On February 21, 2025, President Trump issued the America First Investment Policy Memorandum, which promotes foreign investment in the United States from allies yet also signals restrictions for certain investments in technology, critical infrastructure, healthcare, agriculture, energy, raw materials, and other sectors. The Memorandum highlights how “economic security is national security” but does not include details regarding any new regulations, directives or timelines for implementation. However, the underpinnings of the Memorandum indicate significant changes could be forthcoming with respect to actions taken by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) regarding its reviews of transactions involving, in particular, Chinese investors, allied country investors, and access to capital markets in the United States.
CFIUS is an interagency committee tasked with reviewing the national security implications of foreign acquisitions of and direct investments in United States businesses and real property. The Committee is chaired by the Department of the Treasury and comprised of nine voting members, two nonvoting ex officio members and other members appointed by the President from time to time.
Pursuant to its current promulgated regulations (31 CFR Parts 800 and 802), CFIUS has broad authority to address perceived national security risks arising from cross-border transactions within the scope of its jurisdiction. In assessing the national security risks of a given transaction, the Committee uses the following three-part framework:
- What is the threat presented by the foreign person’s intent and capabilities to harm United States national security?
- What aspects of the United States business present vulnerabilities to national security?
- What would the consequences for United States national security be if the foreign person were to exploit the identified vulnerabilities?
Foreign entities seeking to do business in the United States must now proactively analyze CFIUS compliance obligations by undergoing significant due diligence to assess the need for mandatory or voluntary CFIUS filings. Under the aforementioned rules implemented under the Biden administration, there is no safe harbor for failure to make mandatory filings. When CFIUS identifies national security risks relating to a specific transaction, the Committee has far-reaching authority to mitigate such risks by stopping or modifying pending transactions – or unwinding transactions that have already closed.
In years past, CFIUS primarily exercised authority over the defense, telecom, and aerospace sectors in the United States. Now, the Committee can impact any foreign entity’s acquisition or investment in the United States relating to numerous economic sectors. President Trump’s actions and stated policy directives indicate CFIUS will likely become more aggressive in policing requirements with mandatory filings. Further, enhanced scrutiny of transactions by the Committee is one of the few activities in Washington that receives strong bipartisan support.
In practical terms, when a foreign entity is contemplating an investment or acquisition of a company or real property in the United States, there is a framework of regulations that the entity must comply with in connection with the investment or acquisition if it (i) poses a national security risk or (ii) is within a certain proximity to a United States military installation. Issues that have raised perceived national security risks range from acquisitions of businesses with defense contracts to less obvious transactions such as foreign minority investments in offshore wind farm projects.
Further, certain states (and even some municipalities), including North Carolina, may require entities to undergo review under the Committee’s traditional “voluntary” filing framework in order to be eligible to receive economic development incentive packages in connection with a given project. When an entity decides to submit a CFIUS filing (either pursuant to a mandatory filing requirement or a determination that a voluntary filing is warranted or necessary in order to receive an incentive package), it must decide what form of filing to make. A full filing is known as a “Notice” filing. Alternatively, entities may also choose to file the short-form “Declaration” filing, which is subject to an abbreviated assessment period. While Declarations can be resolved more quickly and involve less expense than a traditional Notice filing, Declarations are not always more advantageous.
