The U.S. needs to more aggressively monitor transactions that aren't reported to the Committee on Foreign Investment in the U.S., said Nazak Nikakhtar, former acting head of the Bureau of Industry and Security. Nikakhtar, speaking during a Jan. 27 panel discussion hosted by China Tech Threat, said that the transfer of technologies to China, particularly semiconductor production equipment, has allowed it to outpace America in hypersonic missiles and has “placed the U.S. and the world in incredible jeopardy.”
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The Committee on Foreign Investment in the U.S. is investigating a Chinese investment in California-based Icon Aircraft after receiving allegations that the aircraft manufacturer may be transferring sensitive technology to China, The Wall Street Journal reported Jan. 18. CFIUS began the review in late November after receiving a memo from a group of Icon’s American shareholders, the report said. In the memo, the shareholders said a Chinese company, Shanghai Pudong Science and Technology Investment Co. (PDSTI), has been “installing board members and executives, pressuring others and laying plans to transfer Icon’s technology to China.” In addition to CFIUS, the FBI opened a separate criminal probe and is investigating potentially illegal technology transfers from Icon to China, the report said. Icon said its aircraft don’t have military applications and the company “doesn’t see PDSTI’s investment as a national-security concern,” according to the report. The company also told the WSJ that it expects the CFIUS review to be completed at the end of February. A spokesperson for the Treasury Department, which chairs CFIUS, declined to comment. The FBI and Icon didn’t immediately respond to requests for comment.
The U.S. should try to use existing tools to better screen outbound investments rather than create a new investment regime, which could burden American companies and damage U.S. competitiveness, two former U.S. officials and an international investment expert said. But one member of a bipartisan congressional commission said a new outbound investment regime is necessary to better protect U.S. critical technologies and national security.
The Treasury Department earlier this month added New Zealand to its list of excepted foreign states that benefit from certain exemptions to the Committee on Foreign Investment in the U.S. process. New Zealand, along with the U.K., will have until February 2023 to meet certain foreign investment criteria and cement its position as an excepted foreign state. Treasury announced this month that Australia and Canada had met that criteria and will remain eligible for the provision, which provides certain foreign countries exemptions to the CFIUS process, sometimes allowing them to skip CFIUS clearance altogether (see 2201050039 and 2109030039). New Zealand qualifies as an excepted foreign state because of its intelligence-sharing relationship with the U.S., “among other factors,” Treasury said Jan. 5. The agency also pointed to New Zealand’s “collective defense arrangement and cooperation” with the U.S.
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Australia and Canada have met certain investment screening requirements and will remain eligible for the Treasury Department’s foreign excepted state provision, the agency said Jan. 5. Treasury also extended for one year the deadline by which certain U.S. allies must prove that they have a robust foreign investment screening process, which will allow those countries to also qualify for the exemption.
The Committee on Foreign Investment in the U.S. has asked a Ukrainian businessman and his technology company to sell its stake in Texas-based Firefly Aerospace due to national security concerns, Bloomberg reported Dec. 29. CFIUS is concerned that valuable U.S. technology could be transferred from Firefly to Ukraine or Russia via tech entrepreneur Max Polyakov and his firm Noosphere Venture Partners, the report said, and has asked the firm to sell its 50% stake in Firefly. Noosphere told CFIUS it plans to follow through with the request and sell its stake, the report said. Firefly, which develops commercial space launch vehicles, subsequently announced it would pause preparations for its next launch, according to a Dec. 30 report from SpaceNews. Noosphere told Bloomberg that it understands “CFIUS’s actions come amid rising tensions between Ukraine and Russia,” adding that the firm is “working diligently to address CFIUS’s concerns in the most efficient and appropriate manner possible.” Polyakov in 2020 agreed to step down from the company’s board and Firefly’s day-to-day activities “to help make it easier for the company to win U.S. government and military contracts and ease some of the underlying tensions,” Bloomberg said. Firefly, Noosphere and the Treasury Department, which chairs CFIUS, didn’t immediately respond to requests for comment.
The Defense Department recently issued a document outlining its procedures for reviewing transactions filed with the Committee on Foreign Investment in the U.S. The 45-page document, issued Dec. 16, “establishes policy, assigns responsibilities, and provides procedures for DoD participation” in CFIUS, including its national security investigations, the non-notified transaction process and communication with other committee members.
Beijing’s Wise Road Capital and South Korea's Magnachip Semiconductor Corporation terminated their merger, the two companies said this week. They received permission to withdraw their filing with the Committee on Foreign Investment in the U.S. after being told that CFIUS would not approve Wise Road’s acquisition of Magnachip.