The House’s Republican Study Committee released a counterproposal to the Senate’s Endless Frontier Act that would call for a host of new sanctions against China, continue U.S. export control authorities and make some changes to the Committee on Foreign Investment in the U.S. The committee’s Countering Communist China Act, released July 29, calls for broad U.S. sanctions actions, including designations against Chinese technology applications, various senior government officials, foreign people that steal U.S. intellectual property and “foreign persons that knowingly spread malign disinformation … for purposes of political warfare.” The Treasury Department’s Office of Foreign Assets Control would also be authorized to hire 10 new employees to “carry out activities of the Office associated with the People’s Republic of China.”
The Treasury Department released its annual report to Congress for fiscal year 2020 on the Committee on Foreign Investment in the U.S., outlining CFIUS statistics, key judgments and an overview of transactions reviewed by the committee. Unlike previous annual reports, the FY20 version includes statistics on declarations required for transactions involving critical technologies. The report includes numbers on the declarations made under the requirements, which took effect in October but applied to transactions after Feb. 13, 2020 (see 2009140041), and the pilot program that preceded the requirements.
The U.S. should expand certain foreign investment reporting requirements and establish a list of trusted partner countries that are exempt from investment screening disclosures, the House Armed Services Committee said last week. The committee presented the comments in a July 22 report from its bipartisan Defense Critical Supply Chain Task Force, which said the Committee on Foreign Investment in the U.S. can be used more efficiently to help make critical defense supply chains more secure.
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Several U.S. and foreign companies in June and July provided updates to their transactions that require foreign investment reviews and approvals. The deals include a signed national security agreement (NSA) with the Committee on Foreign Investment in the U.S., plans to file joint CFIUS declarations and a stalled purchase involving a South Korean semiconductor company.
Republican lawmakers again threatened to remove export control responsibilities from the Commerce Department if it doesn’t move faster to issue restrictions over emerging and foundational technologies, doubling down on criticism levied at agency officials for months. The latest threat, sent in a June 15 letter to Commerce Secretary Gina Raimondo and signed by 10 Republican senators, highlights the tension between an agency that wants to avoid rushing into overbroad controls that could harm U.S. companies and lawmakers who say Commerce is neglecting a congressional mandate to restrict sensitive exports to China.
A Chinese private equity fund manager must obtain approval from the Committee on Foreign Investment in the U.S. before completing its transaction with a South Korean semiconductor company, a June 4 Securities and Exchange Commission filing said. Beijing-based Wise Road Capital and South Korea-based Magnachip Semiconductor, which has offices in the U.S., were told by CFIUS last month to submit a “notice concerning” Wise Road's buy of Magnachip, Magnachip said, which is now “conditioned on the receipt of CFIUS approval.” The two companies plan to file a joint voluntary notice, and Magnachip said it expects the deal's timeline to be delayed. Magnachip added that it doesn’t believe the transaction “will require any approval” in South Korea but plans to cooperate with the South Korean government if it has questions.
Countries need to revise their foreign direct investment screening environments, which are contributing to a global drop in FDI, said Simon Evenett, a trade and economics professor at the University of St. Gallen. Evenett, who co-wrote a recent report arguing for a policy reset around FDI (see 2106030034), said a rise in screening tools is chilling investments and creating uncertainty over a range of industries.
President Joe Biden said the U.S. is committed to an open investment environment and remains the “most attractive place in the world” for business despite the sometimes rigorous foreign investment screening by the Committee on Foreign Investment in the U.S. While the U.S. “will always protect our national security, and certain foreign investments will be reviewed” by CFIUS, the U.S. wants to maintain a “level playing field,” Biden said in a June 8 statement. “We believe that our country -- and our world -- are safer, more resilient, and more prosperous because of the investment of foreign-owned companies in the United States,” he said. “As the United States faces increasing competition for the jobs and industries of the future, we will remain the destination of choice for investors around the world.”
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