CFIUS is the federal inter-agency
body responsible for reviewing and determining the effect on national security
of transactions involving a foreign entity taking a majority stake in a U.S.
company. If CFIUS determines that the transaction poses a potential threat to
the national security of the US, the Committee can impose conditions on the
transaction or refer the request to the President for a final decision.
The profile of CFIUS has been
raised lately with the President intervening since taking office in two
significant cases involving US semiconductor companies. In 2017, the President
denied the request of Canyon Bridge Capital Partners, a Beijing-based private
equity firm, from taking control of Lattice Semiconductor Corporation of
Portland, Oregon. This year, the President blocked Broadcom from acquiring
Qualcomm. Broadcom was based in Singapore when the President made his
announcement, but the company has since finalized incorporation in the US.
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While the reforms are likely to
have a minimal immediate direct impact on the workforce mobility industry,
there are future implications regarding the ability of foreign entities to
acquire majority stakes in U.S. companies and real estate. This in turn could
lead to changes in certain business sectors in the movement of employees of
foreign entities to the U.S. and vice versa. There is also the larger issue of
the potential impact of reduced foreign investment in the U.S.
The most significant reform is
that requests for CFIUS review by foreign entities will no longer be voluntary
in cases where the entity is looking to control a company in which a national
security issue could be raised. Until now, requests for review were voluntary
however CFIUS has had the right to review the transaction if the Committee
thought there was a national security issue. The new reforms also include those
transactions in which a minority investment is being made instead of a
controlling interest in a company.
The reform language would also
provide CFIUS with greater authority regarding the investment of foreign
entities in real estate in the U.S. in which the location or influence over
tenants of the property could pose national security concerns. Examples of such
locations would be properties near the key federal buildings in Washington, DC
or military installations.
Issues could also be raised if
the property is leased to a key U.S. agency or state or local first responder.
The new language would also place emphasis on investments in companies
collecting personally identifiable information of U.S. citizens posing a
While some of the reforms will
take effect almost immediately, the Secretary of the Treasury as the Chair of
CFIUS will be promulgating a rule to implement of majority of the changes. In addition to the Secretary of the Treasury,
members of CFIUS include the Secretaries of Commerce, Defense, Energy Homeland
Security, Justice and State as well as the head of the Office of Science &
Technology Policy and the U.S. Trade Representative.
Representatives of the Office
of Management and Budget (OMB), Council of Economic Advisors, National Security
Council, National Economic Council, Homeland Security Council and the Director
of National Intelligence and Secretary of Labor are also observation members of
President Trump is expected in
the next few days to sign into law H.R. 5515 with the language to reform CFIUS.