2014 continues to be an eventful year for the Committee on Foreign Investment in the United States (CFIUS). On September 18, 2014, Congresswoman Rosa DeLauro has introduced legislation that has the potential to significantly enlarge the Committee’s mandate. Currently, CFIUS reviews foreign acquisitions, mergers, and takeovers of U.S. businesses that raise national security concerns.  The proposed Foreign Investment and Economic Security Act of 2014 (FIESA) however, would require certain agencies to also conduct a “net benefit” analysis of the transaction.

  • This would include consideration of the effect of the transaction on factors such as U.S. employment, productivity, industrial efficiency, technological development, and product innovation.
  • The analysis would also look at national, industrial, economic, and cultural policies; and public health, safety, and well-being of U.S. consumers.
  • The net benefit analysis would be conducted by the U.S. Departments of the Treasury, Commerce, and Labor, the U.S. Attorney General, the U.S. Trade Representative, and, if appropriate, the U.S. Departments of Agriculture and/or Health and Human Services.

Significantly, the bill also targets “foreign government-influenced transactions.” CFIUS’ authority is currently limited to transactions involving actual foreign government ownership.  In conducting the net benefit analysis for such a “foreign government-influenced transaction,” the agencies would take into consideration several factors, including:

  • The “governance and commercial orientation” of the foreign person engaging in the transaction;
  • The extent to which the foreign person is influenced by a foreign government;
  • Whether the foreign person adheres to U.S. laws or standards of corporate governance; and
  • Whether the foreign person will likely operate on a commercial basis.

Finally, FIESA also expands CFIUS’authority to review transactions involving “any construction of a new facility in the United States” by a foreign person.  Such greenfield investments are not currently within CFIUS’ purview.

FIESA’s introduction appears to have been largely driven by Chinese food company Shuanghui International Holdings Limited’s (Shuanghui) purchase of Smithfield Foods.  The 2013 purchase raised serious economic concerne, rather than national security concerns.

FIESA is unlikely to pass in the current Congress, given the political issues raised and the late date of the bill’s introduction.  There are reports that Senator Stabenow is also drafting legislation to toughen CFIUS oversight of foreign acquisitions in the United States, with specific focus on U.S. food companies.  Perhaps such a sector-specific bill will gain more traction than Rep. DeLauro’s more general bill.