New guidance from the Committee on Foreign Investment in the U.S. signals that the committee is preparing to increase its enforcement efforts, law firms said this week. Companies should expect more scrutiny from the committee, firms said, adding that completing and documenting due-diligence before finalizing an investment transaction is growing increasingly important.
U.S.-based TuSimple Holdings, which provides self-driving truck and autonomous freight shipping technology, is being investigated for whether it illegally transferred technology to a Chinese startup, The Wall Street Journal reported Oct. 30. The U.S. company is being probed by the FBI, the SEC and the Committee on Foreign Investment in the U.S., which are examining its “relationship” with Hydron, the report said. Hydron is an autonomous truck startup led by one of TuSimple’s co-founders. The agencies are examining whether TuSimple shared with Hydron “intellectual property developed in the U.S.” and whether that “defrauded TuSimple investors by sending valuable technology to an overseas adversary,” the report said.
The Committee on Foreign Investment in the U.S. should conduct a review of Elon Musk’s purchase of Twitter, Sen. Chris Murphy, D-Conn., said on Twitter. CFIUS should investigate the “national security implications” of the deal, Murphy said Oct. 31, specifically Saudi Arabia’s role in the acquisition. Bloomberg recently reported (see 2210210018) that CFIUS could exercise its jurisdiction over the deal due to the “presence of foreign investors in Musk’s consortium,” which includes Prince Alwaleed bin Talal of Saudi Arabia.
The Biden administration is weighing whether it should subject billionaire Elon Musk’s deal to buy Twitter and his SpaceX’s Starlink satellite network venture to national security investment reviews, Bloomberg reported Oct. 20. U.S. officials have “grown uncomfortable over Musk’s recent threat to stop supplying the Starlink satellite service to Ukraine” and what they view as his “increasingly Russia-friendly stance following a series of tweets,” the report said. Musk’s plans to buy Twitter could involve foreign investors, and the administration is reviewing whether the Committee on Foreign Investment in the U.S. could scrutinize the deal for national security risks, the report said. A White House spokesperson didn’t comment.
The Treasury Department this week released its first ever enforcement and penalty guidelines for the Committee on Foreign Investment in the U.S., detailing how it decides on violations, where the committee gets its information and other steps it takes during the penalty process. The committee -- which has been criticized for lacking transparency by lawyers and companies looking to comply with its requirements (see 2208050028 and 2008240031) -- also outlined various aggravating and mitigating factors it considers when calculating a penalty amount.
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Although President Joe Biden’s recent executive order on foreign direct investment isn’t expected to significantly change review outcomes, it sends a clear signal to industry about the U.S.’s FDI priorities and could help companies better understand whether they should submit a voluntary filing, law firms said this month. One firm said the Committee on Foreign Investment in the U.S. may use the order as further reason to reach out to businesses about non-notified transactions.
The Biden administration and TikTok drafted a “preliminary” agreement to resolve national security concerns raised by ByteDance, the app’s Chinese owner, but face “hurdles” before the agreement can be finalized, The New York Times reported Sept. 26. Under the draft deal, which will need to be approved by the Committee on Foreign Investment in the U.S., TikTok would restructure its “data security and governance” but would not be required to divest itself from ByteDance, the report said. Multiple agencies are skeptical the agreement will sufficiently address the U.S.’s national security concerns, the report said, which “could force changes to the terms and drag out a final resolution for months.”
Made in China 2025, China's public document of its ambitions for technology dominance, came out of Chinese officials' anxiety about their tech vulnerability due to integration of U.S. and Chinese supply chains, panelists said during a Peterson Institute for International Economics webcast Sept. 23 featuring PIIE scholars and an expert on China's foreign economic policy from the University of Maryland, Margaret Pearson.
The Committee on Foreign Investment in the U.S. should require TikTok to cut ties with China-based ByteDance and all other Chinese companies, Sen. Josh Hawley, R- Mo., wrote in a Sept. 19 letter to Treasury Secretary Janet Yellen. Hawley said TikTok’s COO told Congress last week that the company’s Chinese engineers are able to access U.S. user data and that TikTok “has taken no measures to ensure that the employees in China accessing this data are not members of the Chinese Communist Party.”