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Sponsors of legislation to broaden the U.S. process for vetting foreign investments are pushing back on industry claims that the additional scrutiny would interfere with routine business activities.
Tech companies such as IBM Corp. have protested that the measure (S. 2098, H.R. 4311) would harm routine deals between U.S. companies and foreign firms. Lawmakers are particularly concerned about China, where they see encroaching business investment as a national security threat to the U.S.
The Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel headed by the Treasury Department, is responsible for assessing the national security risks of foreign transactions. The bill sponsors say CFIUS’s vetting system needs to be expanded to address strategic efforts by China to vacuum up U.S. technologies.
The legislation is bipartisan and has the support of the Trump administration. House sponsors say they want to get the measure to the president’s desk by August.
The bill would increase government oversight of cross-border business transactions involving “critical technologies,” a term that industry participants say is too vague. Sponsors counter that it’s vital for military security.
“This is laser focused on technology that’s military related,” Rep. Robert Pittenger (R-N.C.), lead House sponsor of the legislation, told Bloomberg Law in an interview.
Pittenger said he’s open to “clarifications” but doesn’t want to create “loopholes” that would weaken the measure.
Senate Majority Whip John Cornyn (R-Texas), who sponsors the companion bill in the Senate, Feb. 12 accused industry participants of trying to prevent the legislation from going forward.
“I would call this a patriotism deficit on their part,” he said in a speech on the Senate floor, without naming any companies.
“Despite the critics’ scare tactics, the bill would not sweep up harmless business transactions with no ties to national security,” Cornyn said.
Cornyn said the bill includes “reasonable safeguards” to prevent undue delay of regular business deals. For example, he said there would be a “safe list” of certain allied countries for which certain transactions are exempt from review. Routine transactions where other laws already address national security risks would be exempted, he said.
Jaret Seiberg, a Washington-based financial services analyst for Cowen Washington Research Group, said in a Feb. 15 research note that if the bill passes, he expects “Chinese deals for U.S. financial firms to get an even more hostile reception.”
The view of Chinese deals in the U.S. is already chilly. Chinese firm Ant Financial Group is the most recent company to scuttle a deal when it abandoned its purchase of MoneyGram International Inc. last month after CFIUS said it posed national security problems.
The Securities and Exchange Commission, which isn’t part of CFIUS, late Feb. 15 rejected a takeover the Chicago Stock Exchange by a Chinese firm, saying the bid didn’t meet legal standards.
Chris Krueger, who co-wrote the Cowen research paper with Seiberg, predicted the CFIUS bill has a more than 50 percent chance of passing this year. The desire to get “tough” with China and to strengthen the CFIUS review process is one of the few areas where there’s sufficient bipartisanship in Washington to get a bill across the finish line, he said.
The CFIUS bill is undergoing some changes to tighten the focus of provisions and make clear that ordinary business transactions won’t be inadvertently included, according to a Feb. 8 statement issued by Pittenger’s office.
But Pittenger said in that statement he’ll “never” soften the bill in light of industry concerns. He added that “certain American companies” need to decide whether they really care about America’s national security. He also didn’t name any companies.
While there’s broad support for the overall goals of the effort, a key sticking point is language that would give CFIUS increased jurisdiction over a wide variety of transactions between U.S. companies with “critical” technology — deemed as innovations that will sustain a U.S. competitive edge in the future — and foreign companies. Tech companies are watching those provisions with concern that they may be too restrictive on non-sensitive transactions such as computer hardware sales or software licensing.
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