The Biden administration’s road to implement regulations for its outbound investment executive order will be “incredibly complex,” particularly if agencies disagree on how narrow or broad to scope the restrictions,Thomas Feddo, a former Treasury Department official, said during a webinar this week. Lawyers on the webinar said investors are “very concerned” about the rules having a potential “chilling” effect on a broad range of investments, especially if the government fails to adequately define a range of key terms in the executive order.
The Treasury Department is putting eight more military bases under the jurisdiction of the Committee on Foreign Investment in the U.S. after proposing the additions in May (see 2305040052). The expansion, effective Sept. 22, includes the Grand Forks Air Force Base in North Dakota that was the subject of a controversial CFIUS decision last year (see 2212150035, 2212290023 and 2208310066) as well as bases in Texas, California, South Dakota, Iowa and Arizona. CFIUS will be able to intervene in certain land purchases by foreign buyers if they are near any of those sensitive military bases.
The U.S. and Europe should create a shared list of companies subject to investment restrictions, which would help both sides better harmonize their inbound and outbound screening rules and create a “level playing field” for investors, said Zongyuan Zoe Liu, a China studies fellow at the Council on Foreign Relations. She also said the two sides could create a shared “white list” of foreign investors that would be exempt from the restrictions, streamlining filings before the Committee on Foreign Investment in the U.S. and reviews conducted by EU member states.
The U.S. may run into challenges enforcing aspects of its new outbound investment restrictions on China, especially for intercompany transfers and investments, Sarah Bauerle Danzman, a former State Department official, said during a webinar hosted by the Center for a New American Security last week. She said investors will likely need more guidance on the issue whenever the Treasury Department releases regulations for the regime.
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The Congressional Research Service this month issued an updated version of its overview of the Committee on Foreign Investment in the U.S. The report notes Congress is proposing legislation to expand CFIUS jurisdiction over certain land purchases and potentially add the USDA secretary as a permanent member of the committee (see 2307280052 and 2307180022). CRS listed several items Congress should be considering, such as how the Treasury Department will implement any “new agriculture-related responsibilities in regulation and practice”; how “sufficient are CFIUS’ current authorities” now that five years have passed since the Foreign Investment Risk Review Modernization Act was enacted; and how the Commerce Department’s process of identifying emerging and foundational technologies for export controls is “facilitating or hindering CFIUS reviews of transactions related to such technologies.”
Rep. Rick Larsen, D-Wash., one of the shrinking number of members of Congress who advocate for engaging with China rather than punishing it, recently published a white paper of his views on how to manage competition with China, how to use both offensive and defensive measures to compete with China, how to improve U.S. governance and competitiveness, and how to identify areas of cooperation.
The U.S. needs to better protect agricultural technology from Chinese theft and push Beijing to reduce tariffs on U.S. crops, American farmers told lawmakers last week. Speaking during a panel in Iowa organized by the House Select Committee on China, at least one farmer said U.S. trade policy should focus more on securing free trade deals, which would help exporters become less reliant on China.
The Committee on Foreign Investment in the U.S. is reaching out to companies to warn them of a recent frequently asked question from May that may create “significant obstacles” for tech startups and others trying to raise capital, Wilson Sonsini said in a client alert last week. The CFIUS guidance clarified that the completion date of a transaction is the date when the foreign person obtains any equity interest in the U.S. business, and law firms at the time warned the clarification could lead to problems for parties that for years relied on "springing rights" for minority investments -- deals that allow an investor to acquire equity but not in a way that would make their stake a covered transaction under CFIUS (see 2305300058).
The Committee on Foreign Investment in the U.S. continued to see an increase in notices last year and initiated the most investigations since 2017, CFIUS said in its annual report to Congress released this week. The committee received 286 notices during calendar year 2022, a slight increase from the 272 it received in 2021, and began 162 investigations into transactions, 32 more than in 2021 and close to double the amount from 2020.