^r^ity^.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^Membership.^Membership.
^{The Secretary of t}^{he Treas}^ury.^Same.
^{The Secretary of}^{Homeland Secu}^rity.^Same.
^{The Secretary of Comme}^rce.^Same.
^{The Secretary of Defe}^nse.^Same.
^{The Secretary of State.}^Same.
^{The Attorney}^Gene^ral.^Same.
^{The Secretary of}^Ene^rgy.^Same.
^{The Chairman of}^{the Cou}^{ncil of Economic Advisors.}^{The Secretary of}^{Labor (ex}^officio).
^{The United States Trade Represe}^ntative.^{The Director of National Intelligence (ex officio).}
^{The Director of the O}^{ffice of Ma}^{nagement a}^{nd Budget.}^{The heads of a}^{ny other}^exec^utive^departme^{nt, agency, or}
^{The Director of the}^{National Economic Council.}^{office, as the President determin}^e^s^app^{ropriate, generally}
^{The Director of the O}^{ffice of Science and Tec}^hnology^{or on a case-by-case}^basis.
^Pol^icy.
^{The President’s Assistant for}^Nat^{ional Security Affairs.}
^{Any other design}^{ee of the}^{President from t}^{he E}^xec^utive
^{Office of the P}^resident.
^Chairperso^n.^Chairperso^n.
^{The Secretary of t}^{he Treas}^ury^sh^{all be the Chairp}^erson^Same.
^{of the Committee.}
^{The Secretary of}^{Homeland Secu}^{rity and the Sec}^{retary of}^{No com}^para^{ble provision.}
^{Commerce shall be t}^{he Vice Chai}^rperson^{s of the}
^Committee.
^{No com}^para^{ble provision.}^{Designation of lead agen}^cy.
^{The Secretary of t}^{he Treas}^{ury w}^{ould be req}^{uired to}
^{designate another}^membe^{r or m}^{embers, as a}^p^p^ropriate,
^{of the Committee to be t}^{he lead agency or age}^{ncies on}
^{behalf of t}^{he Committee:}
^{A) for each tra}^{nsaction, and for}ⁿ^{egotiating any}
^mitigati^{on agreements}^{or other}^c^{onditions necessary to}
^{protect national sec}^{urity; and}
^{B) for all matters related to the}^{monitoring of the}
^{completed transaction, to ens}^ure^{compliance with su}^ch
^{agreements or}^conditions.
^{Other members.}^{Other members.}
^{The Chairpe}^{rson of th}^{e Committee would be re}^quired^{The chairpe}^{rson would be}^req^uir^{ed to consult with the}
^{to involve the heads of s}^{uch ot}^he^{r Federal departme}^nts,^{heads of suc}^{h othe}^{r Federal depa}^{rtments, agen}^{cies, and}
^{agencies, and indepe}^{ndent esta}^blishment^{s in an}^{y review}^independent^establishme^{nts in a}ⁿ^y^{review or}
^{or investigation under s}^ubs^{ection (b) as the C}^hairper^son,^{investigation under s}^ubse^{ction (a), as the chair}^person
^{after cons}^{ulting with the}^{Vice Ch}^{airpersons, determines}^{determines to be a}^p^p^{ropriate, on}^{the ba}^{sis of the fa}^cts
^{to be ap}^{propriate on t}^he^{basis of}^{the facts a}^nd^{and circumsta}^{nces of t}^{he t}^ransact^{ion under re}^{view or}
^circumstan^{ces of t}^{he tra}^nsaction^{under inv}^{estigation (or}^{investigation (or the designee of}^{any su}^{ch de}^partme^{nt or}
^{the designee of a}^{ny s}^{uch de}^partm^{ent or agen}^{cy head).}^{agency head).}
^Mee^tings.^Mee^tings.
^{The Committee shall meet u}^pon^{the direction of the}^Same.

^{President or upo}^{n the}^{call of the}^Chairperson^{of the}
^{Committee without regard to se}^{ction 552}^{b of title 5,}
^{United States Code (if otherwise applicable).}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Collection of evidence.}^{No com}^para^{ble provision.}
^{The Committee may, for the}^pu^r^{pose of carrying}^{out this}
^section:
^{A) sit and act at suc}^{h times a}^{nd p}^{laces, take such}
^{testimony, receive suc}^{h evidence,}^{administer suc}^{h oaths;}
^and
^{B) require t}^{he attenda}^{nce a}^{nd tes}^{timony of such}
^{witnesses and t}^he^{production of}^such^{books, records,}
^corresponde^{nce, memoranda, pa}^{pers, and docume}^{nts as}
^{the Chairp}^{erson of t}^{he Committee may determine}
^advisable.
^{Authorization of}^a^ppr^opriations.^{No com}^para^{ble provision.}
^{There are a}^{uthorized to be a}^ppr^{opriated to the}
^{Secretary of the}^Treasu^{ry for eac}^{h of fiscal years}²⁰^08,
²⁰⁰^{9, 2}⁰¹^{0, and 2}⁰¹¹^e^xpre^{ssly a}^{nd solely for the}
^{operations of the Committee t}^h^a^t^{are conducted}^{by t}^he
^{Secretary, the s}^{um of}^$1^0,00^0,00^0.
H.R. 556 would have left unaltered the current Exon-Florio provision, which granted the
President the authority to “take such action for such time as the President considers appropriate to
suspend or prohibit” any acquisition, merger, or takeover by a foreign entity of “persons engaged
in interstate commerce in the United States” that threaten to impair the national security. The
Senate measure empowers the President to take such action as the President considers appropriate
concerning “any covered transaction by or with a foreign person or government” that threatens to
impair the national security of the United States. Both measures follow the current procedure,
which requires the President to announce his decision within 15 days after CFIUS completes its
investigation of a proposed transaction. Both measures also follow current statute, which grants
the President the authority to direct the Attorney General to seek appropriate relief, including
divestment relief, in the district courts of the United States in order to implement and enforce this
decision by the President.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{No com}^para^{ble provision.}^{Action by the President.}
^{The President may take}^suc^{h acti}^{on for suc}^{h time as t}^he
^{President considers ap}^{propriate t}^o^suspe^{nd or pro}^hibit
^{any covered tra}^nsaction^{by or wi}^{th a foreign}^person^or
^government^{that t}^hreate^{ns to im}^{pair the}^{national security}
^{of the United States.}
^{No com}^para^{ble provision.}^Anno^{uncement by the President.}
^{The President mu}^{st an}^noun^{ce th}^{e decision on whethe}^r
^{or not to take action not later th}^{an 1}⁵^{days afte}^{r the}
^{date on which a}ⁿ^{investigation is}^completed.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{No com}^para^{ble provision.}^Enfo^rcement.
^{The President may direct t}^{he Att}^{orney Ge}^{neral of th}^e
^{United States to seek app}^ropriat^{e relief, including}
^{divestment relief, in the district c}^{ourts of the}^United
^{States, in order to implement an}^{d enforce t}^his
^subsec^tion.
^{No com}^para^{ble provision.}^{Findings of the President.}
^{The President may e}^{xercise t}^{he a}^{uthority confe}^{rred b}^y
^paragra^{ph (1), only if the}^{President finds t}^hat:
^{A) there is credible evidence}^that^{leads the President to}
^{believe that the}^{foreign inter}^{est e}^{xercising control might}
^{take action that t}^hreaten^{s to imp}^{air the national sec}^urity;
^and
^{B) provisions of law, other than t}^{his section and th}^e
^Inter^{national Emerge}^ncy^Econom^{ic Powers Act, do not,}
^{in the judgme}^{nt of the P}^{resident, provide adequate a}^nd
^approp^{riate aut}^{hority for the Pr}^e^{sident to protect the}
^{national security in t}^{he matter}^be^{fore the President.}
^{No com}^para^{ble provision.}^{Factors to be}^considered.
^{For pur}^{poses of determining}^whe^{ther to take action, the}
^{President shall consider, among other factor}^{s each}^{of the}
^{factors described in t}^{his meas}^ure.
Both measures leave unchanged the current Exon-Florio provision, which grants the President the
authority to block proposed or pending foreign acquisitions of “persons engaged in interstate
commerce in the United States” that threaten to impair the national security. Congress directed,
however, that before the President can invoke this authority he must believe that the case meets
two tests, or findings. First, he must believe that other U.S. laws are inadequate or inappropriate
to protect the national security. Secondly, he must have “credible evidence” that the foreign
investment will impair the national security. S. 1610 also indicates that the findings of the
President are not subject to any judicial review.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{No com}^para^{ble provision.}^{Actions an}^{d fin}^{dings n}^{onreviewable.}
^{The actions of the Pre}^{sident u}^{nder this s}^{ubsection a}^nd
^{the findings of t}^{he President a}^re^{not subject to judicial}
^review.
As it was written, the Exon-Florio provision included a list of five factors the President may have
considered in deciding to block a foreign investment. These factors were also considered by the

individual members of CFIUS as part of their own review process to determine if a particular
transaction threatens to impair the national security. This list included the following elements:
⁽¹⁾^d^o^m^e^{stic p}^r^o^d^u^ctioⁿⁿ^eed^e^d^f^o^r^p^r^o^j^ectedⁿ^a^tioⁿ^a^{l d}^e^f^eⁿ^s^{e r}^e^q^u^ir^e^m^en^t^s^;
⁽²⁾^th^{e cap}^ab^ility^an^d^cap^acit^y^o^f^d^o^m^e^s^{tic in}^d^u^strⁱ^e^s^to^m^{eet n}^a^tioⁿ^a^{l d}^e^f^eⁿ^s^{e r}^e^q^uⁱ^r^em^en^t^s^,
ⁱⁿ^cl^u^dⁱⁿ^g^t^h^{e av}^ai^lab^ilit^y^o^f^h^u^m^aⁿ^r^e^so^u^r^{ces, p}^r^o^d^u^{cts, tec}^hⁿ^o^lo^g^y^,^m^a^terⁱ^{als, a}ⁿ^d^o^t^h^e^r
^su^p^p^{lies a}ⁿ^d^ser^v^ice^s^;
⁽³⁾^t^h^e^c^oⁿ^t^r^o^l^o^f^d^o^m^e^s^tⁱ^cⁱⁿ^d^u^s^t^rⁱ^e^s^aⁿ^d^c^o^m^m^e^r^cⁱ^a^l^a^c^tⁱ^vⁱ^t^y^b^y^f^o^r^e^igⁿ^citizeⁿ^s^as^it^af^f^ect^s
^th^{e cap}^ab^ilit^y^aⁿ^d^cap^acit^y^o^f^th^{e U.S. to}^m^{eet t}^h^{e r}^e^q^u^ir^e^m^eⁿ^{ts o}^fⁿ^a^tioⁿ^a^{l sec}^u^rⁱ^t^y^;
^{(4) th}^{e poten}^{tial eff}^ects^of^t^h^e^tran^s^actions^on^t^h^{e s}^a^le^s^of^m^ilitar^y^g^oods^{, equ}ⁱ^p^m^eⁿ^{t, or}
^techⁿ^o^lo^gy^{to a coun}^tr^y^as^iden^ti^fⁱ^{ed b}^y^t^h^{e Secretar}^y^of^State^s^un^{der th}^{e E}^x^port
^A^d^mⁱⁿⁱ^s^t^ratⁱ^oⁿ^A^c^t^t^h^at^su^pport^s^t^e^rrori^s^m^{or un}^{der t}^h^e^N^u^cl^{ear N}^oⁿ^-^Prolⁱ^f^eratⁱ^on^A^c^t^t^h^at
^prolⁱ^f^erat^es^mⁱ^s^sⁱ^l^e^t^e^c^hⁿ^o^l^ogy^{or ch}^e^mⁱ^c^a^l^an^{d bi}^ol^ogⁱ^cal^w^eapons^;^an^d
^{(5) th}^{e poten}^{tial ef}^f^ect^s^of^th^{e t}^r^an^s^action^on^U.^{S. tec}^hⁿ^o^lo^gⁱ^c^a^{l lead}^er^sh^{ip in}^areas^aff^e^c^tⁱⁿ^g
^{U.S. n}^a^tioⁿ^a^l^secu^rⁱ^t^y^.
Both H.R. 556 and S. 1610 amend the current factors the President and the Committee use to
evaluate mergers, acquisitions, or takeovers. In particular, the measures changed the status of the
factors to be considered from being discretionary (may) to being required (shall) in evaluating a
transaction. The Senate measure adds transactions identified under the fourth factor by the
Secretary of Defense as “posing a regional military threat” to the interests of the United States.
Also, H.R. 556 would have added four more factors to the five that currently exist. These new
factors are:
^{(1) w}^h^et^h^e^{r th}^{e tran}^s^a^c^tion^has^{a s}^ecu^rit^y^-^r^elat^{ed i}^m^{pact o}ⁿ^{critical inf}^r^as^tr^u^c^tu^{re i}ⁿ^th^e
^Un^ited^State^s^;
^{(2) th}^{e poten}^{tial ef}^f^ect^s^of^th^{e t}^r^an^s^action^on^t^h^{e eff}^o^rts^of^t^h^{e Un}^{ited State}^s^{to cu}^{rtail h}^u^m^aⁿ
^s^m^u^gglⁱⁿ^{g a}ⁿ^d^t^o^c^u^r^t^aⁱ^l^d^r^u^g^s^m^u^gglⁱⁿ^g.
⁽³⁾^w^h^e^t^he^r^t^h^e^eⁿ^tⁱ^t^{y i}ⁿ^vo^l^v^e^dⁱ^s^b^eⁱ^{ng c}^o^nt^r^o^l^l^e^d^b^y^a^fo^r^eⁱ^gn^go^ve^rⁿ^m^e^nt^;
^{(4) an}^{d s}^u^ch^oth^e^{r f}^actors^as^{the P}^r^es^iden^{t or h}ⁱ^s^desⁱ^gⁿ^ee^“m^a^y^deter^mⁱⁿ^{e to be ap}^pro^p^riate,
^g^eⁿ^e^rall^y^{or in}^conn^ection^wⁱ^t^h^{a s}^p^ecifⁱ^{c re}^vⁱ^e^w^{or tran}^s^acti^oⁿ^.^”
S. 1610 adds seven new factors to the five that currently exist. These new factors are:
^{(1) w}^h^et^h^e^{r th}^{e tran}^s^a^c^tion^has^{a s}^ecu^rit^y^-^r^elat^{ed i}^m^{pact o}ⁿ^{critical inf}^r^as^tr^u^c^tu^{re i}ⁿ^th^e
^Un^ited^State^s^;
^{(2) th}^{e poten}^{tial eff}^ect^s^on^Uⁿ^{ited State}^s^{critical i}ⁿ^f^r^as^tru^c^tu^{re, in}^cl^u^dⁱⁿ^g^m^a^j^o^{r en}^erg^y
^assets^;
⁽³⁾^th^{e p}^o^t^en^{tial ef}^f^{ects o}ⁿ^Uⁿ^ited^{States cr}^{itical tec}^hⁿ^o^lo^gⁱ^e^s^;
⁽⁴⁾^w^h^et^h^e^r^th^{e tr}^an^sactioⁿ^is^{a f}^o^r^e^igⁿ^g^o^v^e^rⁿ^m^eⁿ^t^-^c^oⁿ^t^r^o^lled^tr^an^sactioⁿ^;
⁽⁵⁾ⁱⁿ^t^h^o^s^e^c^a^s^e^sⁱ^nvo^l^vⁱ^ng^a^go^ve^rⁿ^me^nt^-c^oⁿ^t^r^o^l^l^e^d^t^r^aⁿ^sa^c^tⁱ^o^n,^a^r^e^vi^e^w^o^f⁽^A⁾^t^h^e
^ad^h^e^r^eⁿ^{ce o}^f^th^e^f^o^r^e^igⁿ^co^uⁿ^tr^y^toⁿ^oⁿ^p^r^o^lif^er^atioⁿ^coⁿ^t^r^o^{l r}^e^gⁱ^m^e^{s, (}^B⁾^th^{e f}^o^r^e^igⁿ

^co^uⁿ^t^r^y^’^s^r^eco^r^d^oⁿ^co^o^p^er^atin^gⁱⁿ^co^uⁿ^ter^-^ter^r^o^r^is^m^e^f^f^o^r^t^{s, (}^C⁾^th^{e p}^o^t^en^tial^f^o^r
^tr^an^ss^hⁱ^p^m^en^{t o}^r^dⁱ^v^e^r^s^ioⁿ^o^f^t^echⁿ^o^lo^gⁱ^es^wⁱ^t^h^m^ilitar^y^ap^p^licatioⁿ^s^;
⁽⁶⁾^th^{e lo}ⁿ^g^-^t^er^m^p^r^o^j^ectioⁿ^o^f^t^h^{e U}ⁿ^ited^State^s^r^e^q^u^ir^e^m^eⁿ^ts^f^o^r^so^u^r^ce^{s o}^f^eⁿ^er^g^y^aⁿ^d
^oth^e^{r critical res}^o^u^r^ces^an^d^m^a^terials^;^an^d
⁽⁷⁾^su^ch^o^t^h^e^r^f^a^c^t^o^r^{s as th}^{e P}^r^esid^en^{t o}^r^th^{e Co}^m^m^{ittee d}^e^te^r^mⁱⁿ^{e to}^b^e^ap^p^r^o^p^r^iate.
Both bills make the United States immune from any liability for any losses or expenses incurred
by the parties to an investment transaction as a result of actions taken by CFIUS if the entities do
not submit a written notification to CFIUS or if the transaction is completed prior to the
completion of a CFIUS review or investigation.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Additional fa}^ctors^{required to be c}^onsidered.^{Additional fa}^ctors^{required to be c}^onsidered.
^Sect^{ion 721(f) of t}^{he Defe}^{nse Pr}^{oduction Act of 19}⁵⁰^{Section 721(f) of t}^{he Defe}^{nse Pr}^{oduction Act of 19}⁵⁰
^{(50 U.S.C. App. 217}^{0(f)) is amend}^{ed by making t}^he^{(50 U.S.C. App. 217}^{0(f)) is amend}^{ed by adding}
^{factors mandatory a}^{nd by}^{adding the following factors to}
^{be considered:}
^{No com}^para^{ble provision.}^{B) identified by the Secretary of}^{Defense as}^{posing a}
^{potential regional military threat to the interests}^{of the}
^{United States;}

^{6) whet}^{her t}^{he covered tra}^nsacti^{on has a se}^curity-^Same.
^{related impact on critical infrastr}^uctur^{e in th}^{e United}
^States;
^{7) the}^{potential effects of t}^{he cov}^{ered transaction on}^the^{7) the}^{potential effects on}^{United States critical}
^{efforts of the}^{United States to cu}^{rtail human}^smuggling^infrastr^uctu^{re, including major en}^{ergy assets;}
^{and to curtail drug sm}^{uggling with regard to a}^{ny cou}^ntry^{8) the}^{potential effects on}^{United States critical}
^{which is not descri}^{bed in pa}^ragra^{phs (}^{1) and (2) of}^{technologies;}
^{section 10}^{03(a) of the}^{Controlled Substance}^{s Im}^{port and}^{9) whet}^{her t}^{he covered tra}^nsacti^{on is a foreign}
^Export^Act;^{government-cont}^{rolled transaction, as determined u}^nder
^{8) whet}^{her t}^{he covered tra}^nsacti^{on is a foreign}^subsec^{tion (b)(1)(B);}
^{government-cont}^{rolled transaction; and}^{10) with r}^espect^{to transac}^{tions requiring a}ⁿ
^{9) suc}^{h other}^{factors as t}^{he Presi}^{dent or the Pre}^sident’s^{investigation under s}^ubse^{ction (b}^{)(1)(B) only, a review of}
^{designee may determine}^{to be ap}^{propriate, generally or}^{the cu}^rre^{nt assess}^{ment of:}
^{in connection with a}^{specific re}^{view or investigation.}^{A) the adhere}^{nce of t}^{he s}^{ubject c}^{ountry to}
^{nonproliferation control regimes, including treaties and}
^{multilateral supply guidelines, which shall draw on, b}^ut
^{not be limited to, the annual r}^e^p^{ort on ‘Adherence}^to
^{and Compliance with Arms}^Cont^{rol, Nonproliferation}
^{and Disarmament Agr}^eement^{s an}^{d Commitments’}
^required^{by section}⁴⁰^{3 of th}^{e A}^{rms Control and}
^{Disarmament Act;}
^{B) the relationship of s}^uch^count^{ry with the}^United
^{States, specifically on its record on cooperating in}
^counter-ter^{rorism efforts, whic}^h^{shall draw on, but}^not
^{be limited to, the report of the P}^{resident to Congress}
^{under s}^{ection 71}²⁰^{of the}^{Intelligence Reform a}^nd
^{Terrorism Prevention Act of}²⁰⁰^{4; and}
^{C) the potential for tra}^nsshi^pmen^{t or diversion of}
^{technologies with military applications, including an}
^{analysis of national export co}^{ntrol laws and regulations;}
^{11) th}^{e long-term p}^{rojection of United States}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^requirem^ents^{for source}^{s of ene}^r^{gy and other}^critical
^{resources a}^{nd material; and}
^{12) s}^{uch oth}^{er factors}^{as th}^{e Pre}^{sident or the}
^{Committee may determine to be}^appro^{priate, generally}
^{or in connection with a}^{specific r}^{eview or investigation.}
The Exon-Florio provision codified confidentiality requirements that are similar to those that
appeared in Executive Order 11858 by stating that any information or documentary material filed
under the provision may not be made public “except as may be relevant to any administrative or ²⁷
judicial action or proceeding.” The provision does state, however, that this confidentiality
provision “shall not be construed to prevent disclosure to either House of Congress or to any duly
authorized committee or subcommittee of the Congress.” The Exon-Florio provision requires the
President to provide a written report to the Secretary of the Senate and the Clerk of the House
detailing his decision and his actions relevant to any transaction that was subject to a 45-day ²⁸
investigation. As presently written, there is no requirement for CFIUS or the President to notify
or otherwise inform Congress of cases it reviews or of the outcome of any investigation.
Both H.R. 556 and S. 1610 provide for the release of proprietary information “which can be
associated with a particular party” to committees only with assurances that the information would
remain confidential. Members of Congress and their staff members are accountable under current
provisions of law governing the release of certain types of information.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Confidentiality provisions.}^{Confidentiality provisions.}
^{The disclosure of information u}ⁿ^{der this su}^{bsection s}^hall^Same.
^{be consistent}^{with the}^re^quireme^{nts of su}^{bsection (c).}
^Membe^{rs of Congres}^{s and staf}^{f o}^f^{either Ho}^{use or an}^y
^{committee of the Congress}^{shall be su}^{bject to the}^same
^limitat^{ions on disclosure of information as are ap}^plicable
^{under s}^u^c^h^su^bsection.
Since the implementation of the Exon-Florio provision, CFIUS has developed several practices
that likely were not envisioned when the statute was drafted. For instance, members of CFIUS
negotiate conditions with firms at times either to mitigate or to remove matters that raise national
security concerns among the members of CFIUS. Such agreements often are informal
arrangements that have an uncertain basis in statute and have not been tested in court. These

²⁷^{50 U}^.^S.C^.^A^ppe^ndix^Se^c^.²¹⁷⁰⁽^c⁾^.
²⁸^{50 U}^.^S.C^.^A^ppe^ndix^Se^c^.²¹⁷⁰⁽^g⁾^.

arrangements have been negotiated during the formal 30-day review period, or even during an
informal process prior to the formal filing of a notice of an investment transaction.
H.R. 556 and S. 1610 address one concern about CFIUS’s actions by granting CFIUS and a
designated lead agency the authority to negotiate, impose, or enforce any agreement or condition
with the parties to a transaction in order to mitigate any threat to the national security of the
United States. Such agreements are to be based on a “risk-based analysis” of the threat posed by
the transaction. Also, if a notification of a transaction is withdrawn before any review or
investigation by CFIUS can be completed, the Committee the authority to take a number of
actions. In particular, the Committee can develop (1) interim protections to address specific
concerns about the transaction pending a re-submission of a notice by the parties; (2) specific
time frames for re-submitting the notice; and (3) a process for tracking any actions taken by any
party to the transaction. The federal entity or entities involved in any mitigating agreement must
report to CFIUS on any modification to any agreement or condition that had been imposed and
must ensure that “any significant” modification is reported to the Director of National
Intelligence and to any other federal department or agency that “may have a material interest in
such modification.” Such reports must also be filed with the Attorney General.
In addition, CFIUS is required to develop a method for evaluating the compliance of firms that
had entered into a mitigation agreement or condition that was imposed as a requirement for
approval of the investment transaction. Such measures, however, would be required to be
developed in such a way that they would allow CFIUS to determine that compliance is taking
place without also: 1) “unnecessarily diverting” CFIUS resources from assessing any new
covered transaction for which a written notice had been filed; and 2) placing “unnecessary”
burdens on a party to a investment transaction.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^Mitigat^{ion and tra}^cking.^Mitigat^{ion and tra}^cking.
^Mitigat^ion.^Mitigat^ion.
^{The Committee or any age}^{ncy de}^{signated by t}^he^{The Committee or a lead agency}^{may negotiate, enter}
^Chairperson^{and Vice Chairpe}^{rsons may}^{negotiate, enter}^{into or impose, and enforce a}^ny^{agreement or}^condition
^{into or impose, and enforce a}^ny^{agreement or}^condition^{with any}^{party to t}^{he covered tra}^{nsaction in order to}
^{with any}^{party to a cover}^{ed trans}^{action in order to}^{mitigate any threat to t}^{he nationa}^{l security of the}^United
^{mitigate any threat to t}^{he nationa}^{l security of the}^United^{States that arises as a}^res^{ult of th}^{e covered transa}^ction.
^{States that arises as a}^res^{ult of th}^{e transaction.}
^{Risk-based analysis.}^{Risk-based analysis.}
^{Any agreeme}^{nt e}^{ntered into or c}^{ondition imposed under}^Same.
^sub^paragra^{ph (A) s}^{hall be based}^{on a risk-based analysis,}
^{conducted by}^{the Committee, of}^{the th}^{reat to national}
^{security of t}^{he covered tra}^nsacti^on.
^{Tracking a}^uthority.^{Tracking a}^uthority.
^{If any}^written^{notice of a covered}^{transaction t}^{hat was}^Same.

^{submitted to the Committee is w}^{ithdrawn be}^{fore any}
^{review or investigation by t}^{he Committee is completed,}
^{the Committee would be re}^quire^{d to establish, as}
^approp^riate-
^{1) interim p}^{rotections to address specific concer}^{ns with}
^{such t}^ransa^{ction that}^{have b}^een^r^{aised in connection}
^{with any s}^uch^{review or investiga}^{tion pending an}^y

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^resu^{bmission of any w}^{ritten notic}^{e under}^{this section}
^{with respe}^{ct to suc}^{h tra}^nsaction^{and furt}^her^{action by}
^{the President}^{under t}^{his section;}
^{2) specific time fra}^{mes for}^resu^b^{mitting any su}^{ch w}^ritten
^{notice; and}
^{3) a process}^{for tracki}^{ng any a}^{ctions that may}^{be take}ⁿ
^{by any}^part^{y to the t}^{ransaction, in conne}^{ction with the}
^{transaction, before t}^he^{notice ref}^{erred to in clause (2) is}
^resu^bmitted.
^{Designation of a}^gency.^{Designation of a}^gency.
^{The Committee may designate 1}^{or more app}^ropriate^{The lead agency, other t}^{han a}^ny^{entity of the intelligence}
^{Federal departments or}^agencies,^{other tha}^{n an}^{y entity of}^{community s}^{hall ensure}^{that t}^he^requirem^{ents of}
^{the intelligence commu}^{nity as a lead agency to car}^{ry out}^sub^paragra^{ph (A) with}^respe^{ct to any covered}
^{the re}^quireme^{nts with}^respe^{ct to any covered}^{transaction that}^{is su}^{bject to suc}^{h su}^bpa^ragrap^{h are}^met.
^{transaction that}^{is su}^{bject to su}^b^paragra^{ph (A).}
^{Negotiation, modification, monitoring, an}^d^{Negotiation, modification, monitoring, an}^d
^enfor^cement.^enfor^cement.
^{The Committee shall designate 1}^{or more Federal}^{The lead agency s}^{hall negotiate,}^{modify, monitor, and}
^department^{s or agencies a}^s^{the le}^{ad agency to negotiate,}^{enforce, on b}^{ehalf of t}^{he Committee, any agreeme}^nt
^{modify, monitor, and enforce, on behalf of t}^he^{entered into or condition imposed under}^paragra^{ph (}¹⁾
^{Committee, any agreement}^enter^{ed into or condition}^{with respe}^{ct to a covered tra}^nsa^{ction, based on the}
^{imposed under}^paragra^{ph (}^{1) with res}^{pect to a covered}^{expertise wit}^{h and k}^{nowledge of the issues}^{related to}
^{transaction ba}^{sed on the}^ex^pertis^{e with and k}^nowledge^{such t}^ransa^{ction on the}^{part of t}^{he designated}
^{of the issues}^{related to suc}^{h tran}^{saction on the}^{part of}^department^{or agency.}^{Nothing i}ⁿ^this^paragra^{ph s}^hall
^{the designated depart}^{ment or ag}^ency.^{prohibit other de}^partme^{nts or ag}^{encies in assisting t}^he
^{lead agency in car}^{rying out t}^{he p}^{urposes of t}^his
^paragra^ph.
^{Reporting by design}^{ated agency.}^{Reporting by design}^{ated agency.}
^{Implementation reports.}^{No com}^para^{ble provision.}

^{Each Federal depa}^rtment^{or agen}^{cy designated by t}^he
^{Committee as a lead agency in co}^{nnection with a}^ny
^{agreement e}^{ntered into or condi}^{tion imposed with}
^{respect to a}^{covered tran}^saction^shall:
^{1) report, as a}^p^p^{ropriate b}^{ut not}^{less than onc}^{e in eac}^h
^{six-month pe}^{riod, to the Chairpe}^{rson and Vice}
^Chairpersons^{of the Committee}^{on the impleme}^ntation
^{of such ag}^reeme^{nt or condition; and}
^{2) req}^{uire, as ap}^{propriate, any}^pa^{rty to the cover}^ed
^{transaction to re}^{port to the}^head^{of such}^departm^{ent or}
^{agency (or the}^{designee of s}^{uch d}^epartme^{nt or agen}^cy
^{head) on the impleme}^{ntation or}^{any material cha}^{nge in}
^circumstan^ces.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Modification rep}^orts.^{Modification rep}^orts.
^{Any Federal departme}^{nt or age}^nc^{y designated by t}^he^{The lead agency in con}^{nection wi}^{th any ag}^reeme^nt
^{Committee as a lead agency in co}^{nnection with a}^ny^{entered into or condition imposed with respect}^{to a}
^{agreement e}^{ntered into or condi}^{tion imposed with}^{covered transaction s}^hall
^{respect to a}^{covered tran}^saction^shall:^{1) provide periodic reports to t}^h^e^{Committee on any}
^{1) provide periodic reports to t}^h^e^Chairperso^{n and Vice}^{material modificat}^{ion to any suc}^h^agreement^{or condition}
^Chairpersons^{of the Committee}^{on any modification to}^{imposed with respec}^{t to the t}^ran^{saction; and}
^{any su}^{ch ag}^reement^{or condition imposed with respec}^t
^{to the transa}^{ction; and}
^{2) ens}^{ure t}^{hat any}^{significant mo}^dificati^{on to any suc}^h^{2) ens}^{ure t}^{hat any}^{material modification to any such}
^{agreement or}^{condition is report}^{ed to the Director of}^{agreement or}^{condition is report}^{ed to the Director of}
^{National Intelligence and to any o}^{ther Federal}^{National Intelligence, the Attorne}^{y Gene}^{ral of the U}^nited
^department^{or agency}^that^{may h}^{ave a material interest}^{States, and any other Federal de}^p^{artment or age}^{ncy t}^hat
^{in such}^{modification.}^{may have a}^{material interest in}^su^{ch modification.}
^Compliance.^Compliance.
^{The Committee shall develop and agree u}^{pon met}^hods^Same.
^{for evaluating compliance with}^an^{y agreement}^ente^red
^{into or condition imposed with respect to a covered}
^{transaction that}^{will all}^{ow the Committee to adequately}
^{assure com}^{pliance without-}
^{1) un}^necessa^{rily diverting Committee resource}^{s from}^Same.
^{assessing any}^new^{covered tran}^sa^{ction for which a}
^{written notice has}^bee^{n filed pur}^s^{uant to s}^ubsection
^{(b)(1)(C), and if necessary r}^eachi^{ng a mitigation}
^{agreement with}^{or imposing a co}^{ndition on a party to}
^such^{covered tra}^{nsaction or any}^{covered transaction for}
^{which a re}^{view has}^been^reope^ne^{d for any rea}^{son; or}
^{2) placing u}^nne^cessary^bu^{rdens o}ⁿ^{a pa}^{rty to a covered}^Same.
^transaction.
In hearings that were held during the 109^th Congress after the Dubai Ports World transaction
became public, various Members expressed concern that they were provided so little information
under the current statutes that their ability to fulfill their oversight responsibilities was hampered.
In addition, some Members apparently believed that the current requirements do not provide
Members with enough information to address public concerns that occasionally arise concerning
particular investment transactions, such as the Dubai Ports World transaction. Currently, the
President is required to report to Congress on his determination to take action on a proposed
investment transaction after CFIUS has completed a 30-day review and a 45-day investigation of
the transaction. The President’s report is required to contain a detailed explanation of the findings
and of the factors the President used to make his determination.
The President also is required to provide an assessment of the risk of diversion of defense critical
technology posed by an investment transaction if such an assessment is performed and that the
assessment be provided to any other individual responsible for reviewing or investigating
investment transactions under the Exon-Florio provision. In addition, the President is required to
provide Congress with a quadrennial report which evaluates two issues: 1) whether there is
credible evidence of a coordinated strategy by one or more countries or companies to acquire

U.S. companies involved in research, development, or production of critical technologies for
which the United States is a leading producer; and 2) whether there are industrial espionage
activities directed or directly assisted by foreign governments against private U.S. companies
aimed at obtaining commercial secrets related to critical technologies.
Both H.R. 556 and S. 1610 increase oversight by the Congress. H.R. 556 would have required
that not later than five days after CFIUS completed an investigation, or 15 days after the end of
an investigation if the President had determined to take actions under the Exon-Florio provision,
the Committee would provide a written report to leaders in both Houses of Congress and to the
Chairman and Ranking Member of committees in both houses with jurisdiction over any aspect of
the transaction and its possible effects on national security, specifically, at a minimum, the
Committee on Foreign Affairs, the Committee on Financial Services, and the Committee on
Energy and Commerce in the House. Both measures require CFIUS to brief certain congressional
leaders if they requested such a briefing. Members of Congress and their staff are subject to
disclosure limitations and proprietary information would be shared with congressional
committees only under conditions that would assure the confidentiality of the information.
H.R. 556 and S. 1610 require CFIUS to report annually to Congress on any reviews or
investigations that it had conducted during the prior year. Each report must include a list of all
reviews and investigations that had been conducted, information on the nature of the business
activities of the parties involved in an investment transaction, information about the status of the
review or investigation, and information on any withdrawal from the process, any roll call votes
by the Committee, any extension of time for any investigation, and any presidential decision or
action taken under the Exon-Florio provision. In addition, CFIUS must report on trend
information on the number of filings, investigations, withdrawals, and presidential decisions or
actions that were taken. The report also must include cumulative information on the business
sectors involved in filings and the countries from which the investments originated; information
on the status of the investments of companies that withdrew notices and the types of security
arrangements and conditions CFIUS used to mitigate national security concerns; the methods the
Committee used to determine that firms were complying with mitigation agreements or
conditions; and a detailed discussion of all perceived adverse effects of investment transactions
on the national security or critical infrastructure of the United States.
Relative to critical technologies, both H.R. 556 and S. 1610 require CFIUS to include in its
annual report an evaluation of any credible evidence of a coordinated strategy by one or more
countries or companies to acquire U.S. companies involved in research, development, or
production of critical technologies in which the United States is a leading producer. The report
must include an evaluation of possible industrial espionage activities directed or directly assisted
by foreign governments against private U.S. companies aimed at obtaining commercial secrets
related to critical technologies. For the purposes of this section, the House measure would have
defined critical technologies as technology defined in the National Science and Technology ²⁹
Policy Organization and Priorities Act of 1976, or “other critical technology, critical
components, or critical technology items essential to national defense or national security.”

²⁹^P^.^L^.^94-²⁸^{2 (}^M^a^y^{11, 19}⁷⁶⁾^w^h^ic^{h s}^t^a^t^e^s^tha^t^the^prⁱ^o^r^ity^ne^e^d^s^of^the^N^a^tio^{n r}^e^la^tiv^e^{to i}ⁿ^v^e^s^t^m^e^{nt in s}^c^ie^nc^e^a^nd
^te^c^hnol^og^y^a^r^e^:^{(1) pr}^om^oting^c^o^ns^e^r^v^a^{tion a}ⁿ^{d e}^f^fⁱ^cⁱ^eⁿ^{t utiliz}^a^tⁱ^o^{n of}^na^tura^l^a^nd^hum^aⁿ^re^s^ourc^e^s^;⁽²⁾^prote^c^ting^t^h^e
^o^cean^{s an}^d^co^ast^a^l^zon^e^s;⁽³⁾^st^ren^g^t^h^enⁱⁿ^{g t}^h^{e eco}^no^my^an^d^p^r^o^m^o^tⁱⁿ^{g f}^u^l^l^em^p^l^o^y^m^eⁿ^t^;⁽⁴^{) assu}^riⁿ^g^ad^eq^u^a^t^e
^s^uppl^ie^s^of^f^{ood, m}^a^te^ria^l^s^,^a^{nd e}ⁿ^e^r^gy^{; (5) im}^prov^ing^the^q^u^a^lity^of^he^a^{lth c}^a^r^e^;^a^{nd (6)}^im^prov^ing^the^na^tio^n’s
^housⁱⁿ^g^,^tr^aⁿ^s^por^ta^ti^on^{, a}ⁿ^{d c}^o^m^m^unic^a^{tion s}^y^s^t^em^s^.

In addition, both measures require the Secretary of the Treasury, in consultation with the
Secretary of State and the Secretary of Commerce to conduct a study on investment in the United
States, particularly in critical infrastructure and industries affecting national security by: 1)
foreign governments, entities controlled by or acting on behalf of a foreign government, or
persons of foreign countries which comply with any boycott of Israel; 2) foreign governments,
entities controlled by or acting on behalf of a foreign government, or persons of foreign countries
which do not ban organizations designated by the Secretary of State as foreign terrorist
organizations.
Both measures require the Inspector General of the Department of the Treasury to investigate any
failure of CFIUS to comply with requirements for reporting that were imposed prior to the
passage of this measure and to report the findings of this report to the Congress. In particular, the
report must be sent to the chairman and ranking member of each committee of the House and the
Senate with jurisdiction over any aspect of the report, including the Committee on International
Relations, the Committee on Financial Services, and the Committee on Energy and Commerce of
the House.
H.R. 556 and S. 1610 also require the chief executive officer of any party to a merger, acquisition,
or takeover to certify in writing that the information contained in the written notification to
CFIUS fully complied with the requirements of the Exon-Florio provision and that the
information is accurate and complete. This written notification includes any mitigation agreement
or condition that was part of a CFIUS approval.
^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Increased ove}^{rsight b}^y^{the Cong}^r^ess.^{Increased ove}^{rsight b}^y^{the Cong}^r^ess.
^{Reports on}^co^{mpleted invest}^igations.^{No com}^para^{ble provision.}
^{Not later than}^{five days afte}^{r the}^{completion of a}^{No com}^para^{ble provision.}

^{Committee investigation or, if the President indicates an}
^{intent to take an}^{y action with re}^s^{pect to the t}^ransa^ction,
^{after the}^{end of}^{15-day pe}^{riod referred to in su}^bsection
^{(d), the Chairperson or a Vice C}^hairperson^{of the}
^{Committee would be required to}^{submit a w}^ritten
^{report on t}^{he findings or a}^ctions^{of the Committee with}
^{respect to s}^uch^{investigation, the}^{determination of}
^whethe^{r or not to take action}^un^{der sub}^{section (d), an}
^{explanation of th}^{e findings}^under^subsec^{tion (e), and the}
^{factors considered u}^{nder s}^ubsec^t^{ion (f), with respect to}
^{such t}^ransa^{ction, to:}
^{1) the}^{Majority Leader and th}^{e M}^{inority Leader of the}
^{Senate; 2) the S}^{peaker a}^{nd the}^M^{inority Leader of the}
^{House of Repre}^sentatives;^{3) the}^{chairman a}^{nd ra}^nking
^{member of}^{each committee of t}^h^e^{House of}
^{Representatives a}^{nd the}^Senate^{with jurisdiction over any}
^{aspect of t}^{he covered tra}^nsaction^{and its possible effect}^s
^{on national security, including, at}^{a minimum, the}
^{Committee on Foreign Affairs, th}^{e Committee on}
^{Financial Services, and the Comm}^{ittee on Ene}^{rgy and}
^{Commerce of the}^{House of Rep}^r^{esentatives; and}⁴⁾
^{Senators rep}^resenting^{States and}^Membe^{rs of Congres}^s
^represe^{nting cong}^{ressional districts that would be}
^{significantly affected by}^the^cover^{ed transaction.}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Notice and briefing}^requirem^ent.^{Notice and briefing}^requirem^ent.
^{If a written}^req^{uest for}^{a b}^riefing^{on a covered}^{The Committee shall, upon re}^qu^{est from an}^{y Mem}^{ber of}
^{transaction, or on compliance wi}^{th a mitigation}^{Congress sp}^{ecified in sub}^section^(b)(3)(C)(iⁱⁱ⁾^{, promptly}
^{agreement or}^{condition imposed with respe}^{ct to suc}^h^{provide briefings on a}^{covered tr}^{ansaction for whic}^{h all}
^{transaction, is sub}^{mitted to the}^{Committee by any}^{action has concluded u}^{nder t}^{his s}^{ection, or on}
^{Senator or Mem}^{ber of Congre}^ss^{who receives a r}^eport^{compliance with a mitigation agreement or condition}
^{on the tra}^{nsaction, the C}^hairper^s^{on or a Vice}^{imposed with respec}^{t to suc}^{h tra}^{nsaction, on a classified}
^Chairperson^{(or suc}^{h other}^pers^{on as the C}^hairper^son^{basis, if deemed necessar}^{y by}^the^{sensitivity of the}
^{or a Vice Chairperson}^{may designate) shall provide 1}^{information. Briefings under t}^his^paragra^{ph ma}^{y be}
^{classified briefing to each Hous}^e^{of the Congress}^from^{provided to the congressional sta}^{ff of suc}^{h a}^Memb^{er of}
^{which an}^{y suc}^h^{briefing re}^que^{st originates in a sec}^ure^{Congress having}^ap^{propriate se}^c^{urity clearance.}
^{facility of appropriate size and location that shall be ope}ⁿ
^{only to the Majority Leader and t}^{he Minority Leader}^of
^{the Senate, the}^{Speaker a}^{nd the}^{Minority Leader of the}
^{House of Repre}^{sentatives, (as th}^{e case may}^{be) the}
^{chairman a}^{nd ra}^{nking mem}^{ber of}^{each committee of t}^he
^{House of Repre}^{sentatives or t}^he^{Senate (as the ca}^{se may}
^{be) with jurisdiction over any as}^p^{ect of the cover}^ed
^{transaction and its}^{possible effect}^{s on national secu}^rity,
^{including, at a minimum, the Com}^{mittee on Foreign}
^{Affairs, the Committee on Financ}^{ial Services, and the}
^{Committee on Energ}^{y and Com}^{merce of th}^{e House}^of
^{Representatives, a}^{nd app}^ropriate^{staff mem}^bers^who
^{have sec}^{urity clearan}^ce.
^{Annual report.}^{Annual report.}
^{The Chairpe}^{rson of th}^{e Committee would be re}^quired^{The chairpe}^{rson would be}^req^uir^{ed to transmit a re}^port
^{to transmit a re}^{port to the c}^hair^{man and}^ranking^{to the chairma}^{n and}^ranking^me^{mber of t}^{he committee}
^{member of}^{each committee of t}^h^e^{House of}^{of jurisdiction in the Senate and t}^{he House}^of
^{Representatives a}^{nd the}^Senate^{with jurisdiction over any}^{Representatives,}^{before J}^{uly 3}¹^of^{each yea}^{r on all of the}
^{aspect of t}^{he re}^{port, including, at a minimum, the}^{reviews and investigations of cov}^{ered transactions}
^{Committee on Foreign Affairs, th}^{e Committee on}^{completed under}^su^{bsection (b)}^{during the}¹^2-month
^{Financial Services, and the Comm}^{ittee on Ene}^{rgy and}^{period covered by t}^{he re}^port.
^{Commerce of the}^{House of Rep}^r^{esentatives, before}^July
^{31 of eac}^{h yea}^{r on all the re}^{views and investigations of}
^{covered transactions}^{completed under s}^u^b^{section (b)}
^{during the}¹^2-month^{period covered by t}^{he re}^port.
^{Contents of rep}^ort.^{Contents of rep}^ort.
^{1) A list of all notices filed and al}^l^{reviews or}^{1) A list of all notices filed and al}^l^{reviews or}
^{investigations completed during t}^{he pe}^{riod with basic}^{investigations completed during t}^{he pe}^{riod, with basic}
^{information on each}^party^{to the}^{transaction, the}^natu^re^{information on each}^party^{to the}^{transaction, the}^natu^re
^{of the b}^{usiness a}^{ctivities or products of all pertine}^nt^{of the b}^{usiness a}^{ctivities or products of all pertine}^nt
^{persons, along with information a}^{bout the}^status^{of the}^{persons, along with information a}^{bout any}^withdrawal
^{review or investigation, information on any withd}^rawal^{from the}^{process, and a}^{ny decision or action by}^the
^{from the}^{process, an}^{y roll call vo}^{tes by t}^{he Committee}^{President under}^{this section.}
^{under t}^{his section, any e}^xten^{sion of time for any}
^{investigation, and any pre}^{sidential decision or action}
^{under t}^{his section.}
^{2) Specific, cumulative, and, as ap}^{propriate, trend}^Same.

^{information on the}^num^bers^{of filings, investigations,}
^{withdrawals, and presidential decisions or actions under}
^{this section.}

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{3) Cumulative and, as a}^p^p^ropriat^{e, trend information on}^Same.
^{the b}^usiness^{sectors involved in t}^{he filings which}^have
^{been made, a}^{nd the cou}^{ntries f}^{rom which t}^he
^{investments have}^originated.
^{4) Informa}^{tion on whet}^{her com}^p^{anies that withdrew}^Same.
^{notices to the Committee in acc}^{ordance with su}^bsection
^(b)(1)(C)(i^{i) have later re-filed such notices, or,}
^{alternatively, abandoned the t}^ran^saction.
^{5) The ty}^{pes of sec}^{urity ar}^range^{ments a}^{nd conditions the}^Same.
^{Committee has used to mitigate}^{national security}
^concerns^{about a}^transa^{ction, including a discussion of}
^{the met}^{hods the Committee and}^{any lead departme}^nts
^{or agencies designated u}^{nder s}^u^b^{section (l) are using to}
^{determine compliance with}^suc^h^arrangeme^{nts or}
^conditions.
^{6) A detailed discussion of all perceived adverse effect}^s^Same.
^{of covered transactions on}^theⁿ^{ational security or}
^{critical infrastruct}^{ure of t}^{he Unit}^{ed States that the}
^{Committee wil}^{l take into account}^{in its deliberations}
^{during the}^{period before delivery}^{of the n}^{ext s}^uch
^{report, to the e}^xtent^possible.
^{Contents of rep}^{ort relating to critical}^{Contents of rep}^{ort relating to critical}
^{technologies.}^{technologies.}
^{In order to assist t}^{he Congress}ⁱⁿ^{its oversight}^Same.
^{responsibilities with respect}^{to th}^{is section, the President}
^{and suc}^{h agen}^{cies as the}^Presiden^{t shall designate shall}
^{include in the a}ⁿⁿ^{ual report}^su^b^{mitted under}^paragra^ph
^{(1) the following:}
^{1) An evaluation of w}^hethe^{r the}^r^e^{is credible evidence of}^Same.
^{a coordinated strategy by}^{1 or m}^{ore countries or}
^{companies to acq}^{uire United Stat}^{es companies involved}
^{in researc}^{h, development, or p}^{roduction of critical}
^{technologies for which t}^{he Unite}^{d States is a leading}
^producer.
^{2) An evaluation of w}^hethe^{r the}^r^e^{are indust}^rial^Same.
^{espionage activities directed or di}^{rectly assisted by}
^{foreign governme}^{nts against}^priva^{te United States}
^{companies aimed at obtaining co}^{mmercial secrets r}^elated
^{to critical technologies.}
^{Critical technologies.}^{No com}^para^{ble provision.}

^{Critical technologies means tech}^{nologies identif}^{ied under}
^{title VI of the National Science an}^{d Technology Pol}^icy,
^{Organization, and Priorities Act}^{of 19}^{76 or othe}^{r critical}
^{technology, critical components, or critical technology}
^{items essential to national defens}^{e or national security}
^{identified pursua}^{nt to this section}^.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Release of unclassified study.}^{Release of unclassified study.}
^{That portion of the a}ⁿⁿ^{ual repor}^{t under}^parag^rap^{h (1)}^{That portion of the a}ⁿⁿ^{ual repor}^{t under}^parag^rap^{h (1)}
^{that is req}^{uired by}^{this pa}^ragra^ph^{may be}^{classified. An}^{that is req}^{uired by}^{this pa}^ragra^ph^{may be}^{classified. An}
^{unclassified version of that}^{portion of the}^report^{shall be}^{unclassified version of the}^report,^{as app}^ropriate,
^{made available to the pu}^blic.’.^{consistent with sa}^feguarding^{national security and}
^{privacy, shall be made available to the p}^ublic.
^{Study and repo}^rt.^{Study and repo}^rt.
^{Before the e}^{nd of the}¹²^{0-day pe}^{riod beginning on t}^he^Same.
^{date of the enac}^{tment of t}^{his act}^{and ann}^{ually therea}^fter,
^{the Secretary}^{of the Trea}^sur^{y, in consultation with the}
^{Secretary of State and t}^{he Secret}^{ary of Commerce, shall}
^{conduct a st}^{udy on invest}^ments^{in the U}^{nited States,}
^{especially investments in}^{critical infrastr}^uct^{ure a}^nd
^{industries affecting}^{national secu}^r^{ity, by-}
^{A) foreign governme}^{nts, entities}^{controlled by or acting}^Same.
^{on behalf of a}^{foreign gover}^nmen^{t, or persons of}^foreign
^{countries w}^{hich comply with}^any^{boycott of Israel; or}
^{B) foreign governmen}^{ts, entities controlled by or acting}^Same.
^{on behalf of a}^{foreign gover}^nmen^{t, or persons of}^foreign
^{countries w}^{hich do not ba}^{n orga}^{nizations designated by}
^{the Secretary}^{of State as foreign t}^{errorist organizations.}
^Report.^Report.
^{The Secretary of t}^{he Treas}^ury^sh^{all submit a report to}^Same.
^{the Congress, for t}^rans^{mittal to all appropriate}
^{committees of the Senate a}^{nd th}^{e House of}
^{Representatives, containing}^the^{findings and conclu}^sions
^{of the Secretary}^{with res}^{pect to t}^{he study des}^{cribed in}
^paragra^{ph (1), togethe}^{r with an}^a^{nalysis of the ef}^{fects of}
^{such in}^vestme^{nt on t}^{he national s}^{ecurity of th}^{e United}
^{States and on any}^{efforts to addr}^{ess those ef}^fects.
^{Investigation by Inspector G}^eneral.^{Investigation by Inspector G}^eneral.
^{The Ins}^pector^Gene^{ral of the De}^partme^{nt of the}^Same.
^{Treasury s}^{hall conduct a}ⁿ^indepe^{ndent investigation to}
^{determine all of the facts a}^{nd circ}^umstanc^{es conce}^rning
^{each failure of t}^{he Depa}^rtment^{of the Treas}^{ury to make}
^{any re}^{port to the Cong}^{ress t}^hat^{was req}^{uired u}^nder
^{section 72}^{1(k) of the Defe}^{nse Pr}^{oduction Act of 19}^{50 (as}
^{in effect}^{before t}^{he date of th}^{e e}^nactment^{of this act).}
^{Report to the Con}^gress.^{Report to the Con}^gress.
^{Before the e}^{nd of the}²⁷^{0-day pe}^{riod beginning on t}^he^Same.

^{date of the enac}^{tment of t}^{his act,}^{the I}^nspe^{ctor Ge}^neral
^{of the Depart}^{ment of t}^{he Treas}^u^{ry shall su}^{bmit a re}^port
^{to the chairma}^{n and}^ranking^me^{mber of eac}^{h committee}
^{of the House}^{of Represe}^ntatives^{and the Senate}^with
^{jurisdiction over any aspect of}^th^{e report, including, at a}
^{minimum, the Committee on For}^{eign Affairs, the}
^{Committee on Financial Services,}^{and the Committee on}
^Energ^{y and Commerc}^{e of the}^{House of Repr}^esentatives,
^{on the investigation u}^nder^paragr^{aph (1) co}^{ntaining the}
^{findings and conclusions of t}^{he I}ⁿ^{spector G}^eneral.

^{H.R. 5}⁵⁶^{S. 16}¹⁰
^{National Security Foreign Investment Reform}^{Foreign Investment and National Security Act o}^f
^{and Strengthened Trans}^pare^{ncy A}^{ct of 2007}²⁰⁰⁷
^{Certification of n}^otices.^{Certification of n}^otices.
^{Certification of Notices an}^d^Assura^nces.^{Certification of Notices an}^d^Assura^nces.
^Each^{notice req}^{uired to be s}^ubmi^{tted, by a part}^{y to a}^Same.
^{covered transaction, to the Pre}^{sident or the Pre}^sident’s
^{designee under}^{this section a}^{nd r}^{egulations presc}^ribed
^{under s}^u^c^h^{section, and an}^{y infor}^{mation submitted b}^y
^{any su}^ch^{party in}^conne^{ction with any a}^{ction for whic}^{h a}
^{report is re}^quired^purs^uant^{to pa}^ragrap^{h (3)(B)(ii)}^of
^subsec^{tion (l) with respect to t}^h^e^{implementation of any}
^mitigati^{on agreement or}^conditio^{n described in}
^paragra^{ph (1)(A) of s}^{uch s}^u^b^{section, or any material}
^{change in}^circum^{stances, s}^{hall be}^{accompanied by a}
^{written stateme}^{nt by}^the^{chief e}^x^{ecutive officer or t}^he
^{designee of the}^person^req^{uired t}^o^{submit su}^ch^{notice or}
^{information certifying that, to th}^e^{best of t}^{he pe}^rson’s
^{knowledge and belief—}
^{‘(1) the notice or information su}^b^{mitted fully complies}
^{with the re}^quire^{ments of t}^{his sec}^{tion or such}^regulation,
^{agreement, or condition; and}
^{‘(2) the notice or information is a}^{ccurate a}^{nd complete in}
^{all material respects.’}

The proposed DP World acquisition of P&O, while arguably of little economic impact on the U.S.
economy, could affect public policy on foreign investment that relates to issues of corporate
ownership, foreign investment, and national security in the U.S. economy. The transaction
revealed significant differences between Congress and the Administration over the operations of
CFIUS and over the objectives the Committee should be pursuing. In addition, the transaction
demonstrated that neither Congress nor the Administration has been able so far to define clearly
the national security implications of foreign direct investment or the national security
implications of foreign investment activity in the economy. These issues likely reflects differing
assessments of the economic impact of foreign investment on the U.S. economy and differing
political and philosophical convictions among Members and between the Congress and the
Administration.
The incident also focused attention on the informal process firms use to have their investment
transactions reviewed by CFIUS prior to a formal review. According to anecdotal evidence, some
firms apparently believe that the CFIUS process is not market neutral, but that it adds to market
uncertainty that can negatively affect a firm’s stock price and lead to economic behavior by some
firms that is not optimal for the economy as a whole. Such behavior might involve firms
expending a considerable amount of resources to avoid a CFIUS investigation, or deciding to
terminate a transaction that would improve the optimal performance of the economy in order to
avoid a CFIUS investigation. While such anecdotal evidence may not serve as the basis for
developing public policy, it does raise a number of concerns about the possible impact of the
CFIUS process on the market and the potential costs of redefining the concept of national security
relative to foreign investment.

The recent focus by Congress on the Committee has also shown that the DP World transaction, in
combination with other recent unpopular foreign investment transactions, has exacerbated
dissatisfaction among some Members of Congress over the operations of CFIUS. In particular,
some Members are displeased with the way the Committee uses its discretionary authority under
the Exon-Florio provision to investigate certain foreign investment transactions. As a result, some
Members of Congress are proposing changes to the CFIUS process through legislation that is ^st^th
progressing through the 1 Session of the 110 Congress. The changes could mandate more
frequent contact between the Committee, which generally operates without much public or
congressional attention, and the Congress and enhance Congress’s oversight role over the
Committee.
The DP World transaction also revealed that the September 11, 2001 terrorist attacks may have
fundamentally altered the viewpoint of some Members of Congress regarding the role of foreign
investment in the economy and over the impact of such investment on the national security
framework. Some argue that this changed perspective requires a reassessment of the role of
foreign investment in the economy and of the implications of corporate ownership of activities
that fall under the rubric of critical infrastructure. As a result, some Members of Congress are
looking to amend the CFIUS process to enhance Congress’s oversight role while reducing
somewhat the discretion of CFIUS to review and investigate foreign investment transactions in
order to have CFIUS investigate a larger number of foreign investment cases. In addition, the DP
World transaction has focused attention on long-unresolved issues concerning the role of foreign
investment in the nation’s overall security framework and the methods that are being used to
assess the impact of foreign investment on the nation’s defense industrial base, homeland
security, and national economic infrastructure.
Changes to the CFIUS process being proposed in the House and Senate bills would alter the
current CFIUS process, but it remains to be seen how the changes would affect the outcome of
the CFIUS process. In the final analysis, the President retains sole authority to apply the Exon-
Florio provisions and he has complete discretion to accept or reject a CFIUS recommendation to
block a proposed foreign investment transaction. As a result, CFIUS reflects the President’s
priorities and policies relative to foreign investment. To date, Presidents have been highly
reluctant to use the authority of the Exon-Florio provision to block investment transactions, which
has happened just once since the measure was adopted. In part, this reluctance may stem from the
narrow range of policy options that are provided for in the provision, which seems at odds with
the often highly complex nature of foreign investment transactions. As a result, CFIUS has slowly
developed an informal process that essentially expands the policy options available to the
President by allowing CFIUS members to review proposed investment transactions ahead of any
formal review and, most importantly, to negotiate informal agreements that mitigate aspects of
the investment that otherwise would spur CFIUS members to oppose the transaction. By
formalizing this process through proposed legislation, Congress likely would expand the range of
policy options available to the President and possibly broaden the scope of measures foreign
firms may be asked to comply with in order to gain approval. Depending on how foreign firms
view these changes, they may regard them as signaling a less tolerant attitude in the United States
toward foreign investment and the changes potentially could add support to the renewed
willingness of some foreign governments to impose additional restrictions on foreign investors.
Most economists agree that there is little economic evidence to conclude that foreign ownership,
whether by a private entity or by an entity that is owned or controlled by a foreign government,
has a measurable impact on the U.S. economy as a whole. Others may argue on non-economic
grounds that such firms pose a risk to national security or to homeland security. Similar issues

concerning corporate ownership were raised during the late 1980s and early 1990s when foreign
investment in the U.S. economy increased rapidly. There are little new data, however, to alter the
conclusion reached at that time that there is no definitive way to assess the economic impact of
foreign ownership or of foreign investment on the economy. Although some observers have
expressed concerns about foreign investors who are owned or controlled by foreign governments
acquiring U.S. firms, there is little confirmed evidence that such a distinction in corporate
ownership has any measurable effect on the economy as whole.
For most economists, the distinction between domestic- and foreign-owned firms, whether the
foreign firms are privately owned or controlled by a foreign government, is sufficiently small that
they would argue that it does not warrant placing restrictions on the inflow of foreign investment.
Nevertheless, foreign direct investment does entail various economic costs and benefits. On the
benefit side, such investments bring added capital into the economy and potentially could add to
productivity growth and innovation. Such investment also represents one repercussion of the U.S.
trade deficit. The deficit transfers dollar-denominated assets to foreign investors, who then decide
how to hold those assets by choosing among various investment vehicles, including direct
investment. Foreign investment also removes a stream of monetary benefits from the economy in
the form of repatriated capital and profits that reduces the total amount of capital in the economy.
Such costs and benefits likely occur whether the foreign owner is a private entity or a foreign
government.
^J^a^m^e^{s K.}^J^a^c^k^soⁿ
^Specialis^{t i}ⁿ^In^terⁿ^ation^a^{l T}^r^{ade an}^{d Fin}^aⁿ^ce
^jj^ack^s^oⁿ^@^cr^s^.^loc.g^o^v^{, 7-}⁷⁷⁵¹