59–010 

Calendar No. 197 

110TH CONGRESS REPORT " ! SENATE 1st Session 110–80 

FOREIGN INVESTMENT AND NATIONAL SECURITY ACT 

OF 2007 

JUNE 13, 2007.—Ordered to be printed 

Mr. DODD, from the Committee on Banking, Housing, and Urban 

Affairs, submitted the following 

R E P O R T 

[To accompany S. 1610] 

The Committee on Banking, Housing, and Urban Affairs, having 

had under consideration an original bill (S. 1610), to ensure national security while promoting foreign investment and the creation 

and maintenance of jobs, to reform the process by which such investments are examined for any effect they may have on national 

security, to establish the Committee on Foreign Investment in the 

United States, and for other purposes, reports favorably thereon 

and recommends that the bill do pass. 

I. PURPOSE

Section 721 of the Defense Production Act, also known as the 

Exon-Florio Amendment (‘‘Exon-Florio’’), established a statutory 

framework for the United States Government to analyze foreign acquisitions, mergers, and takeovers (hereafter ‘‘transactions’’) of privately-owned entities within the United States to determine whether such transactions affect the national security of the United 

States. The Foreign Investment and National Security Act of 2007 

(hereafter ‘‘the Act’’) amends Section 721 for the purpose of 

strengthening the process by which such transactions are reviewed 

and, when warranted, investigated for national security concerns. 

In addition, the Act provides for a system of Congressional notification so that Congress is able to conduct proper oversight of the national security implications of foreign direct investment in the 

United States to ensure that it is beneficial and has no adverse impact on U.S. national security. 


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II. BACKGROUND

In 1988, Section 721 of the Defense Production Act of 1950, 

Exon-Florio, was passed in response to congressional concerns 

about the impact on national security of certain foreign acquisitions 

of United States corporate entities. Exon-Florio established a process by which proposed foreign transactions would be analyzed by 

the Executive Branch of the United States Government (specifically, ‘‘the President or the President’s designee’’) to determine 

whether such transactions could pose a threat to U.S. national security. Historically, U.S. Presidents have assigned the responsibility for implementing Exon-Florio to the Committee on Foreign 

Investment in the United States (hereafter, ‘‘CFIUS’’), a multiagency organization established by Executive Order in 1975. ExonFlorio was amended in 1992 by the so-called ‘‘Byrd Amendment’’ to 

require that all foreign transactions involving a foreign government-owned or controlled entity would be subject to a more stringent analytical process. 

CFIUS Process.—Exon-Florio established a four-step process for 

examining a foreign acquisition: (1) voluntary notice by the companies; (2) a 30-day review to identify any national security concerns; 

(3) an optional 45-day investigation to determine whether identified concerns require more extensive mitigation efforts or a recommendation to the President for possible action; and (4) a Presidential decision to permit, suspend, or prohibit an acquisition in 

those instances where potential national security concerns cannot 

be mitigated. 

During the standard review period, CFIUS conducts a national 

security analysis to determine whether any national security issues 

exist with a particular transaction, and if so, whether those concerns can be mitigated. In practice, companies sometimes ‘‘pre-file’’

with CFIUS, providing information about the transaction in order 

to ensure that CFIUS has all necessary information during the formal review period. Further, companies may withdraw from the formal review in order to address concerns on the condition that they 

re-file promptly with CFIUS or abandon the transaction. Therefore, 

while the vast majority of CFIUS transactions are approved by the 

end of the 30-day review, the total time devoted to transactions is 

sometimes longer. If national security concerns have not been resolved during the 30-day review, CFIUS can extend its review to 

a second stage 45-day investigation. At the end of a 45-day investigation, the transaction is sent to the President for a decision, accompanied by a CFIUS report and recommendation. Any transaction that goes to the President must be reported to Congress. 

Transactions that enter investigation may also be terminated before reaching the President, with the companies voluntarily withdrawing and abandoning the investment. Presidential decisions are 

also avoided in cases where a mitigation agreement has been 

reached during the investigation period and the companies withdraw from investigation and immediately re-file. 

Mitigation agreements, which are contracts with CFIUS or 

CFIUS agencies entered into by the parties to the transaction, are 

an important element of the CFIUS review and investigation process. These agreements are intended to mitigate possible national 

security threats posed by a transaction short of requiring that the 


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parties abandon the transaction altogether. The Department of Defense (hereafter ‘‘DOD’’) has for many years used various types of 

mitigation agreements under existing DOD authority and regulations, such as the National Industrial Security Program Operating 

Manual (NISPOM) to address the impact of foreign ownership and 

control over companies that have classified contracts with the Pentagon or intelligence agencies. In recent years, the Departments of 

Justice and Homeland Security have also done so. 

Of necessity, the reviews and investigations, which contain classified evaluations of national security vulnerabilities as well as extensive proprietary business information, remain highly confidential. Given this lack of transparency, there have been concerns over 

the years about CFIUS’s accountability to Congress and to the public, particularly with regard to fundamental questions of whether 

CFIUS policies are consistent with the statute, executive orders, 

and regulations that govern its operations and whether CFIUS 

policies are applied consistently from transaction to transaction. 

CFIUS has explicit authority in the regulations (31 CFR 

800.601(e)) to reopen a case in the event that CFIUS discovers 

there has been a material misstatement or omission in the information provided by the parties to the transaction. CFIUS agencies 

also have all of the remedies that are normally available under a 

contract in order to enforce the terms of the mitigation agreement. 

In addition, in a large number of CFIUS cases, and particularly 

those involving the Defense Department, CFIUS approvals can be 

effectively nullified simply by ending the federal agency’s contracting relationship with the company. Defense-related contracts 

are often a central element of CFIUS transactions, so the threat of 

being denied a contract going forward ensures compliance with the 

terms of mitigation agreements or other conditions agreed to by the 

foreign investor. 

Congressional Oversight Difficult within Existing Procedures.— Since Exon-Florio went into effect, transactions have been reviewed 

in a highly confidential manner in part to prevent the public release of sensitive proprietary information. The practical effect of 

conducting transactional reviews in this manner, however, has 

made congressional oversight and public understanding of ExonFlorio extremely difficult. 

Recent Concerns about CFIUS Process.—In February 2004, after 

a series of specific transactions brought to the forefront the difficulty in conducting thorough oversight by Congress of the security 

review process, then chairman of the Committee on Banking, Housing, and Urban Affairs, Senator Shelby, and then Ranking Member 

of the Committee, Senator Sarbanes, requested a study by the Government Accountability Office of the implementation of ExonFlorio. That study was completed in September 2005. 

In its 2005 report, GAO offered a number of recommendations for 

congressional action. Those recommendations include more clearly 

delineating the factors to be considered in CFIUS reviews and investigations; addressing the time constraint problem by replacing 

the existing review and investigation phases; and providing for 

greater transparency by reviewing the existing Exon-Florio provision pertaining to notifications to Congress. Finally, to address congressional concerns regarding the status of cases withdrawn from 

CFIUS review for the purpose of ‘‘stopping the clock,’’ GAO recVerDate Aug 31 2005 03:19 Jun 15, 2007 Jkt 059010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\SR080.XXX SR080

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ommended that Congress require the Secretary of the Treasury to 

establish more formal and stringent criteria to govern such withdrawals, including a process for tracking withdrawn cases. 

While GAO was conducting its examination, but prior to the release of its findings, the China National Offshore Oil Corporation 

(CNOOC) announced on June 23, 2005, its intention to acquire 

Unocal, a U.S. energy company. This announcement resulted in increased congressional concerns regarding foreign acquisitions of 

U.S. energy companies. While the CNOOC bid was withdrawn 

prior to that proposed transaction’s review by CFIUS, the Chinese 

company’s bid led many members of Congress to raise questions 

about the transfer of ownership or control of certain sectors of the 

U.S. economy to foreign companies, especially to foreign companies 

located within or controlled by countries the governments of which 

might not be sympathetic to U.S. regional security interests. 

On October 6, 2005, the Committee on Banking, Housing, and 

Urban Affairs conducted a hearing into the findings of the GAO report. Testifying on behalf of GAO were Ms. Katherine Schinasi, 

Managing Director for Acquisition and Management, and Ann 

Calvaresi, director of Industrial Base Issues. Discussion between 

the GAO witnesses and Banking Committee members further highlighted deficiencies in implementation of Exon-Florio and the level 

of dissatisfaction with the lack of communication between CFIUS 

and the appropriate oversight committees of Congress. That hearing was followed on October 20, 2005 by another hearing that allowed the Banking Committee to hear directly from many of the 

agencies that comprise CFIUS, including the Department of the 

Treasury, which has the lead role in implementing Exon-Florio, as 

well as private sector representatives. 

In late January 2006, congressional offices became aware of the 

proposed acquisition of terminal operations at a number of U.S. 

maritime ports by Dubai Ports World (hereafter ‘‘DPW’’), an established port operator owned by the government of the Emirate of 

Dubai. Concern within Congress about a transaction that would 

transfer control of terminal operations to a company owned by a 

Persian Gulf emirate through whose financial system funds had 

been transferred to the terrorists who carried out the September 

11, 2001 attacks upon the United States, and that had been a central conduit for nuclear weapons components being smuggled to 

hostile regimes, provided further impetus for review of the manner 

in which foreign transactions were being analyzed by CFIUS. That 

senior White House officials, and the Secretaries and Deputy Secretaries of the Departments of the Treasury and Homeland Security 

were unaware of the Dubai Ports World transaction, combined with 

the fact that this transaction was not subjected to a formal investigation in violation of the Byrd Amendment, compounded congressional concerns about the nature of the underlying transaction. 

In response to Congressional criticism related to the DPW case 

in 2006, CFIUS agencies pledged to address flaws in the CFIUS 

process identified by Congress. There were 113 transactions filed 

with CFIUS in 2006, up 74 percent from the previous year. Because companies seek CFIUS consideration voluntarily, this increase reflected greater sensitivity among foreign investors, which 

in turn may reflect a more aggressive stance from CFIUS. CFIUS 

conducted seven second-stage investigations, the same number of 


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investigations that had been conducted over the previous 5-year period. There was also an increase in the number of companies withdrawing from CFIUS reviews and investigations, which suggests a 

higher degree of scrutiny: either companies withdrew for the purpose of terminating the underlying transaction or in order to restructure the transaction to address CFIUS concerns. 

The number of cases in which CFIUS approved transactions with 

conditions attached through mitigation agreements also increased. 

CFIUS has also increased its Congressional outreach, notifying the 

Congressional leadership and committees of jurisdiction upon completion of CFIUS action on each transaction. Treasury also finally 

produced the long-overdue quadrennial report on CFIUS-related 

issues as mandated by the Defense Production Act of 1950. 

Despite these changes after the DPW case, CFIUS has not fully 

addressed key problems identified by Congress. Key concerns 

raised by the DPW case included a lack of senior-level involvement 

in CFIUS decision-making, failures in communications to Congress, 

and ambiguity in the standards by which CFIUS determines the 

need for second-stage investigations as well as in the procedures 

for seeking, monitoring, and enforcing mitigation agreements. 

In response to continued concerns regarding implementation of 

Exon-Florio, on April 30, 2006, the Committee on Banking, Housing, and Urban Affairs reported an original bill (S. 109–264) which 

made significant amendments to Section 721 to strengthen the review and oversight process. Senate bill 109–264 passed the Senate 

on July 26, 2006. On the same day the House passed its own reform legislation (H.R. 5337). No further action occurred on the bills 

prior to the adjournment of the 109th Congress. 

On February 28, 2007, The House once again passed legislation 

amending Section 721 to strengthen the foreign investment review 

process (H.R. 556—The National Foreign Investment Reform and 

Strengthened Transparency Act of 2007). On May 16, 2007, the 

Senate Committee on Banking, Housing and Urban Affairs convened to consider and report an original bill (The Foreign Investment and National Security Act of 2007) proposed by Chairman 

Christopher J. Dodd, after working closely with Ranking Member 

Richard Shelby and drawing upon the extensive work that members of the Committee had undertaken on this subject in the 109th 

Congress. 

The Committee believes that Senate passage of the Committee’s 

reported bill will not only implement needed reforms and thereby 

strengthen national security, but also provide more transparency 

and predictability to the CFIUS process that is important to ensuring that the U.S. economy continues to benefit from the fruits of 

foreign direct investment. 

III. MAJOR PROVISIONS OF THE BILL

The Foreign Investment and National Security Act of 2007—

1. Establishes the membership of the Committee on Foreign Investment in the United States (CFIUS) in statute. 

2. Strengthens the role of the Director of National Intelligence 

(hereafter ‘‘DNI’’) by making the DNI an ex-officio member of 

CFIUS and requiring that the Director undertake a thorough analysis of the transaction with respect to any national security implications, engage the intelligence community, and report the DNI’s 


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findings to the committee within 20 days of the commencement of 

the CFIUS review. Requires the DNI to update CFIUS with any 

additional relevant intelligence information that becomes available 

during the course of a review and/or investigation. 

3. Mandates the designation of a lead agency or agencies for each 

covered transaction, in addition to the Treasury Department, 

charged with negotiating any mitigation agreement or other conditions to ensure that national security is protected, and for follow 

up compliance with the terms of the agreement after the transaction has been approved by CFIUS. 

4. Provides for the 30-day review of covered transactions by 

CFIUS to determine its effects on national security, and for signoff at the assistant secretary-level (or above) that there is no threat 

to national security by the proposed transaction. 

5. Provides for the 45-day investigation of covered transactions 

that threaten to impair national security, including transactions involving foreign government-owned companies and control of critical 

infrastructure, and for sign off at the Deputy Secretary level that 

there is no threat to the national security by the proposed transaction. 

6. Provides for certain exceptions for the requirement that a 

state-owned entity automatically go to the investigation stage if the 

Secretary or Deputy Secretary of the Treasury, and the equivalent 

level official in the Lead Agency, determine after review of the 

transaction that national security will not be impaired by the 

transaction. 

7. Requires assessment of a country’s compliance with U.S. and 

multilateral counter-terrorism, non-proliferation and export control 

regimes for acquisitions by state-owned companies in the investigation stage. 

8. Provides authority to the President to suspend or prohibit a 

covered transaction if there is credible evidence that such transaction threatens to impair U.S. national security. 

9. Provides authority to CFIUS, or the lead agencies acting on 

behalf of CFIUS, to negotiate, impose and enforce conditions necessary to mitigate any threat to national security related to a covered transaction. 

10. Adds to the list of factors that CFIUS should consider in the 

conduct of its reviews and investigation to include among other 

things consideration of the potential impact of a transaction on critical infrastructure, energy assets, or critical technologies. 

11. Provides for written notice, to the Congress at the conclusion 

of the CFIUS process for both reviews and investigations, providing 

details about the transaction, including written assurance that the 

transaction does not threaten to impair national security or that 

any initial concerns have been mitigated through binding agreements between the parties and CFIUS (or the lead agency or agencies designated by the Chairman of CFIUS.). 

12. Provides for detailed annual reports to Congress on the activities of CFIUS, including information concerning the transactions that have been reviewed or investigated during the previous 12 months. 

13. Provides for an investigation by the Inspector General of the 

Department of Treasury to determine why the department failed to 

comply with provisions of the Defense Production Act with respect 


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to certain reporting requirements related to potential industrial espionage or coordinated strategies by foreign parties with respect to 

U.S. critical technology by foreign parties. 

14. Provides for the issuance of regulations and guidance to carry 

out the provisions of the Act. 

IV. DESCRIPTION OF THE LEGISLATION

The Committee’s reported bill seeks to address legitimate concerns about CFIUS procedures and policies, while also providing 

statutory clarity so that a climate favorable to foreign investments 

is maintained. It enshrines in statute a process by which all transactions that have been temporarily withdrawn from CFIUS are 

closely monitored and establishes a clear process by which any potential national security issues can be addressed together with a 

clear and permanent process of post-transaction monitoring. 

The bill would strengthen the Administration’s accountability, 

enhance Congress’s ability to perform its necessary oversight of the 

CFIUS process, better protect classified and proprietary business 

information utilized by CFIUS—all without creating any unnecessary barriers to normal investment transactions in the United 

States. The bill mandates an intelligence assessment of each 

CFIUS transaction, led by the Director of National Intelligence 

(DNI)—who would serve as an ex officio member of CFIUS with no 

policy role. The Committee understands that CFIUS monitors the 

press and other sources for information on transactions and on occasion consults with parties about those transactions. 

The bill also provides for the designation of a lead agency for 

each transaction to oversee the process along with the CFIUS 

chairman—The Secretary of Treasury or his designee. The Committee expects the Treasury Department to make its designation of 

the lead agency or agencies for each transaction based upon the nature of the national security threat posed by the transaction and 

the expertise of the agency or agencies in understanding and mitigating such threat. The Committee expects CFIUS to continue to 

monitor covered transactions that may have national security implications. The Committee also expects all relevant government 

agencies to cooperate with the information collection process conducted by CFIUS and the DNI with respect to information that is 

relevant to CFIUS’s national security analysis. When the original 

Exon-Florio analysis was enacted into law, Congress made clear 

that ‘‘national security’’ is to be broadly defined. Access to relevant 

sources of information within the United States Government is critical for the ability of CFIUS to protect United States national security. 

All approved CFIUS transactions must be certified by the CFIUS 

Chair (or designee) and designated lead agency head (or designee) 

to ensure that there is a clear and direct senior-level responsibility 

for CFIUS decisions. 

Regarding the provision outlining the process for the development of the Director of National Intelligence’s intelligence analysis, 

the bill reported by the Committee requires that the DNI provide 

its intelligence assessment to CFIUS members not later than 20 

days from the commencement of the review of the transaction. The 

Committee expects that the DNI shall do a thorough job of proVerDate Aug 31 2005 03:19 Jun 15, 2007 Jkt 059010 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\SR080.XXX SR080

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viding CFIUS with intelligence analysis throughout the entire 

CFIUS process. 

The legislation reinforces CFIUS’s capacity to refuse, suspend, 

modify or reverse any transaction if a written notice of such transaction is not filed with CFIUS or if there is an intentional material 

omission or falsehood in connection with a completed CFIUS review or investigation, or an intentional material breach in any 

post-transaction mitigation agreement, and establishes a formal requirement that all filings with CFIUS must be complete and accurate to the best of the filing party’s ability. Thus, the Committee 

establishes a clear signal that all violations of such notice certification should be considered in the context of Title 18, Section 1001, 

and all intentional breaches or misstatements could also lead to severe modification or divestment of an acquisition of a previously reviewed transaction at any time. 

The bill establishes a mechanism by which CFIUS can unilaterally reopen a transaction that had previously been approved. The 

Committee expects that this authority will only be used in exceptional circumstances when no other remedies exist and where there 

has been an intentional breach that affects national security. For 

that reason, the bill requires important procedural safeguards to 

ensure that this authority is not used lightly—among other safeguards, it requires, for example, that the decision to reopen a case 

is made at the same level of seniority as is required in the bill for 

the approval of transactions. The bill makes clear that CFIUS can 

only reopen a transaction if these threshold tests are met. The 

Committee also expects CFIUS to use the so-called ‘‘evergreen’’ provision in exceptional cases when national security concerns can be 

addressed in no other way. 

The Committee bill makes clear that national security encompasses national security threats to critical U.S. infrastructure, including energy-related infrastructure. The Committee expects that 

acquisitions of U.S. energy companies or assets by foreign governments or companies controlled by foreign governments—including 

any instance in which such foreign government has used energy assets to interfere with or influence policies or economic conditions in 

other countries in ways that threaten the national security of those 

countries—will be reviewed closely for their national security impact. 

The legislation establishes a system of briefings and annual reporting to Congress. Both in briefings and reporting, the Committee recognizes that, in addition to Congressional leadership and 

the committees of jurisdiction named in the legislation, CFIUS will 

be obligated to brief, and report to, other committees that have ‘‘jurisdiction over any aspect of’’ the covered transactions which are 

the subject of the briefing and/or reporting. The Committee also expects CFIUS agencies to keep state governors informed of any relevant information related to a covered transaction, particularly 

those involving critical infrastructure, where a governor or state 

agencies under his direction would have interactions with such infrastructure as a normal course of carrying out its duties to protect 

its citizens. 

The Committee bill also establishes procedures for the creation, 

implementation, and monitoring of mitigation agreements. The 

Committee believes that mitigation agreements play a critical role 


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in the CFIUS process, allowing CFIUS to fully address national security concerns arising from a transaction without resorting to an 

outright rejection of the transaction when concerns arise. The Committee believes that mitigation agreements should address national 

security threats that arise as a result of the covered transaction, 

when those threats can not be adequately addressed by other areas 

of law or regulation. Specifically, mitigation agreements should not 

be considered the first option for addressing more general national 

security concerns, but rather should be focused on threats that 

arise directly from the transaction in those cases where other areas 

of law or regulation cannot adequately mitigate those threats. 

The legislation mandates that heightened scrutiny be applied to 

transactions involving foreign government ownership and control. 

It requires either a second stage investigation for such transactions, or a Deputy Secretary level certification that the transaction poses no threat to national security. The Committee believes 

that acquisitions by certain government-owned companies do create 

heightened national security concerns, particularly where government-owned companies make decisions for inherently governmental—as opposed to commercial—reasons. But not all government acquisitions create the same degree of national security risk. 

This bill recognizes these differences by providing flexibility for the 

Executive branch to distinguish between foreign government investments. If a transaction by a state-owned entity either presents 

no threat to national security or when such threat can be addressed by a mitigation agreement, CFIUS has the flexibility to approve the transaction within the initial 30 days, subject to the procedural requirements described above. The Committee believes this 

flexibility is important in allowing CFIUS to focus its resources and 

efforts on those cases involving foreign governments that truly 

raise national security concerns. 

V. SECTION-BY-SECTION ANALYSIS OF BILL

Section 1—This section establishes the short title of the bill as 

the ‘‘Foreign Investment and National Security Act of 2007’’ and 

sets forth the table of contents. 

Section 2—This section amends Section 721 of the Defense Production Act of 1950 to reform and strengthen the way that acquisitions by foreign companies of companies operating in the United 

States are analyzed for with respect to their impact on United 

States national security. 

Subsection (a) defines terms used throughout the bill: Committee, control, covered transaction, foreign government controlled 

transaction, critical infrastructure, critical technologies, and lead 

agency. 

Subsection (b) establishes the method by which covered transactions are reviewed and investigated by the Committee on Foreign 

Investment in the United States to determine if they threaten to 

impair United States national security; establishes that any transaction involving a foreign government-controlled company or critical infrastructure must undergo an ‘‘investigation’’ by CFIUS unless the Chairman and designated lead agency head (or their designees) jointly determine that such transaction does not pose a national security threat; establishes the voluntary process for parties 

notifying CFIUS of a proposed transaction and a procedure for 


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treating transactions that are withdrawn from the CFIUS process 

by the parties to a transaction; establishes a procedure for the 

President and CFIUS to unilaterally initiate a review of a transaction, and to initiate a review of a previously reviewed transaction 

in certain exceptional cases; makes clear that national security reviews of transactions shall take no longer than 30 days and, if necessary, investigations that follow reviews shall take no longer than 

45 days; describes reasons for a transaction to undergo an investigation; establishes that no review or investigation is complete 

until the chairman and designated lead agency head (or their designees) sign a certified notice or report (in the case of an investigation); specifies who in Congress shall receive the certified notices 

or reports related to approved transactions; provides for a thorough 

intelligence analysis coordinated by the Director of National Intelligence (DNI) of any threat to national security by any covered 

transaction and for the findings to be made available to CFIUS not 

later than 20 days after the review process has commenced; provides that the DNI shall be an ex-officio member of CFIUS with 

no policy role; and provides for notice of results of review or investigation to the parties by CFIUS; provides for regulations to implement changes to existing law. 

Section 3—This section formally establishes the Committee on 

Foreign Investment in the United States; establishes its membership; specifies that the Secretary of the Treasury shall be the chairman and specifies that a lead agency or agencies with relevant expertise be designated for each transaction; provides discretionary 

authority to the President to add additional departments, agencies 

or offices to the Committee. 

Section 4—This section amends Section 721(f) to add additional 

factors to be considered by CFIUS, including the impact of the 

transaction on the sale of military goods, equipment, or technology 

to any country identified by the Secretary of Defense as posing a 

potential regional military threat to the interests of the United 

States, the security related impact of a transaction related to critical infrastructure in the United States, potential effects on United 

States critical technology and major energy assets, and the adherence of the parent country to its international nonproliferation obligations and its record of cooperation in counterterrorism efforts for 

investigations of acquisitions by state-owned companies. 

Section 5—This section establishes that CFIUS, or lead agencies 

acting on behalf of CFIUS (which agencies may, like DOD or the 

Department of Commerce, have existing regulatory authority 

through which they can act independently of CFIUS) may enter 

into agreements with parties to a transaction to mitigate any 

threats to national security; establishes that CFIUS shall name appropriate lead Federal agencies to monitor, on behalf of CFIUS 

compliance with such agreements, negotiate any changes in such 

agreements on behalf of CFIUS and report back to CFIUS on compliance and modifications. This section also establishes a method of 

tracking transactions that are withdrawn from the review or investigation process as well as a process for setting interim protections 

on such transactions to address specific national security concerns. 

Section 6—This section amends subsections (d) and (e) of 721 of 

the Defense Production Act related to actions by the President related to the CFIUS process. It provides broad authority to the 


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President, subject to certain conditions, to take such action for such 

time as he considers appropriate to suspend or prohibit a transaction by a foreign person or government that threatens to impair 

the national security of the United States. It provides for the Attorney General, upon the direction of the President, to seek appropriate relief, including divestment by the foreign party if no other 

remedy is available to protect the national security of the United 

States. 

Section 7—This section establishes a broad new system for reporting information on CFIUS activities to Congress so that it may 

conduct appropriate oversight of the CFIUS. This includes a mechanism for Congress to request a detailed, classified briefing on a 

transaction; and affirmative protections for proprietary business information. The section requires CFIUS to file annual reports with 

Congress that contain information on transactions handled by the 

CFIUS, cumulative and trend analysis of transactions by business 

sector and country of origin, information on security and mitigation 

agreements. This section also incorporates into the annual reporting the contents of the previously required quadrennial reporting 

on foreign industrial espionage in the U.S. and on foreign attempts 

to control a particular U.S. business or industrial sector, and requires a report on investments in the U.S. by countries that do not 

ban foreign terrorist organizations and by countries that support 

the boycott of Israel. The quadrennial report is repealed as redundant. 

Section 8—This section makes clear that parties to a transaction 

must certify that the information they file with CFIUS is complete 

and correct. 

Section 9—This section directs the President to cause regulations 

to be issued to carry out the requirements of Section 721, and 

specifies that to the extent possible they minimize paperwork burden and coordinate new reporting requirements with existing ones. 

Section 10—This section clarifies that no portion of the bill 

should be construed as affecting or altering other existing law or 

regulation. 

Section 11—This section establishes an effective date 90 days 

after enactment. 

VI. HEARINGS

The Committee on Banking, Housing, and Urban Affairs held the 

following public hearings on implementation of the Exon-Florio 

Amendment to the Defense Production Act of 1950: 

October 6, 2005 A Review of the CFIUS Process for Implementing the Exon-Florio Amendment 

Witnesses: Ms. Katherine Schinasi, Managing Director, 

Acquisition and Sourcing Management, U.S. Government 

Accountability Office; Ms. Ann Calvarese Barr, Director, 

Industrial Base Issues, U.S. Government Accountability 

Office. 

October 20, 2005 Implementation of the Exon-Florio Amendment and the Committee on Foreign Investment in the United 

States 

Witnesses: The Honorable James Inhofe, United States 

Senator; The Honorable Robert Kimmitt, Deputy Secretary, Department of the Treasury; The Honorable David 


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A. Sampson, Deputy Secretary, Department of Commerce; 

The Honorable Stewart Baker, Assistant Secretary for Policy, Department of Homeland Security; The Honorable E. 

Anthony Wayne, Assistant Secretary for Economic and 

Business Affairs, Department of State; The Honorable 

Robert McCallum, Acting Deputy General, Department of 

Justice; The Honorable Peter Flory, Assistant Secretary for 

International Security Policy, Department of Defense; The 

Honorable Patrick A. Mulloy, U.S.-China Economic and 

Security Review Commission; Mr. David Marchick, Partner, Covington and Burling. 

March 2, 2006, Continued Examination of Implementation of 

the Exon-Florio Amendment: Focus on Dubai Ports World’s Acquisition of P&O 

Witnesses: The Honorable Robert Kimmitt, Deputy Secretary, Department of the Treasury; The Honorable Eric 

Edelman, Under Secretary for Policy, Department of Defense; The Honorable Robert Joseph, Under Secretary for 

Arms Control and International Security, Department of 

State; The Honorable Stewart Baker, Assistant Secretary 

for Policy, Department of Homeland Security. 

VII. COMMITTEE CONSIDERATION

The Committee on Banking, Housing, and Urban Affairs met in 

open session on May 16, 2007, and ordered the bill reported, without amendment. 

VIII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

Section 11(b) of the Standing Rules of the Senate, and Section 

403 of the Congressional Budget Impoundment and Control Act, require that each committee report on a bill contain a statement estimating the cost of the proposed legislation. The Congressional 

Budget Office has provided the following cost estimate and estimate of costs of private-sector mandates. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, May 25, 2007. 

Hon. CHRISTOPHER J. DODD, 

Chairman, Committee on Banking, Housing, and Urban Affairs, 

United States Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for the Foreign Investment and 

National Security Act of 2007. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

PETER R. ORSZAG, Director. 

Enclosure. 

Foreign Investment and National Security Act of 2007 

The legislation would amend the Defense Production Act of 1950 

to establish in law the Committee on Foreign Investment in the 

United States (CFIUS). The committee would consist of at least 


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nine permanent members with seven full members, including the 

Secretaries of the Treasury, Homeland Security, Commerce, Defense, State, and Energy, as well as the Attorney General and two 

ex-officio members including the Secretary of Labor and the Director of National Intelligence to coordinate the review of foreign investment in the United States that involves national security or 

critical infrastructure. The legislation would formalize and expand 

the review and investigation process. In addition, the legislation 

would require specific reports by the Department of the Treasury 

on the previous work of CFIUS and on foreign investment in the 

United States. 

CBO expects that complying with the bill’s provisions would increase the administrative expenses of some federal agencies, including the Department of the Treasury, but because of the confidential nature of the CFIUS review process, the number of agencies involved, and the confidential information needed to prepare 

an estimate for some provisions of the legislation, CBO cannot determine a precise estimate of the likely total costs of this bill. Additional costs over the 2007–2012 period, however, would generally 

come from agencies’ salary and expense budgets which are subject 

to annual appropriation. Such costs would probably total at least 

a few million dollars per year. 

Enacting the legislation would likely increase collections of civil 

penalties for the violations related to the review process. Such collections are recorded in the budget as revenues and deposited in 

the Treasury. CBO estimates that the additional collections of civil 

penalties would not be significant because of the relatively small 

number of cases likely to be involved. Enacting the bill would not 

affect direct spending. 

The legislation contains no intergovernmental or private-sector 

mandates as defined in the Unfunded Mandates Reform Act and 

would not affect the budgets of state, local, or tribal governments. 

On February 16, 2007, CBO provided a cost estimate for H.R. 

566, the National Security Foreign Investment Reform and 

Strengthened Transparency Act of 2007, as ordered reported by the 

House Committee on Financial Services on February 13, 2007. The 

two bills are concerned with CFIUS but have some different provisions. H.R. 566 would authorize the appropriation of $10 million 

annually over the 2008–2011 period. The Senate legislation does 

not authorize the appropriation of a specific amount to implement 

the CFIUS responsibilities. 

The CBO staff contact for this estimate is Matthew Pickford. 

This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

IX. REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b), rule XXVI, of the Standing 

Rules of the Senate, the Committee makes the following statement 

concerning the regulatory impact of the bill. 

The bill seeks to ensure that certain transactions involving companies owned or controlled by foreign governments undergo a thorough investigation to determine whether the national security 

would be impacted by the transactions. While the bill gives discretion to CFIUS to forego investigations under certain limited circumstances, it could nevertheless entail the production of more docVerDate Aug 31 2005 03:19 Jun 15, 2007 Jkt 059010 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\SR080.XXX SR080

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umentation by involved corporate entities than would otherwise 

have been required. 

The requirement established in the bill under (b)(2)(B) that foreign transactions involving U.S. critical infrastructure be subjected 

to an investigation unless national security concerns have been 

previously addressed through conclusion of a mitigation agreement 

could entail costs to both the government, charged with implementing the provisions of the bill, and the corporate entities 

charged with complying. 

The Congressional Budget Office Cost Estimate prepared for this 

bill notes that enactment of the legislation ‘‘would likely increase 

collections of civil penalties for the violations related to the review 

process’’ . . . ‘‘CBO estimates that the additional collections of civil 

penalties would not be significant because of the relatively small 

number of cases likely to be involved.’’

Æ 


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