U.S. GOVERNMENT PUBLISHING OFFICE

31–568 WASHINGTON : 2019

PERSPECTIVES ON REFORM OF THE CFIUS REVIEW 

PROCESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON DIGITAL COMMERCE AND 

CONSUMER PROTECTION 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

APRIL 26, 2018 

Serial No. 115–122 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

GREG WALDEN, Oregon 

Chairman 

JOE BARTON, Texas 

Vice Chairman 

FRED UPTON, Michigan 

JOHN SHIMKUS, Illinois 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

JEFF DUNCAN, South Carolina 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

DEBBIE DINGELL, Michigan 

SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION

ROBERT E. LATTA, Ohio 

Chairman 

GREGG HARPER, Mississippi 

Vice Chairman 

FRED UPTON, Michigan 

MICHAEL C. BURGESS, Texas 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

DAVID B. MCKINLEY, West Virgina 

ADAM KINZINGER, Illinois 

GUS M. BILIRAKIS, Florida 

LARRY BUCSHON, Indiana 

MARKWAYNE MULLIN, Oklahoma 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

JEFF DUNCAN, South Carolina 

GREG WALDEN, Oregon (ex officio) 

JANICE D. SCHAKOWSKY, Illinois 

Ranking Member 

BEN RAY LUJA ́ N, New Mexico 

YVETTE D. CLARKE, New York 

TONY CA ́ RDENAS, California 

DEBBIE DINGELL, Michigan 

DORIS O. MATSUI, California 

PETER WELCH, Vermont 

JOSEPH P. KENNEDY, III, Massachusetts 

GENE GREEN, Texas 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

Hon. Robert E. Latta, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 2 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

prepared statement .............................................................................................. 117 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, prepared statement ........................................................................ 118 

WITNESSES

Heath Tarbert, Assistant Secretary, International Markets and Investment 

Policy, U.S. Department of Treasury .................................................................. 5 

Prepared statement .......................................................................................... 7 

Answers to submitted questions ...................................................................... 123 

Richard Ashooh, Assistant Secretary, Export Administration, U.S. Department of Commerce ............................................................................................... 13 

Prepared statement .......................................................................................... 15 

Answers to submitted questions ...................................................................... 125 

Kevin Wolf, Partner, Akin Gump Straus Hauer and Feld, LLP ......................... 41 

Prepared statement .......................................................................................... 43 

Answers to submitted questions ...................................................................... 127 

Clay Lowery, Managing Director, Rock Creek Global Advisors .......................... 63 

Prepared statement .......................................................................................... 65 

Answers to submitted questions ...................................................................... 129 

Celeste Drake, Trade and Globalization Policy Specialist, AFL-CIO .................. 76 

Prepared statement .......................................................................................... 78 

Answers to submitted questions ...................................................................... 131 

Derek Scissors, Resident Scholar, American Enterprise Institute ...................... 91 

Prepared statement .......................................................................................... 93 

Answers to submitted questions ...................................................................... 133 

SUBMITTED MATERIAL

Statement of the Federal Communications Commission ..................................... 120 

Statement of the Department of Energy ............................................................... 121 

(1) 

PERSPECTIVES ON REFORM OF THE CFIUS 

REVIEW PROCESS 

THURSDAY, APRIL 26, 2018 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER

PROTECTION, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2322 Rayburn House Office Building, Hon. Robert Latta (chairman 

of the subcommittee) presiding. 

Members present: Representatives Latta, Kinzinger, Burgess, 

Lance, Guthrie, McKinley, Bilirakis, Bucshon, Mullin, Walters, 

Duncan, Schakowsky, Welch, Kennedy, and Green. 

Staff present: Samantha Bopp, Staff Assistant; Daniel Butler, 

Staff Assistant; Melissa Froelich, Chief Counsel, Digital Commerce 

and Consumer Protection; Adam Fromm, Director of Outreach and 

Coalitions; Ali Fulling, Legislative Clerk, Oversight & Investigations, Digital Commerce and Consumer Protection; Elena Hernandez, Press Secretary; Zach Hunter, Director of Communications; Paul Jackson, Professional Staff, Digital Commerce and Consumer Protection; Bijan Koohmaraie, Counsel, Digital Commerce 

and Consumer Protection; Austin Stonebraker, Press Assistant; 

Greg Zerzan, Counsel, Digital Commerce and Consumer Protection; 

Michelle Ash, Minority Chief Counsel, Digital Commerce and Consumer Protection; Lisa Goldman, Minority Counsel; and Caroline 

Paris-Behr, Minority Policy Analyst. 

OPENING STATEMENT OF HON. ROBERT E. LATTA, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. LATTA. Good morning. I would like to welcome you to the 

Digital Commerce and Consumer Protection Subcommittee of Energy and Commerce. And before we get started, just to let everyone 

know the Environment Subcommittee is also running downstairs, 

so we will have members coming in and out from downstairs from 

that subcommittee meeting, too. 

So I, again, want to welcome you to the subcommittee and I recognize myself for 5 minutes. 

And again, good morning and welcome to our witnesses. And we 

thank you for being with us today to discuss proposed reform of the 

Committee on Foreign Investment in the United States or CFIUS. 

CIFUS was first established by the Executive order by President 

Ford. Over the years, the committee was codified and its members 

2 

expanded based on input from this committee under both Republican and Democratic leadership. 

CFIUS is tasked with reviewing mergers, acquisitions, or takeovers of U.S. businesses by foreign persons to see if they pose a 

threat to our national security. If CFIUS determines that a transaction does threaten national security, it can negotiate changes to 

the terms of the proposed deal. Alternatively, the committee can 

recommend that the President block a proposed deal. 

Until recently, presidents have generally not found it necessary 

to block a proposed foreign purchase of or controlling interests in 

U.S. assets. However, in the last 6 years, presidents from both parties have blocked a total of four proposed transactions. 

The increase in presidential action to stop foreign takeovers of 

American companies is one indication of how the world has 

changed. Foreign direct investment in the United States in 2016 

doubled over the previous 10 years. In addition to an increase in 

monetary investments, foreign investments have also taken new 

forms, including the joint venture. 

While more foreign investment in America is generally a good 

thing, for example, Honda has a large presence in Ohio, concerns 

have arisen that some investments could be the work of foreign 

governments that want to access the U.S. technology or infrastructure. If America’s international competitors lack the ability to develop their own technology, they may find it easier to buy it by acquiring an American business or, they might seek to purchase critical U.S. infrastructure as a way to harm American interests. 

CFIUS is the organization charged with examining who is investing in national security-related U.S. companies and why. Today, we 

are going to examine whether CFIUS has the proper tools to do 

that job, what tasks are already assigned to other government bodies, including export control agencies, and what steps are already 

being taken through regulation to reform CFIUS. 

The most important job of Congress is to ensure the safety and 

security of our nation. Whether through the CFIUS process or 

other government programs, it is our duty to be vigilant for the 

American people. Our security, both economic and national, secures 

the freedoms that helps Americans thrive. 

I look forward to hearing from our witnesses today on their 

thoughts on the reform processes and proposals for CFIUS, in particular H.R. 4311, the Foreign Investment Risk Review Modernization Act of 2017, and what other considerations policymakers 

should keep in mind during this debate. 

I want to, at this time, yield to the ranking member, the 

gentlelady from Illinois, the ranking member of the subcommittee. 

[The prepared statement of Mr. Latta follows:] 

PREPARED STATEMENT OF HON. ROBERT E. LATTA

Good morning and thank you to our witnesses for being here today to discuss proposed reform of the Committee on Foreign Investment in the United States, or 

CFIUS. CFIUS was first established by Executive Order by President Ford. Over 

the years, the Committee was codified and its members expanded based on input 

from this Committee under both Republican and Democratic leadership. 

CFIUS is tasked with reviewing mergers, acquisitions or takeovers of U.S. businesses by foreign persons to see if they pose a threat to our national security. If 

CFIUS determines that a transaction does threaten national security, it can negoVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
3 

tiate changes to the terms of a proposed deal. Alternatively, the Committee can recommend that the President block a proposed deal. 

Until recently presidents have generally not found it necessary to block proposed 

foreign purchases of, or controlling interests in, U.S. assets. However, in the last 

6 years presidents from both parties have blocked a total of four proposed transactions. 

The increase in presidential action to stop foreign takeovers of American companies is one indication of how the world has changed. Foreign direct investment in 

the United States in 2016 doubled over the previous 10 years. In addition to an increase in monetary investments, foreign investments have also taken new forms— 

including the joint venture. 

While more foreign investment in America is generally a good thing when more 

jobs are created for our citizens, concerns have arisen that some other investments 

could be the work of foreign governments that want access to advanced U.S. technology or infrastructure. If America’s international competitors lack the ability to 

develop their own technology they may find it easier to buy it by acquiring an American business. Or, they might seek to purchase critical U.S infrastructure as way 

to harm American interests. 

CFIUS is the organization charged with examining who is investing in national 

security related U.S. companies, and why. Today, we are going to examine whether 

CFIUS has the proper tools to do that job, what tasks are already assigned to other 

government bodies-including export control agencies-and what steps are already 

being taken through regulation to reform CFIUS. 

The most important job of Congress is to ensure the safety and security of our 

nation. Whether through the CFIUS process, or other government programs, it is 

our duty to be vigilant for the American people. Our security, both economic and 

national, secures the freedom that helps Americans thrive. 

I look forward to hearing from our witnesses today on their thoughts on reform 

proposals for CFIUS, in particular H.R. 4311, the Foreign Investment Risk Review 

Modernization Act of 2017, and what other considerations policymakers should keep 

in mind during this debate. 

Thank you and I yield now to the Ranking Member. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. My opening comments will certainly reflect what you have said, as well. 

American ingenuity attracts investment from around the world. 

That investment can bring much-needed capital to American companies but foreign interests can also use investment to threaten 

our national and economic security. 

Congress has instructed the Committee on Foreign Investment in 

the United States to review mergers and acquisitions by foreign investors for potential national security threats. It has been a decade 

since the last major CFIUS legislation. We are more than due for 

evaluating how CFIUS is operating. 

In 2016, the stock of foreign direct investment in the United 

States totaled $7.6 trillion and foreign investors spent more than 

$365 billion acquiring U.S. companies. Given the enormity of that 

investment, we must consider whether the current safeguards for 

our national security and our nation’s workers are sufficient. 

State-owned and state-affiliated enterprises in China have 

sought U.S. intellectual property through mergers and acquisitions, 

as well as joint venture agreements. Current CFIUS review is inadequate to capture the various ways a foreign interest may try to 

access sensitive American technologies. 

Today, we will be hearing about several bills to reform CFIUS. 

H.R. 4311, the bipartisan Foreign Investment Risk Review Modernization Act, would expand the investments covered by CFIUS— 

CFIUS review to protect critical technologies and infrastructure. 

Congressman Ed Royce and Eliot Engel, the chair and ranking 

member of the Foreign Affairs Committee, have introduced H.R. 

4 

5040, the Export Reform Control Act, to control the outflow of military and dual-use items. 

Finally, Congresswoman Rosa DeLauro has introduced H.R. 

2932, the Foreign Investment and Economic Security Act, to expand CFIUS’ review to greenfield transactions which are new investments, as opposed to acquisitions. Her bill would also ask 

CFIUS to evaluate not only national security risks but also economic, public health, and safety risks. 

Our hearing today occurs within a broader debate over trade. 

President Trump has placed tariffs on steel and aluminum and the 

United States is currently renegotiating—it could be today, I hear, 

we might get some sort of announcement on NAFTA, the North 

American Free Trade Agreement with Canada and Mexico. Any 

new NAFTA deal must include strong labor protections for workers 

in this country, as well as for workers in Mexico and Canada. 

Last week, I was among the 107 House Democrats who sent a 

letter to the U.S. Trade Representative Robert Lighthizer emphasizing our opposition to legislation in the Mexican Senate to weaken labor standards in Mexico. I am encouraged that the legislation 

has now been tabled. 

I believe that Americans benefit from trade relations that are 

fair. Americans are increasingly aware that corporations have manipulated U.S. trade policy to the detriment of workers and consumers. As we examine our trade policy, we want to keep fairness 

to American workers and consumers front and center. 

Corporations have used trade agreements to fight against countries’ labor and environmental laws. We should be fighting for fair 

trade agreements that protect workers and our environment, rather than encouraging a race to the bottom. 

National security is an important consideration as we review foreign investment in the United States but I hope we also spend time 

today on other risks that unfair trade practices pose to this country. 

I look forward to hearing from our two panels of witnesses. I appreciate your being here today. And I want to thank Chairman 

Latta. 

And I yield back. 

Mr. LATTA. Thank you very much. The gentlelady yields back, 

and the chair of the full committee, the gentleman from Oregon is 

not here. Is there anyone on the Republican side that would like 

to claim his time? Seeing none, and we haven’t had—I saw that 

Mr. Green had checked in but we will go ahead and conclude with 

member opening statements at this time. 

And the chair would like to remind members that pursuant to 

the committee rules, all members’ opening statements will be made 

part of the record. 

And again, I want to thank all of our witnesses for being with 

us today and taking the time to testify before the subcommittee. 

Today’s witnesses will have the opportunity to give 5-minute opening statements, followed by a round of questions from the members. 

Our first panel of witnesses for today’s hearing will include the 

Honorable Heath Tarbert, the Assistant Secretary for International 

Markets and Investment Policy at the U.S. Department of TreasVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
5 

ury, and the Honorable Richard Ashooh, the Assistant Secretary 

for Export Administration at the U.S. Department of Commerce. 

And, again, I thank you both forth being here. And Mr. Tarbert, 

you are recognized for 5 minutes. 

STATEMENTS OF HEATH TARBERT, ASSISTANT SECRETARY, 

INTERNATIONAL MARKETS AND INVESTMENT POLICY, U.S. 

DEPARTMENT OF TREASURY; AND RICHARD ASHOOH, ASSISTANT SECRETARY, EXPORT ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE 

STATEMENT OF HEATH TARBERT 

Mr. TARBERT. Chairman Latta, Ranking Member Schakowsky, 

Vice Chairman Kinzinger, and distinguished members of the subcommittee, thank you for the opportunity to testify in support of 

FIRRMA and about CFIUS more generally. 

The United States has always been a leading destination for investors. Alexander Hamilton argued that foreign capital is precious 

to economic growth. Foreign investment provides immense benefits 

to American workers and families, such as job creation, productivity, innovation, and higher median incomes. At the same time, 

we know foreign investment isn’t always benign. On the eve of 

America’s entry into World War I, concerned by German acquisitions in our chemical sector, Congress passed legislation empowering the President to block investments during national emergencies. 

During the Depression in World War II, cross-border capital 

flows fell dramatically. And in the boom years of the 1950s and 

’60s, investment in the U.S. was modest compared to outflows. During that time, foreign investment also posed little risk. Our main 

adversaries, the Soviet Union and its satellites, were communist 

countries that were economically isolated from us. 

But when the post-war trend changed in the 1970s, CFIUS was 

born. The oil shock that made OPEC countries wealthy led to fears 

that petro dollars might be used to buy strategic U.S. assets. 

In 1975, President Ford issued an Executive order creating 

CFIUS to monitor foreign investments. Then in 1988, a growing 

number of Japanese deals motivated Congress to pass the ExonFlorio amendment. For the first time, the President could block a 

foreign acquisition without declaring a national emergency. 

For the next 20 years, CFIUS pursued its mission without fanfare but, in the wake of the Dubai Ports controversy, it became 

clear that CFIUS needed greater procedural rigor and accountability. In 2007, some of you helped enact FINSA, which formally 

established CFIUS and codified our current structure and process. 

Well now we find ourselves at yet another historic inflection 

point. The foreign investment landscape has shifted more than at 

any point during CFIUS’ 40-year history. Nowhere is that shift 

more evident than in the caseload CFIUS now faces. The number 

of annual filings has grown within the last decade from an average 

of about 95 or so to nearly 240 last year. But it is the complexity, 

not simply the volume, that has placed the greatest demand on our 

resources. In 2007, about four percent of the cases went to the 

6 

more resource-intensive investigation stage. Last year in 2017, 

nearly 70 percent did. 

This added complexity arises from a number of factors: strategic 

investments by foreign governments, complex transaction structures, and globalized supply chains. Complexity also results from 

the ever-evolving relationship between national security and commercial activity. Military capabilities are rapidly building on top of 

commercial innovations. What is more, the data driven economy 

has created vulnerabilities never before seen. 

And I know the gravity of this last point isn’t lost on any of you. 

Protecting against the disclosure of Americans’ sensitive personal 

data lies at the core of this subcommittee’s work. In several cases 

we have seen, even over the last year, the company being acquired 

had access to significant amounts of sensitive information capable 

of exploitation by state actors. Similar sensitivities can arise because a company has concentrations of data regarding American 

servicemen and women, private information such as medical 

records, or simply personally identifiable information on such a 

vast scale that the national security concerns are too large to ignore. 

New risk require new tools. The administration has endorsed 

FIRRMA because it embraces four pillars critical to CFIUS modernization. First, FIRRMA expands the scope of transactions potentially reviewable by CFIUS to include certain non-passive investments, joint ventures, and real estate purchases. These changes lie 

at the very heart of CFIUS modernization. Right now, we can’t review a host of transactions that present identical concerns to those 

we regularly examine. 

Second, FIRRMA allows CFIUS to refine its procedures to ensure 

the process is tailored, efficient, and effective. Only where existing 

authorities, like export controls, can’t resolve the risk will CFIUS 

step in. 

Third, FIRRMA recognizes that our closest allies face similar 

threats and incentivizes our allies to work with us to address those 

threats. 

And finally, FIRRMA acknowledges that CFIUS must be appropriately resourced. 

Since testifying in the Senate in January and the House in 

March, I have been meeting regularly with Members of Congress, 

the business community, and other stakeholders to hear their 

views on the bill. As a result of these meetings, we have been 

working on proposed technical amendments to ensure that 

FIRRMA is even better tailored to address jurisdictional gaps, 

while also encouraging investment in our country. There is only 

one conclusion here: CFIUS must be modernized. In doing so, we 

must preserve our longstanding open investment policy. We must 

also protect our national security. These twin aims transcend party 

lines and they demand urgent action. 

I look forward to working with this subcommittee on improving 

and advancing FIRRMA. 

Thank you. 

[The prepared statement of Mr. Tarbert follows:] 

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TESTIMONY OF THE HONORABLE HEATH P. TARBERT 

Assistant Secretary of the Treasury 

Before the U.S. House Energy & Commerce 

Subcommittee on Digital Commerce and Consumer Protection 

Apri/26, 2018 

Chairman Latta, Ranking Member Schakowsky, Vice Chairman Kinzinger, and 

distinguished Members of the Subcommittee, thank you for the opportunity to testify in support 

of the Foreign Investment Risk Review Modernization Act (FIR.Rt\1A), H.R. 4311, !15th Con g. 

(2017). I would also like to thank those members of the subcommittee who have joined 

FIRRMA as co-sponsors, including Representative Mullin. 

My top priority as Assistant Secretary is ensuring that the Committee on Foreign 

Investment in the United States (CFIUS) has the tools and resources it needs to perform the 

critical national security functions that Congress intended it to. 1 I believe FIRRMA-a bill 

introduced with broad, bipartisan support-is designed to provide CFIUS with the tools it needs 

to meet the challenges of today and those likely to arise in the future. Of particular importance 

to this subcommittee is the challenge of protecting against the harm that could result from the 

acquisition of companies that collect or store large pools of sensitive data about individual 

Americans. Malicious actors could exploit sensitive healthcare, financial, and other personally 

identifiable information to the detriment of U.S. national security. The Administration believes 

that FTRRMA will protect our national security from these and other kinds of risks while 

strengthening America's longstanding open investment policy that fosters innovation and 

economic growth. 

Importance of Foreign Investment in the United States 

From the early days of our Republic, the United States has been a leading destination for 

investors, entrepreneurs, and innovators. In his famous Report on the Subject of Manufactures, 

Alexander Hamilton argued that foreign capital was not something to be feared or viewed as a 

rival to domestic investment, but was instead a "precious acquisition" in fostering our economic 

growth. 2 Throughout the nineteenth and twentieth centuries, capital from abroad funded the 

construction of America from our railways to our city skylines, while at the same time helping 

make such innovations as the automobile a reality. 3 Foreign investment has also brought 

significant benefits to American workers and their families in the form of economic growth and 

well-paid jobs. 

The same is true today, with a total stock offoreign direct investment in the United States 

standing at a staggering $7.6 trillion (at market value) in 2016. 4 Numerous studies have 

1 See Nomination Hearing Before the S. Comm. on Banking, Housing, and Urban Affairs, !15th Cong. (May 16, 

2017) (testimony of Dr. Heath P. Tarbert). 2 Alexander Hamilton, Report on the Subject of Manufactures (Dec. 5, 1791 ), available at 

https ://founders.archives.gov/documents!Hamilton/0 1-1 0-02-0001-0007. 3 See Mira Wilkins, The History of Foreign Investment in the United States to 1914 (Harvard Univ. Press 1999). 4 U.S. Bureau of Economic Analysis, US Net International Investment Position at the End of the Period, Table 1.1. 

(Dec. 28, 20 17), available at https://bea.gov/scb/pdf/20 18/0 1-January/0 118-international-investment-positiontables.pdf. 

. I . 
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31568.002

demonstrated that the benefits from foreign investment in the United States are substantial. 

Majority-owned U.S. affiliates of foreign entities accounted for over 23 percent of total U.S. 

goods exports in 2015. 5 They also accounted for 15.8 percent of the U.S. total expenditure on 

research and development by businesses.6 They employed 6.8 million U.S. workers in 2015, and 

provided compensation of nearly $80,000 per U.S. employee, as compared to the U.S. average of 

$64,000. 7 One study estimated that spillovers from foreign direct investment in the United 

States accounted for between 8 percent and 19 percent of all U.S. manufacturing productivity 

growth between 1987 and 1996.8 As Secretary Mnuchin-echoing his predecessor, Secretary 

Hamilton-has observed, "we recognize the profound economic benefits of foreign investment" 

today and place the utmost value on having "industrious and entrepreneurial foreign investors" 

continue to invest, grow, and innovate in the United States.9 

Evolution of CFIUS 

Despite its many benefits, we are equally cognizant that foreign investment is not always 

benign. On the eve of America's entry into World War I, concerned by German acquisitions in 

our chemical sector and other war-related industries, 1

° Congress passed the Trading with the 

Enemy Act, giving the President broad power to block investments during times of war and 

national emergency. 11 

During the Great Depression and World War II, international investment flows dropped 

dramatically. 12 And in the boom years of the 1950s and !960s-as many countries devastated 

by World War II were rebuilding their economies-investment in the United States from abroad 

was modest compared to outflows. Indeed, for the first time ever, America became a net source 

5 U.S. Dep't of Commerce, Economics & Statistics Admin., Foreign Direct Investment in the United States, ESA 

Issue Brief06-17, Oct. 3, 2017, at 2. 

6 Jd. 

7 Jd. 

8 Wolfgang Keller & Stephen R. Yeaple, Multinational Enterprises, Int 'I Trade, and Productivity Growth: Firm 

Level Evidence from the United States, 91 Review of Economics & Statistics, November 2009, at 821, 828. 9 Steven T. Mnuchin, Secretary, Dep't of the Treasury, Se1ectUSA Investment Summit Welcome Address (June 20, 

2017). 

10 Edward M. Graham & David M. Marchick, Institute for lnt'l Economics, U.S. Nat 'I Security & Foreign Direct 

Investment 4-8 (2006). Prior to America's entry into World War I, it was revealed that the German government 

made a number of concealed investments into the United States, including establishment of the Bridgeport Projectile 

Company which "was in business merely to keep America's leading munitions producers too busy to fill genuine 

orders for the weapons the French and British so desperately needed." Ernest Wittenberg, The Thrifty Spy on the 

Sixth Avenue El, American Heritage (Dec. 1965), available at http://www.americanheritage.com/content!thrifty-spysixth-avenue-el. The company placed an order for five million pounds of gunpowder and two million shell cases 

"with the intention of simply storing them." !d. The plot was revealed when a German spy inadvertently left his 

briefcase containing the incriminating documents on a New York City train, with the documents being returned to 

the custody of the Treasury Department. Jd. 11 50 U.S.C. § 4305. TWEA, originally passed in 1917, empowered the President to "investigate, regulate, direct 

and compel, nullify, void, prevent or prohibit, any acquisition holding, withholding, use, transfer, withdrawal, 

transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect 

to, or transactions involving, any property in which any foreign country or a national thereof has any interest." !d. 

§ 4305(b)(l)(B). 

12 Graham & Marchick, supra note 10, at xvi, 14, 18. 

-2 
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of investment capital instead of its destination. 13 And what foreign investment did exist posed 

little risk since our main strategic adversaries-the Soviet Union and its satellites-were 

communist countries whose economic systems were largely isolated from our own. 

When the post-war trend changed in the 1970s, however, CFIUS was born. The oil 

shock that made OPEC countries wealthy led to concern that petrodollars might be used to 

purchase key U.S. assets. In 1975, President Ford issued an Executive Order creating CFIUS to 

monitor and report on foreign investments, but with no power to stop those posing national 

security threats. 14 Then in the 1980s, a growing number of Japanese acquisitions motivated 

Congress to pass the Exon-Fiorio Amendment in 1988. 15 For the first time, the President could 

block the foreign acquisition of a U.S. company or order divestment where the transaction posed 

a threat to national security without first declaring an emergency. That law created Section 721 

of the Defense Production Act of 1950, which remains the statutory cornerstone of CFIUS today. 

Subsequently, in 1992, Congress passed the Byrd Amendment which requires CFIUS to 

undertake an investigation where two criteria are met: ( 1) the acquirer is controlled by or acting 

on behalf of a foreign government; and (2) the acquisition results in control of a person engaged 

in interstate commerce in the United States that could threaten our national security. 16 In the 

years that followed, it became evident that CFIUS and Congress did not share the same view on 

when a 45-day investigation period was discretionary rather than mandatory, a rift that was more 

clearly exposed in the wake of the Dubai Ports World controversy. In order to instill greater 

procedural rigor and accountability into CFIUS's process, Congress enacted the Foreign 

Investment and National Security Act of2007 (FINSA), which formally established CFIUS by 

statute and codified its current structure and processes. 17 

Critical Need for CFIUS Modernization 

Now, more than a decade after FINSA and three decades after Exon-Florio, we find 

ourselves at another historic inflection point. Within the last few years, the national security 

landscape as it relates to foreign investment began shifting in ways that have eclipsed the 

magnitude of any other shift in CFIUS's 40-year history. Nowhere is that shift more evident 

than in the caseload CFIUS now faces. The resources ofCFIUS are challenged by increased 

case volume and complexity. The average volume of CFIUS cases has been growing steadily 

from fewer than 100 in 2009 and 2010 (the two years following the financial crisis) to nearly 240 

last year. While it is difficult to measure case complexity in real terms, one indicator is the rate 

at which cases have proceeded to CFIUS's investigation stage, which is more resource intensive. 

In 2007, approximately 4 percent of cases went to investigation; in 2017, approximately 70 

percent did. Another potential measure of complexity is the number of cases in which CFIUS 

determines that mitigation or prohibition is necessary to address national security concerns, 

which require significantly more time and resources. From roughly 2008 through 2015, such 

cases represented fewer than 10 percent of the total covered transactions CFIUS reviewed; this 

13 /d. at9. 14 Exec. Order 11,858,40 F.R. 20,263 (May 7, 1975). 

"Pub. L. 100-418, Title V, § 5021, 102 Stat. 1107 (1988). 16 Pub. L. 102-484, 106 Stat. 2315 (1992). 17 Pub. L. 110-49, 121 Stat. 246 (2007). 

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figure has risen to approximately 20 percent of total covered transactions CFIUS reviewed in 

2017. 

The added complexity CFIUS is confronting arises from a number of different factors, 

including: the way foreign governments are using investments to meet strategic objectives, more 

complex transaction structures, and increasingly globalized supply chains. Complexity also 

results from continued evolution in the relationship between national security and commercial 

activity. Military capabilities are rapidly building on top of commercial innovations. 

Additionally, the digital, data-driven economy has created national security vulnerabilities never 

before seen. 

The gravity of the last point regarding the vulnerabilities arising from the digital, datadriven economy must not be lost on this subcommittee given your critical role on digital 

commerce and consumer protection issues. In several cases we have seen even within the last 12 

months, the company being acquired-which may, for example, be in the technology hardware, 

technology services, or financial services industry-has access to significant amounts of 

sensitive information on Americans that can be exploited by state actors. The sensitivity could 

arise because a given company has concentrations of data regarding American military 

servicemen and women, deeply private information such as medical records, or simply 

personally identifiable information on such a vast scale that the national security concerns are 

just too large to ignore. Thus today, the acquisition of a Silicon Valley start-up or even a 

healthcare provider may raise just as serious concerns from a national security perspective as the 

acquisition of some defense or aerospace companies, CFIUS's traditional area of focus. 

CFIUS's exposure to such cases has allowed it to play a critical role in protecting against 

threats to national security, but has at the same time highlighted gaps in our jurisdictional 

authorities. We continue to be made aware of transactions we lack the jurisdiction to review but 

which pose similar national security concerns to those already before CFIUS. These gaps are 

widening as more threat actors seek to exploit them. The problem lies in the fact that CFIUS's 

jurisdictional grant is now 30 years old, originating with the Exon-Florio Amendment and 

maintained in FINSA. Under current law, CFIUS has authority only to review those mergers, 

acquisitions, and takeovers that result in foreign "control" of a "U.S. business." That made sense 

in the 1980s and even in the first decade of this century, but the foreign investment landscape has 

changed significantly, with non-controlling investments and joint ventures becoming ever more 

prolific. 

Consequently, certain transactions-such as investments that are not passive, but 

simultaneously do not convey "control" in a U.S. business-that the Committee has identified as 

presenting a national security risk nonetheless remain outside its purview. Similarly, CFIUS is 

also aware that some parties may be deliberately structuring their transactions to come just below 

the control threshold to avoid CFIUS review, while others are moving critical technology and 

associated expertise from a U.S. business to offshore joint ventures. While we recognize that 

parties can choose among a variety of transaction structures, purposeful attempts to evade CFIUS 

review put this country's national security at risk. Finally, we regularly contend with gaps that 

likely never should have existed at all. For example, the purchase of a U.S. business in close 

proximity to a sensitive military installation is subject to CFIUS review, but the purchase of real 

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estate at the same location (on which one could place a business) is not. These gaps can lead to 

disparate outcomes in transactions presenting identical national security threats. 

Support for FIRRMA 

The Administration has endorsed FIRRMA because it embraces four pillars critical for 

CFIUS modernization. First, FIRRMA expands the scope of transactions potentially reviewable 

by CFIUS, including certain non-passive, non-controlling investments, technology transfers 

through arrangements such as joint ventures, real estate purchases near sensitive military 

installations, and transactions structured to evade CFIUS review. The reasons for these changes 

are twofold: (1) they will close gaps in CFIUS's authorities by expanding the types of 

transactions subject to CFIUS review; and (2) they will give CFIUS greater ability to prevent 

parties from restructuring their transactions to avoid or evade CFIUS review when the aspects of 

the transaction that pose critical national security concerns remain. 

Second, FIRRMA empowers CFIUS to refine its procedures to ensure the process is 

tailored, efficient, and effective. Under FIRRMA, CFIUS is authorized to exclude certain noncontrolling transactions that would otherwise be covered by the expanded authority. Such 

exclusions could be based on whether other provisions of law-like export controls-are 

determined to be adequate to address any national security concerns. Only where existing 

authorities cannot resolve the risk will CFIUS step in to act. FIRRMA also allows CFIUS to 

identify specific types of contributions by technology, sector, subsector, transaction type, or 

other transaction characteristics that warrant review--effectively excluding those that do not. 

Third, FIRRMA recognizes that our own national security is linked to the security of our 

closest allies, who face similar threats. In light of increasingly globalized supply chains, it is 

essential to our national security that our allies maintain robust and effective national security 

review processes to vet foreign investments into their countries. FIRRMA gives CFIUS the 

discretion to exempt certain transactions from review involving parties from certain countries 

based on such factors as the nature of the U.S. strategic relationship with the country and the 

other country's process to review the national security implications offoreign investment. 

FIRRMA will also enhance collaboration with our allies and partners by allowing informationsharing for national security purposes with domestic or foreign governments. 

Fourth, FIRRMA requires an assessment of the resources necessary for CFIUS to 

perform its critical mission so that Congress has a full understanding of the needs required to 

fulfill CFIUS's expanded scope. FIRRMA would also establish a "CFIUS Fund," which would 

be authorized to receive appropriations. Under FIRRMA, these monies are intended to cover 

work on reviews, investigations, and other CFIUS activities. FIRRMA further authorizes CFIUS 

to assess and collect fees, which would be set by regulation at a level anticipated not to affect the 

economics of any given transaction. Once appropriated, these funds could also be used by 

CFIUS. Finally, FIRRMA grants the Secretary of the Treasury, as CFIUS chairperson, the 

authority to transfer funding from the CFIUS Fund to any member agencies to address emerging 

needs in executing requirements of the bill. This approach would enhance the ability of agencies 

to work together on national security issues. 

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31568.006

Since my earlier testimony before the Senate Committee on Banking, Housing, and 

Urban Affairs on January 25,2018 and the House Financial Services Subcommittee on Monetary 

Policy and Trade on March 15,2018, my colleagues and I have been meeting regularly with 

members of Congress and the business community to hear their views on CFJUS-related 

legislation. Notably, while some have suggested technical amendments aimed at improving the 

core proposal, all agree on one essential point: CFIUS must be modernized through a 

comprehensive piece of legislation. Based on the feedback we received, we have been working 

on proposed amendments to ensure that FIRRMA is even better tailored to remedy existing gaps 

in CFIUS's authority without harming-but rather, encouraging-the foreign direct investment 

that has benefitted our country so greatly. 

In sum, CFIUS must be modernized. In doing so, we must preserve our longstanding 

open investment policy. At the same time, we must protect our national security from current, 

emerging, and future threats. The twin aims of maintaining an open investment climate and 

safeguarding national security are the exclusive concern of neither Republicans nor Democrats. 

Rather, they are truly American aims that transcend party lines and regional interests. But they 

demand urgent action if we are to achieve them. I look forward to working with this 

subcommittee on improving and advancing FIRRMA, and I am hopeful the bill will continue to 

move forward on a bipartisan, bicameral basis. 

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13 

Mr. LATTA. Well, thank you very much for your testimony. 

And, Mr. Ashooh, you are recognized for 5 minutes. And, again, 

thank you for being with us this morning. 

STATEMENT OF RICHARD ASHOOH 

Mr. ASHOOH. Thank you, Mr. Chairman, and thank you also 

Ranking Member Schakowsky, and the members of the committee 

for having us here today. 

I appreciate the opportunity to testify before the subcommittee 

today regarding CFIUS. And to share the perspective of the Department of Commerce, not only as a member agency of CFIUS but 

also, Mr. Chairman you mentioned in your opening statement 

about export control agencies, and we will bring that perspective to 

our testimony today as well. 

Within Commerce, the International Trade Administration and 

the Bureau of Industry and Security, or BIS, play important roles 

in the Department’s review of CFIUS matters. BIS is the administrator of the Export Administration Regulations or EAR is the regulatory authority for the licensing and enforcement of controls on 

dual-use items, which are items that have a civilian end-use but 

can also be used for a military or proliferation-related purpose, and 

also includes less-sensitive military items. 

The export control system administered by BIS is a process that, 

like CFIUS, involves multiple agencies, primarily the Departments 

of Defense, Energy, and State. We work closely with these agencies 

to review not only license applications submitted to BIS but also 

to review and clear any changes to the EAR itself, ensuring that 

the export control system is robust. 

The interagency licensing process also takes into account intelligence information to assist in the analysis of the potential threats 

posed by those proposed exports. Further, the export control system 

benefits from close cooperation with our international partners 

through four major multi-lateral export control regimes focused on 

national security, as well as missile technology, nuclear, and chemical weapons nonproliferation. Through these regimes, the United 

States and our partners coordinate on which items and technologies merit control and how those controls should be applied. 

The EAR’s authority covers an array of in-country transfers of 

technology, as well as exports of goods, software, or technology to 

foreign countries. For example, the EAR regulates the transfer of 

controlled technology within the United States or abroad to foreign 

nationals under what we call deemed exports. It differentiates between countries that range from our closest allies to embargoed nations; thus, allowing the export control system to handle technology 

transfers under different licensing review policies, depending on 

the level of concern with the recipient country. 

The EAR also includes lists of end-users of concern that trigger 

extraordinary licensing requirements, as well as prohibitions of certain end uses. 

The export control system is also highly adaptable to evolving 

threats and challenges. BIS is currently reviewing control levels 

and procedures to specifically address such threats from adversary 

nations, as well as their interest in emerging critical technologies. 

14 

Our export control system includes aggressive enforcement capabilities as well. BIS’ special agents are located across the United 

States and overseas with a primary focus on identifying violations 

of the EAR and bringing to justice domestic and foreign violators. 

Recently, BIS, in conjunction with other federal law enforcement 

agencies announced a prosecution against two individuals conspiring to violate export control laws by shipping controlled semiconductor components to a Chinese company that was under a 

Commerce license restriction known as the entity list. 

The export control system and CFIUS are complementary tools 

that we utilize to protect U.S. national security, with CFIUS addressing risks stemming from foreign ownership of companies important to our national security and export controls dealing with 

the transfer of U.S. goods, technology, and software to foreign nationals, regardless of the mode of transfer. 

As with the export control system, it is also crucial that CFIUS 

remain adaptive to current and evolving security challenges. The 

FIRRMA legislation introduced in the House and the Senate would, 

if enacted, take several important steps in this direction, especially 

the provision requiring mandatory filings for certain transactions 

involving foreign government-controlled entities, as well as the provision which would facilitate greater cooperation and informationsharing with our allies and partners. Such international cooperation is an essential part of our export control system and would 

benefit CFIUS as well. 

In sum, the export control system and CFIUS are both vital authorities and complementary tools that the United States relies 

upon to protect our national security. Strengthening CFIUS 

through FIRRMA, while ensuring that CFIUS and the export control authorities remain distinct, will enable even stronger protections of U.S. technology. 

The Department of Commerce looks forward to working with the 

committee and the bill’s cosponsors on this important effort. 

And I look forward to taking your questions. 

[The prepared statement of Mr. Ashooh follows:] 

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31568.007

Statement of 

Richard E. Ashooh 

Assistant Secretary of Commerce for Export Administration 

Before the Subcommittee on Digital Commerce and Consumer Protection 

Committee on Energy and Commerce 

U.S. House of Representatives 

Apri126, 2018 

Chairman Latta, Ranking Member Schakowsky, and Members of the Committee: 

I appreciate the opportunity to testify before the Subcommittee today regarding the Committee 

on Foreign Investment in the United States or CFIUS. I am pleased to share the perspective of 

the Department of Commerce in this area, both as a member agency of CFIUS and as an export 

control agency. 

Since becoming Assistant Secretary of Commerce for Export Administration last year, I have 

reviewed almost I 00 CFIUS cases and participated in policy deliberations on many sensitive and 

complex transactions. While in the private sector, I worked for a defense company owned by a 

foreign company, an acquisition that was reviewed by CFIUS. Based on my experience, it is 

clear that CFIUS plays an important role in protecting our national security. 

The International Trade Administration (IT A) and my organization, the Bureau of Industry and 

Security (BIS), play important roles in Commerce's review of CFIUS matters, reviewing every 

transaction and bringing different expertise to CFIUS's deliberations. ITA has extensive 

expertise on U.S. and global market conditions and provides insights into how the foreign 

investments reviewed by CFIUS fit into the overall market. BJS, on the other hand, has a 

national security mission, the main element of which is the administration of the U.S. export 

control system codified in the Export Administration Regulations (EAR), which are often a key 

factor in CFIUS reviews. 

Administering Export Controls 

In our role administering the EAR, BIS's responsibilities encompass the entirety of the export 

control process- we write and implement the regulations, issue export licenses, conduct 

compliance activities (including overseas end-use checks), and enforce the regulations, including 

by preventing violations and punishing those who violate. 

The EAR has traditionally been the regulatory authority for the control of "dual-use" items, 

which are items that have a civil end-use but can also be used for a military or proliferationrelated use. However, in recent years some less sensitive military items previously controlled 

under the International Traffic in Arms Regulations (IT AR) have been transferred to the EAR. 

The dual-use items subject to control and these less sensitive military items are listed on the 

Commerce Control List (CCL) within the EAR. Additionally, commercial items that are not 

determined to merit control on the CCL as dual-use items are still subject to the EAR and are 

controlled to sanctioned destinations and parties as well as to prevent sensitive end uses such as 

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those relating to developing weapons of mass destruction. We refer to such items as EAR99 

items. 

It is important to note that the export control system administered by BIS is an instrument of 

national security that, like CFIUS, involves multiple agencies. We work closely with the 

Departments of Defense, Energy, and State and these agencies review and clear any changes to 

the EAR itself as well as license applications submitted to BIS. The different equities, 

viewpoints and technical expertise that our four agencies bring to the table ensure that the export 

control system is robust and that national security remains at the forefront. 

The EAR's authority covers a wide array of transactions and technology transfers. The goods, 

software and technology listed for control on the CCL are defined by specific technical 

parameters. The interagency decisions on where to set these parameters are national security 

determinations based on when particular items become sufficiently applicable to a military enduse to warrant control. The EAR governs what are considered traditional exports of goods, 

software or technology to foreign countries, but the EAR also covers the transfers of controlled 

technology within the United States to foreign nationals under what we call "deemed exports." It 

is also important to note that the EAR differentiates between countries that range from our 

closest allies to embargoed countries. This differentiation allows the export control system to 

treat exports and technology transfers under different licensing review policies depending on the 

level of concern with the recipient country. The EAR also includes lists of end-uses and endusers of concern that trigger extraordinary licensing requirements if an export is in support of, or 

destined for, such an end-use or end-user. 

In addition to being an interagency national security process, our export control system benefits 

from close cooperation with our international partners through the four major multilateral export 

control regimes. Through these regimes- the Wassenaar Arrangement, the Nuclear Suppliers 

Group, the Missile Technology Control Regime, and the Australia Group- the United States and 

our partners agree on which items and technologies merit control and how those controls should 

be applied. It has long been our position that export controls are significantly more effective 

when they are implemented multilaterally. This helps ensure that these sensitive technologies 

are controlled by all countries that are capable of producing them to make it more difficult for 

them to be acquired by parties of concern. 

The export control system and CFIUS are complementary tools that we utilize to protect U.S. 

national security, with CFIUS addressing risks stemming from foreign ownership of companies 

important to our national security, and export controls dealing with transfer of specific goods and 

technologies out of the United States or to foreign nationals, regardless of mode of transfer. 

Some risks, such as the potential transfer of sensitive technology from a United States firm by a 

new foreign owner, could fall under the purview of both mechanisms. Each mechanism has its 

strengths, and it is important that each be applied in ways that complement, and not duplicate, 

the other. 

One issue that has received a lot of attention in recent months is the concept of "emerging" 

technologies that may not yet be well understood but could potentially be sensitive and present 

national security concerns. Our export control system has been addressing technological 

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31568.009

innovation for decades in light of the rapid pace of innovation and the increased overlap between 

civil and military technologies. Moreover, BIS has existing tools to identity and deal with 

emerging technologies through its specialized expertise and the EAR. One way that BIS seeks to 

keep as updated as possible on emerging technologies is through our technical advisory 

committees (TACs), which are our primary vehicle for interacting with industry in technical 

areas impacted by our export controls. These TACs cover various technology sectors including 

transportation, information technology, and sensors. 

Not surprisingly, the concept of emerging critical technologies is one that presents challenges to 

CFIUS as well. The Department of Commerce regularly brings to the CFIUS process the 

knowledge gained of such technologies through its administration of the Export Administration 

Regulations. The Department of Commerce shares the Committee's concerns over China's 

industrial policies and activities. It is important that the export control process continue its role in 

securing U.S. technology leadership. For this reason, we are currently undertaking a review to 

better utilize our authorities to combat threats arising from the transfer of this kind of technology. 

Similarly, it is also crucial that CFIUS remain adaptive to current and evolving security 

challenges. As the Subcommittee is aware, legislation has been introduced in the House and 

Senate which, if enacted, would take several important steps in this direction. The Department 

supports the legislation, known as the Foreign Investment Risk Review Modernization Act 

(FIRRMA). There are a few provisions that I would like to highlight that are of particular 

interest to our Department: 

• The Department welcomes the affirmations in FIRRMA of the U.S. policy supporting direct 

investment in the United States. 

• We are supportive of the requirement for mandatory filings for certain transactions involving 

foreign government-controlled entities. However, we are concerned that the 25 percent 

threshold in FIRRMA is too high and that transactions could easily be structured to evade it. 

We encourage the Congress to consider a lower threshold. 

• We appreciate that FIRRMA requires an assessment of the resources necessary for CFIUS to 

carry out its critical work, and would both establish a CFIUS Fund and permit filing fees to 

help achieve that end. We also appreciate that the bill states that the provisions which would 

expand CFIUS authorities will not take effect until CFIUS has put in place the regulations 

and has the resources it needs to implement its expanded role. 

• Additionally, we support the provisions ofFIRRMA that would facilitate greater cooperation 

and information sharing with our allies and partners. This would permit increased 

coordination with like-minded countries, particularly on acquisitions that cross borders, as 

we attempt to address national security concerns. 

We in BIS are committed to continuing to identify and control sensitive emerging technologies 

and to ensuring that the export control and CFIUS processes relevant to managing security 

challenges presented by emerging technologies are systematic, proactive, and institutionalized. 

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In sum, CFIUS and export controls are both vital and robust authorities the United States relies 

upon to protect our national security. As we strengthen both to meet current challenges, it is 

important that they remain complementary and not overlap unnecessarily, as that has the 

potential to overburden the CFIUS process and partially duplicate the more comprehensive 

coverage of technology transfer under the export control system. Commerce looks forward to 

working with the Congress on ways to protect sensitive U.S. technologies and assets that provide 

key advantages to our industrial base and national security. 

Thank you. 

4 
19 

Mr. LATTA. Well, again, thank you for your testimony. And that 

will end our presentations from our witnesses. And I will begin the 

questioning and recognize myself for 5 minutes. 

Pardon me, it is allergy time in Washington. 

First this is a question for both of you. What are the administration’s views on the proper relationship between export controls and 

CFIUS? 

Mr. Tarbert, would you like to start or Mr. Ashooh? 

Mr. TARBERT. Sure, I can start. I think Assistant Secretary 

Ashooh said it right, the administration believes they are complementary and mutually reinforcing tools of the United States 

Government. And so the stronger export controls are, the better 

that it makes CFIUS and vice-versa. 

Mr. ASHOOH. And I would certainly reiterate that. And the fact 

that the—not only is CFIUS in need of modernization but our export control authorizing legislation, as well. And right now there 

are independent efforts to do both. That is very, very important because, as we modernize one, it is important to modernize both because they really are knitted together and rely upon each other to 

be effective. 

Mr. LATTA. Let me follow-up with that, then, Mr. Ashooh, if I 

could, because do current legislative proposals create a distinction 

between CFIUS and export controls? And if they don’t, should 

they? 

Mr. ASHOOH. The current legislation, the CFIUS legislation? 

Mr. LATTA. Right. Right. 

Mr. ASHOOH. The latest, and I don’t want to pretend to be an expert on what is going on in the committees that are working on the 

legislation but, as we understand it, the latest draft does do a very 

good job of not only drawing the line but leveraging each other. 

There is an acknowledgment that the goals of FIRRMA need to be 

accomplished with several authorities. And expert control is specifically carved out and reinforces the relationship that the two have. 

Mr. LATTA. Thank you. 

Secretary Tarbert, how has foreign direct investment in the 

United States changed since the last time this committee considered CFIUS legislation in 2006? 

Mr. TARBERT. So we are seeing, and I mentioned a few points in 

my opening testimony but just to give you a little bit more flavor 

on that, the rise of state-owned enterprises, particularly from certain countries that are buying strategic assets as part of an industrial plan and, in some cases, that industrial plan involves civil 

military fusion. And so there is this inflow of state-owned enterprise money that is sort of government-backed money that are not 

purely financial investments but are purchasing U.S. businesses 

with more military and strategic goals in mind. 

The other thing that has changed is that, to go back to this committee and what you all are really specialists in, is the vulnerability side. So there is sort of the sources of the funds coming into 

the United States and why people are investing but then there is 

also the U.S. companies. There is much more. We live in a big data 

economy now. And so when we are looking at a particular U.S. 

company, a healthcare firm, for example, or even an internet servicing firm, the data on U.S. citizens is much greater than it was 

20 

10 years ago and certainly 30 years ago, when the actual jurisdictional provision of CFIUS was created. So it has been 30 years 

since CFIUS’ actual jurisdiction has been revisited. 

Mr. LATTA. Thank you. 

Secretary Ashooh, do the current export controls administered by 

your Department adequately prevent the transfer of sensitive goods 

in intellectual property? 

Mr. ASHOOH. They do but they need to be utilized aggressively. 

This is not a one and done scenario, as we have learned. Not only 

on the CFIUS side, on the export control side, bad actors seek to 

evade current restrictions. And they do this all the time and the 

volume of this activity is also going up. 

So the authorities, while they need to be updated, are certainly 

able to deal with the threats to the technology transfer but they 

need to be utilized aggressively. 

Mr. LATTA. When you talk about utilized aggressively, how would 

you define that? 

Mr. ASHOOH. Well, as I mentioned, one of the things that is important about the export control system is we do have enforcement 

and we need to utilize our enforcement. And so I referred to one 

example in my opening statement but that is something that we 

are relying on Congress to help us make sure is resourced properly 

because, at the end of the day, this comes down to having the right 

people doing the job but it also means making sure that we are 

staying ahead of the technologies that are targets. And we are living in a world now where emerging technologies, which is clearly 

the strength of the U.S. innovation base. 

We are very excited about the technologies that are coming online, most of them for civilian purposes, but which could have national security implications. And so we need to be aggressive about 

identifying and potentially controlling that category of technology. 

Mr. LATTA. In my last 20 seconds, not to be picking on you, one 

last question. 

In your testimony you said that however we are concerned that 

the 25 percent threshold in FIRRMA is too high and that you 

might encourage that Congress consider a lower threshold. What 

would that lower threshold be, in your opinion? 

Mr. TARBERT. So we have identified 10 percent, which is similar 

to what the SEC uses to identify their definition of control. Our 

view is from an export control perspective. The wider the aperture 

that proceeds through CFIUS is an opportunity for the export control system to understand and examine those specific transactions 

for export control purposes. So, we think the overall system benefits from having that wider aperture. 

Mr. LATTA. Thank you very much. My time has expired. 

And the gentlelady from Illinois, the ranking member of the subcommittee, is recognized for 5 minutes. 

Ms. SCHAKOWSKY. I have so many questions. I am going to try 

and get through some of them, anyway. 

So I am interested in hearing from both of you the issues of staffing and resources. It is my understanding that the number of investments or transactions that CFIUS is reviewing is already—you 

talked about that, how many more there are and that FIRRMA 

could require CFIUS to review even more transactions. 

21 

So, if we could start with you, Secretary Tarbert. 

Mr. TARBERT. Sure. So in order to do this, we will need resources, particularly FIRRMA. I mean we are committed to ensuring that the resources are there so that cases can be reviewed adequately for national security purposes. 

One thing that FIRRMA does is it has special funding mechanisms, which helps ensure that the resources are there. It also has 

a special, the legislation would not go into effect until there is a 

certification by the Treasury Secretary that the new regulations 

and resources are in place. 

So, absolutely, resources are a very important part of this. 

Ms. SCHAKOWSKY. So how many transactions per year does 

CFIUS review now and how many do you expect it would be required to review if the bill became law? 

Mr. TARBERT. Right now we had a little under 240 cases before. 

Ms. SCHAKOWSKY. Yes, you said that. 

Mr. TARBERT. We don’t know with exact certainty because the 

bill is changing. It will certainly be multiples of that but we don’t 

know exactly how many because the bill is changing and we also 

want to make sure that the regulations really pinpoint those transactions that are most likely to give rise to national security concerns. 

Ms. SCHAKOWSKY. And how many staffers work for or are assigned to the committee and how many more staff—so you can’t 

really tell how many more would be required if the law passed. 

Mr. TARBERT. Not at this time. 

Ms. SCHAKOWSKY. OK. Secretary Ashooh, did you want to respond? 

Mr. ASHOOH. Sure. There is actually a good reason why it is difficult to forecast. And that reason is, certainly in the case of Commerce, the majority of people who work CFIUS cases are also working licensing and other export control-related matters. So we are 

leveraging the expertise of both. 

We have got a cadre of about 30 engineers and scientists that 

help us understand the technology in question and those are people 

who would work on both. The caseload will go up, there is no question, but I don’t think it will be necessarily a one-for-one increase 

because we will continue to leverage the overall organization to 

support what we are doing. 

Ms. SCHAKOWSKY. So, Secretary Tarbert, we have been, this subcommittee and the Energy and Commerce Committee, has been 

dealing with the issue in pretty high-profile hearings on security, 

data security, privacy, that kind of thing. 

And the things that you were saying really concern me because 

then what are the guiding principles? The United States of America has very few real regulations when it comes to data privacy and 

security. Europe has come up with a new regime on how to do that. 

So what guides you on whether or not the data that these investments want to have or do have is protected, or how do you balance 

it? 

Mr. TARBERT. Yes, it is a great question. So there is probably a 

whole other data protection debate that you have raised about that. 

What CFIUS looks at are specifically are there national security 

concerns arising from the vulnerabilities of the target company. So 

22 

when we do an assessment of a transaction, we look at the threat, 

which is an intelligence community analysis of the foreign acquirer, 

and then we look at the vulnerability, which is essentially an assessment of what the target company has in the U.S. And then we 

put those two together and say if a threat meets the vulnerability, 

what are the potential consequences. 

So if we have a foreign acquirer—— 

Ms. SCHAKOWSKY. Well, these all ifs, but have you actually enforced some? Can you tell me about that? 

Mr. TARBERT. Absolutely. So we see cases where the foreign 

acquirer, there may be concerns that they could take American’s 

information and share them with their state authorities in a way 

that could have intelligence community effects. And so, in some 

cases, we would require mitigation that effectively doesn’t allow 

certain people from the foreign acquirer to have access to Americans’ information. 

Ms. SCHAKOWSKY. And then how often does that happen? 

Mr. TARBERT. It is happening more often than before. But, again, 

it has to arise to the level where we need to say there is actually 

a national security concern. But it is arising more often than certainly 5 years ago and certainly 10 years ago. 

Ms. SCHAKOWSKY. And what kind of company would that be? 

Mr. TARBERT. It could be any particular company. 

Ms. SCHAKOWSKY. What company has there been? 

Mr. TARBERT. They are in various industries, health care, for example, where healthcare information is particularly sensitive. And 

it can be in the financial services industry, as well, where we have 

seen cases where, again, there is lots of personal data and financial 

data on Americans, where we are concerned that it could have national security ramifications. 

Ms. SCHAKOWSKY. Thank you. I would like to hear more about 

that but I have run out of time. 

Mr. TARBERT. Absolutely, my pleasure. 

Mr. LATTA. Thank you very much. The gentlelady yields back. 

The chair now recognizes the gentleman from Illinois, the vice 

chair of the subcommittee for 5 minutes. 

Mr. KINZINGER. Thank you, Mr. Chairman, and thank you both 

for being here. I appreciate it. Obviously, there are a lot of questions we have. 

This is an extremely important issue, especially when you deal 

with the economy. We obviously want to make sure we are protected. At the same time, anytime we make changes in the way our 

economy works, it could have implications that we know nothing 

about. And so part of you being here is extremely important for 

that. 

Mr. Tarbert, in your testimony, you emphasized the gravity of 

potential vulnerabilities arriving from the digital data-driven economy that we live in. Can you explain how countries are exploiting 

this and how you believe that modernizing CFIUS will help address those concerns? 

Mr. TARBERT. Yes. There is only so much I can say because some 

of that is classified as to how countries may be exploiting the 

vulnerabilities. But I think if you think about a company that contains lots of personally identifiable data, personal healthcare data 

23 

on individual Americans, one can easily see that if that information 

got into the wrong hands, particularly if those individual Americans work in sensitive U.S. Government positions, that a foreign 

actor could exploit that. 

Mr. KINZINGER. OK. 

Mr. Ashooh, in your testimony, you state that our export control 

system and CFIUS are complementary tools, as the chairman 

talked about, that we utilize to protect our national security. Given 

that they complement each other, are there any gaps in the way 

that they interplay? 

Mr. ASHOOH. I think any gaps that might exist are not gaps between the two. I think that FIRRMA is addressing gaps that need 

to be addressed in certain transactions. That will benefit the export 

control system. 

And I think it is also important you know to illustrate why these 

two need to be complementary. If we are concerned about a certain 

technology, oftentimes the concern will be over the nature of the 

transaction under which that technology would be transferred. 

CFIUS is very good at understanding, and blocking, or mitigating 

those transactions. 

Once that occurs, though, the technology still exists and may belong to several companies. In fact, it usually does. And so if we 

have a concern over the technology that was resonant in that 

transaction, we want to make sure, as an export control agency, we 

follow it and control it wherever it goes. 

So the—— 

Mr. KINZINGER. Kind of cradle-to-grave, in essence. 

Mr. ASHOOH. Yes, really, belt and suspenders, whatever you 

want to use. It is very important for us to follow the technology of 

concern wherever it goes. 

And I think the changes that we are talking about, if there are 

gaps, those will be addressed in FIRRMA and that will then help 

the export control system be more robust. 

Mr. KINZINGER. And then let me ask you how does coordination 

with other agencies, such as DOD, occur with respect to the evaluation of potential military application of a civilian technology? 

Mr. ASHOOH. So the export control system is founded on an interagency process. And so the agencies that I mentioned, Energy has 

a nation security role, protects a stockpile; Defense; State all are 

the member agencies that review export control licenses. That includes an escalation process, meaning if one agency has a concern 

that it does not feel is being addressed, it can raise that up to the 

Assistant Secretary level, all the way up to the Cabinet, so we can 

really drill down into the issues that are of concern. 

I would also like to expand on that internationally. We have a 

similar process where we work with international allies because, 

again, we are talking about evasion in cases. Where the adversary 

nation wants to obtain something from the U.S., can’t get it, it 

doesn’t do us any good to control it if they can get it from Europe 

or somewhere else. So we have a number of ways to work with our 

allies to control technology. 

And FIRRMA, again, acknowledges the need to work internationally, as the export control system does, again, creating more complementary natures. 

24 

Mr. KINZINGER. And then do you think, for both of you, do you 

think that CFIUS is capable of addressing emerging technology 

concerns, given how rapid innovation is occurring? And what 

changes do you think are necessary to better position it to do so? 

In a month we are going to have technology we don’t even know 

exists today. 

Mr. TARBERT. I would just say there needs to be a process where 

emerging technologies are identified, and considered, and made 

part of the CFIUS review process or certainly the export controls. 

And so we have been working a lot on that process in the bill with 

Members of Congress, with the committees of jurisdiction, to make 

sure that we have such a process and that that process keeps up. 

Mr. ASHOOH. Sir, this is a critical issue for us. We are spending 

a great deal of our resources and focus on adapting to the trend 

you just identified. 

We have technical advisory committees that include private sector individuals and companies that are those early stage 

innovators. We were relying on them. In fact, we have reorganized 

them around emerging technologies, one of many. With more time, 

I would be happy to fill you in on what we are doing to tackle that. 

Mr. KINZINGER. Cool. 

And Mr. Chairman, to be an example for generations to come, I 

yield back with time on the clock. 

Mr. LATTA. The gentleman yields back. 

The chair now recognizes the gentleman from Texas for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

The bill contemplates increasing CFIUS scrutiny of certain transactions that involve critical technology or critical infrastructure. 

While I understand the purpose of CFIUS is to consider each transaction in light of national security, I am interested in how labor 

issues are considered. 

I understand that the Secretary of Labor is a nonvoting member. 

What is their role in the committee? 

Mr. TARBERT. Sure. So if an issue raises to the level of national 

security, it will be considered. And as you say, the Secretary of 

Labor has an observer role. And so, therefore, if there is a case— 

so normally what happens is that if there is a case involving a company where let us say the Labor Department is primarily involved, 

whether it is a set of ERISA funds or other things, a labor union 

of some sort, where there is a foreign acquisition there, then we 

would often ask that Cabinet secretary to sit as the co-chair of the 

case. 

Mr. GREEN. OK. Can CFIUS consider whether a transaction 

would strip the U.S. of these good high-paying jobs or pose threats 

to the health or environment of Americans? 

Mr. TARBERT. Right now, CFIUS is focused solely on national security. So if there is an issue where it rises to the level of national 

security, it would be considered. 

There are a number of other tools the U.S. Government has to 

address some of those issues, as well as some of the issues that you 

raised, Ranking Member Schakowsky, about unfair trade practices 

and things. But for now, CFIUS is just focused on national security. 

25 

Mr. GREEN. Well, and I know I live in a very urban area, an industrial area in Houston. If a foreign company comes in and there 

is a labor bargaining unit, by federal law they continue that agreement. 

Does CFIUS take that into consideration or is that Department 

of Labor responsibility? 

Mr. TARBERT. I believe that is the Department of Labor. We are 

set up solely to focus on does this pose a national security concern 

to the United States. 

Mr. GREEN. OK. The issue is focused on foreign investment. Obviously, we like to have foreign investment in our country. 

And discuss, either of you, do you agree that the U.S. needs to 

support R and D and infrastructure spending? I mean that ought 

to be a no-brainer. I think all of us do. 

What are you doing to push the administration to make such investments? 

Mr. TARBERT. Do you want to? 

Mr. ASHOOH. Sure. So I come from the Bureau of Industry and 

Security, which is dedicated to national security issues within Commerce but we are a very small bureau in a very large agency that 

is focused on ensuring that we are putting pedal to the metal on 

innovation, research and development. R and D in the United 

States exceeded $500 billion last year, which is an all-time high. 

Most of that is private and so we want to make sure that we continue to encourage that private investment. 

Mr. GREEN. Mr. Tarbert, some have recommended that a net economic benefit test should be added to CFIUS review procedures, 

like those that some of our allies employ. Would you support such 

a test being mandated or, if not, why not? 

Mr. TARBERT. Sure. So the administration’s position is is that 

CFIUS has always been designed and should continue to focus solely on national security. 

Mr. GREEN. OK. 

Mr. TARBERT. That said, there are other tools available to address economic issues. And so the 301 investigation is something 

that I think goes to many of the concerns that you have raised. 

Mr. GREEN. OK, thank you, Mr. Chairman. I yield back. 

Mr. LATTA. Thank you. The gentleman yields back. 

And the chair now recognizes the gentleman from Florida for 5 

minutes. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. 

Secretary Ashooh, is that correct? 

Mr. ASHOOH. Yes, sir. It rhymes with cashew, if you like cashews. 

Mr. BILIRAKIS. Oh, gosh. OK, very good. 

When CFIUS law was last amended in 2007, does the term national security include homeland security when analyzing the national security implications of a transaction? And if so, does this include issues related to state and local enforcement agencies, which 

are often on the front line of homeland security? 

Mr. ASHOOH. Yes, sir, it does. 

Mr. BILIRAKIS. It does? 

Mr. ASHOOH. Yes. 

Mr. BILIRAKIS. OK, very good. Thank you. 

26 

And Secretary Tarbert, how does CFIUS seek out the input of 

other federal agencies not included on the committee, such as FTC 

or other regulators, who review, separately enforce competition and 

consumer protection? 

Mr. TARBERT. Sure. So in many of the cases, you brought up the 

FTC, and also the FCC, there is often a regulatory process ongoing. 

So if a company is buying another company, CFIUS will be running, in many cases, in parallel to whatever separate regulatory 

process there is. 

So sometimes we will coordinate with them if they spot a national security issue that we haven’t spotted. That is rare because 

we use the intelligence community and the Defense Department. 

We will work with them. 

The other thing we do is sometimes we will see a case involving 

an agricultural company, for example. And there, the Secretary of 

Agriculture doesn’t technically sit on the committee, the Department of Agriculture, but because they have unique expertise, we 

will invite them in to help co-chair the case. And so that has happened a number of times. 

Mr. BILIRAKIS. Well thank you very much. 

Again, for Secretary Ashooh, how does the Department ensure 

that the Commerce Control List is keeping up with emerging technologies that we might not want to fall into the wrong hands? 

Mr. ASHOOH. Again, this is something we are devoting a great 

amount of energy to. 

Emerging technologies, that is not a new thing. We have always 

had the concept of new technologies that have yet to be subject to 

the Commerce Control List but, as we alluded to earlier, it is the 

volume. And again, this is a good trend. We are seeing amazing innovations occur. 

I have already referred to one change that we made structurally 

just to our technical advisory committees but we have also established a certain control number, a control area within the Commerce Control List specifically designed for emerging technologies. 

And what this does is allow us to place an immediate control on 

a technology that may be so new, it has yet to be considered and 

that we are not clear on what the national security implications 

might be. This way, we can control it immediately and that then 

triggers a process, an interagency process that was referred to earlier that will allow us to work under certain time constraints, so 

we are not going on forever, and adjust the control appropriately, 

and then, take it the multilateral regime so we are doing it internationally. 

This is an area that is going to get much more attention based 

on this trend and the large volume of emerging technologies. 

Mr. BILIRAKIS. Very good. It sounds like you have been very 

proactive. 

Mr. ASHOOH. Devoting a lot of time to it, sir. 

Mr. BILIRAKIS. I appreciate that very much. 

I yield back, Mr. Chairman. 

Mr. LATTA. Thank you. The gentleman yields back. 

The chair now recognizes the gentleman from Indiana for 5 minutes. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

27 

Assistant Secretary Tarbert, obviously you look at governments 

and investment with direct connections and stuff but, as you know, 

around the world there are individuals who also have maybe nebulous connections to various governments. Is that the type of thing 

that would trigger a CFIUS review, potentially, as a specific individual? Tell me what you can tell me. 

Mr. TARBERT. Yes, absolutely. No, when someone files with 

CFIUS, the intelligence community does something called the national security threat assessment. And that national security threat 

assessment looks at the acquirer, as well as the individuals behind 

the acquirer to get an understanding of who they are. 

At the same time, within the Treasury Department, we have the 

Office of Terrorist Financing and Intelligence, which runs a check 

through our systems on the individuals as well, whether they have 

been involved in anti-money laundering or there are any issues 

there, and their potential connection. 

So that is a very thorough part of the process because I think, 

as you are intimating, we could have a company from a country 

who is an ally but had bad people at that company. 

Mr. BUCSHON. That is my point. You have people that have people that have maybe nebulous—— 

Mr. TARBERT. Exactly. 

Mr. BUCSHON [continuing]. Connections to other people that 

aren’t necessarily on our side on certain issues. 

Mr. TARBERT. Exactly. 

Mr. BUCSHON. The other thing is can you briefly describe maybe 

the chain of command-type decisionmaking process with CFIUS? 

Because obviously, the ones that we hear about are in the newspaper. The President, himself or herself, whatever the case may be, 

has made that decision but, obviously, that is kind of unusual probably. 

Mr. TARBERT. Right. 

Mr. BUCSHON. And whatever you can say publicly about the process because I think, from a representatives perspective, the more 

that the American people know about a process, the better they understand it, the more people like me are able to help you reform 

the process. 

Mr. TARBERT. Absolutely. And so in the wake of the Dubai Ports 

controversy, FINSA was passed. And so that statute essentially 

lays out what the process needs to be. 

And so the case comes in. We assign it to case officers and members from all of CFIUS’ member agency, case officers work on that 

particular case. Ultimately, a case cannot be cleared unless a Senate-confirmed official, at least one, signs off on the case. 

There are certain cases that require higher level sign-offs at the 

deputy or even secretary level. And those involve ones that go to 

the investigation stage, as well as when the acquirer is a foreigncontrolled entity, foreign government-controlled entity. 

Mr. BUCSHON. All right because I think that is an important concept for people to understand. The only cases you are seeing in the 

newspaper that the President, him or herself, has decided are not 

the only cases that you all are looking at. And sometimes I think 

that that impression is created where people are saying well why 

did the President make that decision. And to know that there was 

28 

a more complicated process that actually ramped up to that level 

I think is important. 

Mr. TARBERT. Right. In less than one-tenth of one percent of the 

cases, the President blocks. So there are a lot of cases where we 

review them. They either get cleared or we impose mitigation. 

Mr. BUCSHON. Right. 

Mr. TARBERT. So, people only read the newspaper story but it 

is—— 

Mr. BUCSHON. Yes, and I think also people have the impression 

that sometimes it is a political decision, not a national security decision that a President, him or her, has made and that is just not 

the case. 

Last question, Secretary Tarbert, in your testimony you touch on 

the gaps and jurisdictional authority to protect national security. 

Obviously, those are probably commonly known gaps by people that 

are trying to get around your process. 

Can you describe what those might be and how H.R. 4311 might 

help to resolve those gaps? 

Mr. TARBERT. Sure. And those gaps, in many cases, have been 

brought to our attention because the parties themselves have said 

well, if you don’t approve our transaction, we will restructure it 

this way to get around it. 

Three gaps are essentially these: number one are real estate in 

close proximity to military bases and other sensitive U.S. Government. The statute allows us to look at mergers/acquisitions of a 

U.S. business but if it is vacant land, that is not a business. 

So there have been situations where if it has a windmill on it, 

we can review it; if it doesn’t have the windmill on it and they put 

the windmill on after they buy it, we can’t review it. 

The second area are non-passive investments. So these are investments that come below the level of control but they involve a 

board seat, they involve the ability to come on the premises to get 

all the information they need, and many foreign actors have found 

that that is even better than even getting control because it is 

cheaper but they get what they need. 

And finally, there is the J.V. provision, where essentially, they 

replicate the business in the U.S. overseas and, therefore, it is not 

a U.S. business anymore. 

Mr. BUCSHON. I yield back. 

Mr. LATTA. Thank you very much. The gentleman yields back. 

The chair now recognizes the gentlelady from California for 5 

minutes. 

Ms. WALTERS. Thank you, Mr. Chairman. 

Mr. Ashooh, in general, the Trade Sanctions Reform and Expert 

Enhancement Act of 2000 prohibits unilateral sanctions, restrictions, or conditions on the export of key humanitarian products, 

such as food, medicine, and medical devices. 

Is it your sense that medical device products should generally be 

excluded from proposed CFIUS reform definitions, in particular, 

the terms critical technologies and emerging technologies? 

Mr. ASHOOH. I would say that that is definitely an issue for the 

export control system and is one that we have in consideration. But 

as far as definitions within CFIUS, we believe that those definitions should synch up, just as the two systems should synch up. 

29 

And so I mean this is a reasonable policy. It is primarily an issue 

in the export control system. I don’t know that it is one that has 

really emerged on the CFIUS side. 

Ms. WALTERS. OK, is there any reasonable argument that medical device products, including the associated intellectual property 

are sufficiently relevant to national security to justify subjecting 

transactions involving such products to CFIUS jurisdiction? 

Mr. ASHOOH. It is possible. It is possible. I don’t have a crisp answer for you because I don’t have any direct experience in that case 

but it is certainly possible. 

Ms. WALTERS. OK. And do you have any suggestions as to how 

to ensure CFIUS legislation accounts for such a humanitarian exemption? 

Mr. ASHOOH. I am sorry, one more time. 

Ms. WALTERS. Do you have any suggestions as to how to ensure 

CFIUS legislation accounts for such a humanitarian exemption? 

Mr. ASHOOH. Yes. And again, it gets back to the theme we have 

been repeating. That is the sort of thing that Department of Commerce would bring to the table, as well as potentially other CFIUS 

member agencies, HHS, for example. That is why the interagency 

process in CFIUS is so important. We rely on the expertise where 

it belongs in the various agencies. 

Ms. WALTERS. OK, thank you. 

And I yield back the balance of my time. 

Mr. LATTA. Thank you. The gentlelady yields back. 

And the chair recognizes the gentleman from South Carolina for 

5 minutes. 

Mr. DUNCAN. Thank you, Mr. Chairman. Thank you guys for 

being here. 

Before I got on Energy and Commerce back in December, I 

chaired the Western Hemisphere Subcommittee of the Foreign Affairs Committee. And during my time there, we had hearings on 

the Venezuela situation and especially with their company, 

PDVSA. And during that time, PDVSA pledged their stake, 49 percent of Citgo, to Russia for a loan of $1.5 billion, something like 

that I believe. 

Rosneft is the company, the Russian oil company that basically 

took the collateral. And if Venezuela defaulted on that loan, that 

would effectively give Russia and their energy company, Rosneft, a 

49 percent stake in Citgo, an American-based refinery company 

and oil producer. 

We sent a letter, Ranking Member Albio Sires and I sent a letter 

to the secretary on April 6th of last year asking you guys at CFIUS 

to look at this transaction and with the possibility of blocking Russia’s ownership of not a majority stake but a dang-near close majority stake in a huge American asset of Citgo Refinery. 

So let me ask you what the status of that investigation is and 

where we may go from here. What is the next step? 

Mr. TARBERT. So the statute prohibits us from talking about specific cases in a public setting. So if you are amenable to it, I will 

give you a confidential briefing to your office whenever you would 

like. 

But let me just say this. The point that you are raising is an important one because right now the statute allows us to look at anyVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
30 

thing where there will be control. But for a non-passive investment 

that doesn’t pass that threshold of control, particularly for a critical 

infrastructure asset, CFIUS does not have jurisdiction. 

So that was one of the things that we looked at very carefully 

in crafting the provision of FIRRMA to ensure that transactions 

similar to the one that you described would absolutely be within 

our jurisdiction. 

Mr. DUNCAN. Thank you. I am going to take you up on that briefing. 

Mr. TARBERT. Absolutely. 

Mr. DUNCAN. I am no longer chairman of that subcommittee but 

this is an issue that I have followed for a long time, the situation 

in Venezuela but also Russia’s involvement in energy, in guaranteeing loans and assets that are American assets. 

Let me just ask you one more question in the time I have got. 

Assistant Secretary Tarbert, in your testimony you touch on gaps 

and your jurisdictional authority to protect against national security concern. What are these gaps and does H.R. 4311 help resolve 

those? 

Mr. TARBERT. Yes, to the three gaps are land that is not a business but, nonetheless is near a sensitive military installation of 

some sort or other national security installation. 

The second would be the one that we just talked about, where 

potentially you have an ownership stake that doesn’t technically 

meet the definition of control but, nonetheless, has a lot of influence, has access, has the ability to get information and to influence 

the decisions of the company. So that is a non-passive investment. 

And then the third are when someone essentially tries to replicate a business or a core business capability overseas. That is not 

a U.S. business and hence, CFIUS doesn’t have the authority. 

FIRRMA addresses all of these things and is continuing to evolve 

in a manner that addresses them with more effectiveness. 

Mr. DUNCAN. Well, thank you. 

Mr. Chairman, because of the jurisdictional boundaries, this committee may not have been aware of the situation I was talking 

about with Venezuela, and PDVSA, and Rosneft, and Citgo. I 

would like unanimous consent to enter into the record copies of the 

letters we sent to CFIUS. 

Mr. LATTA. Without objection. 

[The information appears at the conclusion of the hearing.] 

Mr. DUNCAN. Thank you. With that, I will yield back. 

Mr. LATTA. Thank you. The gentleman yields back. 

And the chair now recognizes the gentleman from Massachusetts 

for 5 minutes. 

Mr. KENNEDY. Thank you, Mr. Chairman. Thank you to our witnesses for being here. Thank you holding an important hearing. 

A couple of topics I wanted to touch on. So first, gentlemen, this 

is about state-owned enterprises. There has been a bit of discussion 

as to whether Congress or CFIUS should make a distinction between foreign investments made by private persons or firms as 

compared to those made by firms that are state-owned or partially 

state-owned. 

During one of the hearings at Financial Services Committee, 

members commented that it really did not matter in the case of 

31 

China because even private firms are influenced by the Chinese 

Government and would rather make investments or disclose information upon request of the Chinese Government. 

So curious as to your thoughts, either one of you. Can you share 

your thoughts as to whether we should be making such a distinction or whether China is a problem no matter what? 

Mr. Tarbert. 

Mr. TARBERT. Thank you. Thank you, Congressman Kennedy. 

For purposes of state-owned enterprises we think there is a mandatory declaration requirement for those because we think that certainly with state-owned enterprises, there is a clear nexus and, 

therefore, we think that we should be notified of those transactions. 

When we go through the threat analysis and the intelligence 

community does the national security threat assessment, they look 

very carefully at the history of a given company and its potential 

connections to the state. 

And so you are exactly right that with respect countries, particularly those with doctrines of civil military fusion, the line between 

state-owned and private becomes blurred and we take that into account. 

Mr. ASHOOH. And certainly, that is an issue we deal with constantly in the export control system. And the system is designed to 

allow us to examine whether or not that civil military integration, 

which is a factor certainly in China, and in fact is common to the 

countries that we find ourselves spending most of your time with, 

Russia and Iran as well. 

Mr. KENNEDY. And I assume then, gentlemen, it would be kind 

of a similar analysis with regards to investment in a venture capital fund or a private equity fund, in terms of foreign investment 

going into a partnership with a V.C. that is either buying up potentially strategically important early stage companies. Someone? 

Mr. TARBERT. If the venture capital firm itself—so the question 

is is the venture capital firm, itself, a foreign firm. If the answer 

is yes, then that would be within our jurisdiction. 

If it is an American firm and the foreign investor just has a passive L.P. interest but doesn’t control that, then that is out of our 

jurisdiction. 

Mr. KENNEDY. OK. Do you believe that CFIUS can place appropriate conditions on the investments that could critically limit Chinese or any other government their access to critical or emerging 

technology when investors are Chinese firms? So similar, I guess, 

followed between the two. 

Mr. TARBERT. Yes and we do it nearly every day. Thank you. 

Mr. KENNEDY. Pushing a little bit more on the passive investment side, some concerns have been raised about a provision in the 

bill that would limit investments, even when they are passive and 

the investor would not have control of the U.S. company and would 

not have a say in those decisions. 

Under such a case, does the committee have a way to ensure that 

the relationship does not change after a review takes place? So for 

example, if a foreign investor started to see certain I.P., from what 

or how at least I understand it, the relationship would already be 

established. So could such a case get before CFIUS on a secondary 

review? 

32 

Mr. TARBERT. That is a great question. And so we have thought 

about exactly the point that you made. And so in the FIRRMA bill, 

there is an additional basis of jurisdiction when an investor’s ownership changes you know materially to fall into one of the jurisdictional categories that exist. 

Mr. KENNEDY. And forgive me. How would you be notified if that 

investor’s relationship changes? 

Mr. TARBERT. Well, if it is a state-owned enterprise, there would 

be a declaration. But otherwise, CFIUS remains a voluntary process. So we have methods and capabilities of sort of monitoring the 

landscape but, as a technical matter, it could occur. 

Now sort of the ability that we have is if it does occur and they 

don’t notify us, then we have the ability to go in and reopen that 

transaction at any time. 

Mr. KENNEDY. OK. 

Anything to add, sir? 

Mr. ASHOOH. Only that if there is a case where there is a technology transfer concern in what you are discussing. 

The Commerce Department will often place an additional licensing requirement on the companies in question as an important reminder that they are obligated to not transfer that technology, not 

only to a foreign national but the re-export of that as well. So, 

again, we keep track. This is how we leverage the CFIUS process 

to make sure we are keeping track of the technology. 

Mr. KENNEDY. Thank you both. 

I yield back. Thank you, Chairman. 

Mr. LATTA. Thank you. The gentleman yields back. 

The chair recognizes the gentleman from Kentucky for 5 minutes. 

Mr. GUTHRIE. OK, thank you very much. Thanks, Mr. Chairman. 

Thanks for having this hearing and thank you guys for being here. 

And I have the questions. These two questions are for both of 

you. One, you mentioned earlier today that about the volume of reviews. Specifically, if the current form of legislation is enacted, how 

many additional transactions will CFIUS be required to review and 

can CFIUS handle that increase? 

Mr. TARBERT. So I can answer it. We don’t know with exact certainty because the bill continues to evolve—— 

Mr. GUTHRIE. In current form. 

Mr. TARBERT [continuing]. In current form. We are still—because 

then there would be regulations, additionally, that redefine it. We 

think it would be multiples of what we are currently reviewing and 

we would need the resources to be able to staff that. 

But more importantly, we don’t think that the per case/per case 

officer volume would remain the same, that ratio. Because one of 

the things that the bill does, which I think is critically important 

is for those transactions that don’t really require an immense 

amount of government resources, there is a streamlined filing process. 

So for example, when our ally buys an American company, there 

is very little national security issues, we can process those a lot 

quicker. Today, if you want to file before CFIUS, you have to fill 

out a 50- to 300-page form listing all this stuff. And so for things 

that are more likely to be cleared, a much shorter form, more effiVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
33 

cient and effective will actually reduce the time spent on each particular case. 

So we think that it is really helpful to modernize it. 

Mr. GUTHRIE. Because you know the volume goes up and there 

will be tools to moderate it. 

Mr. TARBERT. Absolutely. And this would not go into effect—one 

of the key provisions in the bill says that nothing will go into effect 

and become live until the Secretary of the Treasury signs a certification saying the resources and the regulations are in place. 

Now at the same time, the argument there is, well, that could 

take a while. That could take a year. What about stuff we are seeing today that is a concern? It also allows us, potentially, if passed, 

to have a pilot program. So if we know there are transactions out 

there of a certain type that we want to stop, the day the bill is 

passed, we can issue an immediate sort of regulation to address 

those, while getting the resources in place for the larger jurisdiction. 

Mr. GUTHRIE. Well here is another question, too, is we are looking at H.R. 4311 and if the reviewable transactions dramatically do 

increase—I know you have this streamlined process but let’s say it 

dramatically increases and it is an issue, what do you think that 

will do to foreign investment in the U.S.? Will it deter it or hamper 

it? 

Mr. TARBERT. We don’t think so because America still remains 

the preeminent destination for investment. And the more we are 

able to protect those companies, to protect national security, in the 

long-run, the more attractive that is going to be for investors. 

Mr. GUTHRIE. OK. 

Mr. TARBERT. But obviously, the reason why CFIUS is chaired by 

the Treasury Department is we are particularly aware of wanting 

to attract investment to the United States. 

And so in 1988 and 2007 we have always got that balance right 

and we want to continue to get that balance right by protecting our 

national security but, obviously, continuing to attract foreign investment. 

Mr. GUTHRIE. OK, do you have any comments on this? 

Mr. ASHOOH. Yes, I might add it is worth pointing out that, even 

absent FIRRMA, the caseload under CFIUS has gone up year on 

year fairly substantially. So the resource issue is one that we have 

been grappling with and will continue. I don’t see, and Secretary 

Tarbert might agree, we don’t see that steady increase slowing. 

This is being driven by, obviously, some trends regarding nations 

that see a benefit in pursuing it. 

Mr. TARBERT. And one final point. As a Treasury Department, we 

don’t really like to spend a lot of money. We like to collect it. 

But I think our view on this is that—— 

Mr. GUTHRIE. It is like business; you want more money to come 

in than go out. 

Mr. TARBERT. Yes. But well, no, given the amount of money that 

we spend on the defense of this country, this, to spend whatever 

we need to spend have people reviewing these critical transactions 

to ensure that our technological edge isn’t lost. In many ways, it 

is an insurance policy that is well worth the money. 

34 

Mr. GUTHRIE. OK, thanks. And I have a question just for you, 

Secretary Tarbert, or either one. 

Can you tell us, in general and obviously in unclassified terms 

of what you can share, what is the greatest threat to the U.S. that 

CFIUS is tracking right now? For instance, is it the transfer of 

technology, foreign control of infrastructure, or something else? Because I did a town hall recently and somebody stood up and said— 

the hardest question I had to answer was of all the questions I had 

to answer and they were from left and right—were what keeps you 

up at night. 

Mr. TARBERT. You know the truth is, all of the above that we are 

seeing threats and vulnerabilities. Obviously, state-owned enterprises as well as other companies that are working in close contact 

with their states and trying to acquire companies that are critical 

to our technological edge, that is important. But on the vulnerability side, the personally identifiable information. There are a 

number of other things we are worried about and we are always 

worried about infrastructure, you know the purchase of infrastructures. 

So I would say, unfortunately, it is all of the above. Every day 

I come in I see sort of a new threat or a new vulnerability, I feel. 

Mr. GUTHRIE. All right, thank you very much. 

My time has expired and I will yield back. 

Mr. LATTA. Thank you. The gentleman’s time has expired and he 

yields back. 

The chair now recognizes the gentleman from Vermont for 5 minutes. 

Mr. WELCH. Thank you both. You know this question of imposing 

a big responsibility without providing the resources to get the job 

done is of concern to me. So one of the questions that is brought 

up in this bill is whether there are some ways to streamline without relinquishing review. 

And one of those ideas is to have the bill apply only to a limited 

number of countries or, in the alternative, have a large number of 

countries listed that are not of concern and they would receive a 

safe harbor. 

I guess I am looking to your reaction to that because we could, 

over time, have a list of countries that would shift. You know it 

might have been Japan 10 or 15 years ago, whereas, it probably 

would be China now. 

So, I would ask your thoughts about this. Is this a practical way 

to try to relieve the burden without sacrificing safety? 

Mr. TARBERT. Sure, the bill chooses the second alternative in 

what is called sort of the good guys list. It doesn’t choose a blacklist and the reason is is because if you start blacklisting certain 

countries, it can easily be evaded, particularly in the acquisition 

context. 

So if you had—and then you run into the problem well then, if 

you are a blacklisted country and then how many investors in a 

particular entity do you need to make that entity blacklisted, and 

then we end up sweeping in our allies. And to your point, the 

threat changes over time. 

And the vulnerabilities remain the same. So it is very well possible that we have a U.S. company that is so important that, even 

35 

people from countries that we wouldn’t necessarily blacklist, still 

requires review and some kind of mitigation. 

But the good guys list is important because there our allies are 

facing, in many cases, the exact same threats that we are. And so 

the idea is is that if we can get them to work with us to create 

similar investment screening regimes, that would actually save us 

potential concerns because—yes. 

Mr. WELCH. Similar protocol—— 

Mr. TARBERT. Exactly. 

Mr. WELCH [continuing]. For them and us because we have a 

unified interest. 

Mr. TARBERT. Correct. 

Mr. WELCH. Yes, thank you. 

Mr. ASHOOH. And if I might add, you know one of the benefits 

of CFIUS is that the member agencies bring their expertise and 

authorities to the CFIUS table. And the export control system is 

very list-driven. We have got end-users, countries of concern. And 

I can tell you that lists come with a cost. It takes a fair amount 

of effort to maintain those lists. 

Mr. WELCH. Right. 

Mr. ASHOOH. So rather than have multiple and perhaps overlapping lists, you know it is useful, I think, for these agencies to bring 

them to the table and Commerce certainly does that in the CFIUS 

context. 

Mr. WELCH. OK, thank you. That is all I have. Thank you very 

much. 

I yield back. 

Mr. LATTA. Thank you. The gentleman yields back. 

The chair recognizes the gentleman from West Virginia for 5 

minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. I am sorry I was at 

another hearing downstairs and so I have missed a lot of the testimony that perhaps you have given. But one thing that I did hear 

as I came in was early you made point that CFIUS is a voluntary 

program. And that concerns me a little bit—a great deal, actually. 

And I am hesitant because we went through our classified briefing and then I had another classified briefing on another situation 

that had to do with CFIUS. So I am hoping I am going to be able 

to stick to what we can have from open source. 

But should we be making it mandatory? 

I come from the construction industry, 50 years in construction. 

You can’t start a project without getting your permits for water, 

sewer, air, archeological digs, what environmental yet we allow a 

project to begin. Someone, a foreign entity, can invest in a project 

and it may take you a while before you become engaged. And by 

that time, it is too late. 

The information on energy transporting data is already out there 

and it is gone. Why is it voluntary and why is it—why would we 

not make it mandatory that they have to first check the box that 

they have approached CFIUS for preliminary ruling before they 

proceed? 

Mr. TARBERT. Great. So the first question, you know why has it 

been voluntary, and it has been voluntary since the start of it—— 

Mr. MCKINLEY. That doesn’t make it right but go ahead. 

36 

Mr. TARBERT. Yes, and I think the thought there is that because 

CFIUS has the ability then to address the transaction, to potentially unwind the transaction, those—— 

Mr. MCKINLEY. After the fact. 

Mr. TARBERT [continuing]. After the fact, that is enough to get 

people to file. 

Now that said, the point you are raising is an important one. 

And for certain types of transactions, our view, particularly those 

by state-owned enterprises, and also by particular types of technology, it is so important, just as you said, that we want to get a 

declaration in advance of that transaction so we know about it. 

And so the bill actually does that. 

The bill has a certain provision in there that there are mandatory declarations, in some cases, for state-owned enterprises. 

Mr. MCKINLEY. So under this legislation, will someone that is acquiring an energy company, energy transmission company, they 

will have to announce that they are going to do this? 

Mr. TARBERT. Right now, the bill requires declarations for stateowned enterprises that have some kind of substantial interest. And 

it may be 25, it may be—— 

Mr. MCKINLEY. I don’t need that. 

Mr. TARBERT. But if it is—yes. 

Mr. MCKINLEY. If I just have a seat at the board without any investment in that, if I get a seat at that board, I have got access 

to all the information I need. How are you aware of that? 

Mr. TARBERT. So right now, we are monitoring some things but 

the bill would provide us with the authority. It doesn’t mandate us 

to do that but would provide us with the authority to say that in 

certain types of transactions, like the one you announced, you have 

to get a declaration before CFIUS before you can engage in that 

transaction. 

And so during the notice and comment period, we will be soliciting—if the bill passes, be soliciting views of what are the kinds 

of transactions, to your point, that are so critical and important we 

don’t want to be learning about them after the fact, that we want 

an advanced declaration before—— 

Mr. MCKINLEY. Is there any protection, as legislation, that—because the technical information, understanding how our utility 

markets operate is instantaneous. And by that virtue, your coming 

is after the fact trying to address that. So will this legislation prevent that transfer of information without an investment, that is 

just merely a seat at the table? Are you going to be able to prevent 

that from happening? Because it happens in an instant before you 

are aware of it. 

Mr. TARBERT. Yes, to be frank, it could prevent it in certain instances, it may not prevent it in others. And so there may need to 

be additional legislation. It may not even require a board seat. 

Someone could just walk into the energy company, get to know the 

CEO and—— 

Mr. MCKINLEY. Thank you. 

Mr. TARBERT [continuing]. A relationship starts. So it sounds like 

for that specific instance, we just deal with foreign investments of 

various sorts that there may need to be added protection under 

some other area of the law. 

37 

Mr. MCKINLEY. So let me ask you. You just offered to do another 

classified. I would like to follow up on the conversation you and I 

had last week and see where we might be able to go with this. 

Mr. TARBERT. We are planning that, actually. I think we have 

got it—we are working to schedule that, the one specific to your 

state. 

Mr. MCKINLEY. You know what I am talking about. 

Mr. TARBERT. Yes, sir. 

Mr. MCKINLEY. Thank you. I yield back. 

Mr. LATTA. And you know what he is talking about, OK. 

The gentleman yields back and the chair now recognizes the gentleman from Texas, the chairman of the Health Subcommittee of 

Energy and Commerce for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman, and thanks to our witnesses for being here today. I also thank the subcommittee for putting together the classified briefing that we had on this subject. It 

was important. 

And I will just ask if I ask you a question that really should not 

be answered in an open setting, I will accept your deflection on 

that. 

I was here in the United States House of Representatives when 

Dubai Ports World got all the headlines. Most people didn’t know 

what CFIUS was before them and then, of course, everybody knew 

and became an expert on CFIUS. But what many people didn’t 

know and I didn’t know at the time is that this participation in this 

process is largely voluntary. Is that correct? 

And just as a matter of procedure, a notice which is given to you 

for to answer a possible question, how does that arise? Where do 

those notices come from? Do the companies make those notices or 

the company that is involved makes the notices? 

Mr. TARBERT. Normally, the acquirer and the target company, 

the people doing the business combination will come to CFIUS, oftentimes, as they are getting into the initial stages of planning the 

transaction to tell us about the transaction and to get the notice 

started. They will send us drafts back and forth of the notice and 

we will work with them to complete the notice so then we can deem 

it accepted. 

Mr. BURGESS. So that is part of their due diligence in doing the 

merger and acquisition background. Does it ever come to your attention from another source, through someone else say hey, this is 

happening and I wonder about it? 

Mr. TARBERT. It does. And we have members of the intelligence 

community that are sort of—and other resources. But that is one 

of the things that I think this bill acknowledges that we also need 

to have resources devoted to scanning the investment landscape for 

things that are not notified to us. 

So every now and again, we will get wind of a particular transaction that wasn’t notified to us. We will look into the matter and, 

in some cases, ask the parties to file. If the parties don’t want to 

file or for some reason we don’t think they will be cooperative, we 

have the authority to actually issue the notice ourself and start the 

case. 

Mr. BURGESS. Just as a general matter, of the number of notices 

that come to your attention, are all of them investigated, a portion 

38 

of them investigated, a large portion, a small portion? Could you 

qualify that? 

Mr. TARBERT. Yes, normally not many at all investigated. There 

is a technical definition of investigation—— 

Mr. BURGESS. OK. 

Mr. TARBERT [continuing]. Which means the second phase. But 

I would say all of them we look at and we determine whether there 

needs to be a filing. 

One of the things that FIRRMA does, which makes it a lot easier 

is because the filing costs a lot of money. 

Mr. BURGESS. Sure. 

Mr. TARBERT. It is 50 to 300 pages. And so for let’s say a Canadian company buying an American company, where there is not 

likely to raise any national security concerns, the parties will often 

say this is what we are doing here. Do we really need to file with 

you? We have to then say well, we can’t tell you not to file but, 

based on what you are saying and what we know about the companies, there may not be a national security concern. 

But that is difficult. So one of the things that FIRRMA does is 

it creates the declaration where they can actually file a short 

version of that that doesn’t cost as much money but we can then 

review that and determine whether we want a full notice of whether we have enough information to say that transaction is OK. 

Mr. BURGESS. Well, under the current regime, are there any particular countries that —when you list out the number of countries 

that are investigating—or where you have notices that you are investigating, do there tend to be a preponderance of countries or is 

there a single country that is identifiable as this is where we spend 

a lot of our time? 

Mr. TARBERT. What I can tell you is in those cases where we 

have reached out, where there hasn’t been a notice and a transaction has occurred and we have asked the parties to file, required 

them to file, or filed a notice ourself to get it started, those cases 

have involved recently China and Russia. 

Mr. BURGESS. And just of the transactions involving China, how 

many are allowed to proceed? Can you quantify that? Is there a 

percentage? Is it a lot, a little, all of them? 

Mr. TARBERT. It is a substantial number but a number of them, 

there is proceeding without mitigation, there is not proceeding, and 

then there is sort of proceeding with mitigation, where the Government requires certain things to happen before that transaction can 

go forward. 

Mr. BURGESS. And you may have already answered this or you 

may have been asked this. I am not sure if I understood or heard 

the answer. Is this a two-way street? U.S. involvement in other 

countries, is it blocked from time to time? 

Mr. TARBERT. Well, it is. In some countries, U.S. investors are 

blocked regardless of national security. There are simply investment caps that don’t allow our companies to invest in other countries but that is more of an economic issue than an issue. 

I am not aware of any situation where for national security reasons another country has blocked an American acquisition of one 

of their companies. 

39 

Mr. BURGESS. For economic reasons, when the President talks 

about he wants trade to be fair and reciprocal, is this one of those 

areas? 

Mr. TARBERT. That would be potentially one of those areas. And 

I know that the Treasury Department and other government agencies have talked to different governments about you know if we 

allow your countries to invest here, why are you preventing our 

companies from opening their doors in your country or requiring 

that our company needs to form a joint venture with one of your 

nation’s companies, that if we are going to allow investment in our 

country, why don’t you allow our companies to go and do business 

in your country without imposing constraints on them. But that is 

an economic issue. 

Mr. BURGESS. Yes, sir. 

Mr. ASHOOH. And sir, if I might just add, the concept of CFIUS 

is still fairly unique in the world. Although we are seeing the EU, 

and Japan, and other allied countries establish similar procedures, 

we generally think that is a good thing because this is, again, a national security review. And to the extent we share national security 

goals, it is helpful to manage the foreign—— 

Mr. BURGESS. Good enough. As far as the economic goals, I may 

follow up with you, Mr. Tarbert, just because that is of interest to 

me. 

Thank you, Mr. Chairman, I will yield back. 

Mr. LATTA. Thank you. The gentleman yields back. 

The chair recognizes the gentleman from New Jersey for 5 minutes. 

Mr. LANCE. Thank you very much and good morning to our distinguished panel. 

Both the Treasury and the Commerce Department maintain lists 

of prohibited persons and nations for purposes of trade and sanctions. Gentlemen, do you believe that these lists are effective in 

identifying the entities that pose threats to American interests? 

Mr. ASHOOH. Yes, indeed. 

Mr. TARBERT. Yes. 

Mr. LANCE. And do they provide a model of how CFIUS should 

view certain types of investment? For example, should CFIUS have 

a list of nations that will draw special scrutiny? 

Mr. TARBERT. On this, we don’t think so. And the reason is is 

that we want to be able to review all transactions involving foreign 

investors, where relevant. And each transaction is looked at specifically for the threat, the vulnerability, and the consequence. So 

there is an intelligence analysis of the particular acquirer. And so 

you could have a situation where you have an acquirer from an allied country but the particular individuals within that are not necessarily friendly to U.S. national security interest. 

And so our view is that we have never maintained a blacklist, 

so to speak, for particular countries. But since every transaction 

undergoes a very thorough intelligence analysis, the kinds of issues 

that you are talking about are always unearthed. 

Mr. ASHOOH. And sir, if I might, Commerce, through the export 

control system, does maintain a multiplicity of lists. It can be individuals, companies, technologies, end uses, end-users. And Commerce, as one would hope, we bring those to the CFIUS table. So 

40 

you know the experiences and knowledge that we have get brought 

to the CFIUS table and that way we are not having to overdo it 

on the list side. 

Mr. LANCE. Thank you. Obviously, foreign direct investment has 

historically been a tremendous boom to our economy. Does the administration seek to ensure that any reforms to the CFIUS process 

do not create unnecessary hurdles for legitimate and beneficial direct involvement? 

Mr. TARBERT. Absolutely, and that is why the Treasury Department of the chair of CFIUS because it recognizes that we are looking at protecting our national security while, at the same time, 

maintaining an open investment environment. 

So while the FIRRMA bill would increase the jurisdiction to certain types of transactions that have been avoiding review, at the 

same time, it has a number of measures to modernize the process 

and to streamline it a bit for those transactions that are least likely to raise national security issues. 

Mr. LANCE. Thank you. 

Mr. ASHOOH. And sir, where there is a technology transfer concern, we spent a lot of time really drilling down to what actually 

matters from a national security perspective so that we are not 

over-controlling and being overly restrictive. 

Mr. LANCE. Thank you and thank you for your distinguished testimony. 

And Mr. Chairman, I yield back 2 minutes. 

Mr. LATTA. Well, before the gentleman yields back, would he 

yield? 

Mr. LANCE. Oh, I will be happy to yield to the chair. 

Mr. LATTA. Well, thank you very much because I would like to 

follow up on a question that the gentleman from Texas asked and 

came back. 

How often is a company or companies not cooperative with you 

when you want to get with them and all of a sudden they say we 

are not going to cooperate? 

Mr. TARBERT. It is very rare. Because CFIUS has the ultimate 

power to unwind the transaction, impose other things, and in some 

cases impose fines if there is a violation of a mitigation agreement, 

most companies seek to comply and work with us. 

Mr. LATTA. And you say most. OK. All right. Well, thank you. 

The gentleman yields back and I will yield back his time. 

And we want to thank you very much for testifying before us 

today. It has been very, very informative. We appreciate all that 

you do out there to help keep things straight for Americans and especially when it comes to our security reasons. We really appreciate your testimony today and all you do. So, thanks for being 

with us today. 

And so that will conclude the first panel. And we will get ready 

to have the second panel come before us. 

[Recess.] 

Mr. LATTA. Well, good morning and I would like to take this opportunity to thank you all for coming before the subcommittee. And 

again, we do have the other subcommittee running downstairs, so 

we do have members coming in and out during the hearing. 

41 

And if I could, I would like to introduce our second panel. The 

Honorable Kevin Wolf, partner at Akin Gump Strauss Hauer and 

Feld, and former Assistant Secretary for Export Administration at 

the United States Department of Commerce. Welcome. The Honorable Clay Lowery, Managing Director at Rock Creek Global Advisors, and former Assistant Secretary for International Affairs at 

U.S. Department of Treasury. Ms. Celeste Drake, Trade and 

Globalization Policy Specialist at the AFL-CIO. Thank you. And 

Dr. Derek Scissors, the Resident Scholar at the American Enterprise Institute. 

And again, we want to thank you for being with us today because 

this is a really important subject. 

And Mr. Wolf, you are recognized for 5 minutes. So, thank you 

very much for being with us. 

STATEMENTS KEVIN WOLF, PARTNER, AKIN GUMP STRAUS 

HAUER AND FELD, LLP; CLAY LOWERY, MANAGING DIRECTOR, ROCK CREEK GLOBAL ADVISORS; CELESTE DRAKE, 

TRADE AND GLOBALIZATION POLICY SPECIALIST, AFL-CIO; 

AND DEREK SCISSORS, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE 

STATEMENT OF KEVIN WOLF 

Mr. WOLF. Thank you, Mr. Chairman, Ranking Member Schakowsky, for inviting me to speak today. 

As an opening note, the comments I make today are my own 

views and are not on behalf of anyone else. 

First before I begin, a compliment. As I have been following this 

FIRRMA and CFIUS reform discussion, it has been a genuine, nonpartisan, good faith, regular order, civil, spirited public debate over 

a—this hearing has been too straightforward. Let’s see if we can 

raise it up a little bit. 

But no, seriously, these are legitimately difficult issues and on 

difficult national security and economic security issues, where 

bright lines are hard. 

So in fact, just a summary of where the debate really is. It is sort 

of between, and apologies for over-generalizing, two camps, two 

very nonpartisan, good faith camps. There is one view that believes 

that CFIUS should have substantially expanded jurisdictional authority over far more transactions going in and out of the country 

to address evolving and emerging threats, particularly with respect 

to strategic acquisition from China of emerging technologies. Technologies evolve quicker than law or regulations can. Commercial 

transactions are very creative and more creative than the Government can quickly understand. 

And so, therefore, we need substantially more authority to be 

able to metaphorically look in every box going in and out of the 

country and decide whether if in that box there is a transaction of 

concern, technology, or PII, or other types of activity of concern. 

And then the other camp does not deny the underlying threat 

but says that before the Government uses this extraordinary authority to impose additional controls on otherwise commercial 

transactions, that it should do the hard work first to identify the 

particular technologies, and threats of concern, and tailor the scope 

42 

of the new authorities accordingly, so as not to discourage because 

fear and uncertainty about what would be controlled discourages 

investment in the United States. The U.S. is an open investment 

culture for which there are great benefits to foreign direct investment. 

And so that is really what the debate in FIRRMA is going back 

and forth. In my prepared testimony, I lay out some detail about 

the benefits of foreign investment and the issues with respect to 

the strategic plans from China but I also lay out the questions to 

be asking when considering any changes to CFIUS. 

And the first question is: Does the statutory authority exist in 

some other area of law to address the issue through a regulatory 

or process change? 

And then the second question is: Would what the threat is you 

are trying to address be better addressed more directly, with fewer 

collateral consequences, by another area of law, such as the export 

control system, trade remedies, government contract issues, and intellectual property protection? 

And then the third question is: The threat that you are trying 

to address or the issue that you are trying to resolve, can it be addressed through more investment simply internally in the Government, for example, in identifying more non-notified transactions, to 

have more and deeper robust review of already filed transactions 

or to be able to have more staff to monitor mitigation agreements, 

which are alterations of agreements thereafter? And if the answer 

to any one of those questions is no, then that is the sweet spot for 

reform. 

The area for which I am the particular expert in, given my background, is with respect to the issues pertaining to technology transfer. And one of the threats identified in the previous panels and in 

general is the identification of and the control over technology that 

is being sought, that is emerging, that has dual-use implications, 

both commercial, and other activities of concern. And my main 

theme is that with respect to efforts to control outbound investment to please remember that there is an entire area of law, the 

export control system, which Secretary Ashooh spoke about so well, 

that exists explicitly to do that, to identify and to regulate through 

an interagency process for national security purposes technologies 

of concern without imposing unintended collateral burdens on foreign direct investment, which we want to encourage. 

So, I am here to answer your questions about anything involving 

CFIUS, or export controls, or how they could or would work better 

together. 

And with that, I will stop and turn it over to my colleagues. 

[The prepared statement of Mr. Wolf follows:] 

43 


31568.011

United States House Committee on Energy and Commerce 

Subcommittee on Digital Commerce and Consumer Protection 

"Perspectives on Reform of the CFIUS Review Process" 

Prepared Remarks of The Honorable Kevin J. Wolf 

Partner, Akin Gump Strauss Hauer & Feld LLP 

Former Assistant Secretary of Commerce for Export Administration (2010-2017) 

Apri126, 2018 

Chairman Latta, Ranking Member Schakowsky, and other distinguished 

members of the subcommittee. Thank you for convening this hearing and for inviting 

me to testify on this important national security topic. 

For nearly 25 years in both the private sector and government, I have focused 

my practice on the law, policy, and administration of export control and related foreign 

direct investment issues. From 2010 to 2017, I was the Assistant Secretary of 

Commerce for Export Administration. In this role, I was primarily responsible for the 

policy and administration of the U.S. dual-use export control system and, as a result of 

the Export Control Reform effort I helped lead, part of the defense trade system. I was 

also during this time a Commerce Department representative to the Committee on 

Foreign Investment in the United States (CFIUS), particularly with respect to cases 

involving technology transfer issues. 

Although I am now a partner at Akin Gump Strauss Hauer & Feld LLP, the views 

I express today are my own. I am not advocating for or against any issue or potential 

changes to legislation on behalf of another. Rather, given my industry and government 

background, I am primarily here to answer your questions about how CFIUS and the 

export control system work together and how they could work even better to address 
44 


31568.012

emerging national security issues. As requested, I am also willing to comment on the 

Foreign Investment Risk Review Modernization Act (FIRRMA) (H.R. 4311 ). particularly 

with respect to technology transfer issues. My suggestions, I believe, will be 

constructive and supportive of the essential national security policy objectives 

motivating the bill's introduction. 

I. A Compliment 

Before beginning my substantive comments, I would like to point out that this 

topic is a welcome example of a non-partisan, good faith, regular order, and spirited 

public debate over legitimate and genuinely difficult national security and economic 

security issues. I thus want to compliment Senator Cornyn, Senator Feinstein, 

Congressman Pittenger, Congressman Heck, and all the other co-sponsors of FIRRMA, 

the Administration, and this and the other committees of jurisdiction for doing such a 

good job of working through the issues. No one I know or have heard from objects to 

the bill's policy objective of enhancing our national security given emerging threats from 

countries of concern and the evolution of dual-use technologies. Most, however, have 

suggestions for different or modified ways of achieving those objectives with the least 

amount of collateral regulatory and economic burdens. Discussing them as we are is 

part of the usual process of getting to a good result. 

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II. High Level Summary of What the FIRRMA Debate is About 

As Derek Scissors will describe in more detail, the policy motivations for the bill 

stem from the comprehensive Chinese strategy described in the 2015 "Made-in-China 

2025" plan. In sum, China has announced plans to become dominant in emerging 

technologies of strategic importance through indigenous development and acquisition 

from companies in the US and allied countries. The stated goal is not to join the ranks of 

the leading high-technology countries but to replace them as such. As the government 

witnesses described, this is in the context of the general situation where there are often 

not material distinctions in China between planned civil and military applications of 

commercial technology or between private and state-owned enterprises. There is direct 

and indirect state subsidization for the acquisition of emerging technologies and state 

support for commercial cyber espionage. Technology transfer requirements are often 

imposed as a condition for companies to do business in China. There are similar 

concerns with other countries, but most of the discussion has pertained to China. 

Different people can easily agree or disagree with any particular response to 

these issues by this Administration or the previous Administration. All can agree, 

however, that no one area of law or policy can provide the complete response. 

Technology-based cyber defenses against bad actors must continue to be enhanced. 

Investigation and prosecution of those involved in such espionage and traditional 

intellectual property theft must continue to be supported. Bilateral efforts to negotiate 

and motivate changes in behavior may be frustrating, but are necessary. Explaining 

with evidence these concerns to our allies so that they are motivated to take similar 

whole-of-government responses in their countries is critical. Thoughtful WTO cases and 

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trade remedy actions consistent with the rule of law and international norms are 

warranted. Updated and tailored derivative technology transfer and use clauses in 

government contracts and follow-on compliance are vital. Multilateral trade agreements 

that have intellectual property, labor, and environmental protections are a useful in 

exerting multilateral leverage over countries of concern. In the other direction, and 

perhaps even more importantly, massive amounts of support and attention must be 

given to investments in the United States for STEM education, general R&D, and 

infrastructure improvements so that we maintain our edge. 

I am here today, however, to discuss only two of the tools the government can 

use in response- (i) the FIRRMA proposal to update and expand the jurisdictional 

scope of CFIUS to address investment-based technology transfer concerns and (ii) 

creatively enhancing the use of existing export controls to address the same issue. 

From my perspective and with apologies for over-generalizing, there are basically two 

non-partisan camps in this part of the FIRRMA discussion. Both are reasonable and 

acting in good faith. 

On one side are those who say that CFIUS needs to have significantly expanded 

jurisdiction over outbound and inbound investments in order to be able to review 

massively more transactions to determine if they might result in the contribution of 

technologies of concern, particularly in their earliest stages, and that are otherwise the 

target of strategic acquisition. Broader jurisdictional authority is needed because 

technology evolves quicker than regulations or laws can be updated. Transactions are 

more creative than the government can quickly understand. Given that we are dealing 

with what are, by definition, novel emerging technologies, the government does not 

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know what it does not know. One must consider national security threats created by 

such investment over decades rather than with respect to individual transactions. Thus, 

the government should have the authority to (i) metaphorically look into most investment 

boxes going in and out of the country to see if they contain technology, particularly early 

stage technology, implicating an area of concern and (ii) be able to block or mitigate the 

transfer given the long-term national security threats. If the technology is not of concern 

to the destination, then the government will let the transaction go forward. 

On the other side are those who believe that before the government uses its 

extraordinary authority to alter the free flow of civilian commerce, it should do the hard 

work of identifying the specific technologies of concern and then regulate such 

technologies, at whatever stage of their development, to the specific end uses, end 

users, and destinations of concern. Without such tailoring, there is a greater harm to 

the U.S. industrial base caused by the additional regulatory burdens, approval delays, 

and investment uncertainties. That is, given a choice between investing or partnering 

with a U.S. company that will involve such baggage, foreign parties will often choose to 

invest or partner with companies in allied countries that do not impose such burdens. 

Some U.S.-based multi-nationals will choose to engage in development efforts outside 

the United States where the regulatory burdens are lower. Moreover, without such 

tailoring, the U.S. government's finite resources are burdened by the need to review 

benign transactions submitted by risk-averse companies when the government should 

be focusing its resources on the transactions of concern. Finally, the U.S. government 

already has an entire export control system that can better address concerns in 

FIRRMA regarding the contribution or other release of technologies of concern. This 

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side does not deny the national security concern, but rather wants to have it addressed 

more directly. 

The essence of this debate is not new to me. It was inherent in the entire Export 

Control Reform effort. 1 There was and remains a constant tension in the export control 

system and regulatory systems in general between controls that are broad and general 

versus those that are tailored and specific. The former have the virtue of being simpler, 

but they impose unnecessary controls over less sensitive items and transactions. The 

latter have the virtue of imposing fewer regulatory burdens, but are harder to craft, are 

more complex, and require regulatory updates. Based on my experience as a 

government policy maker, it is generally the case that the more tailored controls that are 

regularly updated to reflect new information, although harder to create, address the 

threats more directly and thus with fewer collateral harms. Our experience with the 

imposition of broad controls on the commercial satellite and spacecraft industry, and 

then their later tailoring to address the negative impacts of over-controls, are a good 

example of this point, which I would be happy to discuss separately if you would like. 

Ill. Questions to Ask When Considering Changes to CFIUS 

The first question to ask with any contemplated piece of legislation or regulation 

is "what is the problem to be solved?" As discussed, there are many related China 

investment and technology transfer issues where the solution to each might be slightly 

different. Thus, when considering changes to the statutory authority for CFIUS with 

respect to the issues at hand, I would suggest you ask the following questions: 

1 https:/lwww.bis.doc.gov/index.php/about-bis/newsroom/speeches/speeches-2015/1164-

remarks-of-assistant-secretarv-kevin+wolf-at-the-2016-update-conference 

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(i) Does the statutory authority already exist to address the issue through a 

regulatory or process change? 

(ii) Would action and related enforcement in another area of law -- such as 

trade remedies, government contracts, export controls, or intellectual 

property -- address the issue more directly and without collateral 

consequences for foreign investments of less concern that we welcome? 

(iii) Does the solution lie in providing more resources to the CFIUS agencies 

to, for example, identify more non-notified transactions that CFlUS should 

review, monitor more mitigation agreements, or process more cases more 

quickly with a deeper review? 

If the answer to any of these questions with respect to investment-related concerns is 

"no," then that is the sweet spot for consideration of change to CFIUS legislation. 

Without commenting on the merits of any particular change, it is nonetheless vital 

to weigh the costs of each change. For example, if there is even a small expansion in 

the scope of CFIUS's review authority, then some companies may be less willing to 

invest in the United States with the actual or perceived extra burden and time involved 

in closing a transaction, particularly if there is not a significant expansion in CFIUS staff 

and aggressive compliance with deadlines. With every expansion in scope, there will 

be a corresponding and exponential expansion in burdens and costs generally. More 

regulations lead to more words, which lead to more analyses of those words in novel 

fact patterns, leading to more filings, more reviews, more mitigation agreements, and on 

and on. Also, if legislation becomes too prescriptive, then it may limit the ability of the 

Administration and staff to resolve novel national security issues in a creative way. 

Above all, and regardless of whether national security concerns warrant more or fewer 

controls, the key question to ask with any change is whether it will create more or less 

certainty. Even without substantive changes, beneficial investment and international 

trade are harmed by uncertainties in scope, jurisdiction, timeliness, likely outcome, and 

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possible enforcement. 

The questions I have been answering as part of the public debate over FIRRMA 

pertain to whether and how the export control system can address the technology 

transfer-related concerns. The short is answer is that it, with new resources, creative 

thinking, and a whole-of-government approach, can and should handle the concerns 

and could do so better than CFIUS could. Indeed, the very reason for the existence of 

the export control system is to handle such issues. Moreover, why create within CFIUS 

a new technology transfer regime when one already exists elsewhere within the 

government, albeit with the need for enhancement? To the extent the investment issue 

does not pertain to technology transfers, then the export control system is not the 

solution. Before I get in to the details of these issues, I want to summarize the 

importance of foreign direct investment and the basics of CFIUS. 

IV. Importance of Foreign Direct Investment 

Foreign Direct Investment (FDI) is vital to economic growth and job creation in 

the United States. Assistant Secretary Tarbert and others have described well the 

statistics regarding the millions of US workers employed by affiliates of foreign 

companies, the billions of dollars foreign companies invest in America, and how FDI 

fuels growth for US companies. It was in recognition of these and the other benefits of 

the free flow of capital in open and competitive markets that Presidents Obama, Bush, 

Clinton, Bush, and Reagan explicitly reaffirmed the United States' open investment 

policy and took steps to ensure that we remain the destination of choice for foreign 

investment. The United States has, in fact, been the destination of choice for FDI 

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because of such policies, our rule of law, our economy, and our workforce. Competition 

to attract FDI, however, has never been stronger and companies have many more 

options around the world than they once did. Therefore, it is vital to our economic 

security and prosperity that we continue to take actions to make the United States 

attractive for investment, including modernizing the CFIUS process. 

V. CFIUS 

The United States, of course, is obligated to protect its national security. We 

never want to be in a fair fight, and aggressively enforced and properly staffed 

technology transfer, investment, and other controls are a critical part of maintaining that 

advantage. Former Assistant Secretary Clay Lowrey, one of the authors of the current 

CFIUS regulations, other witnesses, and CFIUS staff2 have well described the evolution 

and current operations of CFIUS. In sum, the statute authorizing CFIUS gives it 

jurisdiction over foreign investments into U.S. businesses to identify and address 

national security concerns. This statutory focus reinforces our long-standing 

commitment to welcoming investment that does not create unresolvable national 

security concerns. 

By law and in my experience on CFIUS, the Committee does not consider 

industrial policy or political concerns when reviewing foreign investments. Basically, we 

would ask ourselves three questions with respect to each transaction. First, is it a 

"covered transaction?" That is, is it within the scope of CFUIS jurisdiction because it 

2 See Committee on Foreign Investment in the United States, 2015 Annual Report to Congress. 

https://www. treasurv.gov/resource-center/international/foreigninvestment/Documents/Unclassified%20CFIUS%20Annuai%20Report%20-

%20(report%20period%20CY%202015). pdf 

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could give a foreign person the ability, directly or indirectly, formally or informally, to 

control or affect the activities of a U.S. business? Second, does the transaction present 

a national security concern? The Intelligence Community is the primary lead for 

advising whether the acquirer and related parties pose a national security concern. The 

CFIUS agencies take the primary lead in analyzing whether the national security would 

be made more vulnerable by the acquisition. Although there is not a binding definition of 

national security and I will not speak about particular cases, common types of questions 

we would ask ourselves to get to the answer included: 

(i) Are there co-location issues? For example, is the investment in a 

business near a military facility? 

(ii) Would it create espionage risks or cybersecurity vulnerabilities? 

(iii) Could it reduce the benefit of certain U.S. Government technology 

investments? 

(iv) Would it reveal personally identifying information that, if exploited, would 

be harmful to our interests? 

(v) Would it create security of supply issues for the Defense Department or 

other government agencies? 

(vi) Would it implicate national security-focused law enforcement equities or 

activities? 

(vii) Would it create vulnerabilities for critical infrastructure, such as with the 

telecommunications or power grids? 

(viii) Is it from a country with a record of nonproliferation or other national 

security concerns, or that otherwise has a history of taking or intending to 

take actions contrary to our national security? 

(xix) Would it allow technology of concern to be released to foreign persons of 

concern? For example, was a country of concern seeking to acquire 

specific technology that, if acquired, could reasonably be used to enhance 

its military or intelligence capabilities? 

Such questions were not asked in isolation. Rather, we would analyze together whether 

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the combination of any identified threats with a vulnerability would risk impairing our 

national security. Each of these topics warrants its own, separate analysis and 

commentary when considering possible changes to CFIUS. The third question we 

would ask is whether a threat was resolvable by another area of law or through 

mitigation, i.e., through altering the terms of the transaction. The CFIUS agency 

representatives lead this discussion and contribute their particular expertise and equity 

to the analysis. If there were an unresolved national security threat, then we would 

recommend to the President that he block the transaction. 

In my experience, the existing CFIUS structure, authorities, and internal 

procedures generally allowed for the resolution of these issues quite well. The Treasury 

Department was an excellent honest broker and facilitated consensus conclusions -

often after lengthy interagency discussion and always with the terrific support from the 

intelligence community. The agencies were always respectful of the need for a wholeof-government decision that accounted for the particular equities and expertise of the 

other agencies. The career staff were and remain talented, dedicated public servants. 

This last point is key. Given the increase in filings and the increase in more complex 

cases, the staff was stretched thin when I was there, and I know they are even more 

stretched now. They need help. They need more resources, particularly aimed at those 

involved in monitoring mitigation agreements and studying non-notified transactions. I 

make this polite suggestion not only for their benefit but also for the sake of our national 

security. I also make the suggestion so that the U.S. remains known as a country that 

welcomes foreign direct investment with the minimum necessary and quickest possible 

safe-harbor review burden. 

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VI. Need for Modernization 

FIRRMA's proponents have identified legitimate national security issues the U.S. 

Government needs to address. The bill contains a number of significant improvements 

that, if it became law, would improve CFIUS's ability to enhance our national security. 

Subject to a little wordsmithing by staff and practitioners, examples include: 

(i) Enabling CFIUS to review certain real estate transactions unrelated to an 

investment in a U.S. business if near a military facility. 

(ii) Requiring the submission of a declaration if the investment involves 

significant foreign government interests. 

(iii) Expanding the list of national security factors CFIUS may consider when 

reviewing transactions. 

(iv) Improving the monitoring of, and compliance with, mitigation agreements. 

(v) Ensuring sufficient funds for additional CFIUS staff at Treasury and its 

other member agencies. 

(vi) Encouraging the Administration to share information with our allies and to 

work with them on their foreign investment screening and export control 

regimes. 

In particular, I applaud the FIRRMA sponsors' efforts to bring attention to the need to 

identify and control to countries and end users of concern emerging critical technologies 

that are not now controlled for release under the export control system to foreign 

persons but, after an interagency review and public notice and comment process, 

should be. 

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VII. Commentary on the new Outbound and Inbound Investment Provisions 

Since this is a legislative hearing, I will, as requested, provide my commentary on 

the bill as introduced. I know, however, that there are significant draft, informal 

amendments being discussed by the bill's sponsors, the Administration, and the various 

committees of jurisdiction. Although I will not know with certainty until there is a final 

formal proposed mark to the bill, I believe that most of my suggestions and comments 

are consistent with what may be the Administration's view. My two primary comments 

pertain to the outbound and inbound investment provisions, and my suggestion to use 

the export control system to identify and control the emerging critical technologies of 

concern motivating the two provisions. 

A. Outbound Investment Provision- Section 3(a)(5)(B)(v) 

This provision would expand the definition of "covered transaction" to include 

"[t]he contribution (other than through an ordinary customer relationship) by a United 

States critical technology company of both intellectual property and associated support 

to a foreign person through any type of arrangement, such as a joint venture, subject to 

regulations prescribed under subparagraph (C)." The bill defines "United States critical 

technology company" as any "United States business that produces, trades in, designs, 

tests, manufactures, services, or develops one or more critical technologies, or a subset 

of such technologies, as defined by regulations prescribed by the Committee." 

The provision does not require that the arrangement at issue have anything to do 

with the contribution or release of critical technology to a foreign person for it to be a 

transaction subject to CFIUS jurisdiction. Rather, it only requires that some part of the 

company "trades in," "services," "develops," "produces," etc. "critical technology." 

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Moreover, the term "critical technology" is defined in the bill to include (i) any technology 

on any export control list, which includes many widely available commercial and dualuse technologies on the Commerce Control List, and (ii) also any "emerging critical 

technology" that is not listed on any export control or other list. Virtually all technology 

companies contribute both intellectual property and associated support to a foreign 

person in the normal course of business. Thus, far more companies and daily 

transactions would be within the scope of this provision than it may seem upon first 

reading. 

Such a broad jurisdictional scope would discourage many foreign parties from 

wanting to enter into transactions with U.S. companies because it would impose U.S. 

jurisdiction over transactions that, by definition, would not involve the release of 

technology of concern. The burden and uncertainty would be magnified by the absence 

of a list of, or even a process to create a list. of emerging technologies the government 

might deem to be critical. Thus, foreign and U.S. parties would not know whether any 

particular U.S. company involved with such unlisted technology might be declared to be 

a "critical technology company." Foreign companies would often choose not to enter 

into transactions where there would be even a low risk that the U.S. government might 

exercise its non-reviewable extraterritorial jurisdiction to alter the transaction. Others 

would avoid transactions with U.S. companies where there would be a delay as a result 

of a regulatory filing not required by other countries. Thus, they would often choose to 

conduct the same venture with a non-U.S. company for the sake of speed and certainty. 

Companies proceeding with a transaction that would want to eliminate any 

possibility, even for seemingly benign covered transactions, that the U.S. government 

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might later alter the transaction would play it safe and file with CFIUS. This would, by 

definition, impose unnecessary regulatory burdens and delays on such companies and 

would significantly add to the CFIUS workload. This could harm the committee's ability 

to focus its finite resources on the transactions that could potentially involve national 

security issues. 

Finally, the provision as introduced would exempt from its scope the contribution 

of unlisted emerging critical technology to a foreign person if it occurred during an 

"ordinary business relationship." This exclusion would thus permit the release to a 

foreign person of exactly the same emerging critical technology if it occurred during a 

direct sale but would control the same contribution if done during a joint venture. If the 

technology is so sensitive that it warrants the U.S. government's having the jurisdiction 

to alter or block a venture, it warrants being controlled for release to foreign persons of 

concern regardless of the nature of the underlying transaction. 

B. New Inbound Investment Provision - Section 3(a)(5)(B)(iii) 

CFIUS already has jurisdiction over any "transaction, which irrespective of the 

actual arrangements for control provided for in the terms of the transaction, results or 

could result in control of a U.S. business by a foreign person." 31 C.F.R. § 800.301 (a). 

(emphasis supplied). "Control" is defined as meaning "the power, direct or indirect, 

whether or not exercised, through the ownership of a majority or a dominant minority 

of the total outstanding voting interest in an entity, board representation, proxy voting, a 

special share, contractual arrangements, formal or informal arrangements to act in 

concert, or other means, to determine, direct, or decide important matters affecting an 

entity; in particular, but without limitation, to determine, direct, take, reach, or cause 

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decisions regarding [a list of matters], or any other similarly important matters 

affecting an entity . ... " ld. § 800.204(a). (emphasis supplied). 

FIRRMA would add to the list of covered transactions those that include any 

"other investment (other than passive investment) by a foreign person in any United 

States critical technology company or United States critical infrastructure company, 

subject to regulations prescribed under subparagraph (C)." With this provision, CFIUS 

jurisdiction would apply to non-passive investments that, by definition, could not result in 

control over a U.S. business, directly or indirectly, formally or informally. Moreover, it 

would apply to investments at any level into a company, including affiliates such as 

subsidiaries, that meet the broad definition of "critical technology company" even if the 

investment is completely unrelated to and would not or could not result in the transfer of 

emerging critical technology of concern to a foreign person. 

I would suggest amending slightly the provision so that it is limited to transactions 

between unaffiliated entities that would or could result in the release or contribution of 

critical technology to a foreign person from a country of concern by a U.S. business. 

The policy motivation behind the provision is essentially the same as paragraph (B)(v), 

which is to have jurisdiction over transactions that might involve the release of such 

technology to foreign persons of concern. Thus, its scope should be tied directly to the 

policy it is designed to achieve and there should be a process requiring the government 

to identify such technologies for the reasons set forth above. Otherwise, it would impose 

jurisdiction over transactions that, by definition, would not or could not involve the 

contribution of critical technology. Also, companies involved in unlisted technologies 

would not know if foreign investments in them are covered. This would create 

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unnecessary clouds over foreign investment, regulatory burdens, delays, and 

unnecessary work for CFIUS. 

In addition, I do not believe that the bill's sponsors have identified concerns about 

inbound intra-company transactions, such as a parent company's investing further in its 

U.S. subsidiary to do additional research. Thus, I would suggest inserting an exemption 

for transactions among affiliates or between foreign parents and subsidiaries- i.e., 

between companies with a common ultimate owner. 

VIII. A Technology Transfer Control System Already Exists 

The apparent underlying policy motivations for the new outbound and inbound 

investment provisions is a concern that, as a result of transactions in or by a "critical 

technology company," listed or unlisted technologies of concern, particularly early stage 

technologies of strategic interest, could be released to a foreign person from a country 

of concern without the U.S. government's ability to review and potentially control the 

release of such technologies. This is a worthy concern. However, the U.S. government 

already has a system with broad statutory authority to identify and regulate the release 

of technologies of concern -- at any stage of their development-- to foreign persons. It 

is the export control system. Export controls are the rules that govern 

(i) the export, reexport, and transfer 

(ii) by U.S. and foreign persons 

(iii) of commodities, information/technology, software, and services 

(iv) to destinations, end users, and end uses 

(v) to accomplish various national security and foreign policy objectives. 

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In connection with a recent House Foreign Affairs Committee hearing entitled 

"Modernizing Export Controls: Protecting Cutting-Edge Technology and U.S. National 

Security," I described the U.S. dual-use export control system in some detail.3 In sum, 

the Department of Commerce's Bureau of Industry and Security (BIS) administers the 

Export Administration Regulations (EAR).4 These regulations govern the items that 

warrant control but that are not regulated by another part of the U.S. Government. In 

essence, they describe on the Commerce Control List (CCL) the commercial, dual-use, 

and less sensitive military items that warrant control for national security, foreign policy, 

and other reasons. "Dual-use" items- i.e., commodities, software, and technology- are 

those that have both benign commercial applications as well as applications of concern. 

In essence, the EAR controls technology that is required for the development, 

production, or use of an item. "Developmenf' includes all stages prior to serial 

production. The controls in the EAR can be as broad or as narrow as the national 

security concern warrants. The heart of the technology transfer part of the FIRRMA 

debate is whether there are additional dual-use technologies- i.e., emerging critical 

technologies - that are not now controlled but that should be in light of the evolving 

threats that I described earlier. 

Identifying and controlling technologies is not the only tool the EAR has to 

address national security concerns. It also has the authority to impose controls on all 

exports and reexports of items subject to US jurisdiction to specific foreign persons or 

companies of concern. It also has the authority to impose controls on specific end uses 

3 https://docs.house.gov/meetings/F A/FA00/20180314/1 07997/HHRG-115-FAOO-Wstate-WolfK20180314.pdf 

4 https://www. bis.doc.gov/index. php/about-bis/mission-statement 

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of items even if the underlying technology is widely available. Controls can be unilateral 

as needed, but the better controls are those that are multilateral so that our allies are 

working with us to achieve the same policy objectives. 

BIS is responsible for leading interagency efforts to identify and control such 

technologies. As described in my HFAC testimony in more detail, the Departments of 

Defense, State, and Energy are the primary participants in this effort, but BIS takes 

input from all parts of the government with equities and expertise in the topic at hand. 

The lists are thus regularly evolving to take into account new national security concerns 

and new facts. After a technology or other item is identified, the controls on its transfer 

can be tailored in the regulations to apply to the whole world or to specific destinations, 

end uses, and end users to address specific concerns. The control choice is a function 

of a national security and foreign policy judgment to be made on a technology-bytechnology basis and regardless of the existence or nature of any underlying 

commercial transaction. That is, export controls apply to exports or other releases of 

technology regardless of, for example, whether the exporter is owned or controlled by a 

foreign parent, the transaction is a sale or a joint venture, or the release is tangible or 

intangible. 

In my experience, the existing export control system works well. BIS and its sister 

agencies are full of talented, dedicated, and motivated public officials. Given the 

(legitimate) increase in attention to analyzing emerging technologies, at whatever stage 

of their development, more resour~es are needed for them to do this work on top of their 

regular efforts. In my opinion, the answer to the inbound and outbound FIRRMA 

provision process issues I described earlier is essentially in section 109 of the Export 

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Control Reform Act of 2018 (H.R. 5040) introduced by Congressmen Royce and Engel. 

In sum, it requires the Administration to: 

1. enhance the existing export control system with a regular, well-funded 

interagency effort to get from national security, intelligence, and industry 

experts information and predictions regarding uncontrolled technologies 

that are (a) emerging and critical to maintaining our military and 

intelligence advantages, and (b) the subject of acquisition efforts by 

countries of concern that, if so acquired, would be harmful to our interests; 

2. absent an emergency need to publish unilateral controls immediately, 

publish proposed amendments to the export control rules for public 

comment to make sure the descriptions of such technologies are clear and 

do not contain unintended collateral consequences unrelated to or that 

would harm our national security; 

3. publish final export controls tailored to the destinations, end uses, and end 

users of concern, regardless of the nature of the underlying transaction; 

4. educate the U.S. and foreign public, and our allies, on the controls and the 

reasons for why they are needed; 

5. work with the relevant export control regimes to develop common, 

multilateral controls over the new technologies- i.e., so that the 

technologies are controlled by allies as well as when sent from the United 

States; 

6. provide healthy resources and tools to the law enforcement agencies so 

that they can properly investigate and prosecute violations of the new and 

the old controls; and 

7. institutionalize a system to regularly review, revise, and update the 

controls so that they do not become outdated as threats evolve and more 

information is gathered. 

My standard joke is that I have a three-minute, thirty-minute, three-hour, and three-day 

version of every export control topic. So, I will stop here. Thank you again for spending 

the time to think through this complex and important national security issue. I am happy 

to answer whatever questions you have. 

20 
63 

Mr. LATTA. Thank you very much. 

Mr. Lowery, you are recognized for 5 minutes. 

STATEMENT OF CLAY LOWERY 

Mr. LOWERY. Chairman, Ranking Member, and members of the 

committee, thank you for the opportunity to testify today on CFIUS 

and the modernization efforts underway. 

In general, I support FIRRMA but I would like to point out what 

I consider to be several key shortcomings in the current bill, particularly from the perspective of someone who had to implement 

the major reform of CFIUS that happened about a decade ago. 

Before I discuss these issues, however, I did want to say just a 

few words about CFIUS that goes beyond what Assistant Secretary 

Tarbert had to say. The easiest way to understand it is to know 

what its mandate is. And that mandate is to ensure national security while promoting foreign investment. It is not solely about protecting national security. And the reason for this is because welcoming foreign investment, in fact promoting foreign investment, is 

part of our national security. It is core to our economic growth. It 

is core to our increasing productivity. And it is core to creating jobs 

in this country. 

There was an earlier discussion about whether it should be a voluntary process. The reason it is a voluntary process, in many respects, is because of that issue. There is usually over 1,200 or 1,500 

mergers and acquisitions that happen in the United States every 

year. Most of them have exactly nothing to do with national security. If we had mandatory process, we would have to be investigating all of those. 

The CFIUS is exactly what I said. It is a committee. It is an 

interagency committee that investigates cross-border mergers and 

acquisitions that could put our national security at risk. 

Mergers and acquisition parties file with CFIUS, and CFIUS determines whether the acquirer will gain control in the U.S. business, and then it does a three-part analysis, as Assistant Secretary 

Tarbert laid out. 

The history of CFIUS is that it addresses complex transactions 

under very tight timelines, in an orderly process, that protects classified information and proprietary information very well. While 

most transactions don’t raise national security risks, as I just mentioned, those that do are addressed because CFIUS has extraordinary powers to investigate, to mitigate, and, in very rare circumstances, to recommend to the President to block a transaction. 

The FIRRMA bill, I think, does a good job of modernizing CFIUS 

and does a good job of filling in some of the gaps that were mentioned earlier. My worry, though, is that the legislation that we 

saw back of November is that portions of the bill use vague language, duplicate existing export control authority, and will be overly burdensome for both the private sector and the Government. 

There is a substantial part of this bill that transforms the committee on foreign investment in the United States into a technology 

control regime in which there isn’t a merger, there isn’t an acquisition, in fact there isn’t even a foreign investment into the United 

States. In this scenario, CFIUS would go from reviewing approximately 200 transactions a year to several thousand. If this expanVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00067 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
64 

sion is truly necessary for our national security, and cost is the 

only issue, then, by all means, let’s find a way to pay for it. But 

this expansion is not driven by national security. Instead, it would 

be the needless result of a bill that is too vague and too duplicative, 

rendering it practically impossible for CFIUS to accomplish the 

work it has been tasked to do and that is so vital for our U.S. economic and national security. 

We have just heard from Assistant Secretary Tarbert and Ashooh 

that the administration has recognized some of these concerns and 

is making a serious effort working with Congress to fix bill. And 

this trajectory, in my mind, is very positive and it suggests that we 

may actually find a way to modernize CFIUS, make it 

implementable, and improve our national security. If we don’t fix 

it, though, I fear we will not enhance our security, we will harm 

it. 

Thank you very much. 

[The prepared statement of Mr. Lowery follows:] 

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Testimony of the Honorable Clay Lowery 

Managing Director 

Rock Creek Global Advisors LLC 

House Committee on Energy and Commerce 

Subcommittee on Digital Commerce and Consumer Protection 

April 26, 2018 

Perspectives on Reform ofthe CFIUS Review Process 

Chairman Latta, Ranking Member Schakowsky, and Members of the Committee, I thank 

you for the opportunity to testify on Reform of the CFIUS process and particularly the 

Foreign Investment Risk Review Modernization Act of2017 (FIRRMA). My name is 

Clay Lowery, and I am currently Managing Director of Rock Creek Global Advisors, a 

consulting firm that advises companies on international economic and financial policy 

matters. Our clients have views regarding FIRRMA- both positive and negativehowever, my testimony today reflects my own views. 

My views are largely informed by my prior government experience as well as my own 

analysis of the FIRRMA bill. I served in the U.S. Government from 1994 to 2009, most 

of it at the Treasury Department but also at the National Security Council. During my 

final years in government, from 2005 to 2009, I was the Assistant Secretary of 

International Affairs for the Treasury Department, and one of my primary responsibilities 

was overseeing the Committee on Foreign Investment in the United States, or CFIUS, 

during the last CFIUS modernization effort. 

In 2006, I inherited the consequences of one of the most controversial transactions in the 

history ofCFIUS: the Dubai Port World case. This case put a spotlight on the 

shortcomings in the CFIUS process at that time and the need to modernize it. Over the 

next few years, I led a reorganization of Treasury to address these shortcomings and 

assisted with a reorganization of CFIUS across the federal government, including with 

the intelligence community. As part of this process, I worked with Congress to create the 

Foreign Investment and National Security Act of2007 ("FINSA"), worked with the 

White House to draft the 2008 Executive Order, oversaw the rule-making process that 
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developed the CFIUS regulations of2008, and led the CFIUS review process, including 

the analysis and disposition of hundreds of transactions. 

I am pleased to be testifying alongside Kevin Wolf and Derek Scissors, both of whom I 

respect and of whose views and expertise I think highly. 

In my testimony, I will provide some background about CFIUS as well as discuss my 

general support for FIRRMA while pointing out what I consider to be several key 

shortcomings in the proposed November 2017 bill- particularly from the perspective of 

someone who has had to implement a major reform of CFIUS in the past. 

I would like to highlight that I know there have been a number of informal updates to 

FIRRMA by the House Financial Services Committee, the Senate Banking Committee, 

and the Administration, as well as a companion piece of legislation addressing export 

controls in the House Foreign Affairs Committee. I think that these updates are 

addressing a number of the criticisms I have of the November bill, which are highlighted 

in my testimony today, and the reform agenda seems to be moving in what I consider to 

be a much more productive and implementable direction. 

As an initial matter, I think the most important thing to keep in mind about CFIUS is its 

purpose: ensuring national security while promoting foreign investment. This mission 

statement comes directly from the legislation that created CFIUS and has guided it for the 

last 30 years. 

Roughly 7 million American workers, or about 6 percent of total U.S. private-sector 

workers, are employed directly through foreign direct investment (FDI). These are good, 

high-paying jobs that provide average compensation per worker 24 percent higher than 

U.S. private-sector wages. These jobs are disproportionally in the manufacturing sector: 

20 percent of all manufacturing employment is due to FDI. And, according to a recent 

Reuters analysis, two-thirds of the manufacturing jobs created from 2010 to 2014 can be 

attributed to foreign direct investment. 

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In short, FDI is in the national interest of the United States and we should not become 

complacent. While the U.S. remains the largest destination for FDI, our share of 

attracting such investment has fallen about 40 percent in the past 16 years. 1 

This dual mission- to ensure national security while continuing to encourage foreign 

investment into the United States- should be kept in mind when trying to reform CFIUS. 

In my remarks today, I will emphasize three main points, which I hope will contribute to 

your efforts to modernize CFIUS successfully. 

1. The FIRRMA bill should be one element of a comprehensive strategy to protect U.S. 

technology, which should also include reforming and enhancing our export control 

system. 

2. Key parts of the current FIRRMA bill are vague, duplicative and unnecessarily 

burdensome, and should be amended in order for this legislation to be effective. 

3. CFIUS does not have adequate resources or expertise to deal with the massive number 

of cases that would result from the current draft of FIRRMA. 

Before I discuss these issues, however, I wanted to say a few words about the CFIUS 

review process. 

CFIUS Process 

CFIUS is an interagency committee that investigates transactions that could result in 

control of a U.S. business by a foreign person in order to determine the effect, if any, on 

U.S. national security. CFIUS is chaired by the Treasury Department and is comprised of 

the Departments of Commerce, Defense, Energy, Homeland Security, Justice, and State, 

as well as the Office of the U.S. Trade Representative and the Office of Science and 

Technology Policy. In addition, the Intelligence Community under the leadership of the 

DNI and the Department of Labor serve as non-voting members of CFIUS.2 

1 United Nations Conference on Trade and Development (UNCT AD) World Investment Report 2017. 2 Several offices in the executive office of the president also serve as observers ofCFIUS. 

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Parties submit their transactions to CFIUS for review on a voluntary basis, although 

CFIUS has the authority to compel a filing if necessary. The statute prescribes strict 

timelines for CFIUS's review, but parties are encouraged to pre-file with CFIUS to 

provide the government with an opportunity to begin its analysis before the clock starts 

running. 

CFIUS officials are obligated by law, and subject to the possibility of criminal or civil 

penalties, not to disclose information regarding transactions. The rationale behind this 

rule is to protect both proprietary and intelligence information. 

Once a transaction has been filed, CFIUS first determines whether it has jurisdiction to 

review the transaction- that is, does it involve foreign control of a U.S. business in 

interstate commerce- and, if it does, CFIUS then undertakes a three-part evaluation: 

1. Does the acquirer pose a threat to national security? This analysis is led by the 

Intelligence Community. 

2. Is national security made more vulnerable by the acquisition of the U.S. assets? 

This analysis tends to be driven by the CFIUS agency with applicable subjectmatter expertise. 

3. Do the consequences of permitting a specific transaction that combines the 

identified threat and vulnerabilities risk impairing national security? 

CFIUS investigates these questions in the first 30 days after it accepts the filing. At the 

end of those 30 days, CFIUS can undertake a second stage investigation that lasts up to 

an additional 45 days if it is not satisfied or in most transactions where the acquirer is 

state-contro lied. 

The process, the time lines, the composition of CFIUS, the protection of information, and 

the reforms of2007/08 have all been designed by Congress and respective 

Administrations to protect national security and to do so while maintaining the United 

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States' long-standing policy of openness to investment. In addition, recognizing that 

some transactions may raise national security issues, Congress has expressly authorized 

CFIUS to enter into mitigation agreements with the transaction parties to address those 

concerns. There are many different methods of mitigating a transaction. Examples 

include establishing special security procedures at facilities that can be verified by the 

government, implementing certain passivity mechanisms, or even forcing a company to 

divest specific assets. In short, these mitigation agreements impose measures on the 

parties intended to address national security risks. These mitigation agreements are the 

pressure valve that enables CFIUS to find solutions t4l more difficult transactions in order 

to fulfill its mission of protecting national security while promoting foreign investment. 

If at the end of that 75-day period, CFIUS cannot make a decision or recommends that a 

transaction should be prohibited, the matter is referred to the President who has I 5 days 

to make a decision. Only the President is authorized to block a transaction. 

China as the Rationale for Updating CFIUS 

Since CFIUS was reformed ten years ago, it has performed in an exceptionally 

professional and thoughtful manner. Congress and the American people should be proud 

of how well the group of individuals across the government have carried out their duties. 

Their scrutiny of cases is thorough, and they have protected national security while 

preserving the reputation of the United States as open to investment from around the 

world. CFIUS in many respects has been a model not only within our government but 

also for other countries: various nations are now considering how they can emulate the 

U.S. process. 

That said, there is little question that the investment landscape has changed substantially 

in those ten years. By far, the most important change has been the rise of China as a 

direct investor in the United States. Ten years ago, CFIUS would review just one or two 

transactions a year that involved a Chinese acquirer- today, it is dozens and dozens of 

transactions every year. 

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As highlighted by the bill's sponsors, the rise of China and its growing threat is the key 

rationale behind this bill. 

Derek will cover this in much more detail in his testimony, but in China, the State exerts 

much more control over the economy than does the U.S. Government or that of any other 

major economy. The Chinese government is directing a comprehensive strategy, much of 

it outlined in the Made-in-China 2025 Plan, to become dominant in emerging 

technologies not only through development of its own industries but also through 

acquisitions, including from U.S. companies. China's strategy incorporates government 

efforts to: 

• Fuse the military and civilian sectors; 

• Subsidize industries of the future and individual companies in these sectors; 

• Support cyber espionage to serve commercial and national security objectives; 

• Use restrictions on foreign investment and licensing to coerce technology 

transfers; and 

• Impose domestic standards that favor Chinese companies and promote their 

adoption in other markets, pressuring U.S. manufacturers to conform to 

Chinese standards. 

FIRRMA Bill as a Partial Response 

The United States must address this serious and growing challenge in a comprehensive 

manner that goes well beyond the scope of this hearing. Such a strategy should certainly 

include enhancing our military and cyber capabilities, upgrading our export control 

system, and modernizing CFIUS, among other elements. 

The FIRRMA bill is one important step. I think this bill gets a number of things right. 

For example, the bill correctly: 

• expands CFIUS' jurisdiction from only reviewing cross-border direct investments 

into the U.S. where the acquiring party gains control of the asset to reviewing 

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foreign direct investment (i) into certain real estate transactions in the proximity 

of military facilities, and (ii) where the investor does not necessarily obtain a 

controlling stake in a national security asset; 

• mandates that notice be filed for direct investments by entities with a significant 

foreign government interest; 

• expands the illustrative list of national security factors that CFJUS may consider 

in evaluating transactions; and 

• encourages the Administration to share information with our allies and to work 

with them on their foreign investment screening regimes to make them more 

consistent with the U.S. regime. 

That said, Congress should review and revise the language in the bill to clarify its intent. 

For instance, the inbound investment provision should make clear that the concern about 

minority investments in critical technology or critical infrastructure companies is not 

about the companies per se, but about any critical technology associated with those 

companies. I also am concerned that the FIRRMA bill appears to exempt CFIUS from 

judicial review for even procedural matters- potentially limiting due process and review 

of the government's actions. 

Such issues can be rectified and clarified by small drafting amendments or by a sound 

and thorough "rule-making" process that allows for input from the private sector and 

other interested parties. 

Vague, Duplicative, and Burdensome 

Addressing my other key concerns will take much more work. Among these are that the 

bill uses vague language, duplicates existing export control authority, and will be overly 

burdensome to implement for both the private sector and the government. 

This results from the fact that the FIRRMA bill is only partially about foreign investment 

into the United States. Instead, there is a substantial part of this bill that transforms the 

Committee on Foreign Investment in the United States, CFIUS, into a technology control 

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regime in which there isn't a merger, there isn't an acquisition, and there isn't even a 

foreign investment into the United States. 

My concerns about these issues stem from my experience in implementing the last 

CFIUS modernization legislation in 2007. This process took roughly a year and a half. It 

required a substantial effort by lawyers and policy makers across the government, and in 

that case, we were just updating the procedures and substance of a structure that was 

already in existence. The FIRRMA bill, by contrast, as the Administration and 

Congressional sponsors have highlighted, is much more far reaching and expansive. 

FIRRMA will make for a much more complex rule-making process than the CFIUS 

modernization effort from 10 years ago. I am apprehensive not just because it will take 

much longer than a year and a half to promulgate these regulations, but because the 

legislation uses vague language and leaves too many terms to be defined and interpreted, 

such that there is a distinct possibility of unintended changes or unforeseen consequences 

resulting from the rule-making process. 

Congress is all too familiar with what that can mean. In the 2010 Dodd-Frank bill, a 

provision was put in to create what is known as the "Volcker Rule." As a former U.S. 

Treasury Department official, there are few careers that I respect more than Paul 

Volcker' s. However, the legislative rule named after him for what may have been a 

sound idea has led to an overly complex rule that is vague, burdensome and essentially a 

regulatory nightmare for both the regulators and for the financial institutions they 

regulate. I presume you have heard from your constituents about these consequences. 

Personally, I doubt that this was what was intended by Mr. Volcker's efforts. I worry 

that provisions in FIRRMA may, regardless of how well intended, suggest a failure to 

learn the lessons of the "Volcker Rule" and create substantial implementation problems. 

Let me provide a simple example that highlights anomalous results from the FIRRMA 

bill as drafted that would treat similar transactions differently depending on the corporate 

form of the end user or licensee. A technology license and associated support provided 

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by a U.S. company to a wholly foreign-owned company is presumptively considered an 

"ordinary customer relationship" and is not subject to CFIUS review. Yet the bill 

appears to make that same transaction subject to CFIUS investigation if that licensee is a 

joint venture. Likewise, if that same technology license and associated support 

constituted part of the U.S. company's contribution to a joint venture, an investigation 

would also be triggered. In the end, technology and associated support are being made 

available by the same U.S. party to a non-U.S. party, but some transactions would trigger 

an investigation by CFIUS and others would not. We should worry about creating a 

guessing game for U.S. companies that requires hours of legal analysis of complex 

transactions and structures- when their non-U.S. competitors are not burdened with 

anything even remotely similar. 

The FIRRMA bill has left many terms undefined or ill defined. For example: 

• What is a "critical technology company," which relates to both the incoming 

investment provision (Section 3(a)(5)(B)(iii)) and outgoing transactions (Section 

3(a)(5)(B)(v))? 

• What does "intellectual property" mean? 

• What is the definition of"associated support"? 

• What is "any type of arrangement"? 

• What is an "ordinary customer relationship"? 

• What are "critical technologies"? 

• What are "emerging technologies"? 

• What are the sectors (of critical technologies and emerging technologies?), what 

are the subsectors - Do we need a list? 

In fact, it is this last question that leads to my second concern with FIRRMA -- it 

duplicates our export control regime, which is better equipped than CFIUS to address the 

threat to national security posed by technology exports. Kevin has provided details on 

this in his testimony, but one of the concerns that critics of using export controls for 

emerging technologies have noted is that it is sometimes hard to define the technology 

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that is not already controlled. This bill seems to suggest that CFIUS- a group of roughly 

100 people who don't have subject matter expertise- will be able to do that better than 

the roughly 500 people we have in Defense, Commerce, and State that are already 

working on these export control issues every day. 

This leads to the final concern I would like to highlight, and that is that portions of the 

FIRRMA bill are overly burdensome. Many observers have expressed concerns that the 

proposed regime intrudes excessively into the business affairs of US companies and 

imposes undue burdens on them. While that may be the case, I want to focus more on the 

burden FIRRMA would impose on our government. 

The U.S. Government is not always known for being efficient. CFIUS, even without any 

expansion of its jurisdiction, is especially prone to inefficiency because it is made up of 

numerous agencies that must come to a unanimous decision. Moreover, its mandate is 

focused on protecting national security. For a government employee, while such a 

mandate clearly "focuses the mind", it also adds substantial pressure to "getting it right" 

each and every time- I promise you that this is not a recipe for efficiency. 

Today, CFIUS reviews approximately 150 to 200 transactions a year. Over the preceding 

few months, I don't think there has been a single government witness, CFIUS practitioner 

witness, or CFIUS expert who has testified before Congress who has not said that 

significantly more resources are needed for CFIUS. Maybe just as importantly, many of 

them have also said that we need to develop greater subject matter expertise given the 

rise in complexity of the transactions under review. 

With FIRRMA, however, the number of transactions under review will expand from 200 

a year to several thousand. If this expansion is truly necessary for our national security 

and cost is the only issue, then by all means- let us find a way to pay for it. But this 

expansion is not driven by national security. Instead, it would be the needless result of a 

bill that is too vague and too duplicative, rendering it practically impossible for CFIUS to 

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accomplish the work it has been tasked to do and that is so vital to U.S. economic and 

national security. 

Most CFIUS practitioners in Washington would tell you that over the last few years, 

CFIUS reviews have become very slow and the idea that transactions are being handled 

in a 30-day time period or 75-day time period as defined in legislation is a joke. 

Let me be clear that this is not a criticism of the professionalism and efforts of the CFIUS 

team, who are some of the hardest working people in government, and who have 

demonstrated over a long period of time that they can be trusted to protect confidential 

and proprietary information. 

Instead, it is an acknowledgement that the number of transactions CFIUS must review 

has risen and the nature of foreign direct investment has become more complex, making 

it difficult for the government to keep up. CFIUS members recognize that national 

security decisions should not be rushed or made lightly, but they also have competing 

responsibilities other than analyzing CFIUS transactions. And all these challenges exist 

under the current system, without a single change to the scope of CFIUS. 

To conclude, let me reiterate that I am broadly supportive of the CFIUS modernization 

effort, but I think continued work on the informal updates I mentioned earlier in my 

testimony is needed to ensure that the outcome does not have the unintended 

consequence of chilling investment in the U.S. and harming our competitiveness around 

the world- both of which are important to our economic strength, which is the backbone 

of President Trump's National Security Strategy. In addition, adding the implementation 

risk I've tried to identify in this testimony could destabilize the excellent and, so far, 

targeted work that CFIUS currently performs. In other words, I humbly suggest that 

without fixing this bill- we could harm our national security- not enhance it. 

Thank you. 

11 
76 

Mr. LATTA. Well, thank you very much. 

And Ms. Drake, you are recognized for 5 minutes. Thank you. 

STATEMENT OF CELESTE DRAKE 

Ms. DRAKE. Thank you. 

Chairman Latta, Ranking Member Schakowsky, and members of 

the committee, good morning. Is it still morning? Good. 

I appreciate the opportunity to testify on behalf of the AFL-CIO 

on the critical issues of foreign investment and job creation. I have 

submitted written testimony for the record and will highlight just 

a few key points here. 

The AFL-CIO and its affiliate unions support investment that 

creates good jobs. In determining the impact of foreign investment 

on U.S. security, we must recognize that our economic and national 

security are intricately linked. America’s economy is really the 

source and foundation of our national security and that is also the 

source of the AFL-CIO’s interest in efforts to update and improve 

the Committee on Foreign Investment in the United States or 

CFIUS. At the end of the day, for us, it is a jobs issue. 

As you know, the U.S. is a premiere destination for foreign investment. In comparison to other countries in which investors are 

required to create joint ventures for nearly every investment, or 

pressured to transfer important technology or intellectual property, 

the U.S. has a very open system and we must make sure that 

openness does not become a weakness, allowing jobs, and critical 

technology, and knowhow to bleed away. 

While foreign direct investment can contribute to the creation 

and maintenance of high-quality jobs, we cannot assume this is a 

given. Some foreign investors may seek to drive U.S. competitors 

out of the market, or to transfer valuable technology, equipment, 

and intellectual property overseas, taking jobs with them. Stateowned and controlled enterprises, in particular, may not invest 

with a goal to operate in the U.S. for the long-term but, instead, 

merely to acquire strategic technology for their home country that 

could, in the end, jeopardize U.S. security. 

Because of these risks, we have long-supported updating CFIUS. 

CFIUS’ current charge is too limited. It reviews mergers and acquisitions but needs broader authority to address new and evolving acquisition strategies and vehicles. It cannot review new or greenfield 

investments and its definition of national security is too narrow. 

Some of these shortcomings are directly addressed by the Foreign 

Investment Risk Review Modernization Act or FIRRMA, which we 

believe will benefit American’s working people. FIRRMA balances 

open investment with important national security considerations. 

FIRRMA will allow CFIUS to respond more effectively to efforts 

by China and other nations to buy technological and military components of the United States. Importantly, it will update the definition of a covered transaction, require filings for certain investments 

by state-owned enterprises, and ensure that mitigation agreements 

are monitored. 

Accordingly, we support FIRRMA as a needed update that recognizes the complex business structures and fast-moving technology 

development of the 21st century. However, in our view, FIRRMA 

does not address all of CFIUS’ shortcomings. America’s working 

77 

people have additional concerns. We would expand CFIUS’ ability 

to review greenfield transactions and to consider the net economic 

benefits of any transaction. 

By limiting greenfield reviews to those in proximity to strategic 

installations, as FIRRMA does, we may miss certain predatory investments or the attacks on our companies piece by piece, rather 

than wholesale. 

The Tianjin Pipe Facility provides a case in point. It is a greenfield investment that we wish we knew more about. If Tianjin uses 

its own inputs made in China, with illegal subsidies, or sold at less 

than the cost of production, Tianjin could harm U.S. businesses 

that make those same inputs, costing jobs, wages, and perhaps 

whole communities. We could get at those things with trade remedy law but not once Tianjin is producing here in the United 

States. 

And by failing to review economic impacts, we may miss the forest for the trees, allowing investments that drive down wages or 

leave the U.S. with fewer high-value jobs in the long-run. 

Trading partners such as Australia and Canada already require 

foreign investments to undergo such a review. And cases like the 

1990s Magnequench acquisition demonstrate that not all foreign 

investment creates good jobs. 

In sum, we look forward to working with you to advance 

FIRRMA, to improve CFIUS, and to promote the growth of the 

American economy through investment that creates high wage, 

high benefit jobs. 

I thank the committee for its time and would be pleased to answer any questions you may have. 

[The prepared statement of Ms. Drake follows:] 

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31568.042

American Federation 

of labor and Congress of Industrial 

Organizations 

81516th St., NW 

Washington, DC 20006 

202-637-5000 

af!clo.org 

EXECUTIVE COUNCIL 

RICHARDt.. TRUMKA 

PRESiDENT 

EUZABETH H. SHULER 

SECRETARY-TREASURER 

T£FERE A. GEBRE 

fX[CUT:VEViCEPRESIDENT 

Micttae!S<lcco 

RobertA.Scardelletti 

HaroklSchaithmgm 

C!ydeRivers 

Cecil Roberts: 

LcoW.Gerard 

Gregory J. Junemann 

Fred Redmond 

Matthew loeb 

RandiWeingarlen 

FredricV.Rolando 

Diann Woodard 

Newton B. Jones 

D. Michael langford 

Baldemar Velasquez 

James Boland 

BruceR.Smhh 

Lee A. Saunders 

Terry O'Sullivan 

LawrenceJ.Hanley 

LorrettaJohnson 

James Callahan 

DeMaurlceSmhh 

Se<1nMcGarvey 

J.Oavid(ox 

David Durkee 

D. Taylor 

l<ennelhRlgrtM!den 

Stu<~rtAppelbaum 

Harold Daggett 

Bh<:~!ravJOesai 

Paul Rinaldi 

MmkDimondstein 

DennlsD.'Mir!ams 

Cindy Estrada 

Capt. TimothyCano!l 

Sara Nelson 

loriPellelier 

Marc Perrone 

Jorge Ramirez 

Eric Dean 

Joseph Sellers Jr. 

ChristopherShe!tOil 

lonnie R S~phen~on 

Richard Lanigan 

RotlertMartinez 

GabrlelleCarteris 

MatkMcManus 

Elissa McBride 

John5.3mue!sen 

GeorgeE.McCubbinlll 

VondaMcDamel 

GwenM11ls 

O!arles Wowkanech 

Bonnie castillo 

AFL-CIO 

AMERICA'S UNIONS 

BEFORE THE HOUSE SUBCOMMITTEE 

ON DIGITAL COMMERCE AND CONSUMER PROTECTION 

TESTIMONY FOR THE HEARING: 

"PERSPECTIVES ON REFORM OF THE CFIUS REVIEW PROCESS" 

CELESTE DRAKE 

THE AMERICAN FEDERATION OF LABOR & 

CONGRESS OF INDUSTRIAL ORGANIZATIONS (AFL-CIO) 

Al'RIL 26,2018 
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Contents 

Introduction ..................................................................................................................................... 2 

The Foreign Investment Risk Review Modernization Act (FIRRMA) .. , ....................................... 4 

Figure I: China's Foreign Direct Investment Transactions in the United States, 2005-2016 

(Source: The Rhodium Group) .................................................................................................... 4 

Beyond FlRRMA ............................................................................................................................ 8 

Why Additional Greenfield Investment Review is Important: The Case of Tainjin Pipe ..... 10 

Conclusion .................................................................................................................................... 12 

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Introduction 

The AFL-CIO is the umbrella federation for America's unions, with 55 unions 

representing more than 12 million working men and women in every sector and industry of the 

American economy. We aim to ensure that all people who work receive the rewards of that 

work--decent paychecks and benefits, safe jobs, respect, and fair treatment. We work to make 

the voices of working people heard in the White House, on Capitol Hill, and in state capitals, city 

councils, and corporate boardrooms across the country. 

The AFL-CIO and its affiliate unions support investment that creates good jobs, whether 

that investment is foreign or domestic. We believe that the value of an investment in the U.S. 

should be determined not primarily by the nationality of the investor, but by whether the 

investment will create good job opportunities and provide employees with a voice at work. In 

determining whether any particular foreign investment would be beneficial for the security of 

United States, we believe the determination must recognize that our economic and national 

security are inextricably intertwined. Our economy is the source and foundation of our national 

security. 

While foreign direct investment (FDI) can contribute to the creation and maintenance of 

high-skill, high-paying jobs, such an outcome is not inevitable. The potential failure of some 

FDI to create and sustain high-wage jobs is a real concern. The goal of some foreign investors 

may not be to make a long-term or even medium-term investment in the U.S., but rather to drive 

existing U.S. competitors out of the market or to transfer valuable technology, equipment, 

intellectual property, and other assets to the home country or other points abroad. Either goal is 

likely to ultimately cause job loss in the U.S. and injury to national security interests. 

Because of these risks, we have long supported updates and improvements to the foreign 

direct investment reviews performed by the Committee on Foreign Investment in United States 

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(CFIUS). CFIUS's current charge is quite limited: it reviews mergers and acquisitions (as 

opposed to "brand new" investments, known as "greenfield" investments), and it very narrowly 

assesses threats to national security (as opposed to economic security). Even more importantly, 

CFIUS provides no systematic review process. Parties to a proposed or pending transaction may, 

but are not required to, jointly file a voluntary notice with CFIUS. Otherwise, the President or 

the Committee may initiate a review, but first a transaction must come to their attention. There 

are reportedly thousands of transactions that have never been submitted to CFIUS, but which are 

potentially subject to later review. 

This Subcommittee's attention to CFIUS comes at an important and opportune moment. 

During the past year, the administration has engaged in a number of studies and enforcement 

actions aimed at reforming U.S. trade and investment policy. These actions are nominally 

intended to address the enormous, job-killing U.S. trade deficit, protect our national security, and 

combat trade cheating by China and others. If these studies and actions represent part of a 

coordinated, thoughtful strategy, they could help recalibrate trade policy to grow jobs in the 

cutting-edge manufacturing sector, reduce incentives to outsource, and provide greater benefits 

of trade to ordinary working families. It remains to be seen if Congress and the administration 

can work together to reset trade and investment policy in this manner. In the meantime, a focus 

on FDI is an area ripe for bipartisan cooperation. 

We appreciate the opportunity to raise issues important to working people in the context 

of CFIUS reform. The next section will provide a brief summary of the ways in which the 

Foreign Investment Risk Review Modernization Act (FIRRMA) will benefit America's working 

people while enhancing our national security. The final section of this testimony will highlight 

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additional issues of special concern to working families in the review of foreign investments in 

the U.S. 

The Foreign Investment Risk Review Modernization Act (FIRRMA) 

The Foreign Investment Risk Review Modernization Act (FIRRMA) is reasoned 

legislation that balances the desire to maintain an open investment climate with important 

national security interests. We oppose efforts to diminish the scope of the legislation. Indeed, 

the AFL-CIO would recommend expanding it in a variety of ways. 

The United States has witnessed unprecedented foreign investments from strategic 

competitors including China, which invested a record $45.6 billion in the U.S. in 2016. (See 

Figure 1 for trends in China's investment.) 

Figure 1: China's Foreign Direct Investment Transactions in the United States, 2005-2016 (Source: 

The Rhodium Group) 

of Acquisitions (Rioht Axis) 

-Value of Greenfield Projects (Rioilt Axis I 

-Cumulative Investment since 2000 jlelt Axis} 

4 
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In response to this long-term trend, the bipartisan U.S. China Economic and Security 

Review Commission (USCC) has repeatedly recommended that Congress consider strengthening 

. CFIUS, including by offering these critical recommendations in 2012: 

(l) requiring a mandatory review of all controlling transactions by China's state-owned and 

state-controlled companies investing in the United States; 

(2) adding a net economic benefit test to the existing national security test that CFIUS uses; 

and 

(3) prohibiting investment in a U.S. industry by a foreign company whose government 

prohibits foreign investment in that same industry. 1 

Since the 2012 Report, the USCC has reiterated and expanded its recommendations even 

while the threat has grown. CFIUS has been criticized in the intervening years for not acting to 

block or mitigate a number of transactions, including with respect to the Chicago Stock 

Exchange, the Vertex Joint Venture with the China Railroad Rolling Stock Company, and the 

Ingram Micro acquisition. 

FIRRMA represents a critical opportunity to address some of the USCC's long-standing 

concerns in a bipartisan manner. FIRRMA will provide CFIUS with increased support and 

flexibility, enabling it to respond more effectively to efforts by China and other nations2 to buy 

the technological and military competencies of the United States. While we had hoped that 

FIRRMA would recognize the common-sense conclusion that economic security is an inherent 

component of national security (as does Section 232 of the Trade Expansion Act of 1962 (see 19 

1 These recommendations, still unaddressed, come from the 2012 Report to Congress ofthe U.S.-China Economic 

and Security Review Commission, Executive Summary and Recommendations, available at 

https:/lwww.uscc.govlsites/defaultlfileslannual reports/2012-Report-to-Congress-Key%20Recs.pdf. 2 It is important to note that, while the examples used in this testimony focus on China-based enterprises, the AFLCIO is concerned with the question of how particular investments will help support or harm national security, 

broadly construed-not with the country from which investments originate. The discussion focuses primarily on 

China because of the magnitude of China's investment and the level of participation in such investment by the 

Government of China, as well as the fact that the USCC is an excellent source of reasoned policy advice with 

respect to how to appropriately address increased investment that may pose threats to America's long term interests. 

The AFL-CIO urges the Subcommittee to consider the USCC's recommendations to expand FIRRMA and CFIUS 

with respect to foreign investors of any national origin. 

5 
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U.S.C. § 1862)) and adopt a net economic benefit consideration when reviewing transaCtions, we 

believe the bill, as introduced, is an important and necessary step forward. 

The United States cannot allow its economic and technological advantages to fall into the 

hands of foreign companies that engage in efforts to undermine our nation's strength and 

security, as happened in the Magnequench acquisition.3 As such, the U.S. must strengthen its 

opportunities, in the words of Ericsson Vice President and General Counsel John Moore, "to 

properly vet and scrutinize the efforts by foreign entities to gain access to our markets and our 

technology."4 

China, though not the only threat to the United States, is of particular concern given its 

ongoing use of illegal and unfair strategies to deprive the American people of their economic and 

national security. Such strategies include, but are not limited to: denial of national treatment and 

refusal to open market access to U.S. firms; the use of prohibited subsidies, forced technology 

transfer, and improper export controls; preferential debt and equity financing for state-owned and 

state-controlled enterprises; overcapacity in strategic industries including steel and aluminum 

that drives U.S. firms out of business; dumping; hacking, cyber espionage, and intellectual 

property theft; the denial of internationally recognized workers' rights that drives down China's 

labor costs and retards consumer demand; and predatory lending to developing countries that 

undermines their opportunities for growth and expansion. 

3 For more information on this acquisition of a U.S. firm that made products used in magnets integral to the 

guidance system of cruise missiles, by a China state-owned enterprise please see Jeffrey St. Clair, "The Saga of 

Magnequench," in Counterpunch, April 7, 2006, available at https://www.counteruunch.org/2006/04/07/the-saga-ofmagnequench/. A little over a decade after the original 1995 acquisition, Magnequench shuttered operations in the 

U.S. for good, transferring its remaining machinery to China. See also John Tkacik, Magnequench: CFIUS and 

China's Thirst for U.S. Defense Technology, May 2, 2008, The Heritage Foundation, 

https://www.heritage.org/asialreport/magnequench-cfius-and-chinas-thirst·us-defense·technology. 

4 Letter from John Moore to the Honorable Robert Pittenger, dated January 16, 2018. 

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FIRRMA's reforms, focused on national security concerns, represent a measured approach to 

troubling trends in FDI that CFIUS is currently ill-equipped to address. As drafted, FIRRMA 

would: 

• Expand CFIUS jurisdiction to include certain joint ventures, minority-position 

investments, and real estate transactions near sensitive national security facilities; 

• Update the definition of"critical technologies" to include emerging technologies that 

could be essential for maintaining a U.S. technological advantage; 

• Authorize CFIUS to exempt certain transactions if all foreign investors are from an allied 

country; 

• Create shorter "light filings" with reduced paperwork burdens, as well as mandatory 

filings for certain higher risk transactions; and 

• Expand the national security factors for CFIUS to consider in its analyses, but not create 

a net economic benefit test. 

Simply put, the time has come to mandate reporting of significant, high-risk FDI 

transactions. Among the other important changes FIRRMA would make are ensuring that new 

investment strategies and structures can be addressed by CFIUS, that critical technologies can be 

identified and protected, and that joint venture and cooperative investments by U.S. companies 

will be subject to review when they potentially jeopardize U.S. security. Globalization has 

changed the way business is done. CFIUS must rise to these new challenges. 

Some may wonder why the AFL-CIO has an interest in strengthening the ability of 

CFIUS to review investments on national security grounds--our interest is two-fold. First, as the 

representative of America's working families, we have an interest in CFIUS because CFIUS is a 

jobs issue. Second, foreign investments to acquire U.S. assets that undermine our national 

7 
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security both weaken our country and weaken our defense industrial base, affecting 

manufacturing jobs and wages even in the absence of a net economic benefits test. Simply put, 

we want CFIUS to work because that is what is right for America's working families. 

Accordingly, we support FIRRMA as a step toward helping ensure that America's 

competitors cannot take advantage of our openness in an attempt to strip the United States of its 

global economic and security leadership. 

Beyond FIRRMA 

FIRRMA does not address all ofCFIUS's shortcomings. America's working people 

have a number of additional concerns. 

The United States has benefitted from open markets, but that benefit is not absolute, nor 

guaranteed. It must be safeguarded and preserved with smart policies. Congress has a 

responsibility to monitor developments in the U.S. economy and act to protect U.S. residents 

when market failures injure America's hardworking families. One such market failure is 

occurring now: unrestrained, unreviewed foreign investments that have the potential to rob us 

and our children of our economic future. 

That is why the AFL-CIO recommends following the USCC' s advice to add a net 

economic benefits test to CFIUS. Already, trading partners including Australia5 and Canada6 

5 In Australia, the Foreign Investment Review Board typically considers national security; competition; the impact 

on other Government policies (including taxation); the impact on the economy and the community; and the character 

of the investor in determining whether any particular investment is in the national interest. "Australia's Foreign 

Investment Policy," (January I, 2018) available at https://cdn.tspace.gov.auluploads/sites/82/2017/06/AustraliasForeign-lnvestment-Policy.pdf. 

6 In Canada, investments made to directly acquire ownership and control of certain Canadian businesses with assets 

above a minimum threshold are approved only if the Minister of!ndustry determines the transaction is likely to be of 

"net benefit" to Canada. Factors considered in the determination are: I) the effect of the investment on economic 

activity in Canada; 2) the degree of participation by Canadians; 3) the effect of the investment on productivity, 

efficiency, technological development, innovation and product variety in Canada; 4) the effect on competition; 4) 

the compatibility of the investment with national industrial, economic and cultural policies; and 6) the contribution 

to Canada's ability to compete globally. Mathieu Frigon, "Foreign Investment in Canada: The Net Benefit Test," 

(Library of Parliament), available at https://lop.parl.ca/content/lop/ResearchPublications/cei-22-e.htm. 

8 
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require foreign investments to undergo a similar review. Such a review would consider not just 

strategic acquisitions that could turn advanced technologies against us, but also strategic 

acquisitions designed to strip high value-added production jobs from the U.S. Adding an 

economic benefits test could change an intended "acquire and run" acquisition into a longer-term 

investment and induce the investor to continue operating the U.S., creating more jobs 

opportunities for U.S. workers. Limiting CFIUS review to a narrow and outdated definition of 

national security leaves open the prospect of predatory acquisitions designed to weaken our 

economy-not just acquire strategic technology and know-how. A weakened economy has 

fewer jobs and lower wages and creates impediments to making the security investments 

necessary to keep working families safe. 

The AFL-CIO also recommends expanding CFIUS's ability to review greenfield 

investments beyond those proximate to a military base or other strategic facility. Given the 

demonstrated ability of the Government of China to guide and manage foreign investments to 

achieve long-term goals, it would seem prudent to expand the scope of investments subject to 

CFIUS review, so that we do not, as a nation, face challenges that could have been prevented or 

mitigated with appropriate and timely action. 

Finally, we encourage the Subcommittee to consider whether remaining unaddressed 

recommendations from the 2017 usee report could be adapted in ways that would boost u.s. 

security, including both national and economic security.7 

7 Those additional recommendations include prohibiting the sale of U.S. assets to China's state-owned or statecontrolled entities, including sovereign wealth funds and prohibiting a transaction that would confer control of 

critical technologies or infrastructure to a foreign entity. See the 2017 Report to Congress by the U.S.-China 

Economic and Security Review Commission for a complete list, available at 

https://www. uscc.gov/sites/default!files/annual reports/20 17%20Executive%20Summary%20and%20Recommendat 

ions l.pdf. 

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Why Additional Greenfield Investment Review is Important: The Case of Tainjin Pipe 

The AFL-CIO has previously raised risks posed by CFIUS's lack of a broad review 

process for greenfield investments because such investments have the potential to negatively 

affect both traditional national security-related concerns as well as economic concerns. In the 

traditional area, intelligence and law enforcement experts have identified issues relating to the 

proximity of investments to sensitive installations. For example, a greenfield investment near a 

military base would not fall under the jurisdiction of CFIUS as currently authorized8 even though 

the ability to engage in intelligence activities is extensive given technologies like laser 

microphones, which are readily available on the Internet. FIRRMA would rectify this omission. 

However, greenfield investments raise national security concerns beyond the issue of 

proximity. On these issues, FIRRMA is silent, but could be improved with added greenfield 

review responsibilities. 

Tainjin Pipe provides a case study that emphasizes how FIRRMA might be improved by 

including a broader greenfield review. Relevant to this analysis is the President's March 2018 

announcement of action under Section 232 of the Trade Expansion Act of 1962 to address the 

impact of imports of steel and aluminum on our national security. In response to a detailed 

report by the Department of Commerce, and in consultation with the Department of Defense, the 

President decided to take action on imports of steel and aluminum. Both products are vital to 

national defense (e.g., submarines and aircraft) and critical infrastructure (e.g., roads, railroads, 

airports, and military installations). 

8 In 2012, citing national security risks, President Obama blocked Ralls, a company owned by Chinese nationals, 

from taking ownership of a wind farm near a Navy base. However, in that case, the key factor was not "proximity," 

but rather "restricted airspace." FIRRMA would enable the review of real estate transactions "in close proximity to 

a U.S. military installation or another facility or property of the U.S. Government that is sensitive for reasons related 

to national security," providing assurance that a greenfield acquisition near a military installation could be reviewed, 

and, if necessary, modified or blocked, an assurance not available under current law. Other greenfield investments, 

such as Tainjin Pipe, would not be covered by FIRRMA. 

10 
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Tainjin Pipe, a state-owned entity that bills itself as "China's largest seamless steel pipe 

maker,"9 is in the final stages of opening a greenfield investment in a pipe production operation 

in the Texas Coastal Bend region. This new facility represents a $1 billion investment with 

substantial productive capacity that has the benefit of state-supported funding, which may be low 

cost, or, as is the case with many of China's state-supported investments, with no capital costs at 

all, and potentially no repayment obligation. Substantial overseas investments such as this are 

cleared by the Government of China to make sure they advance the interests of the Chinese 

Communist Party. 

In contrast, U.S. companies must respond to market forces and lack the access to low- or 

no-cost capital available to Tainjin. Additionally, the inputs that will be utilized by Tainjin could 

very well be what is known as "green pipe"-pipe that is shipped here needing only minor 

transformations to be utilized in the U.S. market. If that is the case, Tainjin will profit from 

having the bulk of its production in China (which may be made contrary to World Trade 

Organization and International Labor Organization standards) while avoiding the scrutiny of 

U.S. trade remedy law, including Section 232-as well as the more familiar anti-dumping and 

countervailing duty laws. 

U.S. producers-and by extension their employees-simply cannot compete fairly 

against such subsidized production, which is one of the principal causes of the broader crisis in 

the U.S. steel industry and a recognized threat to national security. 10 Following numerous trade 

cases filed by U.S. industry in the past two decades to respond to predatory and protectionist 

9 http://tianjinpipe.com/. 

1

° For more information about the threat to U.S. security from the global overcapacity in steel production, see U.S. 

Department of Commerce, The Effect oflmports of Steel on the National Security (2018), available at 

https://www.commerce.gov/sites/commerce.govlfiles/the effect of imoorts of steel on the national security -

with redactions - 20180lll.pdf. 

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practices by China, state-owned enterprise Tainjin sidestepped trade remedy rules by buying land 

on which to build a new U.S. production facility. 

While it is easy to see why the Tainjin's investment may be in China's national interest, 

many question whether the investment is in the U.S. national interest. "What will the long-term 

impact on the U.S. steel industry be?," is a question that remains unanswered. FIRRMA would 

not empower CFIUS to review this transaction to determine what the facts are, and whether the 

U.S. should act to mitigate the transaction and ensure that working families benefit. In our view, 

FIRRMA should do so. 

Conclusion 

The AFL-CIO strongly supports FIRRMA. We also encourage the Subcommittee to 

expand the reach ofFIRRMA to address greenfield reviews and net economic benefits and to 

consider the remaining USCC recommendations. We appreciate the opportunity to present our 

views and look forward to further dialogue on these important issues. 

12 
91 

Mr. LATTA. Thank you for your testimony. 

And Dr. Scissors, you are recognized for 5 minutes. 

STATEMENT OF DEREK SCISSORS 

Mr. SCISSORS. Thank you. 

So my written testimony presented China facts to show the context for the CFIUS reform discussion. I am going to go straight to 

the punchline here. 

If the amount of money tells us anything, Chinese technology acquisition is not done primarily in the United States. So if you just 

restrict Chinese investment in the United States, you are not going 

to block Chinese technology acquisition. You are going to do very 

little, in fact, to block it. 

To protect national security the United States must be able to 

regulate certain businesses overseas, and particularly businesses 

involved with China. That is what the facts say. It is not an easy 

thing to do. I am not arguing that it is easy but that is what the 

facts say. 

On the flip side, the business community’s objections are right 

that you can restrict investment in such a way that you deter beneficial investment. So legislation has to be as narrow and clear as 

possible. 

So I am going to talk about the security requirement and then 

suggest some ways to make sure that H.R. 4311 or any modification of it does not or does minimal harm to foreign investment. 

It is not a good idea to single out China in U.S. law but the policy debate is actually about China. And the reason I feel confident 

of that is not just the numbers. It is because China is our first security rival which has enough money to use it as a weapon. 

All over the world, China uses loans as a political tool. For those 

following the Belt and Road Program that China has announced 

that it received some recognition from U.S. foreign policy, is basically using loans as a political tool. In that light, it would be a mistake, in my opinion, to spend too much time thinking about the 

size of the equity stake or what the definition of passive investment is. If China is providing financing to a firm, they have influence over a firm. And you know that doesn’t mean that automatically something nefarious is going on. It means we need to realize 

that Chinese financing brings Chinese influence. Just like with any 

firm, if I am providing the money, I get a say in what you are 

doing. 

And the money trail here is actually evaporating. Total Chinese 

investment in the U.S. was in the $50 billion range in 2016. This 

year it is tracking to reach less than, it is not going to even hit $20 

billion annually. So total investment is falling. 

There have been no $100 million technology investments. We 

track $100 million investments and up. There have been no $100 

million technology investments since January 2017. So it has been 

well over a year. 

Now Beijing hasn’t given up on acquiring technology. So the fact 

that we are not seeing investments in the U.S. is not a sign like 

OK, well, problem solved. The problem is obviously not solved and 

the administration has told us what their primary concern is. 

92 

The Section 301 investigation was launched primarily to deal 

with coercion by China of U.S. firms using access to the Chinese 

market in order to gain technology. In other words, the primary 

technology threat is coercing American firms who want access to 

China; it is not Chinese firms investing here. We know that from 

the administration’s position and we know that from the facts. 

And if China is blocked from an investment here, just as an example, it is a trivially easy thing to do to say hey, would you like 

to set up a joint venture in China? Really favorable terms. You are 

going to make a lot of money. All we need is to get a look at the 

technology you are using, for our own regulatory purposes. So, we 

cannot locate the action here of Chinese technology acquisition as 

investment in the United States. 

Now the hard part is, What do we do? It is easy for me to identify the problem. What do we do about it? I do work in a free market think tank. The U.S. is by far the largest national player in 

global investment, both coming in the United States and going out. 

And what investors love is certainty. 

So a phrase like country of special concern, that doesn’t promote 

certainty. We need to define high-risk countries, not that they are 

the only risk countries, but we need to define high-risk countries 

in a very clear and concrete way that could be updated over time. 

And just as an illustration, if we have an arms embargo on a 

country, that is a higher risk country. That is a good proxy for high 

risk. It is not perfect. It needs to be changed but it is a lot better 

than saying countries of special concern. 

Similarly, words like critical apply to technology, materials, infrastructure, call out for definitions so business knows what to expect from the U.S. review process. Because we want investment, 

those definitions should be as narrow and specific as possible. I am 

happy to talk more about that in Q&A. The goal should be that 

most countries and most firms have nothing to fear from CFIUS reform because it is not aimed at most countries and most firms. 

My last remark applies to all views of what should be done here. 

Whatever the final bill looks like, whether it is more intervention 

as to defense of national security or less, if CFIUS isn’t budgeted 

and staffed properly, it doesn’t matter. 

So I feel like even though we have talked about this, we are not 

paying enough attention to that issue. In a sense, the budgeting 

and staffing is the most important thing and then the goals all follow from what you are willing to provide, in terms of resources and 

people. 

Thank you. 

[The prepared statement of Mr. Scissors follows:] 

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United States House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Digital Commerce and Consumer Protection 

"Perspectives on Reform of the CFIUS Review Process" 

April 26, 2018 

Prepared Remarks of 

Derek Scissors 

Resident Scholar, American Enterprise Institute 

Chinese Technology Acquisition Is Not About Investing In the US 

The American Enterprise Institute (AE!) is a nonpartisan, nonprotit, 50!(c)(3) educational organization and does 

not take institutional positions on any issues. The views expressed in this testimony are those of the author. 
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One-page Highlights 

The Foreign Investment Risk Review Modernization Act (FIRRMA) is vague with regard 

to the "critical" technology, materials, and infrastructure to be shielded, vagueness the business 

community rightly finds worrisome. Investors are generally averse to uncertainty, for instance a 

justified but as yet unstated mandate to protect personal data. And CFIUS is not a magic wand to 

wave at the economy or even just foreign investment. It is a considerable challenge just to 

engage in CFIUS reform that better protects national security while not causing economic harm. 

However, some approaches to CFIUS reform do not seem to take the Chinese threat to 

national security seriously. There has been discussion of time limits on a reform bill, as if the 

PRC will change its mind about acquiring foreign technology in 2026. Rather than sun-setting 

CFIUS reform, the emphasis should be on speeding it up, given that technology loss has 

occurred for many years and the harm to national security is ongoing. 

The evidence shows Beijing engaged in a global campaign to offer money to achieve its 

aims, in part by simply buying foreign assets but also using such tools as below-market lending 

when there is no formal PRC ownership. Direct Chinese acquisition of technology through 

investment in the US has always been minor in scope and is probably declining. Yet IP theft has 

remained heavy, extending first to cyber and later to personal data. Export controls to date have 

not been effective. And the Chinese government's goals are certainly unchanged- it believes it 

can continue to acquire desired technology despite minimal technology investment in the US. 

Taking the Chinese threat seriously thus means investment review cannot only occur 

here. A stricter process here will just relocate the entire problem of PRC technology acquisition 

elsewhere, rather than most of it being located elsewhere, as is the case now. The Trump 

administration might expand the national security review process, since Section 30 I explicitly 

targeted the coercion of American companies using access to the Chinese market. But even if the 

administration does do so, a law passed by Congress is much preferable to executive order. 

Finally, with regard to export controls, the existing regime has failed to inhibit China's 

global acquisition of technology. It's certainly reasonable to argue that better export controls can 

play an important role, keeping CFIUS from discouraging investment or being overstretched. 

However, improved export controls must be actionable, not merely asserted as the superior 

option. The Export Control Reform Act of2018 (H.R. 5040) is a positive step, but any progress 

toward its passage should not be used to justify more delay in upgrading CFIUS. 
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Chinese Technology Acquisition Is Not About Investing In the US 

It may seem contradictory for bills restricting foreign investment to open with findings of its 

benefits. But that is the right framework- foreign investment has spurred innovation and created 

jobs in the US. It follows that any policy changes should, as much as possible, be applied with 

scalpels rather than sledgehammers. Even if the US were to go to the extreme of banning 

investment from a country, it would be wise to minimize the impact on other foreign investors. 

All of this applies to our most controversial economic partner, the People's Republic of China 

(PRC). In 2005, China started investing sizable amounts of money overseas, including here.i At 

that point, the policy environment shifted. The US faced a security competitor with money and 

(eventually) had to weigh on a much larger scale the economic gains from investment against 

national security risks. The trade-off was not immediately apparent because the next decade was 

calm, the amount of Chinese investment in the US and its perceived risk remaining moderate. 

In 2015, however, Beijing twice surprised American decision-makers. It announced the now 

infamous "Made in China 2025" development plan, where long-standing practices of technology 

acquisition and heavy subsidies were aimed for the first time at advanced sectors like robotics. 

Then it unintentionally triggered a surge of money out of the PRC, with one consequence being 

soaring Chinese investment in the US in 2016.ii These changes added fuel to political-military 

differences in the South China Sea and elsewhere, prompting US consideration of new policies. 

In the process of crafting new policy, Congress and the administration should start with the 

premise that China is a unique challenge. This is not only accurate (there is no Made in Canada 

2025), it will make for sharper choices. Restrictions imposed on the PRC should not be imposed 

on others due to vague language like "countries of special concern."iii Beyond that, restrictions 

on the PRC should be crafted to actively minimize the impact on everyone else. The US should 

seek to prevent Beijing from acquiring technology and other assets that pose a national security 

risk, while minimizing economic harm to ourselves and our partners. 
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The difficulty lies in that sweeping action is needed to limit China risk to national security. The 

PRC does not just acquire technology by investing in the US. In fact, independently compiled 

data show no large-scale acquisitions of advanced technology through Chinese investment in the 

US. All Chinese investment in the US, including technology, has slowed sharply in the past 18 

months. Yet Beijing has hardly renounced its industrial policy aspirations or methods. 

Chinese technology acquisition via theft, both cyber and conventional, calls for preventive and 

punitive American responses. The other major avenue for Beijing to acquire technology is 

business transactions outside the U.S. especially in the PRC itself While the benefits of 

investment mean great care must be exercised, Chinese technology acquisition cannot be 

controlled without restricting US investment in China and ventures with Chinese entities 

elsewhere. Among other things, this observation is the foundation for the Trump administration's 

well-justified Section 301 inquiry into the PRC's coercive practices.iv 

The last requirement for useful policy, including all bills to reform the Committee on Foreign 

Investment in the United States (CFIUS), is far less controversial but even more vital. Whatever 

Congress decides must incorporate the needed budget and staff, or it is little more than posturing. 

China's Global Footprint 

The limited role played by the PRC's technology investment in the US proper becomes evident 

through comparisons utilizing the China Global Investment Tracker (CGIT) from the American 

Enterprise Institute, the only fully public record of China's outbound investment and 

construction.v The CGIT lists all verified investment and construction transactions worth $100 

million or more from 2005 through 2017. It is updated every six months and features over 1300 

worldwide investments totaling more than $1 trillion. 

The CGIT shows China's 2017 global investment rising 8 percent, driven by the $43-billion 

acquisition of Swiss agro-tech giant Syngenta (see table 1). Absent this one deal, spending would 

have fallen 17 percent. The total number of investment transactions slid in 2017, as did outlays in 

many countries and sectors. But the top CGIT story was change rather than decline, change to 
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larger deals made by state-owned enterprises and new sectors, such as logistics. This led to 

heavy Chinese investment in Britain, for example. 

From 2005-2016, the annual gap between CGIT investment data and those published by China's 

Ministry of Commerce (MOFCOM) was below I 0 percent. In 2017, the numbers diverged. 

MOFCOM last year reported a 33-percent spending drop, purporting to curb "irrational" 

investment after a record-setting 2016." The ministry does not disclose individual transactions 

but direct queries and its monthly figures indicate the bulk of the Syngenta deal was not counted, 

on grounds it was financed outside the PRC. This is unlikely and, in any case, yields the dubious 

result of excluding China's biggest-ever foreign acquisition. It's always possible for some deals 

to be placed a year earlier or later but MOFCOM's 2017 total is unreasonably small. 

Table 1: Two Views of Chinese Outward Investment($ Billion) 

IS:,:,';:. ;~,·····•·!~r;;~·z·<~ .. ·';;\,7~~;'~~·\~{~~fU~ 2005 I 0.2 12.3 

~. 

2006 19.8 21.2 

2007 29.9 26.5 

2008 54.7 55.9 

2009 57.6 56.5 

2010 65.5 68.8 

2011 68.8 74.7 

2012 80.3 87.8 

2013 83.8 92.7 

20!4 104.3 107.2 

2015 113.2 121.4 

2016 170.4 181.2 

2017 185.4 120.5 

Total 1044 1037 ----
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* Sources: American Enterprise Institute, China Global Investment Tracker, January 20 I 8 update, 

http://www.aei.org/china-global-investment-tracker; National Bureau of Statistics of the People's Republic 

of China, State Administration of Foreign Exchange, 2016 Statistical Bulletin of China's Outward Foreign 

Direct Investment, China Statistics Press, September 20 17; and Xinhua, "China 2017 FDI rises to record 

high, ODI falls," January 16, 2018, http://www.xinhuanet.comlcnglish/20 18-0 1/16/c 136900334.htm 

Prior to 2017, the main problem with Chinese numbers has been a national policy to treat Hong 

Kong as an external port. Funds flow through on the way to their final destination but MOFCOM 

is required to stop following them in Hong Kong and Hong Kong is then assigned more than half 

of Chinese outward investment. Other bilateral numbers, such as for Chinese investment in the 

US, can therefore be far too low. The CGIT follows money to the true recipient country. 

In the first quarter of2018, MOFCOM may be compensating for its exaggerated 2017 decline, 

boasting of a 24% investment increase. vii The as yet unverified CGIT total for the first quarter is 

close to the raw MOFCOM number, with a different growth rate due to the different base 

number. This suggests the ministry has declared success in its loud, politicized rectification 

campaign and is again willing to report accurate figures. 

In many countries, Chinese construction trumps investment. Construction services are provided 

in the host country but do not involve ownership. The CGIT covers China's global construction 

with almost 1400 projects totaling over $700 billion. Construction of power plants, rail lines, 

ports and so on is the heart of the well-known Belt and Road Initiative and there are more large 

($1 00+ million) construction deals than large investments."" PRC construction is not important 

in the US. But Beijing's pattern of winning influence through financing and executing 

construction projects without any equity stakes bears directly on American policy choices. 

Investment and construction dollars do not have the same economic value but combining them 

illustrates the PRC's range. Investment is concentrated in developed economies and construction 

in developing. Chinese companies thus have a presence in every corner of the globe, including 

places and activities most multinationals shy from. An illustration: 20 countries have received at 

least $20 billion in investment or seen $20 billion in Chinese construction since 2005. 
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Table 2: China's Sector Patterns, 2005-17 ($Billion) 

_Sec~l)r .. . .. )_; .\ •-•••··· 1: .,,_ c;~ "~'"'J) \~ ~.jit:.: i?>:;··· .. :· •.• •···•_.····)·.'~.;~·;·······-· 

I .· \> ·•~ ·-••-••·· .. ·.··~·-····· .• >\ ; >. •. I :_c· ... ·~- ·-•·•·• .: ~···••·•···•. Energy and power 354.8 310.6 117.6 

Transport 95.1 230.1 44.4 

Metals 123.9 32.4 74.9 

Real estate 97.7 70.0 19.1 

Agriculture 79.5 16.7 10.9 

Finance 75.2 - 36.5 

Technology 51.1 15.6 27.7 

Tourism 36.3 6.6 7.4 

Entertainment 38.8 2.0 1.6 

Logistics 33.0 4.5 1.0 

Chemicals 11.7 14.3 1.9 

Other* 47.8 33.7 5.0 

Total 1044 736.5 347.9 

-- .. *In other mvestment the Jeadmg sector 1s health care, mother construct10n tt IS uttllties. 

Source: American Enterprise Institute, China Global Investment Tracker, https://www.aei.org/china-globalinvestment-tracker. 

It is no surprise that energy is the biggest draw for PRC investment and construction. Among 

subsectors, oil draws the most investment, by itself on par with second-place metals. In 

construction, coal and hydro plants lead while transportation is a fast-rising second sector. 

Property investment had been growing strongly until Beijing imposed restrictions in 2017.'' 

Perhaps most telling, while technology receives a great deal of publicity, it accounted for only 

five percent of China's worldwide investment from 2005-17. 
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Chinese Investment in the US, 2005-present 

The PRC likes making deals with advanced economies and their firms. The COlTs properly 

calculated bilateral figures make clear that neither the Belt and Road nor Hong Kong draws the 

bulk of Chinese investment. Eight of the top national 10 recipients are wealthy, plus resourcerich Brazil and Russia (see table 2). While the US easily leads in total investment attracted, the 

American figure is not so impressive when adjusting for population or economic size. 

Table 3: Top Recipients of Chinese Investment 2005-17 ($Billion) 

f(;;ou~tl')'<>·.·········· ..••;•;<<'' .·•.·.•\ ••••••.••. ~\'.;~· ~<-•' ;········ ·...•••.• }' ..• ;·~.;~~ .. ,,. i\'k; .• 

United States 170.4 

Australia 91.0 

Britain 72.4 

Switzerland 60.0 

Brazil 54.6 

Canada 49.4 

Russian Federation 38.2 

Singapore 30.8 

Germany 25.5 

Italy 21.5 

Subtotal for top 10 613.8 

Total for all countries 1044 --"" ___ 

Source; Amen can Enterpnse Instllute, Chma Global Investment fracker, https://www.aet.org/chma-globalinvestment~tracker 

Other than the possible 2017 blip, China's global investment has been steadily rising. Not so its 

spending in the US, which is much choppier. China's global investment was basically launched 

with the acquisition of IBM's personal computer unit and hit its first bump with the American 
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rejection of CNOOC's bid for Unocal, both in 2005. From 2007-2010, total Chinese spending in 

the US was nearly $30 billion. There was a sharp drop in 20 II due to clashes over Huawei.x 

2012-2015 saw $58 billion in Chinese investment in the US, a substantial amount but one 

showing only modestly faster growth than Chinese spending globally. That was just the warm-up 

for the high-wire act to come. 

In 2016, Chinese investment in the US rocketed passed $50 billion," accounting for 30% of the 

global total. Then in 2017 the figure dropped by half. Thus far in 2018, spending is on pace to 

drop further, below $20 billion for the year. While boundaries between years can be artificial 

some 2016 investment may be better counted as 2017, for example- the trend is clear: Chinese 

investment in the US is well off its peak and still falling as of now. 

The reason for the initial and sharpest decline was not found in Washington, but in Beijing. ln 

August 2015 and again in January 2016, the People's Bank of China pushed down the value of 

the yuan against the dollar and hinted at more weakening to come. This was at least in part a 

response to a PRC economic downturn that was most serious in the fourth quarter of2015 and 

first quarter of 2016. '" 

The response of many Chinese companies and rich individuals was immediate: get money out of 

the RMB and out of the country. The single best place to go was obviously the US, which had 

the dollar rising against the RMB, a large enough economy to easily absorb investment, and 

attractive opportunities in many sectors. This turned into the 2016 boom, starting in the second 

half of 2015 with companies scouring America for spending outlets. 

Beijing had no response for a shocking amount of time, possibly due in part to corruption. 

Meanwhile, the PRC's foreign exchange reserves burned. From July 2015 to December 2016, 

official reserves fell $680 billion.Xl" When Chinese policy-makers finally acted, they targeted the 

biggest overseas spenders, which were privately-owned firms such as Dalian Wanda. The idea 

was to deter the rest and it worked. XIV The share of private investment in China's global total 

rose from almost nothing in 2006 to nearly half in 2016, but dropped the most on record in 2017. 
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The US has consistently seen more private Chinese participation than the rest of the world 

enjoys. From 2010-2017, the private share of Chinese investment in the US was almost 60 

percent, above the global average for any year. Chinese spending in the US plummeting last year 

in large part stems from the PRC attacking its own private firms to stop capital outflow. 

That's ownership, another element in the rise and fall of Chinese investment in the US is the 

sector pattern. If you want to switch large amounts of money from a weaker currency to a 

stronger one, the quickest purchase is expensive buildings, which do not require the same depth 

of evaluation as a corporation. In 2016, Chinese money swept into American real estate, with 

$15 billion spent on hotels alone. In 20!7 that figure was zero. A ban on investment in hotels and 

tight limits on property in general was first informal then made formal.xv 

The most controversial sector is technology. Small-scale acquisitions of American technology 

assets are a legitimate concern. But there has been no large-scale Chinese investment in truly 

advanced US technology. In 2016, Chinese investment in US technology as a whole exceeded 

$10 billion, but the bulk was a $6-billion acquisition of Ingram Micro, which is an IT distributor 

not an engineering or research firm. xv• Since Oceanwide took over International Data Group in 

January 20!7, there are no $100+ million Chinese technology investments in the US at all. 

General US Investment Poliey 

In considering the full Sino-American investment relationship, the US faces unavoidable tradeoffs. In the most pointed of these, policy-makers are rightly unhappy with Made in China 2025 

but the PRC is also likely to invest north of $1 trillion globally by 2025.xvn Using Table 3, the 

American share of this could approach $200 billion. Chinese spending patterns over time also 

make clear that, if the US is closed, money will instead flow to Australia and Europe. Do we 

want our share or does it come with too much bad behavior? 

Money has already been left on the table. The CGIT lists over 200 troubled transactions worth 

$350 billion in business impaired after commercial agreements were signed. China's investment 

alone sees an annual average of $20 billion impaired. Beijing has belatedly unraveled deals and 
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local or transnational security confrontations have halted them. But the main obstacle is 

objections by host governments, so it is no surprise that the top recipient of the PRC's 

investment also leads in terms of lost spending. It can take time for a deal to founder and more 

troubled China transactions are coming for the US. 

Table 4: Most Troublesome Countries 2005-17 ($Billion) 

Australia 59.1 

Iran 25.2 

Germany (mostly one deal) 15.4 

Libya 12.7 

1-::-:-:--:----------·-----·-------

Nigeria ·---------.. ----------1 

11.5 

Subtotal for top 6 189.3 

Total for all countries 347.9 

Source: American Enterprise Institute) China Global Investment Tracker, https://www.aei.org/china·globalinvestment-tracker. 

The US has always filtered Chinese investments hut obviously did so lightly during the 2016 

expansion. American policy shifted sharply when a seemingly innocuous Chinese bid for 

logistics firm Global Eagle was stalled in the middle of 2017. This was quickly followed by a 

disingenuous claim from Lattice Semiconductor that it was being acquired by an American 

company, one which was entirely funded by the PRC. The choice to bar the Lattice deal was 

correct, and raised the ongoing issue of identifying when an investor is China-controlled 

(below).xv'" A rising number of Chinese bids for US assets have stumbled over the past year. 

That is the situation on the ground. The ensuing American policy choices should consider three 

factors, none of which necessarily involve CFIUS reform. First, "good Chinese investment" is in 

short supply. Beijing has blacklisted property and hotels and private firms are being hounded by 

PRC authorities.xix A bigger problem stems indirectly from Chinese policy. Because Beijing 
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seeks foreign assets, including technology, greenfield investment has faded to less than 15 

percent of the total. Greenfield spending creates new jobs, while mergers and acquisitions may 

not and also represent greater potential loss of competitiveness. The US may welcome private 

greenfield investment, but little is available. 

A second factor is lack of reciprocity. Beijing plainly sees competition as good for everyone else; 

the simplest illustration is centrally-controlled state-owned enterprises being heavily subsidized 

to make acquisitions overseas but entirely off the table to foreign bidders. Nonetheless, there is 

little value in simple investment reciprocity. The US does not want to close the same sectors the 

PRC does, nor would it be useful for Beijing to actually open (much less falsely promise to open) 

massively overcrowded i~dustries such as steel. In addition, the Trump administration is not 

especially interested in better conditions for American companies in the PRC. 

The third matter is most important: rule of law. Even well-intentioned Chinese companies with a 

solid record cannot always be trusted to obey American law. They have a good reason for being 

untrustworthy- all PRC firms are beholden to the Communist Party for survival and their 

executives' freedom. The distinction between private and state-owned Chinese enterprises is 

limited here. The latter are far more heavily subsidize but, with regard to rule oflaw and national 

security, there is no difference in Party control. Private Chinese companies have no courts or 

media through which they can resist Party orders to ignore US law or steal technology. They are 

equally beholden.xx 

In other countries, the ugliest manifestation of lack of rule of law has been corruption for the 

sake of social and political influence. This is no longer limited to poorer countries: both 

Germany and especially Australia have recently accused Beijing of interfering in their domestic 

affairs.xxi If they are not immune, neither is the US. 

For now, though, the main violation of American law concerns intellectual property (IP). This is 

commonly associated with technology but also includes trade secrets and simple data theft. 

American policy falls far short on this score. Estimates of loss to the US from Chinese IP theft 

can run in the hundreds of billions of dollars yet no PRC firm has been sanctioned even 
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indirectly, pending Section 301. xxii Even ifCFIUS is left untouched by Congressional and 

administrative action, Chinese companies shown to have benefited from IP theft should face 

heavy sanctions, or lP theft will only continue. 

CFIUS in Particular 

In addition to the three issues possibly outside CFIUS' remit, two more are crucial to its 

operation. The first is dull, technical, and vital. For CFIUs to claim jurisdiction, an investor or 

partner must be identified as foreign-controlled. And whether such a partner is Chinese must be 

accurately determined for almost any CFIUS reform to be helpful. Canyon Bridge briefly 

pretended it was American when trying to buy Lattice. Another example: the PRC's biggest 

2017 investment in the US was routed through Avolon, an Irish firm.xxiii 

There are ongoing debates over what equity stake constitutes control and how to treat passive 

investment. These are unwise distractions. CFIUS should determine who controls a firm by 

identifying how it is financed. Money ultimately traced backed to the PRC guarantees Chinese 

influence, no matter the company name or location of its headquarters. American policy-makers 

are now correctly concerned about countries becoming Chinese satellites due to excessive 

borrowing.xxiv The same applies to companies. One that borrows heavily from a PRC bank, for 

example, is vulnerable to technology coercion even if there is no formal Chinese ownership. 

A last consideration is evolution in the view of national security. The headline event is the US 

determination that personal data, along with technology and trade secrets, can be a national 

security concern. This was not an issue as recently as 2014, with a shift prompted by the breach 

of Office of Personnel Management files along with Chinese companies showing greater interest 

in acquiring American firms which hold personal data. This interest can be entirely commercial 

at first, only to have the Party later make demands. Such logic motivated, for example, the 

CFIUS denial of an Alibaba unit's bid for Moneygram:xv 

All this should not add up to "anything goes" in curbing Sino-American investment. Foreign 

cooperation is needed if the US is to partly reindustrialize. Investors are averse to uncertainty, for 
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instance a justified but unstated mandate to protect personal data. The Foreign Investment Risk 

Review Modernization Act (FIRRMA) is vague with regard to "critical" technology, materials, 

and infrastructure to be shielded, vagueness the business community rightly finds worrisome. 

Finally, CFIUS is not a magic wand to wave at the economy or even just at foreign investment. 

There is a great deal yet to do while limiting CFIUS reform to better protecting national security. 

However, some objections to FIRRMA's goals do not seem to take the threat seriously. There 

has been discussion about time limits on changes to CFIUS, as if Beijing will in 2026 end its 

program of acquiring foreign technology. Rather than sun-setting CFIUS reform, the emphasis 

should be on speeding it up, as technology loss has occurred for many years and harm to national 

security is ongoing. 

Speed is also required if export controls are to play a more constructive role. The existing export 

control regime has failed to control PRC acquisition of technology. It's certainly reasonable that 

better export controls could play a complementary role to CFIUS, keeping that body from 

discouraging foreign investment or being overstretched in terms of resources. However, 

improved export controls must be actionable, not merely asserted as the superior option. The 

Export Control Reform Act of 2018 (H.R. 5040) is a step in the right direction but its future 

improvement and passage must not be used to delay pressing CFIUS reform.xxvi 

The evidence shows the PRC engaged in a legitimate global campaign to offer money to achieve 

its aims, in part by buying foreign assets but also when there is no formal Chinese ownership. 

Direct Chinese acquisition of technology through investment in the US has always been minor in 

scope and is probably declining. Yet IP theft has remained heavy all the while, extending first to 

cyber and later to personal data. Export controls have not been effective to date. And Beijing's 

goals are certainly unchanged- the Chinese government clearly believes it can continue to 

acquire desired technology without just buying it in the US. 

The conclusion is unavoidable: taking the Chinese threat seriously means investment review 

cannot be confined to the US. A stricter process here will merely relocate the entire problem of 

the PRC' s technology acquisition elsewhere, rather than most of it being located elsewhere as it 
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is now. The Trump administration might undertake the needed expansion of national security 

review, since Section 301 explicitly targeted Beijing's coercion of American companies through 

access to the Chinese market. But even if the administration does hold course, which is hard to 

be sure of, a law passed by Congress is much preferable to executive order. 

China's program is sophisticated, intense, and has been global for more than a decade. The 

American response will naturally require additional resources, is already overdue, and must also 

be global. 
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;; Xinhua, "'Made in China 2025' plan unveiled," China Daily, May 19, 2015, 

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"Alison Frankel, "DOJ bucks China, urges SCOTUS to hear case against vitamin cartel," Reuters, November 17, 

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China," New York Times, December 10, 2015, htto;//www.nytimes.com/20 15/12111/business/chairman-of-fosun· 

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http://www.ipcommission.org/report/IP Commission Report Update 2017.pdf. 

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m> The Export Control Reform Act of2018, H.R. 4504, !15th Cong. (2018), https://foreignaffairs.house.gov/wpcontent/uploads/20 l8/02/hr-5040.pdf 
110 

Mr. LATTA. Well, thank you all for your testimony. And we will 

now move into the Q and A portion of the hearing. 

And I will begin the questioning and recognize myself for 5 minutes. 

Mr. Lowery, how difficult is it for CFIUS to identify transactions 

which involve a foreign purchase of a U.S. company? 

Mr. LOWERY. I don’t think it is that difficult. If it is a foreign 

purchase, where there is going to be control, the first thing is just 

kind of, as we heard in the last panel, there is a process. There is 

a lot of incentive for the companies to come forward and basically 

present that to the U.S. Government for a review under CFIUS. If 

it is obviously in a non-national security area, they wouldn’t do 

that. 

But beyond that, the Government does spend some of its resources on kind of scouring the M and A Press, which is actually 

a very robust press for a variety of reasons. And so from that, at 

least, you can basically have the—CFIUS actually has subpoena 

authority, if it needs to, to go out and actually bring transactions 

in. 

So my own view is that you actually capture most of the critical 

controlling M and A transactions under CFIUS currently. That 

doesn’t mean that it doesn’t take some effort but I think actually 

most of them are actually brought in through CFIUS. 

Mr. LATTA. So would you say that the notice requirements right 

now are adequate that are out there already? 

Mr. LOWERY. I think they are adequate. I actually do think in 

the FIRRMA bill the addition of having a mandatory requirement 

for state-owned enterprises is a very good add. 

Mr. LATTA. Thank you. 

Mr. Wolf, do export controls create a blacklist of prohibited persons and transactions, or whitelist the permitted goods and transactions, and is this the right approach? 

Mr. WOLF. So with respect to individuals—and that is an excellent question because export controls are about controls on information and things, controls on people, end uses, and end users. 

And as was described in the previous panel, there are lists of proscribed individuals and companies to which the export or re-export 

of anything is prohibited for national security reasons, in order to 

get that threat. So that is the blacklist approach. It goes to the certainty point that was very well made a moment ago in that you 

have to know who you can’t deal with to know who you can’t deal 

with. 

With respect with the identification of technology, that is done 

both unilaterally and multi-laterally with our regime allies. And for 

companies to know what requires a license when, what information 

is required to get government permission to release, they have to 

know what it is. And so it is a very explicit list, a very long list, 

a Commerce Control List, of the types of technologies and related 

items that are controlled. 

To the extent it is sometimes too difficult to describe exactly the 

term, occasionally, there are notes that say particular technologies 

in these areas are not caught, such as the whitelist. But the primary approach is a positive lit approach of identifying the names 

of the companies, and the individuals, and the types by technical 

111 

description, or other objective terms the technologies that require 

permission to transfer. 

Mr. LATTA. Thank you. 

Dr. Scissors, what role does foreign direct investment play in creating economic growth here in the United States? 

Mr. SCISSORS. Well, the world changes over time. I think I 

will—— 

Mr. LATTA. Yes, thank you. 

Mr. SCISSORS. The role changes over time. I will answer that 

question I think you know in a quick fashion but a very important 

fashion. 

The President and a lot of other national and local politicians 

have said the U.S. needs to, at least partly, to the extent we can, 

reindustrialize. There are manufacturing jobs that can and should 

be created in the U.S. that, to some extent, have been lost to automation or trade and we can bring some of them back here. And I 

think that is true to some extent. It requires foreign investment. 

We can’t do it without that. 

So if you care, as I do, and I think probably almost everyone in 

this room does, care about reindustrialization, if you deter foreign 

investment, you are really striking—it is a very difficult task to 

bring millions of manufacturing jobs to the United States. You 

can’t do it without foreign investment. 

So that is the way I would say I would describe it. It is a big 

question but foreign investment is crucial to the idea of bringing 

manufacturing jobs, a large number of manufacturing jobs to the 

economy. 

Mr. LATTA. Thank you. 

Mr. Lowery, what is the best way to address the question of how 

to ensure sensitive U.S. technology information that does not fall 

into foreign hands? 

Mr. LOWERY. So I think that it is a combination of factors. One 

is I think the most important one, which actually really isn’t the 

U.S. Government. It is actually the companies themselves. The 

companies themselves, they don’t want to allow their technology to 

fall into foreign hands or, by the way, domestic hands, because that 

is the technology that allows them to make money. And so that is 

the ‘‘secret sauce.’’ 

Going beyond that, though, I think the export control regime is 

probably the best regime we have and it needs to be updated. And 

that is why I think Congressman Royce’s bill is a very positive bill 

and Congressman Engel’s bill. And I think that that helps put 

more force into what they should be doing, the export control regime. 

I think CFIUS also is very helpful but it is my own view that 

it should be about what is a foreign investment into this country. 

And so I think the combination of what the private sector does, and 

then the export control regime, and the CFIUS I think is the best 

way to address these issues. 

Mr. LATTA. My time has expired and I recognize the gentlelady 

from Illinois, the ranking member of the subcommittee for 5 minutes. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

112 

I wanted to explore some things with you, Ms. Drake. Gene 

Green, I don’t know if you were here for the earlier, he raised some 

questions about labor and about the workforce. And the answers 

that we heard from Mr. Tarbert at Treasury essentially was we 

narrowly focus on national security issues. And I would argue that 

it really is narrowly defining national security issues. And in some 

ways I think you have tried to broaden that, what is a national security issue, and I would certainly like to see to the extent that 

jobs are at stake, et cetera, is also a part of a national security 

issue. 

But you mention in your testimony additional shortcomings of 

CFIUS that are not addressed in FIRRMA, including the issue of 

greenfield investments. And so what are greenfield investments 

and why might they present a concern for the United States? 

Ms. DRAKE. Thanks. So greenfield investments are when you are 

not buying a going concern. So you might be buying the land and 

building a factory from scratch. And in theory, you would think, 

well this one of the good kinds of foreign investments that we want 

because if you are building a brand new workplace or factory, you 

are creating jobs that didn’t exists before. And that is potentially 

the case. 

But in the case, I gave the example, in my written testimony and 

mentioned it briefly, Tianjin, which is a steel pipe producer that is 

about to open a new facility actually in Texas, near Mr. Green’s 

district, and the problem is is that if they behave in such a way, 

if the whole point of the investment is to evade U.S. trade remedy 

law, whether it is dumping countervailing duties, Section 232, and 

then they bring in from their own company their own suppliers in 

China, which they own, dump subsidized inputs, we are not going 

to be able to reach those inputs through trade remedy law. And 

then they are behaving here in a predatory manner that might 

drive other U.S. competitors out of business. 

So we could, in the long-run, be losing jobs, be harming communities, and potentially driving down wages in that sector, if we end 

up with a monopsony type situation, where there are fewer buyers 

of labor. 

So these are the kinds of things that we want to look at when 

we are looking at does foreign investment benefit our economic security, which really is linked. I mean whether you talk about a net 

economic benefits test or you just talk about expanding our view 

of what national security is, if our economy isn’t strong, then certainly our national security is at greater risk. 

Ms. SCHAKOWSKY. So right now CFIUS concentrates on this narrow view of national security. And in your testimony, you cited the 

U.S. China Commission’s recommendation for addition of a quote, 

net economic benefits test, unquote. And do you see that being 

under CFIUS or some sort of a new regime? 

Ms. DRAKE. We would put it under CFIUS, rather than building 

a new whole regime. And you know Canada does a similar thing. 

Australia does a similar thing. Those are both popular destinations 

for foreign investment. So it is not driving away investment but it 

is a way to say let’s make sure, if you are investing, it is not to 

strip the knowhow and technology and take the jobs elsewhere but 

you are committing to having the production here for the longVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00116 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
113 

term. You are committing to hiring U.S. workers, to pay them good 

wages. These all really matter because if it is really predatory and 

it ends up killing an entire sector of the U.S. economy, those are 

jobs but those are, in the long-run, things that we can no longer 

make. And we have got to rely, then, on imports from some other 

source. 

So these things really should be looked at part and parcel by 

CFIUS. 

Ms. SCHAKOWSKY. And so you think that we have a structure 

that could add on this whole additional piece. I mean I think it is 

a really important piece and you know where it gets housed and 

where it happens. Does the Department of Labor do any of these 

things now, looking at these investments and how they impact the 

overall economy and jobs? 

Ms. DRAKE. Not in that manner. As you heard from Secretary 

Tarbert on the first panel, the Secretary of Labor sits on CFIUS 

but is a nonvoting member and doesn’t really look at these sort of 

workforce, wage, jobs issues. But it could easily be done and I think 

it would be value added to what CFIUS is already doing. 

Ms. SCHAKOWSKY. You know I would really like to talk to you 

about that. I think these are matters of national security. I would 

like to work with you and the AFL-CIO on that. 

Thank you. 

Ms. DRAKE. Thank you. 

Mr. LATTA. Thank you. The gentlelady yields back. 

The chair recognizes the gentleman from Indiana for 5 minutes. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

Mr. Lowery, when you were at Treasury, the CFIUS process was 

substantially revised. How did the process change and does it provide any insight into how policymakers should proceed under the 

current proposals? 

Mr. LOWERY. Thank you, sir. So the way it mainly changed, it 

didn’t change what CFIUS was looking at, which I think Mr. 

Tarbert talked about. What it did was it made a much more formal 

review process by the intelligence community. 

So the intelligence community was always part of CFIUS but it 

just, it enhanced it. And then it also enhanced the level of our accountability from the U.S. Government. So it wasn’t just signed off 

on by the career civil servants, not that they don’t do a great job 

but, basically, the people that have to testify before Congress have 

to now sign off on all transactions. 

It also provided a lot more transparency between the executive 

branch and congressional branch which, frankly, did not exist before that. 

So all of those were a lot of process issues. The results of some 

updates on the types of issues we were looking at, especially on 

critical infrastructure and some homeland security issues, which 

was an update from a previous era. 

I would say probably the last thing is but it took a lot of time. 

So in 2007, we passed FINSA, through Congress. It took about a 

year and a half to do the regulatory process to get it back up into 

place. And then you had to make sure you had the right personnel 

because everybody has to have the right clearances and so forth to 

look at this. So it just takes a long time. 

114 

Some of my criticism of the FIRRMA bill, and not all of the 

FIRRMA bill but parts of it, are that you would take this and metastasize it. And that is the part that I worry about, that we literally wouldn’t be able to implement it. 

Mr. BUCSHON. Yes, understood. 

Mr. Wolf, in your testimony, you said, and this is interesting to 

me, that one side of the CFIUS debate are folks that believe transactions are more creative than the Government can understand. I 

am just curious if you thought that when you were at Commerce. 

Mr. WOLF. Yes, in fact, which is why I—— 

Mr. BUCSHON. That is a serious question but it is also kind of 

in jest because I—— 

Mr. WOLF. No, technologies are evolving, transactions are evolving. The world is evolving quickly. And in any area of law and regulation, it is difficult for the Government regulations and statutes 

to keep up. 

And I acknowledge that as a serious debate. 

Mr. BUCSHON. Let me just say I agree with you. I do think that 

you know bureaucracies can get behind pretty quickly. 

Mr. WOLF. Right. 

Mr. BUCSHON. And I would just phrase it in a different way. It 

is not that the Government can’t understand it, it is just that 

things are evolving so quickly because of the inherent nature of the 

way agencies and the Government do their business that it is pretty easy for them to quickly get behind. 

I am not saying I disagree. I just thought I would ask you whether you thought that when you were at Commerce. 

Mr. WOLF. But it is the key philosophical question in this 

FIRRMA debate—— 

Mr. BUCSHON. Yes. 

Mr. WOLF [continuing]. Which is if, in light of that fact, should 

you have rather expansive authority with very broad general definitions on inbound and outbound investments, in order to be able 

to know it when you see it later, whether there is a transaction of 

concern. 

Mr. BUCSHON. Yes. 

Mr. WOLF. And then the second question is if that expansive authority does more harm than good with respect to the open investment culture that every President before us has acknowledged. So 

I have got a longer version of that but that is the essential debate 

in this question. 

Mr. BUCSHON. Yes, understood and I don’t disagree. I think we 

need to balance our ability to accept foreign investment and to 

make sure that our economy is strong and not inappropriately burdensome on investment by overreaching. That is why we need to 

strike a balance here. 

But that said, based on what people like me are currently hearing in the classified setting on a lot of issues, we have some really 

pretty serious national security issues to address and that is why 

getting this right is really important. 

So, I yield back, Mr. Chairman. 

Mr. LATTA. Thank you very much. The gentleman yields back. 

The chair recognizes the gentleman from Kentucky for 5 minutes. 

115 

Mr. GUTHRIE. Thank you very much. And just finishing on that, 

and not my line of questioning, but that is one of the debates we 

have as the legislative branch. How much authority do we grant? 

Because it is quicker to react regulatory than legislatively and you 

get broad definitions, and broad authorities, and you hope that the 

things go down the way that Congress intended when you do that. 

But with the Chevron case, it gets to the point where both sides, 

both have—and if you are in the executive branch, you probably 

want to do that anyway, taking a lot of liberty, I think, with what 

Congress intended. 

So, unfortunately, we are to the point that we have to be more 

prescriptive than that because you can’t legislate for who is in 

power now. You have got to legislate for who may be in power in 

the future. 

So, Mr. Wolf, this is the first question to you. One of the reasons 

cited for the current legislation is the need to deal with emergency 

situations, such as when a foreign purchaser is actively seeking to 

acquire U.S. technology. 

How long does it take for the export control process to work and 

is it suited for emergency situations? 

Mr. WOLF. And that is the follow-on to my previous point. And 

the key effort in this effort, in this debate, which I think is very 

well laid out in a process point in Section 109 of Congressman 

Royce’s bill, is the need to identify the technologies of concern, the 

emerging technologies that are being sought by countries of concern, identify and regulate them, regardless of the nature of the 

transaction, whether it is a joint venture, or whether it is a voluntary sale, whether it is a telephone call. If technology is of concern, if it is being sought to be acquired by a foreign government 

to our detriment, it should be regulated and that is exactly what 

the export control system does. 

Now to the timing question. So I was so concerned about this 

when, during my time, we created a process that was referred to 

earlier, the OA521 process that allows the Commerce Department 

to identify immediately and impose unilateral controls, that is 

without needing the permission or coordination of other countries 

over any technologies for any foreign policy or national security 

reason. 

So the legal answer to your question is it can be done as quickly 

as a reg can be written and published, in a day. The harder question, which is where the process point comes in from Secretary 

Royce—or Congressman Royce’s bill is to identify those technologies that, historically, we are not familiar with. And in this entire debate, artificial intelligence, robotics, driverless vehicle technology, a long list of other technologies are the target of acquisition. 

And so my primary advocacy is that the Government devote significantly more creative resources to identifying those technologies, 

listing them, and tagging their ability to be released to countries 

and end uses, and end-users of concern, regardless of whether it is 

an investment, passive or otherwise. 

So, it can be done quickly. So the law is there to do it quickly. 

The hard part is the brain power to think through what really is 

of concern and without doing it in such a broad way that you disVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00119 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
116 

courage investment in the U.S. or U.S. companies from developing 

this technology in the U.S. 

Mr. GUTHRIE. So the law doesn’t prevent you from acting quickly, 

the process, I mean doing the right thing correctly. 

Mr. WOLF. It is a function of will, and creativity, and intelligence, and collective efforts. 

Mr. GUTHRIE. Up to the point where everybody agrees this is 

right but we have got to wait so many days because of the law. The 

law actually allows you to—— 

Mr. WOLF. The existing regulations with the broad authority that 

Congress has given the Commerce Department exist to tag and 

identify something immediately. 

One quick follow-on. However, that shouldn’t be where it ends 

because the worst export controls are the ones that stay forever 

unilaterally, that is, only the U.S. imposes, because what that does 

is it drives that work, that technology, that development to our allies and then we lose that work because the U.S. is a more restrictive environment than our allies. 

And so what I have just described as a short-term unilateral fix 

but the regulation and also Congressman Royce’s bill lays out a 

process to make it multi-lateral so that our allies are in the same 

boat with us, and achieving the common objectives, and leveling 

the playing field with respect to control of the technology of concern. 

Mr. GUTHRIE. OK, thanks. 

Mr. Lowery, is CFIUS equipped to review not only inbound foreign investment into the U.S. but also outbound transactions, such 

as the contribution of intellectual property to a joint venture with 

a foreign entity? 

Mr. LOWERY. No, it is not. In the original FIRRMA bill provided 

that authority and that is the biggest problem of the bill. It should 

not be doing that. 

That is, CFIUS should be about foreign investment into this 

country. And if it is a concern about what is happening that is 

being exported, whether it is in a joint venture or whether it is just 

a regular sale, that is when you turn to the authorities that Kevin 

Wolf just was talking about. That is what the export control system 

is all set up to do. 

That doesn’t mean it doesn’t need to be modernized, updated, 

and maybe sometimes having a fire under the you know whats 

from Congress. And I think that that is kind of what I saw from 

Congressman Royce and Congressman Engel’s bill. 

Mr. GUTHRIE. OK, thank you. 

And Dr. Scissors, can you please touch on the policy motivations 

for H.R. 4311 that stem from the Made in China 2025 Plan? 

Mr. SCISSORS. Sure. You know one difference in talking about 

how quickly to move is that you know China has a declared intent 

to acquire technology, to attain global technological leadership. It 

is not just to acquire technology to make its people better off. It is 

to be the leader, ahead of all of you, everyone else in various sectors. And in some of those sectors, we might think of OK, electrical 

cars. You know we don’t want a lot of combustion engines on Chinese streets for 1.4 billion people. But other areas, like semiconducVerDate Nov 24 2008 15:39 Jan 18, 2019 Jkt 037690 PO 00000 Frm 00120 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-122 CHRIS
117 

tors, there is an obvious national security component to that, as 

well as strategic economic component. 

So Made in China 2025 is not the first time the Chinese have 

announced an industrial policy. It is the first time they have announced an industrial policy at the high end, where we are going 

to get technology at the high end. We are going to subsidize our 

companies at the high end. 

So the challenge to the United States has changed fundamentally 

because China is now competing with us in areas where we 

thought we were the undisputed global leader. And their intent is 

explicitly for that no longer to be true, that we will not be the undisputed global leader. 

Mr. GUTHRIE. Ms. Drake, you were shaking your head a couple 

of seconds ago. Do you have a comment on that, then? 

Ms. DRAKE. Oh, I just, I agree with—— 

Mr. GUTHRIE. You were agreeing, obviously. 

Ms. DRAKE [continuing]. Absolutely with those comments and 

think that we have to adjust what we are doing to respond to what 

China is doing, absolutely. 

Mr. GUTHRIE. OK, thank you. 

And I yield back. 

Mr. LATTA. Well, thank you very much. 

And seeing no other members here to ask questions, first I want 

to thank you all for being here. Your testimony has been very, very 

informative. It is an area that I think this committee is delving 

into and we have got to do something. So I want to thank you for 

being here. 

And before I conclude today, I would also like to make sure that 

we submit for the record, by unanimous consent, a statement from 

FCC Commissioner Michael O’Rielly. 

[The information appears at the conclusion of the hearing.] 

Mr. LATTA. And pursuant to committee rules, we remind members that they have 10 business days to submit additional questions for the record and I ask that witnesses submit their response 

within 10 business days upon receipt of those questions. 

And, without objection, the subcommittee will stand adjourned. 

[Whereupon, at 12:26 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

Good morning and thank you to our witnesses for being here today. Our hearing 

will examine the Committee on Foreign Investments in the United States and the 

vital role it plays in ensuring that corporate transactions involving U.S. and foreign 

persons do not pose threats to our national security. 

We are also here to discuss the role foreign direct investment plays in growing 

the American economy and creating jobs. Perhaps most importantly, we are here to 

discuss the balance between encouraging global investment in the United States, 

while preventing those who would do us harm from exploiting our fundamental faith 

in the free market and the free flow of capital. 

Since 2007, the last time Congress reviewed the CFIUS (Siff-ious) review process, 

much has changed. The types of investments made by foreign persons in U.S. companies have diversified; the role of foreign governments in attempting to acquire 

U.S. assets through companies they partially or wholly own has altered; and technological improvements have increased incentives for other nations to attempt to acquire innovative products and technologies created by American entrepreneurs. 

These changes mean new opportunities and new risks. Under the auspices of investing in an American business, a foreign government could acquire a whole or 

118 

1https://www.commerce.gov/news/fact-sheets/2017/10/foreign-direct-investment-united-states. 

partial stake in a U.S. company that allows it to access critical information or products that could undermine our national security. Some of our colleagues believe the 

CFIUS review process, designed to address such risks, has not kept pace with these 

developments. 

At the same time, it must be recognized that much of foreign investment in the 

United States is beneficial to our country and economy. When a foreign-owned business invests in the U.S., it is acknowledging the tremendous advantages that come 

from employing American workers and operating in U.S. markets. 

Many U.S. companies with foreign ownership not only manufacture their products 

in the United States, employing American supply chains, but also export these U.S. 

built products overseas. 

According to the most recent U.S. Commerce Department data, majority-owned 

U.S. affiliates of foreign entities exported $352.8 billion in goods, accounting for over 

23 percent of total U.S. goods exported in 2015 1. These types of ventures reduce 

our trade deficit while creating jobs for Americans. 

In that same report on Foreign Direct Investment in the United States, the Commerce Department noted that the United States had an inward FDI stock of $3.3 

trillion in 2015 and $3.7 trillion in 2016. The largest investors in the U.S. came 

from the United Kingdom, Japan, Canada and Germany, countries with whom we 

have a close and cooperative relationship. 

Welcoming foreign investment in the United States has yielded tremendous benefits for our citizens. It is important that we do not make the opportunity to invest 

in the U.S. so burdensome or uncertain that we discourage a vital source of economic growth. 

It is also critical that we remain aware of the reality that not everyone in the 

world shares our values or is content to see America succeed. The CFIUS review 

process has historically struck a balance between encouraging investment in America with protecting our citizens from harm. It is our duty to review that process to 

ensure CFIUS has the tools it needs to continue to strike that balance in a changing 

world. 

I look forward to hearing from our witnesses today on whether H.R. 4311 correctly 

strikes that balance, what changes or improvements can be made in the legislation, 

and what equities policymakers should consider as we undertake this process. 

Thank you and I yield back the balance of my time. 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Today we are here to review the CFIUS process. CFIUS, the Committee on Foreign Investment in the United States, serves as an important check on our generally 

open investment climate. Simply put, CFIUS reviews certain transactions to ensure 

that they would not result in adverse national security consequences for the United 

States. 

Investment in American companies, whether foreign or domestic, is a major component of the U.S. economy. It can spur innovation and create good jobs for American workers. 

However, some foreign investment is more beneficial to the U. S. economy than 

others. For example, research has shown that the benefits of investment by acquisitions are ambiguous. In addition, investments that are made based on incentives 

given at the state or local level can foster a ‘‘race to the bottom’’ among jurisdictions. 

And regardless of the potential benefits, foreign investment must never cause 

harm. Therefore, we need to ensure that such investment is not creating risks to 

our national security. 

Over the last several years, there have been calls to update the CFIUS process, 

particularly as the global market and our national defense posture evolves. Most recently, a bipartisan bill the Foreign Investment Risk Review and Modernization Act, 

was introduced by Representatives Pittenger and Heck, which we will discuss at today’s hearing. I look forward to exploring this legislation with our witnesses and 

hope this bill works its way through the process on a bipartisan basis. 

It is imperative that CFIUS is always ready to respond to security threats from 

any power seeking to have a strategic edge over our nation. CFIUS must be reviewing the right transactions and making sure that our critical infrastructure and intellectual property are being protected. The number of investments that need to go 

through the CFIUS process is on the rise so a review of the process now makes 

sense. 

119 

While we do not want to drive investment dollars to other countries, we need to 

protect our technological edge and military readiness. And unfortunately, there are 

other governments seeking to take away that edge. Recently, Chinese President Xi 

Jinping reiterated his vision of China’s future as a technology power. In a speech 

this past weekend, he acknowledged his goal of having Chinese companies collaborate with the Chinese military in that pursuit, what some have called civil-military 

fusion. 

I understand those who are concerned about access to capital. U.S. firms and universities do need capital to grow ideas. I agree, and strongly support efforts to increase funding for research and development. For our nation to maintain its technological and strategic edge, we in Congress must work to ensure federal dollars are 

committed to emerging research and improving our infrastructure 

Mr. Chairman, it is no wonder why the United States is the number one destination for foreign investment. Companies come here because of our workforce, infrastructure, and consumer base. They recognize that it is a great place to do business. 

I look forward to hearing from our witnesses about how to best strike the balance 

of strengthening our national security review and maintaining our title as the investment capital of the world. 

120 


31568.072

Statement for the Record 

FCC Commissioner Michael O'Rielly 

Before the 

Subcommittee on Digital Commerce and Consumer Protection 

Committee on Energy and Commerce 

U.S. House of Representatives 

Hearing on 

"Perspectives of Reform of the CFIUS Review Process" 

April 26, 2018 

Dear Chairman Latta and Ranking Member Schakowsky: 

I applaud the Subcommittee for convening this important hearing to examine the Committee on Foreign 

Investment in the United States (CFIUS) and ways to update the review process. As the Subcommittee 

examines H.R. 4311, the Foreign Investment Risk Review and Modernization Act, I respectfully ask 

Members to also consider potential reforms to the Executive Branch review process, informally known 

as "Team Telecom." 

Just as CFIUS requires review of foreign investments proposed in the United States through the lens of 

national security, Team Telecom (which typically consists of the Departments of Commerce, Justice, 

State, Homeland Security, Defense, the Federal Bureau of Investigations, and the United States Trade 

Representative) plays an important role in ensuring that U.S. national security interests are protected as 

part of the Federal Communications Commission's (FCC or Commission) licensing process. Specifically, 

the FCC consults with and considers the views of Team Telecom when reviewing applicable license 

applications involving foreign ownership. Unfortunately, unlike CFIUS, the Team Telecom process is 

unnecessarily opaque and uncertain. 

Specifically, applications referred to Team Telecom enter a procedural black hole that has been known 

to take years to complete. Entities stuck in this regulatory abyss all too often have no ability to 

determine which agency has concerns or how to locate a point of contact to help facilitate a resolution. 

Basically, there is little to no information available to applicants- or even the Commission for that 

matter- on the status of the application or a timeline for a response. When entities actually hear from 

Team Telecom, they have often been subjected to multiple requests for information, some of which are 

beyond the scope of the foreign ownership being reviewed. Ultimately, this process delays applications 

substantially and dissuades U.S. companies from considering new opportunities. 

It should be clear that efforts to provide greater structure and process reforms to Team Telecom will not 

increase potential risks to national security or undermine the ability of Team Telecom to provide its 

views. Indeed, a more effective structure and process will help generate enhanced attention and 

facilitate improved responses from the requisite agencies. 

With this in mind, I hope the Subcommittee will consider Team Telecom reform as part of its larger 

discussion of ways to improve CFIUS and its review of the legislation before it. More importantly, I stand 

ready to work with the Committee on this important issue and thank Members for considering such a 

proposal. 
121 


31568.073

The Honorable Greg Walden 

Chairman 

Department of Energy 

Washington, DC 20585 

April24, 2018 

Committee on Energy and Commerce 

U.S. House of Representatives 

Washington, DC 20515 

Dear Mr. Chairman: 

Thank you for this opportunity to address the Committee on Energy and Commerce about 

the Department of Energy's (DOE) role on the Committee on Foreign Investment in the 

United States (CFIUS) and our support for the bipartisan efforts in both the House and 

Senate to modernize CFIUS. 

One of my top priorities and functions as the Assistant Secretary for the Office of 

International Affairs at DOE is to oversee the Department's role on CFIUS. DOE was 

designated as full-time CFIUS member in the Foreign Investment and National Security 

Act of2007 (FINSA). 

DOE plays a vital part in the national security role that CFIUS has in our country's ability 

to maintain an open foreign investment policy while also protecting our most sensitive 

national security interests. The Department has a vast portfolio of national security 

responsibilities in the Federal Government from protecting our energy infrastructure to 

maintaining and modernizing our nuclear weapons arsenal. In addition, DOE as part of 

its national security mission, seeks to keep the U.S. at the cutting edge of emerging 

technology and innovation through vital research to expand our scientific frontiers while 

making our economy prosper. 

DOE brings a unique set of attributes to CFIUS with the expertise and experience from 

our National Nuclear Security Administration (NNSA), our traditional program offices 

that handle electricity, fossil energy, renewables, and nuclear power and our expansive 

network of 17 National Laboratories across the country that help us fulfill our mission. 

My office coordinates among these various entities, including the many program offices 

on a wide range of issues, including CFIUS. 

The Department of the Treasury, as the Chair of the CFIUS, is the lead agency on all 

CFIUS cases and selects a co-lead agency per the CFIUS regulations for each case 

review. The co-lead agency generally is the agency most closely aligned to the subject 

matter expe1tise needed for the transaction subject to CFIUS review. Since 2009, DOE 

has often been selected as a co-lead agency. Even in matters where DOE is not a co-lead 

agency, DOE brings a particular set of subject-matter-expertise to the reviews and 

investigations conducted by CFIUS. DOE provides comprehensive national security 
122 


31568.074

analysis to energy security questions, energy-related infi·astructure issues, protecting the 

supply chain of our nuclear weapons arsenal and securing our country from the risks 

posed by cyber related threats. 

2 

CFIUS has evolved and adapted to the ever changing landscape where foreign investment 

into the U.S. crosses with our national security interests. However, CFIUS, which was 

born out of Executive Order 11858 in 1975, codified in the Defense Production Act of 

1950 with amendments including Exon-Florio in 1988 and Byrd in 1992, and FINSA in 

2007, is an appropriate subject for modernization. 

As you proceed in considering an update to the CFIUS process our office is pleased to 

provide our expertise and experience in order to assist in your efforts. Thank you for 

your consideration and please do not hesitate to contact me if you have any questions. 

Respectfully, 

/ 

~~ /Theodore J. Garrish 

Assistant Secretary 

cc: The Honorable Joe Barton 

Vice Chairman 

The Honorable Frank Pallone 

Ranking Member 

Office of!ntemational Affairs 
123 


31568.075

GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNOREO FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<I.Congre%% of tbe mntteb ~tate% 

j!'ouile of l\eprcilcntatibe£1 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

The Honorable Heath P. Tarbe1t 

Assistant Secretary 

j202)225-2927 

1202)225--3641 

May 14, 2018 

International Markets and Investment Policy 

U.S. Department of the Treasury 

1500 Pennsylvania Avenue, N.W. 

Washington, DC 20220 

Dear Assistant Secretary Tarbc1t: 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Refmm of the CFIUS 

Review Process.'' 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached. To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, May 29, 2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, 

Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and 

e-mailed in Word format to ali.fulling@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

''"'='' tJc ?!~.~· Subcommittee 

Chairman 

on Digital 

~ Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
124 


31568.076

Additional Questions for the Record 

The Honorable Gus Bilirakis 

1. 1-Iow docs CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

2. How does CFJUS seek out and accept the assurances of other federal agencies, such as 

the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example? 

3. To the extent current CFIUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFIUS? 
125 


31568.077

GHEG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

QtongreS'S' of tbc Wnttcb ~tatcS' 

~ouse of 3!.\eprcsentntibes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

The Honorable Richard E. Ashooh 

Assistant Secretary 

Export Administration 

U.S. Department of Commerce 

1401 Constitution Avenue, N.W. 

Washington, DC 20230 

Dear Assistant Secretary Ashooh: 

(:1'02)225-2927 

{202)225-3641 

May 14, 2018 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Reform of the CFIUS 

Review Process." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to pennit Members to submit additional questions for the record, which are attached. 

To facilitate the printing of the hearing record, please respond to these questions by the close of business 

on Tuesday, May 29, 2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, Committee 

on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in 

Word format to ali.fulling@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Zi;,t#.._ 

Chairman 

Subcommittee on Digital Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
126 


31568.078

Additional Questions for the Record 

The Honorable Gus Bilirakis 

1. How does CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

2. How does CFIUS seek out and accept the assurances of other federal agencies, such as 

the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example? 

3. To the extent current CFIUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFIUS? 
127 


31568.079

GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

C!Congress of tl)e Wniteb ~tates 

;T!;lou!5c of l\cpre!5entatibe!5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

The Honorable Kevin J. Wolf 

Partner 

(202)225-2927 

(202)225-3641 

May 14,2018 

Akin Gump Strauss Hauer and Feld, LLP 

1333 New Hampshire Avenue, N.W. 

Washington, DC 20036 

Dear Mr. Wolf: 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Reform of the CFIUS 

Review Process." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to permit Members to submit additional questions for the record, which are attached. 

To facilitate the printing of the hearing record, please respond to these questions by the close of business 

on Tuesday, May 29,2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, Committee 

on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in 

Word format to ali.fulling@mail.housc.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

~:€.6-aJJ-. Chairman 

Subcommittee on Digital Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
128 


31568.080

Additional Questions for the Record 

The Honorable Gus Bilirakis 

1. How docs CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

2. How does CFIUS seek out and accept the assurances of other federal agencies, such as 

'the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example? 

3, To the extent current CFIUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFIUS? 
129 


31568.081

GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

C!CongrcS'S' of tbe 'mniteb ~tate% 

J!)ou£1c of l\cpre£\entatibe£1 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RA vsunN HousE OrriCE BuiLDING 

WASHINGTON, DC 20515-6115 Majority (202)225-2927 

Mmonty (202) 225-3641 

May 14,2018 

The Honorable Clay Lowe1y 

Managing Director 

Rock Creek Global Advisors 

800 Connecticut Avenue, N.W., Suite 800 

Washington, DC 20006 

Dear Mr. Lowery: 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Reform of the CFlUS 

Review Process." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to pe1mit Members to submit additional questions for the record, which are attached. 

To facilitate the printing of the hearing record, please respond to these questions by the close of business 

on Tuesday, May 29, 2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, Committee 

on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in 

Word format to ali.fulling@mail.house~y. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

~:'£.#-~ Robert E. Latta 

Chairman 

Subcommittee on Digital Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
130 


31568.082

Additional Questions for the Record 

The Honorable Gus Bilirakis 

1. How does CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

2. How does CFIUS seek out and accept the assurances of other federal agencies, such as 

the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example? 

3. To the extent cunent CFJUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFJUS? 
131 


31568.083

GREG WALDEN, OREGON 

CHAIRMAN 

Ms. Celeste Drake 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

~!Congress of tbc ~nttcb $tatcs 

rt'ourse of l\eprerscntatibers 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 (202)225-2927 

12021225-3641 

May 14,2018 

Trade and Globalization Policy Specialist 

AFL-CIO 

815 16th Street, N.W. 

Washington DC 20006 

Dear Ms. Drake: 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Reform of the CFIUS 

Review Process." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to penn it Members to submit additional questions for the record, which are attached. 

To facilitate the printing of the hearing record, please respond to these questions by the close of business 

on Tuesday, May 29, 2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, Committee 

on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in 

Word format to ali.fulling!Glmail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

~.~~~Mk- Chairman 

Subcommittee on Digital Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
132 


31568.084

Additional Questions for the Record 

The Honorable Gus Bilirakis 

I. How does CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

2. How docs CFIUS seek out and accept the assurances of other federal agencies, such as 

the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example? 

3. To the extent current CFIUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFIUS? 
133 


31568.085

GREG WALDEN, OREGON 

CHAIRMAN 

Dr. Derek Scissors 

Resident Scholar 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

~ongre~% of tbe Wntteb ~tate% 

J!}ouse of l.'\epreilentatibes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 Maiorlty (202)225-2927 

Mmonty (202)225-3641 

May 14,2018 

American Enterprise Institute 

1789 Massachusetts Avenue, N.W. 

Washington, DC 20036 

Dear Dr. Scissors: 

Thank you for appearing before the Subcommittee on Digital Commerce and Consumer Protection 

on, Thursday, April 26, 2018, to testify at the hearing entitled "Perspectives on Reform of the CFIUS 

Review Process." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to penn it Members to submit additional questions for the record, which are attached. 

To facilitate the printing of the hearing record, please respond to these questions by the close of business 

on Tuesday, May 29, 2018. Your responses should be mailed to Ali Fulling, Legislative Clerk, Committee 

on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and c-mailed in 

Word format to ali.fullingialmail.house.gov. 

Thank you again for your time and effm~ preparing and delivering testimony before the 

Subcommittee. 

~~~&~ Chairman 

Subcommittee on Digital Commerce 

and Consumer Protection 

cc: Jan Schakowsky, Ranking Member, Subcommittee on Digital Commerce and Consumer Protection 

Attachment 
134 


31568.086

One Hundred Fifteenth Congress 

House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Digital Commerce and Consumer Protection 

·'Perspectives on Reform of the CFIUS Review Process" 

Additional Questions for the Record 

I. How does CFIUS expressly include and implement issues relating to State and local law 

enforcement agencies? 

Because CFIUS at present is charged only with protecting national security, state and local law 

enforcement is rarely relevant. Some versions of CFIUS reform legislation note correctly that 

firms which have broken American law should be considered higher risks to national security. If 

CFIUS review more fully includes adherence to rule oflaw in assessing security risks, greater 

coordination with state and local law enforcement should follow, though only for the sake of 

gathering the relevant information. 

2. How does CFIUS seck out and accept the assurances of other federal agencies, such as 

the FTC and other regulators, who review and separately approve such acquisitions under 

antitrust laws, for example. 

US enforcement of antitrust laws with regard to Chinese entities is a vital issue which has 

received much less attention than it deserves, considering that most centrally-controlled Chinese 

state-owned enterprises rely on antitrust violations in China as part of their business model. 

However, CFIUS' exclusive focus on national security means it has had little cause to contact 

federal agencies not involved in national security. 

Again, a (needed) rule of law provision in CFIUS reform would entail more cooperation with 

federal agencies. In this case, CF!lJS could incorporate a very brief standardized check with 

other agencies of the legal record of potential investors, at the most general level of has or has 

not broken US law. Chinese telecom company ZTE, for example, should not be allowed to 

invest, given its track record. 

3. To the extent current CFIUS regulations do not require market disclosures from the 

foreign acquirer, are they sufficient to protect a competitive market for critical defense 

items? Should Congress require parties to provide this information to CFIUS? 

CFIUS is empowered to ask for all pertinent information. Companies that do not provide such 

information should, and do, see their investments rejected. But the CF!US process is not 

intended to protect (prospective) equity share-holders. Moreover, disclosure of an investment 

transaction at an early stage could be prejudicial to the companies involved, both American and 

Chinese, and constitute an undesirable barrier to investment. 
135 

Æ 


31568.087

A national security argument for some form of disclosure could be made with regard to ongoing 

operations. That is, companies which do not provide basic, accurate information about the status 

of their operations in the US could be deemed to be higher national security risks in posttransaction monitoring and therefore subject to additional post-transaction CF!US scrutiny. 

With regard to the competitive market for critical defense items, the most important step has 

nothing to do with CFIUS- it is to expand the number of domestic suppliers. Industry 

consolidation has reduced competition and increased vulnerability with regard to defense needs. 

A clear example: it would have been a terrible decision to allow Qualcomm to be acquired by a 

foreign entity. But tbe fundamental problem is Qualcomm's dominant position here.