On November 8, 2017, members of the U.S. House and Senate introduced companion legislation that would update the Committee on Foreign Investment in the U.S. (CFIUS) and the national security review process. The bill, entitled the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA), would change the scope of what is considered a “covered transaction” and add a new “declaration” process that would be required in certain cases. Below are three of the most significant changes contained in the proposed bill.
President Trump issued an Executive Order prohibiting the proposed acquisition of Lattice Semiconductor (Lattice) by a Chinese consortium known as Canyon Bridge. Lattice is a semiconductor company primarily manufacturing programmable logic devices. The Executive Order prohibits the proposed acquisition and any substantially equivalent transaction, and requires the parties to permanently abandon the proposed transaction in 30 days. The Executive Order follows a lengthy review process with the Committee on Foreign Investment in the United States (CFIUS). This is only the fourth time since the enactment of the Exon-Florio Amendment in 1988 that a transaction has been formally blocked.
Recent public reports indicate Sen. Chuck Schumer (D-NY), the Senate Democratic Leader, has authored a letter to President Trump requesting the President order the Committee on Foreign Investment in the United States (CFIUS) to suspend the approval of all covered transactions by Chinese entities. Sen. Schumer explains that such action would place severe economic pressure on China and force the country to take more stringent action against North Korea. While President Trump has publicly expressed “disappointment” with China over its perceived lack of response to recent North Korean missile tests, it is unclear what actions, if any, the President might take to spur action from China.
As the Trump Administration continues to examine its trade relationship with China, legislators in Congress are looking to modernize the Committee on Foreign Investment in the United States (CFIUS) review process in order to effectively respond to increased foreign direct investment in the U.S. and perceived threats to U.S. national security. On June 22, 2017, Senator John Cornyn (R-TX) spoke at the Council on Foreign Relations where he highlighted key features of his proposed Foreign Investment Risk Review Modernization Act (FIRRMA). The bill would make certain changes to the CFIUS review process in order to close perceived gaps. As described, however, it appears that CFIUS already has the legislative and regulatory authority to address many of these issues.