Biden order tightens foreign investment screening process

WASHINGTON– President Joe Biden signed an executive order Thursday that administration officials said is aimed at sharpening the national security considerations included in the federal government’s vetting process for foreign investments in the United States.

Government officials said the order will strengthen oversight by the United States’ Committee on Foreign Investment, an interagency group tasked with reviewing deals and mergers involving foreign individuals and entities.

Known as the CFIUS, the committee is made up of members from the Departments of State, Defense, Justice, Commerce, Energy, and Homeland Security, and is chaired by the Secretary of the Treasury. It sends its findings and a recommendation to the President, who has the power to suspend or prohibit a deal.

While the White House said the new order isn’t targeted at any particular country, it comes amid growing concerns among US officials about China’s investments in the US technology sector and other industries.

The order asks CFIUS to consider whether a foreign investment or sale could harm the resilience of critical US supply chains and the impact on US technological leadership in areas affecting US national security and broader investment trends.

It also asks CFIUS to consider cybersecurity risks that could arise from a transaction and states that the risks to US citizens’ sensitive data should also be considered.

“President Biden’s executive order underscores the CFIUS’ increasing attention to national security risks in several key areas and sharpens the committee’s focus on protecting America’s national security while maintaining U.S. open investment policies,” Treasury Secretary Janet Yellen said in a statement. “Strengthening our supply chains and protecting against foreign threats enhances our national security, and this executive order underscores CFIUS’ important role in that work.”

Biden’s executive order comes after legislation passed by Congress in 2018 significantly expanded CFIUS’s oversight role over foreign investments.

According to senior administration officials who briefed reporters on the condition of anonymity under ground rules established by the White House, CFIUS has already incorporated many of the criteria set out in Biden’s executive order. But the officials added that by publicly emphasizing and sharpening the committee’s focus on what the government sees as emerging risks, the government hopes that by publicly emphasizing and sharpening the committee’s focus, it will bring more clarity to businesses and investors when considering national security risks that are evolving may arise from a potential transaction.

Prior to the 2018 legislation, CFIUS investigated cases where a foreign company’s attempt to acquire or merge with a US company could pose a national security risk. The 2018 legislation expanded CFIUS oversight to review certain joint ventures, minority interests, and real estate deals near military bases or other sensitive national security facilities.

The legislation was prompted by complaints that Chinese companies were exploiting loopholes in US law and improperly acquiring technology and potentially sensitive information. US lawmakers have also raised concerns that Chinese companies are using joint ventures with foreign companies or minority stakes in companies to gain access to sensitive technology.

An annual Treasury Department report released in August showed that Chinese investors more than doubled the number of applications they submitted in 2021 to receive US government regulatory approval for proposed deals.

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