CFIUS: National Security Investigations

Overview

National security investigations - 45 days

Following a national security review, certain covered transactions may be subject to a heightened "national security investigation," including if the transaction

Threatens to impair the "national security" of the United States
Is a "foreign government-controlled transaction", or
Would result in control of any "critical infrastructure" of or within the United States by or on behalf of any foreign person

Alternatively CFIUS has independent authority to initiate an investigation
Investigation to be completed within 45 days

Section 721, as amended by FINSA, also requires an additional 45-day investigation in the following types of cases, subject to certain exceptions (discussed below):

Where the transaction threatens to impair U.S. national security and that threat has not been mitigated prior to or during the 30-day review
Where the transaction is a foreign government-controlled transaction
Transactions that would result in foreign control over critical infrastructure and that CFIUS determines could impair national security, if that impairment has not been mitigated
Where the lead agency recommends, and CFIUS concurs, that an investigation be undertaken

Section 721(b)(2) National security investigations

(A) In general

In each case described in subparagraph (B), the Committee shall immediately conduct an investigation of the effects of a covered transaction on the national security of the United States, and take any necessary actions in connection with the transaction to protect the national security of the United States.

(B) Applicability.

Subparagraph (A) shall apply in each case in which --

(i) a review of a covered transaction under paragraph (1) results in a determination that
(I) the transaction threatens to impair the national security of the United States and that threat has not been mitigated during or prior to the review of a covered transaction under paragraph (1);
(II) the transaction is a foreign government-controlled transaction; or
(III) the transaction would result in control of any critical infrastructure of or within the United States by or on behalf of any foreign person, if the Committee determines that the transaction could impair national security, and that such impairment to national security has not been mitigated by assurances provided or renewed with the approval of the Committee, as described in subsection (l), during the review period under paragraph (1); or
(ii) the lead agency recommends, and the Committee concurs, that an investigation be undertaken.

Any investigation under subparagraph (A) shall be completed before the end of the 45-day period beginning on the date on which the investigation commenced.

(D) Exception.

(i) In general. Notwithstanding subparagraph (B)(i), an investigation of a foreign government-controlled transaction described in subclause (II) of subparagraph (B)(i) or a transaction involving critical infrastructure described in subclause (III) of subparagraph (B)(i) shall not be required under this paragraph, if the Secretary of the Treasury and the head of the lead agency jointly determine, on the basis of the review of the transaction under paragraph (1), that the transaction will not impair the national security of the United States.
(ii) Nondelegation. The authority of the Secretary or the head of an agency referred to in clause (i) may not be delegated to any person, other than the Deputy Secretary of the Treasury or the deputy head (or the equivalent thereof) of the lead agency, respectively.

(E) Guidance on certain transactions with
national security implications

The Chairperson shall, not later than 180 days after the effective date of the Foreign Investment and National Security Act of 2007, publish in the Federal Register guidance on the types of transactions that the Committee has reviewed and that have presented national security considerations, including transactions that may constitute covered transactions that would result in control of critical infrastructure relating to United States national security by a foreign government or an entity controlled by or acting on behalf of a foreign government.

Legislative history

Section 2 of FINSA (2007) amended section 721(b) in its entirety

Related Topic Pages

Section 721 - Statute

31 CFR 800.503 Determination of whether to undertake an investigation

(a) ___________

After a review of a covered transaction under Sec. 800.502, the Committee shall undertake an investigation of any covered transaction if:

(1) A member of the Committee (other than a member designated as ex officio under section 721(k)) advises the Staff Chairperson that the member believes that the transaction threatens to impair the national security of the United States and that the threat has not been mitigated; or
(2) The lead agency recommends, and the Committee concurs, that an investigation be undertaken

(b) ___________

The Committee shall also undertake, after a review of a covered transaction under Sec. 800.502, an investigation to determine the effects on national security of any covered transaction that: (1) Is a foreign government-controlled transaction; or (2) Would result in control by a foreign person of critical infrastructure of or within the United States, if the Committee determines that the transaction could impair the national security and such impairment has not been mitigated.

The Committee shall undertake an investigation as described in paragraph (b) of this section unless the Chairperson (or the Deputy Secretary of the Treasury) and the head of any lead agency (or his or her delegee at the Deputy Secretary or equivalent level) designated by the Chairperson determine at the conclusion of the review that such transaction will not impair the national security of the United States

Proposal release
Section 800.503. This section now specifies the triggers for
commencing an investigation, which are drawn from FINSA and Executive Order 11858, as amended.

31 CFR 800.504 Determination not to undertake an investigation

___________

If the Committee determines, during the review period described in Sec. 800.502, not to undertake an investigation of a notified covered transaction, action under section 721 shall be concluded. An official at the Department of the Treasury shall promptly send written advice to the parties to a covered transaction of a determination of the Committee not to undertake an investigation, and to conclude action under section 721.

31 CFR 800.505 Commencement of investigation

___________

(a) If it is determined that an investigation should be undertaken, such investigation shall commence no later than the end of the thirty- day review period described in Sec. 800.502
(b) An official of the Department of the Treasury shall promptly send written advice to the parties to a covered transaction of the commencement of an investigation

31 CFR 800.506 Completion or termination of investigation and report to the President

Completion or termination of investigation and report
to the President

(a) ___________

The Committee shall complete an investigation no later than the forty-fifth day after the date the investigation commences, or, if the forty-fifth day is not a business day, no later than the next business day after the forty-fifth day.

(b) ___________

(b) Upon completion or termination of any investigation, the Committee shall send a report to the President requesting the President's decision if: (1) The Committee recommends that the President suspend or prohibit the transaction; (2) The members of the Committee (other than a member designated as ex officio under section 721(k)) are unable to reach a decision on whether to recommend that the President suspend or prohibit the transaction; or (3) The Committee requests that the President make a determination with regard to the transaction.

In circumstances when the Committee sends a report to the President requesting the President's decision upon completion or termination of an investigation, such report shall include information relevant to sections 721 (d)(4)(A) and (B), and shall present the Committee's recommendation. If the Committee is unable to reach a decision to present a single recommendation to the President, the Chairperson shall submit a report of the Committee to the President setting forth the differing views and presenting the issues for decision.

(d) ___________

If the Committee determines to conclude all deliberative action under section 721 with regard to a notified covered transaction without sending a report to the President upon completion or termination of an investigation, action under section 721 shall be concluded. An official at the Department of the Treasury shall promptly send written advice to the parties to a covered transaction of a determination to conclude action.

Proposal release
Section 800.506. Executive Order 11858, as amended, specifies the circumstances under which CFIUS will forward a transaction to the President for a final decision. This section repeats these requirements. In all other cases, where CFIUS concludes deliberative action without referring the matter to the President, the Department of the Treasury will send written advice to the parties of the determination to conclude action under section 721. When the President makes the final decision on a transaction, FINSA requires that that decision be announced publicly.

Section 721(j) Technology risk assessments

______

In any case in which an assessment of the risk of diversion of defense critical technology is performed by a designee of the President, a copy of such assessment shall be provided to any other designee of the President responsible for reviewing or investigating a merger, acquisition, or takeover under this section.

Legislative history

Section 2 of FINSA (2007) amended section 721(b) in its entirety

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