https://crsreports.congress.gov
Updated February 21, 2020
CFIUS Reform Under FIRRMA
Overview
Some Members of Congress, the Trump Administration,
and some U.S. businesses have raised concerns over the
risks to continued U.S. technological leadership to support
national defense and economic security due to growing
foreign direct investment (FDI), primarily by Chinese
firms, in U.S. high-tech companies. On August 13, 2018,
President Trump signed into law new rules governing
foreign investment national security reviews. Known as the
Foreign Investment Risk Review Modernization Act
(FIRRMA) of 2018 (Title XVII, P.L. 115-232), the
legislation amends the current process for the Committee on
Foreign Investment in the United States (CFIUS) (under
P.L. 110-49) to review, on behalf of the President, the
national security implications of FDI in the United States.
CFIUS is an interagency body comprised of nine Cabinet
members, two ex officio members, and others as appointed
that assists the President in overseeing the national security
risks of FDI in the U.S. economy. Since its inception in
1975, CFIUS has confronted shifting concepts of national
security and a changing global economic order that is
marked by the rise of such emerging economies as China
and state-led firms that are playing a more active role in the
global economy. The FIRRMA-amended CFIUS process
maintains the President’s authority to block or suspend
proposed or pending foreign “mergers, acquisitions, or
takeovers” of U.S. entities, including through joint
ventures, that threaten to impair the national security.
To exercise his authority under CFIUS, the President must
(1) conclude that other U.S. laws are inadequate or
inappropriate to protect national security; and (2) have
“credible evidence” that the foreign interest exercising
control might take action that threatens to impair U.S.
national security. In addition, final determinations by the
President are not subject to judicial review.
The Foreign Investment Risk Review
Modernization Act of 2018
FIRRMA aims to “strengthen and modernize” the current
CFIUS process for reviewing potential effects of foreign
investment transactions on U.S. national security, last
updated in 2007. Certain provisions took effect
immediately, while others, including some related to the
expanded scope of CFIUS, were subject to further
regulations. Some experts have suggested that the broad
changes under FIRRMA could potentially lead CFIUS to
take a more assertive role that emphasizes both U.S.
economic and national security interests, particularly
relative to the development of emerging or leading-edge
technology.
FIRRMA maintains core components of the current CFIUS
three-step process for evaluating proposed or pending
investments in U.S. firms, but increases the allowable time
for reviews and investigations: (1) a 30-day declaration
filing; (2) a 45-day national security review (from 30 days),
including an expanded time limit for analysis by the
Director of National Intelligence (from 20 to 30 days); (3) a
45-day national security investigation, with an option for a
15-day extension for “extraordinary circumstances”; and a
15-day presidential determination (unchanged). To date,
prior to FIRRMA, Presidents used CFIUS to block five
foreign investment transactions.
FIRRMA broadens CFIUS’s role by explicitly including for
review certain real estate transactions in close proximity to
a military installation or U.S. government facility or
property of national security sensitivities; any
noncontrolling investment in certain U.S. businesses
involved in critical technology, critical infrastructure, or
collecting sensitive personal data on U.S. citizens; any
change in foreign investor rights; transactions in which a
foreign government has a direct or indirect substantial
interest; and any transaction or arrangement designed to
evade CFIUS. Treasury issued final regulations on January
13, 2020, which became effective on February 13.
Without mentioning specific countries, FIRRMA allows
CFIUS potentially to discriminate among foreign investors
by country of origin and transactions tied to certain
countries in reviewing certain investment transactions,
pending specific criteria defined by regulations.
FIRRMA also shifts the filing requirement for foreign firms
from voluntary to mandatory in certain cases and provides a
two-track method for reviewing transactions. Most firms
can file a short-form declaration to CFIUS and receive an
expedited review process, while transactions involving a
foreign person in which a foreign government has, directly
or indirectly, a substantial interest (25% between a foreign
