International Trade > AG Trade Law > China Continues to Dominate CFIUS Review
23 Feb '16

On February 19, 2016, the Committee on Foreign Investment in the United States (CFIUS) released its annual report to Congress. CFIUS is an interagency committee that reviews the national security risks associated with investments that could result in foreign control of U.S. businesses, known as “covered transactions.” This report summarizes CFIUS activity in 2014, which is the most recent year for which it has compiled data. Here is what you need to know:

Figures and Trends: Notices and Investigations

  • Continued Rise in Number of Notices Filed with CFIUS. Companies filed 147 notices of covered transactions in 2014, up from 97 in 2013. This increase is consistent with the general upward trend since 2009 and a high volume of mergers and acquisitions in 2014.
  • Decrease in Percentage of Investigations. In 2014, CFIUS investigated 35 percent of covered transactions, whereas, in 2013, CFIUS investigated 49 percent of covered transactions. The 2014 investigation rate of 35 percent represents a return to the level of investigation activity in 2009–2012. According to CFIUS, the spike in cases subject to investigation in 2013 was due in part to the U.S. government’s shutdown in October 2013, which resulted in a backlog of cases during that year.

Breakdown of “Covered Transactions”

  • Manufacturing and Finance, Information and Services Remain the Most Reviewed Sectors. In 2014, 47 percent of covered transactions filed with CFIUS related to the manufacturing sector, and 26 percent related to the finance, information and services sector. The mining, utilities and construction sectors and the wholesale, retail and transportation sectors accounted for the other 27 percent of covered transactions filed with CFIUS.
  • China Buyers Reviewed the Most, Again. For the third year in a row, China accounted for the most CFIUS notices filed (24) by a foreign country. The United Kingdom accounted for the second highest number of notices reviewed (21) in 2014, up significantly from seven in 2013. Canada’s 15 notices made it the third most represented country in 2014.

Other Important Takeaways

  • CFIUS Updated Its Assessment of National Security Threats to U.S. Critical Technology. According to the CFIUS report, the U.S. Intelligence Community suspects that foreign governments or companies “may be” using a coordinated strategy to acquire U.S. companies that research, develop or produce critical technologies. The report indicates that “foreign governments are extremely likely to continue to use a range of collection methods to obtain critical U.S. technologies.” These conclusions mirror those reached in last year’s report. According to CFIUS, information technology companies, electronics companies, materials companies and semiconductor companies are the prime targets of such efforts.
  • CFIUS Updated the Assessment of Foreign Direct Investment in the United States by Countries that Do Not Ban Terrorist Organizations. Based on its study of foreign direct investment into the United States, CFIUS found no M&A transactions by investors from Cuba, Iran, Syria or Venezuela, which were countries identified in 2014 as not fully cooperating with U.S. antiterrorism efforts. This lack of investment activity is consistent with U.S. economic sanctions related to these countries.