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Foreign Investment

The House passed the Senate amendments to the Foreign Investment and National Security Act, H.R. 556 on July 11, 2007, by a vote of 423-0. This bill strengthens national security by reforming the interagency Committee on Foreign Investment in the United States (CFIUS) process by which the Federal Government reviews foreign investments in the United States for their national security implications. The Senate amendments make only relatively minor changes to the bill passed by the House in February. The bill was signed into law by the President on July 26, 2007.

In early 2006, Americans were outraged by the secretive approval by the Bush Administration of the Dubai Ports World deal.  In January 2006, the Committee on Foreign Investment in the United States (CFIUS) approved a port deal sought by Dubai Ports World - with only minimal review - despite the deal's national security implications.  Dubai Ports World is a company owned by the government of the United Arab Emirates (UAE).  The Dubai port deal would have resulted in the company managing terminal operations at six major U.S. ports.  Before approving this deal, CFIUS did not initiate a 45-day national security investigation - despite the fact that the Department of Homeland Security had raised security concerns.  

Despite the national security implications, the Bush Administration had approved the Dubai Ports World deal with only minimal review - and with no notification of Congress.  It is clear from the record that the Bush Administration only gave the Dubai port deal a cursory look before approving it in January 2006.  The CFIUS approved the plan in only 30 days with little review and without the 45-day national security investigation that clearly should have been conducted.  Furthermore, the CFIUS approval was made by low-level officials.  The senior decisionmakers in the Administration - including the Secretary of the Treasury, the Secretary of Homeland Security, and the President of the United States - were not informed until they became aware of the approval via press reports.  In addition, no Member of Congress was informed of the secretive approval by CFIUS of the port deal - with Members also learning about the deal in press reports.  

The bill responds to the Dubai Ports scandal by significantly strengthening the review of foreign investments.  This bill requires CFIUS to conduct a 30-day review of any national security-related business transaction.  Under the bill, after a 30-day review is conducted, CFIUS would be required to conduct a full-scale, 45-day investigation of the effects the business transaction would have on national security if the committee review results in any of the following determinations:  1) the transaction threatens to impair national security and these threats have not been mitigated during the 30-day review; 2) the transaction is a foreign government-controlled transaction; or 3) the transaction raises national security risks associated with foreign ownership of critical infrastructure and those risks have not been fully mitigated during the review.  The Senate-passed bill also includes provisions to require that CFIUS designate a lead agency in reviewing transactions, such as DOD for defense acquisitions.

The bill ensures senior level accountability for CFIUS decisions.  The Dubai Ports World deal was approved only by low-level officials.  This bill deals directly with this failure of the current system by requiring senior-level accountability.  Specifically, the bill requires that the Chairman of CFIUS (the Secretary of the Treasury) and the head of the lead agency approve all transactions where CFIUS consideration is completed within the 30-day review period (limiting delegation of approval authority to the Assistant Secretary level); and requires that the President approve all transactions that have also been subjected to the second-stage 45-day national security investigation.  The Senate-passed bill also creates a new Assistant Secretary in the Treasury Department who will be charged with CFIUS responsibilities.

The bill increases the scrutiny of foreign government transactions.  The Dubai Ports World deal was approved by low-level officials and without a 45-day national security investigation of the transaction, even though Dubai Ports World was owned by a foreign government.  This bill toughens current law by requiring that, in cases involving a company that is controlled by a foreign government, that either 1) the Chairman of CFIUS (the Secretary of the Treasury) and the head of the lead agency certify that the transaction poses no national security threat, and this certification may not be delegated below the Deputy Secretary level; or 2) a second-stage 45-day national security investigation of the transaction must take place.  

The bill also improves CFIUS accountability to Congress.  Members of Congress were not notified of the CFIUS approval of the Dubai Ports World deal.  This bill addresses that failure by requiring CFIUS to provide a written certification of each transaction reviewed to congressional leadership, committees with jurisdiction over the transaction, and in cases involving critical infrastructure, Members representing the relevant district/state. The bill also requires CFIUS to file annual reports to Congress that contain information on transactions handled by the committee during the previous year.

Finally, the bill strengthens the CFIUS review process by establishing a formal role for intelligence assessments for every transaction.  The bill requires that every transaction be subjected to an assessment by the Director of National Intelligence (DNI) and contains provisions to ensure that the DNI has adequate time to conduct the required assessment.  It also clarifies that the DNI will have no policymaking role in CFIUS.