In 1975, an executive order established CFIUS to monitor the impact of and coordinate U.S. policy on foreign investment in the United States. In 1988, Congress enacted the Exon-Florio amendment adding section 721 to the Defense Production Act of 1950. The amendment authorized the President to investigate the impact of certain foreign acquisitions of U.S. companies on national security and to suspend or prohibit acquisitions that might threaten to impair national security. FINSA further amended the Defense Production Act, established CFIUS as it currently exists, and guides the committee. One of the purposes of FINSA’s enactment was to ensure national security while promoting foreign investment and the creation of U.S. jobs. CFIUS reviews transactions involving a large variety of countries and industry sectors to determine if such transactions pose a threat to national security and whether the transactions should be allowed to proceed (for more information on the characteristics of transactions reviewed by CFIUS, see app. II). FINSA does not formally define national security, but provides a number of factors for CFIUS and the President to consider in determining whether a transaction poses a risk. These factors include the potential national security-related effects on U.S. critical technologies and whether the transaction could result in the control of a U.S. business by a foreign government. CFIUS also may consider other factors that it finds appropriate in determining whether a transaction poses a national security risk (for a full list of factors, see app. III). Under FINSA, CFIUS is chaired by the Secretary of the Treasury and includes voting members from the Departments of Commerce, Defense, Energy, Homeland Security, Justice, and State; and the Offices of the U.S. Trade Representative, and Science and Technology Policy. In addition, the Office of the Director of National Intelligence (ODNI) and the Department of Labor (DOL) are nonvoting ex officio members. Various other White House offices also observe and, as appropriate, participate in CFIUS activities (see fig. 1). CFIUS may also solicit perspectives and expertise from nonmember agencies, such as the Department of Agriculture, designating them as members for purposes of the review of particular transactions, as appropriate, which can include negotiating or imposing mitigation measures or referring the transaction to the President for decision. The committee, which meets weekly at a staff level, generally has three core functions: (1) review transactions that have been submitted to the committee and take action as necessary to address any national security concerns; (2) monitor and enforce compliance with mitigation measures; and (3) identify transactions of concern that have not been notified to CFIUS for review. The Secretary of the Treasury, as the chair of CFIUS, is responsible for a number of tasks. According to Department of the Treasury (Treasury) officials, these tasks, including coordinating operations of the committee, facilitating information collection from parties to a transaction, reviewing and sharing data on mergers and acquisitions with member agencies, and managing CFIUS timeframes, are carried out by Treasury employees specifically staffed to support CFIUS. Treasury also communicates on the committee’s behalf with the parties, members of Congress, and the general public. When necessary, Treasury is responsible for delivering the committee’s recommendation that the President should suspend or prohibit a transaction. In examining covered transactions, CFIUS members seek to identify and address, as appropriate, any national security concerns that arise as a result of the transaction. According to the FINSA amendment, a “covered” transaction is defined as any merger, acquisition, or takeover by or with any foreign person that could result in foreign control of any person engaged in interstate commerce in the United States. CFIUS reviews “notices” that have been submitted—or notified—to the committee by parties to transactions. Notices to CFIUS contain information about the nature of the transaction and the parties involved. According to guidance on the Treasury website, with limited exceptions, a transaction receives “safe harbor” when CFIUS has completed its review and determines that the transaction may proceed. According to Treasury officials, safe harbor provides the parties to the transaction some certainty that CFIUS and the President will not subject the transaction to review again. FINSA does not require that parties notify CFIUS of a transaction; however, CFIUS may choose to initiate a review of any covered transaction. Transactions that have not been notified to CFIUS for review are known as “non-notified transactions.” According to member agency officials, Treasury and several other member agencies have processes for identifying non-notified transactions for CFIUS to potentially review. For instance, Treasury staff compile data on mergers and acquisitions and distribute information about potential non-notified transactions to member agencies for review. In addition, according to member agency officials, in 2010, the Federal Bureau of Investigation (FBI) began a working group, now called Project Iceberg, which is responsible for identifying and understanding counterintelligence threats posed by foreign investments that have not been notified to CFIUS. The working group holds monthly meetings that intelligence agencies as well as CFIUS member agencies are invited to attend. In the absence of voluntary reporting by the parties involved or independent discovery of the transaction, it is possible that CFIUS may not review a covered transaction that could pose a risk to national security. Based on information including FINSA and regulations, the CFIUS process for reviewing transactions that have been notified to the committee comprises up to four stages: pre-notice consultation, national security review, national security investigation, and presidential action. CFIUS reviews each transaction individually, with a focus on the aspects of the transaction that could pose a risk. For each transaction reviewed, the committee identifies agencies with relevant expertise to act as co-lead with Treasury to guide the transaction through the CFIUS process. CFIUS reviews are confidential and protected from public disclosure. A CFIUS review could be concluded when CFIUS members reach consensus about whether the transaction should be allowed to proceed, including on the basis of mitigation, if necessary, or when the parties withdraw their notice, whether for commercial reasons or in light of CFIUS’s national security concerns. Absent one of these conclusions to a CFIUS review, the committee may send the transaction to the President, with a recommendation that the President suspend or prohibit it. See figure 2 for an overview of the steps that comprise the CFIUS process for reviewing selected transactions. Before a transaction is reviewed by CFIUS, Treasury may conduct a pre- notice consultation with parties to a notified transaction. Upon request, Treasury and other agencies meet with the parties, provide informal guidance on the CFIUS review process, and may review early drafts of the notice. Once the parties have developed the final draft, they submit it to the committee for review. When Treasury, with input from member agencies, determines that the notice of the transaction is complete, the official CFIUS review of the transaction commences. CFIUS conducts a national security review of each notified transaction, which includes determining whether it is a covered transaction and developing a national security threat assessment. The national security review lasts up to 30 days and begins the day after Treasury determines the filing is complete and circulates the filing to CFIUS member agencies. At the beginning of the national security review, CFIUS identifies co-lead agencies. According to Treasury officials, typically within the first 10 to 12 days of the national security review, CFIUS develops a “covered transaction analysis,” which determines whether the transaction is a covered transaction according to FINSA. According to Treasury officials, there typically is consensus among voting members on whether the transaction is a covered transaction. During the national security review, CFIUS also assesses whether there is credible evidence that the foreign party in control of that U.S. business might take action to impair the national security of the United States as well as whether the covered transaction is a foreign government-controlled transaction. Concurrently, ODNI develops a national security threat assessment, with input and support from the intelligence community, to be completed during the first 20 days of the national security review. If CFIUS finds that the covered transaction does not present national security risks or that other provisions of law provide adequate and appropriate authority to address the risks, CFIUS may end its review. If CFIUS chooses to conclude its review at this point, CFIUS is to advise the parties in writing that the transaction has been cleared and allowed to proceed. According to information provided by Treasury, CFIUS has historically concluded action on the majority of transactions during or at the end of the 30-day national security review. The committee’s determination must be certified to specified members of Congress after the review is completed. However, if at the end of the national security review, CFIUS has not yet determined that there are no unresolved national security concerns and the committee requires additional time, CFIUS may proceed to a national security investigation, which must be completed within 45 days. If, during the 45-day national security investigation, CFIUS identifies an unresolved national security concern, it works with the parties to mitigate, if appropriate, any national security risks that may exist. If an agency identifies an unresolved national security concern, the agency develops an analysis of the potential risks posed by the covered transaction and includes recommendation for action, such as mitigation measures or referral to the President, and shares this analysis with other members of the committee. Mitigation measures may include ensuring that only authorized persons have access to certain technologies, information, or facilities, or providing the U.S. government the right to review certain business decisions and to object if the decisions raise national security concerns. According to Treasury officials, CFIUS member agencies aim for mitigation that would be effective, can be monitored, and would be enforceable. If there is a difference of opinion among CFIUS member agencies about the level or type of mitigation that should be utilized, CFIUS agencies discuss the matters to reach consensus. In some cases, parties may choose to withdraw and resubmit the notice. If CFIUS has determined that national security concerns cannot be mitigated, according to Treasury officials, CFIUS typically advises the parties that the committee will refer the matter to the President for decision. According to Treasury officials, parties have the opportunity to withdraw and resubmit the notice if they need additional time to discuss CFIUS’s concerns or to present additional information or mitigation proposals for CFIUS’s consideration. Sometimes parties choose to withdraw and abandon the transaction if, for instance, CFIUS proposes mitigation measures that the parties choose not to accept. Parties may also abandon the transaction for commercial reasons unrelated to the CFIUS review. If parties choose to withdraw and resubmit a transaction, the national security review begins again, and the committee has another 75 days to complete the review of the transaction. If CFIUS obtains consensus from committee members that there are no unresolved national security concerns or the national security concerns have been mitigated, the national security investigation ends, and the covered transaction receives safe harbor. Treasury and the co-lead agency send written certification to specified members of Congress that there are no unresolved national security concerns. However, if the committee concludes that a proposed foreign investment threatens to impair the U.S. national security and the threat cannot be mitigated, CFIUS will elevate the notice to the President for determination and CFIUS may recommend that the President suspend or prohibit the transaction. According to Treasury officials, parties may also withdraw their notice at this point rather than have the President decide whether to block the transaction. If, at the end of the national security investigation, CFIUS elevates a transaction to the President for determination, the President has 15 days from the completed investigation to decide to prohibit or suspend the acquisition, or to take no action. Only four transactions reviewed by CFIUS have been the subject of a presidential prohibition since the committee was established in 1975. CFIUS has experienced an increase in workload in recent years, but Treasury, as CFIUS lead, has not coordinated member agency efforts to better understand staffing levels needed to complete core committee functions. According to CFIUS member agency officials, the volume of transactions notified to the committee and the complexity of CFIUS reviews in terms of technology, transaction structure, and national security concerns have increased substantially from 2011 through 2016, while CFIUS staffing levels have experienced a modest increase during the same time period. Member agency officials stated that CFIUS is able to review all transactions that have been voluntarily notified to the committee. However, many stakeholders, including most member agency officials and several external experts, expressed concerns that CFIUS member agencies were limited in their ability to complete other CFIUS functions, such as identifying non-notified transactions. In addition, agency officials were unsure if they would have sufficient staff if the CFIUS workload were to continue to increase. Standards for Internal Control in the Federal Government states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury has not coordinated member agency efforts to better understand the staffing levels needed to complete the current and future workload associated with core functions of the committee. Despite figures decreasing in one year, overall, the number of covered transactions that CFIUS reported it reviewed increased from 111 transactions in 2011 to 172 transactions in 2016, or almost 55 percent (see table 1). In 2017, CFIUS reviewed 238 transactions, according to Treasury officials. According to member agency officials, the increased volume of covered transactions resulted in increased work for all CFIUS members, no matter which agency is the co-lead, because each member agency must review each transaction notified to the committee. The number of reported covered transactions requiring national security investigations almost doubled during this same period, increasing from 40 transactions in 2011 to 79 transactions in 2016. Treasury officials told us that they estimated that the total number of transactions that proceeded to national security investigations was greater in 2017 than it was in 2016. They said that the increase in the number of covered transactions that require a national security investigation is another indication that the committee’s workload has increased. One Treasury official noted that the number of times that parties withdraw and resubmit transactions can increase the workload of the committee as it must review the transaction each time it is submitted. Additionally, the number of reported covered transactions that include mitigation measures has increased. Each year, CFIUS places mitigation measures on a relatively small number of covered transactions. For example, according to Treasury officials, 18 (roughly 10 percent) of 172 transactions the committee reviewed in 2016 resulted in mitigation measures. According to member agency officials, mitigation measures rarely expire; thus, the number of these measures increases over time, as does the accompanying workload for co-lead agencies tasked with overseeing the measures. Officials from CFIUS member agencies stated that the complexity of CFIUS reviews in terms of technology, transaction structure, and national security concerns has increased in recent years. They said that additional time and staff have been required to address this rise in complexity and to complete these reviews. For instance, one member agency official told us that reviews of transactions from parties whose companies use new and emerging technologies, such as artificial intelligence and robotics, typically require input from agency subject matter experts to help the committee understand how, if at all, the acquisition of these technologies by foreign parties could create national security concerns. According to member agency officials, the amount of time and number of staff needed to review a transaction can fluctuate greatly based on, among other things, the technology involved. One agency official said that 6 of their employees, on average, are involved in reviewing a less complex transaction, but up to 15 employees may be necessary to complete the review if the technology involved is more complicated. The number of agency staff involved can increase further if senior level management is required to participate in the review. This official also stated that most of the transactions reviewed in the past were from sectors that agency officials were familiar with and involved more predictable issues, but recently, transactions more frequently involved complex technology, which required additional expertise. Officials from another member agency stated that a majority of their staff involved in reviewing transactions do not have CFIUS as a primary duty and that their agency has reallocated resources to address the increased case load. One Treasury official stated that one case was so complex that it required one staff member to dedicate all of their time to its review, and the other responsibilities of this employee had to be shifted to other members of the staff. Additionally, according to member agency officials, reviews of transactions involving technologies the government frequently uses have increased, requiring additional time and staff to understand how this technology affects various agencies. For instance, member agency officials said that reviewing transactions involving semiconductors, which are commonly used in an array of products used by the government, typically requires additional time and staff because CFIUS member agencies must understand, among other things, how the approval of a transaction could affect systems across government agencies. According to CFIUS member agency officials, the structures of the transactions the committee reviews have also become more complex, requiring more time and staff to assess. For example, business arrangements—such as complex corporate arrangements, joint ventures, loan arrangements, nondisclosure agreements, and memoranda of understanding—may require the work of additional staff. Treasury officials also stated that these arrangements can make it more difficult to determine whether the transaction is covered by CFIUS authorities, as there may be commercial relationships that affect the parties’ decision- making. According to Treasury officials, such arrangements can also increase the complexity of the national security review, as they may create additional “indirect threats” that must also be analyzed. Member agency officials explained that it has become more challenging to identify the ultimate beneficial owners—the persons who ultimately own and control a company—due to the structure of the transaction. According to Treasury officials, in certain countries, it can be difficult to distinguish between control by a private entity and control by a state entity due to the various relationships created by the transaction structure. In these cases, CFIUS often requires additional information from the parties in such transactions before the national security review can begin. Member agency officials stated that they had been encountering these arrangements more frequently, and additional time and staff had been required to examine the national security implications of these transactions. Finally, the nature of the national security concerns the committee considers has expanded beyond the traditional threats, requiring more time and staff to assess them, according to member agency officials. National security concerns include traditional ones, such as threats to U.S. critical infrastructure. Emerging concerns include the possibility of a foreign entity obtaining access to personally identifiable information that, if disclosed, could be exploited for purposes that have national security consequences or the proximity of property to areas considered sensitive by the U.S. government. According to agency officials, the number of staff assigned to CFIUS activities has not kept pace with the increase in covered transactions reviewed by CFIUS. According to one Treasury official, the more an agency is required to act as co-lead, the more time and staff are needed of the agency. After Treasury, which acts as co-lead on every review, the Departments of Defense (DOD), Energy (DOE), and Homeland Security (DHS) acted as co-lead on the largest number of CFIUS reviews in 2016 (see table 2). According to information provided by member agency officials, CFIUS saw a modest increase in staff assigned to CFIUS activities since 2011, with Treasury, DOD, DOE, DHS, and State adding a few staff, while staffing levels did not rise at the other member agencies. The total number of staff assigned to CFIUS activities increased from 82 in 2011 to 91 in 2016, an increase of 11 percent. During that same period, covered transactions reviewed by CFIUS increased from 111 transactions in 2011 to 172 transactions in 2016, an increase of almost 55 percent (see fig. 3). Member agency officials stated that the number of staff assigned to work on CFIUS activities may fluctuate throughout the year based on the committee’s work. For example, as previously discussed, CFIUS member agencies may rely on experts with other responsibilities throughout each agency to provide assistance with the review as the need arises. For instance, in fiscal year 2016, DOE had four staff dedicated to CFIUS, but one DOE official said he reaches out to relevant subject matter experts, who have other responsibilities, to provide input on transactions within their area of expertise. Treasury officials stated that staff have been able to review the number of transactions that have been voluntarily notified to CFIUS to date. One Treasury official said that, despite the increase in the number of transactions reviewed by CFIUS, the committee has almost always provided a determination to the parties within the timeframes required as to whether the covered transaction should be allowed to proceed or blocked by the President. Further, Treasury officials stated that despite staff constraints, CFIUS has, as needed, appropriately mitigated the national security concerns for the transactions the committee has approved. However, several member agency officials and external experts expressed concerns that, due to staff constraints, CFIUS member agencies were limited in their ability to complete other CFIUS functions, such as monitoring mitigation measures and identifying non-notified transactions. First, the time and staff necessary to monitor mitigation measures varies. For instance, according to one member agency official, some mitigation measures require daily monitoring from officials, while other mitigation measures require only the review of an annual report submitted by parties to the transaction. Several member agency officials acknowledged that they have fewer staff than they would like to devote to monitoring mitigation measures. Second, these member agency officials also said that they are not able to devote the amount of time they would like to the task of identifying non- notified transactions. CFIUS member agencies review data on mergers and acquisitions to identify non-notified transactions of concern, those that have not been notified to CFIUS for review. In recent years, according to agency officials, CFIUS has seen an increase in the number of non-notified transactions CFIUS could potentially review. One official indicated that in 2016, their agency examined 2,683 potential non-notified transactions, an increase of roughly 38 percent from 2014. Member agency officials stated that because non-notified transactions are frequently reviewed after the acquisition has been completed, the process of mitigating potential national security concerns of non-notified transactions can be difficult. Several member agency officials suggested that they would like to devote more time to examining non-notified transactions, but staff constraints limit the amount of time agencies can spend conducting this task. Several member agency officials said that they do not know if current staffing levels would be able to address a further increase in CFIUS workload. Treasury officials noted that the volume of transactions reviewed by CFIUS will likely continue to increase. Moreover, congressional bills have been introduced that, if enacted, would alter the CFIUS process. As discussed later in this report, agency officials stated that some of these potential changes would likely further increase CFIUS workload. According to several CFIUS member agency officials, if the CFIUS workload were to increase, additional staff would likely be necessary to complete committee functions, such as identifying non- notified transactions and monitoring mitigation measures. Officials from two member agencies also expressed concerns about their ability to review transactions that have been notified to the committee if the volume of CFIUS notices increased. According to Treasury officials, CFIUS does not have a centralized budget, and Treasury does not have authority to determine CFIUS staffing levels at committee member agencies. Treasury officials stated that they have taken steps, in coordination with the Office of Management and Budget (OMB), to collect data from the member agencies on current staffing levels expended on CFIUS core functions but have not established timeframes for this data collection. Standards for Internal Control in the Federal Government states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury officials stated that they have conducted an assessment of Treasury’s staffing needs and have encouraged other agencies to do the same. However, Treasury, as CFIUS lead, has not coordinated member agencies’ efforts to better understand the staffing levels needed to address the current and future CFIUS workload associated with core committee functions, such as identifying and reviewing non-notified transactions. Without this information, CFIUS may be limited in its ability to fulfill its objectives and address threats to the national security of the United States. Officials from CFIUS member agencies (voting and nonvoting) and selected nonmember participant agencies, as well as external experts, expressed a range of views on the potential benefits and drawbacks to possible changes to CFIUS. In our interviews with them, these stakeholders discussed a variety of possible changes to CFIUS that we organized into three categories: (1) altering the structure of CFIUS, (2) redefining which merger and acquisition transactions should be considered for CFIUS review, and (3) expanding the list of factors CFIUS considers as it evaluates the impacts of a foreign transaction on national security. For the most part, CFIUS member agencies and nonmember participant agencies stated that the existing structure is working effectively and described drawbacks to potential changes, such as changing membership or voting rights. Perspectives among agency officials and external experts varied on the potential effects of redefining which transactions should be considered for review, such as requiring CFIUS to review all covered transactions. Agency officials and external experts described a range of potential effects of expanding the list of factors CFIUS considers. They generally stated that including a net economic benefit test in the review, for example, would not be beneficial. Many officials and external experts agreed that one potential drawback of many of the possible changes is a likely increase to the CFIUS workload, generating concerns about the committee’s capacity to complete its core functions. In general, officials from member and nonmember agencies participating in CFIUS were satisfied with the structure of the committee. Possible changes, which would affect the way CFIUS is organized and does its work, include changes to the chairmanship of CFIUS, changes to the voting membership of CFIUS (adding new voting members and giving voting rights to current nonvoting members), and changes to the timeframes under which CFIUS works. However, for the most part, CFIUS member agencies and nonmember participant agencies reported that the existing structure works effectively. See tables 3, 4, 5, and 6 for details on the perspectives expressed on these changes. Member agency officials and external experts offered a range of views about the effects of changes to the types of transactions reviewed by CFIUS. Possible changes, which would affect which merger and acquisition transactions would be considered for CFIUS review, include changes to the definition of a covered transaction and changing the voluntary notification process to make review of all or some covered transactions mandatory. Stakeholders we spoke with identified benefits and drawbacks to each of these changes. Many stakeholders agreed that one potential drawback of these possible changes is a likely increase to the CFIUS workload. See tables 7, 8, and 9 for details on the perspectives expressed. Member agency officials and external experts were generally satisfied with the list of factors CFIUS currently considers when it reviews foreign transactions and offered a variety of opinions on the effects of changes to them. Possible changes include expanding the statutory national security factors to be considered and introducing an economic impact assessment. Stakeholders we spoke with identified benefits and drawbacks to each of these changes. See tables 10 and 11 for details on the perspectives expressed. The United States maintains an open investment climate that recognizes the benefits of foreign investment to its economy. CFIUS reviews certain foreign acquisitions, mergers, or takeovers of U.S. businesses to determine the effect of the transaction on the national security of the United States. The increased number of covered transactions notified to CFIUS and the complexity of these cases compared with the modest increase in the number of people assigned to reviewing them have, according to member agency officials, taxed the staff of CFIUS member agencies. Member agency officials and external experts have expressed particular concern that CFIUS member agencies were limited in their ability to complete core functions, such as identifying non-notified transactions and monitoring mitigation measures. At the same time, congressional bills have been introduced proposing changes to FINSA that could increase the committee’s workload. Officials from Treasury and other member agencies are aware of pressures on their CFIUS staff given the current workload and have expressed concerns about possible workload increases. Treasury and OMB have begun to collect information from agencies on their current CFIUS staffing levels. This is a crucial first step that could facilitate a better understanding for both the committee and Congress of the current staffing levels across the committee’s organizational structure. However, Treasury, as CFIUS lead, has not coordinated member agency efforts to assess the current and future staffing levels needed to complete the committee’s core functions. Without attaining an understanding of the staffing levels needed to address the current and future CFIUS workload, particularly if legislative changes to CFIUS’s authorities further expand its workload, CFIUS may be limited in its ability to fulfill its objectives and address threats to the national security of the United States. The Secretary of the Treasury, as the chair of CFIUS, and working with member agencies, should coordinate member agencies’ efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. (Recommendation 1) We provided a draft of this report for review and comment to the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Justice, Labor, State, and the Treasury as well as the Offices of the U.S. Trade Representative, Science and Technology Policy, and the Director of National Intelligence, and the Federal Communications Commission. We also provided a draft to the Office of Management and Budget. Treasury provided written comments, which are reproduced in appendix V. In its comments, Treasury stated that it is working with OMB to determine current resource levels across the CFIUS member agencies and has encouraged agencies to assess their staffing needs. Treasury also stated that it generally concurred with the draft report’s recommendation to “conduct an assessment to better understand staffing levels needed to address the current and projected CFIUS workload.” However, Treasury noted that CFIUS does not have a centralized budget, and Treasury does not have the authority over CFIUS staffing levels at member agencies. We acknowledge Treasury’s points and, therefore, we modified the report and clarified the recommendation to focus on Treasury’s coordination role, since, as we note in the report, Treasury is responsible for coordinating the operations of the committee and communicating on the committee’s behalf with the parties, members of Congress, and the general public. Treasury stated in an email that the clarifications to the recommendation address the point raised in its comment letter. USDA also provided written comments, reproduced in appendix VI. In its comments, USDA stated that it generally agreed with the findings in GAO’s draft report. The letter further noted that USDA is satisfied with Treasury’s willingness to include USDA in cases related to food and agriculture and is comfortable continuing to work as a non-voting member of CFIUS. The Departments of Commerce, Homeland Security, State, Treasury, and the Offices of the U.S. Trade Representative and Science and Technology Policy provided written technical comments, which we incorporated as appropriate. The Departments of Defense, Energy, Health and Human Services, Justice, Labor, the Office of the Director of National Intelligence, and the Federal Communications Commission indicated via email that they did not have comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Justice, Labor, State, and the Treasury as well as the Offices of the U.S. Trade Representative, Science and Technology Policy, and the Director of National Intelligence, and the Federal Communications Commission. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact Kimberly Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov or Marie A. Mak at (202) 512-2527 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. This report (1) examines changes in the Committee on Foreign Investment in the United States’ (CFIUS) workload and staffing from 2011 through 2016, and (2) provides information on stakeholder views on potential changes to CFIUS. To address these objectives, we reviewed relevant laws, executive orders, and regulations. We interviewed officials from each CFIUS voting member agency, including the Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury as well as the Offices of the U.S. Trade Representative and Science and Technology Policy. We also interviewed officials from the two nonvoting ex officio members, the Office of the Director of National Intelligence and the Department of Labor. In addition, we interviewed officials from nonmember agencies that have CFIUS case-related expertise, including the Departments of Agriculture and Health and Human Services, and the Federal Communications Commission. To examine the changes in CFIUS workload and staffing levels over the past 5 years, we analyzed information on workload and staffing levels at the voting member agencies from 2011 through 2016, the most recent information available at the time of our review. We also reviewed the 2014 and 2015 CFIUS annual reports. In addition, we interviewed officials from the nine CFIUS voting member agencies about their workload and staffing levels; any changes in the volume, types, and complexity of transactions reviewed by CFIUS; and their ability to complete the core functions of the committee. We requested information from the 9 CFIUS voting member agencies on the number of staff assigned to CFIUS more than 50 percent of their time. To collect information on stakeholder views on potential changes to CFIUS, we conducted individual semi-structured interviews with selected stakeholders, which consisted of officials from the nine CFIUS voting member agencies, the two ex officio nonvoting member agencies, and three selected nonmember agencies that have CFIUS case-related expertise, as well as with external experts. To identify external experts, we asked stakeholders to recommend other stakeholders we should speak with (i.e., snowball sampling). From our list of potential stakeholders, we selected 16 external experts, including former government officials, lawyers who represent parties with transactions notified to CFIUS, and representatives from industry associations and think tanks. In our interviews, we collected views and information on the challenges that CFIUS faces, options for addressing the challenges, and the possible benefits and drawbacks of these options. The information obtained from these stakeholders cannot be generalized across all stakeholders; however, these stakeholders provided insights into the possible effects of implementing certain changes to CFIUS. We conducted this performance audit from December 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Characteristics of Transactions Reviewed by the Committee on Foreign Investment in the United States (CFIUS) CFIUS reviews covered transactions from a large variety of industries, but the largest number of transactions reviewed come from the manufacturing sector. In 2016, the manufacturing sector represented approximately 42 percent of the 172 covered transactions reviewed by CFIUS and, in recent years, the number of transactions reviewed from that sector has increased from 49 transactions in 2011 to approximately 72 transactions in 2016. Computer and electronic transactions, such as those by companies that produce semiconductor technology, accounted for approximately 32 of the 72 covered transactions from the manufacturing sector that CFIUS reviewed in 2016. For instance, in 2016, CFIUS reviewed the potential acquisition of Aixtron, a Germany-based semiconductor firm with assets in the United States, by the Chinese firm Fujian Grand Chip Investment Fund. That year, the President chose to prohibit the acquisition of the U.S. business of Aixtron upon determining that the foreign purchasers might take action that threatens to impair the national security of the United States in exercising control of the U.S. business of Aixtron. Treasury, as the chair of CFIUS, stated in a press release that the national security risks posed by the transaction related to, among other things, a Chinese firm obtaining the company’s body of knowledge and experience. Transactions from the manufacturing sector involve a variety of other industries, including textiles, chemicals, and food manufacturing. For example, in 2013, according to a report from the U.S.-China Economic and Security Review Commission, CFIUS reviewed the acquisition of Smithfield Foods Inc., for $7.1 billion, by China’s Shuanghui International Holdings Ltd. A letter submitted by members of the Senate Agriculture Committee raised concerns that the transaction posed a threat to the nation’s food security; however, according to Security and Exchange Commission filings, CFIUS ultimately completed its investigation and cleared the transaction to proceed. Acquisitions by Chinese-owned companies accounted for the largest number of covered transactions reviewed by CFIUS from 2014 through 2016. According to CFIUS, the number of covered transactions the committee reviewed from China has increased substantially in recent years, from 10 transactions in 2011 to 67 in 2016. In previous years, companies from the United Kingdom were party to the largest share of covered transactions submitted for CFIUS review; however, from 2013 through 2015, parties from the United Kingdom and Canada submitted the second and third largest number of notices. Forty-four percent of all covered transactions reviewed by the committee during this time period involved companies from China, the United Kingdom, or Canada. Appendix III: Factors to Determine Whether Submitted Transactions Pose a National Security Risk The potential effects of the transaction on the domestic production needed for projected national defense requirements. The potential effects of the transaction on the capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies. The potential effects of a foreign person’s control of domestic industries and commercial activity on the capability and capacity of the United States to meet the requirements of national security. The potential effects of the transaction on U.S. international technological leadership in areas affecting U.S. national security. The potential national security-related effects on U.S. critical technologies. The potential effects on the long-term projection of U.S. requirements for sources of energy and other critical resources and material. The potential national security-related effects of the transaction on U.S. critical infrastructure, including critical physical infrastructure such as major energy assets. The potential effects of the transaction on the sales of military goods, equipment, or technology to countries that present concerns related to terrorism; missile proliferation; chemical, biological, or nuclear weapons proliferation; or regional military threats. The potential that the transaction presents for transshipment or diversion of technologies with military applications, including the relevant country’s export control system. Whether the transaction could result in the control of a U.S. business by a foreign government or by an entity controlled by or acting on behalf of a foreign government. The relevant foreign country’s record of adherence to nonproliferation control regimes and record of cooperating with U.S. counterterrorism efforts. Other factors that the President or the committee may determine to be appropriate, generally or in connection with a specific review or investigation. Department of the Treasury (Chair) Kimberly M. Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov. Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition to the contacts named above, Christine Broderick (Assistant Director), Christina Werth (Analyst-in-Charge), Anthony Costulas, Scott Purdy, Kendal Robinson, Lynn Cothern, Grace Lui, Justin Fisher, and Neil Doherty contributed to this report.

Summary: The United States economy has historically been the largest recipient of foreign direct investment in the world—receiving $373 billion in 2016, according to U.S. government statistics. Ensuring that these foreign investments do not harm national security can be a challenge. CFIUS is an interagency group that reviews transactions under its authority—certain foreign acquisitions or mergers of U.S. businesses—to determine their effects on U.S. national security, while maintaining an open investment climate. If CFIUS identifies concerns, it may work with parties to the transaction to mitigate them. In rare cases, CFIUS may recommend that the President block or suspend a transaction. GAO was asked to review the CFIUS process and possible changes to that process. This report (1) examines changes in CFIUS's workload and staffing from 2011 through 2016, and (2) provides information on stakeholder views on potential changes to CFIUS. GAO analyzed CFIUS information on staffing levels and transactions reviewed, and interviewed officials from member agencies, selected nonmember agencies that have CFIUS-related expertise, and knowledgeable external experts, such as think tanks. states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury—the agency that leads CFIUS— has not coordinated member agencies' efforts to better understand the staffing levels needed to address the current and future workload associated with core functions of the committee. Without this information, CFIUS may be limited in its ability to fulfill its objectives and address national security concerns. Officials from CFIUS member agencies and selected nonmember agencies, as well as external experts, expressed a range of views on the potential benefits and drawbacks to possible changes to CFIUS. GAO organized the possible changes into three categories: (1) altering the structure of CFIUS, (2) redefining which transactions should be considered for CFIUS review, and (3) expanding the factors CFIUS considers when evaluating the impacts of a foreign transaction on national security. Agency officials were generally satisfied with CFIUS' structure, such as the committee's chair and membership. Views among officials and experts varied on redefining which transactions should be considered for review, such as requiring CFIUS to review all transactions covered by its authority regardless of notification. Officials and experts generally did not support expanding the list of national security factors CFIUS considers, such as by adding a net economic benefit test. Agency officials and experts agreed that one trade-off related to some possible changes is a likely increase to the CFIUS workload, which they noted is already straining agencies' staff resources. Treasury, as CFIUS lead, should coordinate member agencies' efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. Treasury concurred.