It’s a secretive US panel that few outside Washington have heard of. But it serves an important purpose as the federal government’s ultimate gatekeeper for all foreign investments in, or acquisitions of, US companies that have national security implications.
The Committee on Foreign Investment in the United States (CFIUS) is an inter-agency body that operates under the US Treasury Department. It’s composed of eight other permanent members: the Department of Justice, the Department of Homeland Security, the Department of Commerce, the Pentagon, the State Department, the Department of Energy, the Office of the US Trade Representative and the Office of Science and Technology Policy.
The President’s Council of Economic Advisors, the National Security Council and the National Economic Council also sit in on CFIUS sessions.
If there is a US crackdown on Chinese investment in US artificial intelligence (AI) and machine learning firms, CFIUS will be the hammer. Reports say Congressional legislation is in the works to make CFIUS take a harder line on such transactions.
In the past, CFIUS has reviewed and ruled on everything from the US business website operator Verio’s acquisition by Japan’s NTT Communications to the Chinese computer maker Lenovo’s purchase of IBM’s PC and laptop unit. Most recently, it helped the Obama administration nix a series of proposed acquisitions of US chip makers by Chinese investors.
CFIUS conducts its meetings behind closed doors and rarely makes public statements about its decisions. If it objects to a specific investment proposal, it quietly notifies the relevant parties and the transaction doesn’t go through.
Foreign investors whose proposals trigger a CFIUS review must file them to the panel for consideration. Such investors may amend and refile their proposals in cases where CFIUS has raised objections. Some withdraw their bids after CFIUS begins an investigation.
CFIUS is increasingly in the public eye due to the soaring number of proposed acquisitions by Chinese firms. Reuters says there have been a record 87 announced acquisitions to date of US companies by Chinese businesses in 2017, up from 77 in the same period a year earlier.
A bid by the Chinese conglomerate HNA Group to purchase a US$416 million stake in Los Angeles-based in-flight US services firm Global Eagle Entertainment collapsed on July 25 after failing to win CFIUS approval.
Doug Tsuruoka is Editor-at-Large of Asia Times