Committee on Foreign Investment in the United States

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The Committee on Foreign Investment in the United States (or CFIUS) is an inter-agency committee of the United States Government that reviews the national security implications of foreign acquisitions of U.S. companies or operations. Chaired by the Secretary of the Treasury, CFIUS includes representatives from 12 U.S. agencies, including the Defense, State and Commerce departments, as well as (most recently) the Department of Homeland Security. CFIUS was established by Gerald Ford's Executive Order 11858 in 1975. Ronald Reagan delegated Presidential oversight to CFIUS by his Executive Order 12661 in 1988.

Companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted. CFIUS reviews begin with a 30-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment. Most transactions submitted to CFIUS are approved without the statutory investigation.^[1]

CFIUS has looked at the "restrictions on sale of advanced computers to any of a long list of foreign recipients, ranging from China to Iran."^[2] CFIUS reviews even deals with firms from U.S. allies, such as BAE Systems' early-2005 acquisition of United Defense. This and the vast majority of transactions submitted to CFIUS are approved without difficulty. But at least one deal has been called off when CFIUS began to take a closer look.^[3]

Some important cases include:

The 2005 acquisition by Lenovo, the largest personal computer company in China, of IBM's personal computer and laptop unit
State-owned China National Offshore Oil Corporation's attempted acquisition of UNOCAL (2005)
State-owned Dubai Ports World's planned acquisition of P&O, the operator of many US ports, including New York (2006)
NTT Communications' acquisition of Verio (2000)
The 2005 acquisition of Sequioa Voting Systems of Oakland, California, by Smartmatic, a Dutch company contracted by Hugo Chávez's government to replace that country's elections machinery^[4]

[edit] Opinions on the Committee

In February 2006, Richard Perle gave more insight into CFIUS when he related to CBS News his experience on the panel during the Reagan administration, "The committee almost never met, and when it deliberated it was usually at a fairly low bureaucratic level." He also added, "I think it's a bit of a joke if we were serious about scrutinizing foreign ownership and foreign control, particularly since 9/11."^[5]

Others emphasize the crucial role that foreign direct investment plays in the U.S. economy, and the discouraging effect that heightened scrutiny and protectionism can cause. Foreign investors in the United States, much like U.S. investors elsewhere, bring expertise and infusions of capital into often-struggling sectors of the U.S. economy. In a February 2006 interview with the New York Times, another former Reagan administration official, Clyde V. Prestowitz Jr., noted that the United States "need[s] a net inflow of capital of $3 billion a day to keep the economy afloat.... Yet all of the body language here is 'go away.'"^[6] And, as Secretary Powell once remarked, "money, capital, is a coward; it will go nowhere where it is put in fear."^[7]