The Committee on Foreign Investment in the United States (CFIUS)

Publication Date: April 2008

Publisher: Library of Congress. Congressional Research Service

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The Committee on Foreign Investment in the United States (CFIUS) is comprised of 12 members representing major departments and agencies within the federal Executive Branch. While the group generally operates in relative obscurity, the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed the group's operations under intense scrutiny by Members of Congress and the public.

Prompted by this case, some Members of the 109th Congress questioned the ability of Congress to exercise its oversight responsibilities given the general view that CFIUS's operations lack transparency. Other Members revisited concerns about the linkage between national security and the role of foreign investment in the U.S. economy. Some Members of Congress and others argued that the nation's security and economic concerns have changed since the September 11, 2001 terrorist attacks and that these concerns were not being reflected sufficiently in the Committee's deliberations. In addition, anecdotal evidence seemed to indicate that the CFIUS process is not market neutral, instead a CFIUS investigation of an investment transaction may be perceived by some firms and by some in the financial markets as a negative factor that adds to uncertainty and may spur firms to engage in behavior that is not optimal for the economy as a whole.

As a result of the attention focused on the Dubai Ports World transaction, Members of Congress introduced more than two dozen measures on foreign investment in the 109th Congress. These measures reflected various levels of unease with the broad discretionary authority Congress has granted CFIUS. As a result, most measures would have placed new reporting requirements on CFIUS and strengthen Congress's ability to exercise oversight over CFIUS through the federal agencies that comprise the Committee.

Such measures as H.R. 4813 and H.R. 4917 would have placed new reporting requirements on CFIUS to inform Congress when it initiated an investigation of a proposed acquisition, merger, or takeover. Other measures would have reduced CFIUS's discretion in deciding whether to investigate a foreign investment transaction. H.R. 4929 would have limited CFIUS's discretion by mandating that an investigation must occur for any proposed or pending merger, acquisition, or takeover. H.R. 5337 would have made substantial changes to CFIUS and to the Exon-Florio process. H.R. 5337 was approved unanimously, without amendment by the full House, on July 26, 2006. S. 1797 would have increased requirements for reporting to Congress, and would have required CFIUS to consider the long-term projections of the United States requirements for sources of energy and other critical resources and materials and for economic security. S. 2380 would have added a new national security review to the CFIUS process and the Secretary of Homeland Security and the Secretary of Defense as vice chairs of the Committee. S. 3549 would have added to the list of factors CFIUS and the President would consider in taking action against an investment and it would have provided for a system of assessing countries as a factor in review or investigating investments. The measure was passed, with amendments, by the full Senate on July 26, 2006. The 109th Congress ended before a Conference Committee could be convened on H.R. 5337 or S. 3549 and both measures lapsed. The 110th Congress is expected to consider similar measures. This report will be updated as events warrant.