Global Trade & Foreign Policy Insights

The annual report for 2022 shows that the CFIUS process is becoming more difficult to negotiate in a timely and predictable manner, and in some cases, transactions can get bogged down in the CFIUS quagmire for several months.

On September 15, President Biden issued a new Executive Order (E.O.) titled, “Executive Order on Ensuring Robust Consideration of Evolving National Security Risks by the Committee on Foreign Investment in the United States.”  This is the first E.O. since CFIUS was established in 1975 to provide presidential direction on the factors that CFIUS is required to consider when evaluating foreign investments in U.S. businesses.  Specifically, the E.O. states that CFIUS is required to consider the following four factors when evaluating transactions: (1) the transaction’s effect on supply chain resilience and security, both within and outside of the defense industrial base; (2) the transaction’s effect on U.S. technological leadership in areas affecting U.S. national security; (3) cybersecurity risks that may impair national security; and (4) risk to U.S. persons’ sensitive data.  The E.O. also clarifies that if a foreign person has made multiple investments in an industry or sector, CFIUS will not look at each new investment in a vacuum, but rather will consider the cumulative effect of all of a foreign person’s investments in a particular industry or sector when evaluating the national security risks arising from each new investment.  Finally, the E.O. requires CFIUS to provide regular reports to the White House’s National Security Advisor regarding its regulations, processes, and procedures.