[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
U.S. POLICY ON INVESTMENT SECURITY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE,
AND INTERNATIONAL FINANCIAL INSTITUTIONS
of the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
JULY 16, 2025
__________
Serial No. 119-34
Printed for the use of the Committee on Financial Services
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
61-135 PDF WASHINGTON : 2025
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
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SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS
WARREN DAVIDSON, Ohio, Chairman
ZACHARY NUNN, Iowa, Vice Chairman JOYCE BEATTY, Ohio, Ranking Member
FRANK D. LUCAS, Oklahoma JOSH GOTTHEIMER, New Jersey
PETE SESSIONS, Texas JUAN VARGAS, California
ANDY BARR, Kentucky BILL FOSTER, Illinois
ROGER WILLIAMS, Texas VICENTE GONZALEZ, Texas
YOUNG KIM, California RITCHIE TORRES, New York
ANDREW OGLES, Tennessee SEAN CASTEN, Illinois
LISA MCCLAIN, Michigan SAM LICCARDO, California
MARIA SALAZAR, Florida
C O N T E N T S
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Wednesday, July 16, 2025
OPENING STATEMENTS
Page
Hon. Warren Davidson, Chairman of the Subcommittee on National
Security, Illicit Finance and International Financial
Institutions, a U.S. Representative from Ohio.................. 1
Hon. Joyce Beatty, Ranking Member of the Subcommittee on National
Security, Illicit Finance and International Financial
Institutions, a U.S. Representative from Ohio.................. 2
WITNESSES
Mr. Jonathan Samford, President and Chief Executive Officer,
Global Business Alliance....................................... 3
Prepared statement........................................... 5
Mr. Brian Reissaus, Senior Advisor for National Security,
Freshfields US LLP............................................. 9
Prepared statement........................................... 11
Mr. Benjamin Joseloff, Partner, Cravath, Swaine & Moore LLP...... 16
Prepared statement........................................... 18
Dr. Sarah Bauerle Danzman, Associate Professor of International
Studies, Indiana University Bloomington........................ 26
Prepared statement........................................... 28
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. Warren Davidson:
Investment Company Institute (ICI) Statement................. 46
Hon. French Hill:
Sidley, U.S. Outbound Investment Regulations: Lessons and
Takeaways Six Months In.................................... 52
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative
Joyce Beatty
Dr. Sarah Bauerle Danzman.................................... 57
Written responses to questions for the record from Representative
Maxine Waters
Mr. Jonathan Samford......................................... 58
Mr. Brian Reissaus........................................... 60
Mr. Benjamin Joseloff........................................ 62
Dr. Sarah Bauerle Danzman.................................... 65
Written responses to questions for the record from Representative
French Hill
Mr. Brian Reissaus........................................... 69
Mr. Benjamin Joseloff........................................ 71
U.S. POLICY ON INVESTMENT SECURITY
----------
Wednesday, July 16, 2025
U.S. House of Representatives,
Subcommittee on National Security,
Illicit Finance, and International
Financial Institutions,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:04 a.m., in
room 2128, Rayburn House Office Building, Hon. Warren Davidson
[chairman of the subcommittee] presiding.
Present: Representatives Davidson, Lucas, Barr, Williams of
Texas, Kim, Beatty, Foster, and Liccardo.
Chairman Davidson. The Subcommittee on National Security,
Illicit Finance, and International Institutions will come to
order.
Without objection, the chairman is authorized to declare a
recess of the committee at any time.
This hearing is titled, ``U.S. Policy on Investment
Security.''
Without objection, all members will have 5 legislative days
within which to submit extraneous materials to the chairman for
inclusion in the record.
I now recognize myself for an opening statement.
OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
I welcome our distinguished witnesses to today's hearing on
U.S. policy on investment security where we examine the
Committee on Foreign Investment in the United States (CFIUS)and
its critical role in safeguarding our national security.
Today's testimony will provide a comprehensive overview of
CFIUS' authorities and operations to protect American interests
from foreign investment risks. Established in 1975 under the
Department of Treasury, CFIUS evaluates foreign investments
posing a national security threat. The 2018 Foreign Investment
Risk Review Modernization Act, otherwise known as FIRRMA,
expanded its jurisdiction to include non-controlling
investments in critical technologies, infrastructure, and
sensitive personal data. CFIUS must rigorously scrutinize
foreign investments from any source that could undermine our
technology, agriculture, energy sectors, and more, while
enabling beneficial investment inflows that actually strengthen
our economy.
I commend President Trump's February National Security
Presidential Memorandum--NSPM--directing CFIUS to intensify
oversight of adversarial investments while streamlining reviews
for trusted allies. CFIUS must operate efficiently to
neutralize threats without burdening American business.
However, reviewing inbound investments alone cannot fully
protect our national security. Congress needs to enact a robust
outbound investment bill with severe sanctions to prevent U.S.
capital from supporting industries and adversarial nations that
threaten our sovereignty. This legislation needs to provide a
clear, streamlined framework ensuring American companies can
comply without overly burdensome bureaucratic obstacles. Such a
bill will safeguard our innovation, farmland, infrastructure,
and critical technologies while fostering domestic investments.
This hearing will hopefully help illuminate how CFIUS and
an outbound investment regime could secure our Nation's vital
national interests. I urge my colleagues to support an outbound
investment bill and provide their input so that we can have
stringent sanctions and transparent framework to protect our
economic insecurity interests from all foreign threats. I yield
back, and I now recognize the ranking member for her remarks.
OPENING STATEMENT OF HON. JOYCE BEATTY, RANKING MEMBER OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
Mrs. Beatty. Good morning, and thank you, Mr. Chairman, for
holding this hearing, and thank you to our witnesses for
appearing here today to discuss investment security.
The Committee on Foreign Investment in the United States,
or CFIUS, plays a critical role in our national security
framework, conducting reviews of direct investment transaction
by foreign investors originating from both adversary and allied
nations to identify potential national security risks. Although
it is incredibly rare for CFIUS to recommend that the President
block a transaction, only occurring 10 times to date, the
committee's thorough vetting process is essential to ensure
that foreign investment of all kinds in the United States do
not endanger national security.
Another critical area of focus is outbound investment,
which I am sure we will talk about, flowing from the United
States to foreign countries and companies of concern. The Biden
Administration took a significant first step 2 years ago by
establishing the Outbound Investment Security Program at
Treasury, which screened certain U.S. investments in China
involving sensitive technologies and products that pose an
acute national security risk. While we are waiting to see what
changes the current administration plans to make to the
program, several actions taken by President Trump has raised
serious concern.
A recent high-profile case including TikTok and U.S. Steel
have demonstrated that the President is willing to disregard
CFIUS recommendations and, instead, leverage foreign investment
transactions in unrelated trade negotiations, creating
uncertainty for the private sector and a dangerous potential
for abuse. Further, President Trump seems to be engaging in his
own corrupt business deals with foreign investors. For example,
Trump's stablecoin is being used by an Abu Dhabi investment
firm to invest $2 billion into Binance, a crypto exchange that
has pleaded guilty to money laundering and sanctions
violations. Look, this type of transaction is exactly why CFIUS
exists, and it is why we cannot afford to gut the very laws and
resources that allows it to do its job. If my colleagues across
the aisle are truly concerned about national security risk,
they should be similarly outraged by the President's
activities. Instead, they are trying to eliminate critical
national security tools like the bipartisan--let me say that
again--the bipartisan Corporate Transparency Act, which
President Trump signed into law during his first term.
Gutting the Corporate Transparency Act (CTA) will hinder
CFIUS' ability to identify foreign threats by making it harder
for the committee, the Outbound Security Program, financial
institutions, and national security agencies to properly assess
who truly owns or controls a corporate entity. We simply cannot
play politics with our national security, and I think we will
all agree on that. Democrats are committed to resisting efforts
that would either undercut CFIUS or distort its purpose. I look
forward to learning more about how our investment security
framework is operating and exploring ways that we can
strengthen and not weaken it, and thank you again to our
witnesses. I look forward to our dialog and our questions with
you, and, Mr. Chairman, I yield back.
Chairman Davidson. Thank you. Today we welcome the
testimony of Mr. Jonathan Samford, President and CEO of Global
Business Alliance; Mr. Brian Reissaus, Senior Advisor for
National Security at Freshfields; Mr. Benjamin Joseloff,
Partner at Cravath, Swaine, & Moore; and Dr. Sarah Bauerle
Danzman, Associate Professor of International Studies at
Indiana University. We thank each of you for taking your time
to be here. Each of you will be recognized for 5 minutes to
give an oral presentation of your testimony. Without objection,
your written statements will be made part of the record.
I also ask unanimous consent to enter the ICI statement
into the record.
Without objection.
[The information referred to can be found in the appendix.]
Chairman Davidson. Mr. Samford, you are now recognized for
5 minutes for your oral statement.
STATEMENT OF JONATHAN SAMFORD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, GLOBAL BUSINESS ALLIANCE
Mr. Samford. Chairman Davidson, Ranking Member Beatty,
members of the committee, thank you very much for the
opportunity to be here with you today. I am Jonathan Samford,
President and CEO of the Global Business Alliance (GBA). GBA is
the premier advocacy voice of international companies in
America. Our members represent about 200 of the most well-known
international brands in the world that are globally
headquartered overseas but are major U.S. employers in their
own right. On average, these companies employ about 12,000 U.S.
workers, and, importantly, all of them are headquartered in
countries that are longtime friends and allies of the United
States.
Across America, more than 8 million workers earn a paycheck
from a company that made a deliberate decision to invest and
create jobs in the United States. Global investment is a key
pillar of America's economic strength. International companies
have invested over $5 trillion into the U.S. economy. They pay
workers 7 percent more than the private sector average, drive
12 percent of all private sector R&D, and produce nearly a
quarter of all U.S. exports. Manufacturing is the largest
sector for investment, growing 29 percent over the past 5
years. In Ohio alone, given the representation of the Buckeye
State, more than 320,000 Ohioans are employed by a global
company, and half of that is in the manufacturing sector.
This is not just about economics, though. It is also a
strategic advantage. Seventy-five percent of all investment in
the United States flows from just eight nations. These
investments build local supply chains, fuel innovation, develop
stronger workforces, and tie our allies' interests to our own.
Meanwhile, Chinese direct investment in the United States is
less than 1 percent in total and has declined since Congress,
on a bipartisan basis, passed FIRRMA by about 15 percent.
Global investment has long been a bipartisan priority. Every
President in the past 50 years has reaffirmed America's
commitment to open investment. Congress did the same through
FIRRMA in 2018, ensuring that CFIUS robustly protects national
security while keeping the U.S. open to trusted capital. Just
last month, the House passed the Global Investment and American
Jobs Act by unanimous support.
The inbound business community strongly supports a vigilant
national security-focused CFIUS process. CFIUS must stay
squarely focused on genuine national security threats and not
drift into broader industrial trade policy. When reviews become
unpredictable, it deters precisely the kinds of investments
that grow American jobs and American manufacturing. Updated
public guidance, improved interagency coordination, and a fast-
track pathway, such as the known investor portal for trusted
investors with proven compliance records, would streamline the
low-risk reviews, reduce administrative burdens, and allow
CFIUS to prioritize high-risk reviews, enhancing both
efficiency and investor confidence. CFIUS protects both our
national security and our economic competitiveness. These are
complementary results that have been forged through decades of
thoughtful bipartisan leadership.
In that vein, I want to thank Chairman Hill,
Representatives Barr, Auchincloss, and Strickland for leading
the Global Investment and American Jobs Caucus here in the
House, and for this committee for advancing policies that
strengthen America's workers and communities. Thank you for
this opportunity. I look forward to your questions.
[The prepared statement of Mr. Samford follows:]
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Chairman Davidson. Thank you, Mr. Samford. Mr. Reissaus,
you are now recognized for 5 minutes for your oral statement.
STATEMENT OF BRIAN REISSAUS, SENIOR ADVISOR FOR NATIONAL
SECURITY, FRESHFIELDS US LLP
Mr. Reissaus. Mr. Chairman, Ranking Member Beatty, members
of the subcommittee, thank you for offering me the opportunity
to appear before you today. My name is Brian Reissaus. I am a
Senior Advisor at the law firm, Freshfields, in Washington, DC.
My government experience, spanning roughly 15 years in three
administrations, includes leading the executive branch's
provision of technical assistance to Congress for the Foreign
Investment Risk Review Modernization Act of 2018, serving as
the senior career official for CFIUS from 2018 through 2023,
and contributing to the development of the executive order that
is the basis for the Outbound Investment Security Program.
Before getting into the substance of my remarks, I want to
say that the views I express here today are my own and not
those of my employer or any clients of my employer, and I am
not here representing the interests of any other party.
I would like to offer some observations on U.S. investment
security policy. It is important to note that foreign
investment overwhelmingly benefits the United States through
creating jobs, funding innovation, and fostering economic
growth. It also bolsters our national security. I witnessed
this firsthand throughout my government service. At the
Department of Defense, I oversaw foreign-owned defense
contractors that supply cutting-edge technologies to our war
fighters, and at CFIUS, I reviewed transactions involving
friendly foreign investors that provided capital that was
essential to funding U.S. innovation and emerging technologies.
This has all been possible because of the longstanding
bipartisan U.S. open investment policy. However, Congress
recognized that some foreign investment can pose national
security risks to the United States. CFIUS serves as a critical
safeguard against these risks. CFIUS does this through its
singular focus on reviewing transactions for cognizable
national security risks that could reasonably result from the
transaction, which, under the law, requires CFIUS to identify
credible evidence of a threat of vulnerability and the
consequence. Certain principles of the CFIUS process are
essential to maintaining an open investment environment while
allowing CFIUS to fully resolve national security risks. These
include statutory timelines that provide predictability to
transaction parties, evidence-based decisions that require
credible evidence that a transaction poses a national security
risk.
The tool of last resort, CFIUS only acts when there are no
other adequate or appropriate authorities that can address the
national security risk: proportionality, CFIUS' actions are
tailored to the national security risk arising from the
transaction, not issues unrelated to the proposed acquisition;
confidentiality that encourages transparency from transaction
parties and ensures CFIUS can conduct an apolitical national
security analysis; and accountability, congressional oversight
that ensures CFIUS operates consistent with its statute. This
framework has allowed CFIUS to adapt to emerging national
security risks while providing transaction parties confidence
that their filings would be handled fairly and efficiently.
The foreign investment landscape has shifted considerably
since Congress passed FIRRMA in 2018. At the time, Chinese
investment was at its peak, and CFIUS was grappling with an
increasing number of transactions that raised national security
risks, yet were outside of its jurisdiction. This is not the
case today. According to the American Enterprise Institute, the
People's Republic of China (PRC) spending here has been
negligible since 2018. Chinese investment around the world was
stable at a historically low level in 2024 and barely visible
in the United States. Despite the drop in Chinese investment,
the number of CFIUS filings withdrawn and refiled increased to
historic heights from 2021 to 2023, exceeding the previous
highs when Chinese investment was at its apex from 2016 to
2018. One can infer from this data that our U.S. partners and
allies have been increasingly impacted by delays in mitigation.
As Congress did when it passed FIRRMA, changes to the U.S.
investment security policy should go through a similarly
rigorous process that is, one, based on evidence of a defined
national security risk; two, assesses the impact that such
changes will have on the investment that does not pose a risk
to U.S. national security. The Outbound Investment Security
Program could benefit from such a process. As currently
structured, the regulations pose ambiguities that complicate
compliance. Better alignment between the national security
risks it is intended to solve and the definitions for covered
transactions would provide much-needed clarity to the private
sector. Given the negligible volume of Chinese investment into
the United States today, any expansion of CFIUS' jurisdiction
is more likely to disproportionately impact benign foreign
investment. It could blunt CFIUS' effectiveness as a national
security tool by reducing its ability to thoroughly review each
transaction.
Thank you for your interest in these issues, and I look
forward to your questions.
[The prepared statement of Mr. Reissaus follows:]
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Chairman Davidson. Thank you, Mr. Reissaus. Mr. Joseloff,
you are now recognized for 5 minutes for your oral statement.
STATEMENT OF BENJAMIN JOSELOFF, PARTNER, CRAVATH, SWAINE &
MOORE LLP
Mr. Joseloff. Thank you. Chairman Davidson, Ranking Member
Beatty, and distinguished members of the subcommittee, thank
you for inviting me to testify today. It is an honor to join my
fellow panel members in contributing to your work on U.S.
investment security policy. My name is Ben Joseloff. I am a
Partner at the law firm of Cravath, Swain & Moore. Today I am
presenting my own views and not those of my firm or of any
client of my firm. The perspectives I will offer today are
informed by over 10 years of experience in both the public and
private sectors working on matters relating to the Committee on
Foreign investment in the United States, or CFIUS.
The United States of America has long been known as one of
the most welcoming economies for foreign direct investment.
This is in large part because the U.S. Government, through
administrations of both parties, has recognized the benefits
that come with foreign capital, but not all foreign investment
is benign. Malign actors can and do try to take advantage of
our general openness by using foreign investment to harm U.S.
national and economic security. Thus, the United States has had
for 50 years a mechanism to address harmful foreign direct
investment. That mechanism is CFIUS.
CFIUS operates within and is a part of the U.S. open
investment framework. This means that CFIUS should not be seen
as an exception to U.S. open investment policy. Rather, in my
view, CFIUS is best understood as a mechanism that enables and
perpetuates our commitment to an open investment environment. I
believe that support for a robust, well-resourced, and
efficiently run CFIUS not only helps preserve U.S. national and
economic security, but also enables the continuation of our
Nation's longstanding bipartisan open investment policy.
This is the theoretical underpinning of CFIUS, but how does
CFIUS operate in practice? In my written testimony, I provide
details regarding how the CFIUS process affects U.S. businesses
and their foreign investors. The key takeaway is that the CFIUS
process can result in noteworthy timing and economic friction
in cross-border transactions, and this friction has real costs
and consequences. Of course this is not necessarily
inappropriate. As I noted earlier, CFIUS plays a critical role
within the broader U.S. open investment framework, and some
transaction costs are unavoidable in a system that relies on
thorough, case-by-case assessments carried out by subject
matter experts across the U.S. Government.
To me, the real question then is the following: can we be
confident that we have reduced the transaction costs imposed by
the CFIUS process to those that are necessary and appropriate
to protect U.S. national security? In my view, the short answer
is not yet, but CFIUS is trying, and they are making good
progress. The longer answer is that in my 10 years of CFIUS-
related experience, both in government and in private practice,
my observation is that the individuals who administer the
process are doing their best to accomplish their critical
national security mission as efficiently as possible. This is
true both for the dedicated career civil servants who undertake
the day-to-day work of CFIUS as well as the political
appointees who ultimately make the difficult decisions.
To conclude, I know there are various legislative proposals
relating to CFIUS the members of the subcommittee may be asked
to consider. Rather than opining on any specific legislation, I
would encourage members to ask two questions with respect to
any CFIUS-related bill that crosses your desk. First, will the
legislation help the individuals who administer the CFIUS
process increase efficiency without harming U.S. national
security? Second, if the legislation will create new economic
friction, is that friction truly necessary in order for CFIUS
to achieve its mission? With these questions as a guide, I
believe that the members of the subcommittee will be to be well
placed to ensure that we continue to have an inbound investment
security regime that supports both American security and
American prosperity, and that CFIUS will continue to be
regarded as the global gold standard for the national security
regulation of foreign direct investment.
Thank you again for the opportunity to participate today. I
look forward to your questions.
[The prepared statement of Mr. Joseloff follows:]
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Chairman Davidson. Thank you, Mr. Joseloff. Dr. Bauerle
Danzman, you are now recognized for 5 minutes for your oral
statement.
STATEMENT OF DR. SARAH BAUERLE DANZMAN, ASSOCIATE PROFESSOR OF
INTERNATIONAL STUDIES, INDIANA UNIVERSITY BLOOMINGTON
Dr. Bauerle Danzman. Thank you, Chairman Davidson and
Ranking Member Beatty, for inviting me to testify on evolving
investment security issues of concern to the American people.
It is an honor to speak with the subcommittee today. The views
I express in my testimony are my own and do not necessarily
reflect the views of Indiana University or of the Atlantic
Council where I am a fellow.
As Congress evaluates current national security regulation
for inward and outbound investment, I encourage representatives
to ensure that any additional congressional action aligns with
the following five principles. First, investment security
policy should be clear to U.S. companies and foreign investors.
The compliance burden of investment regulation has increased
tremendously in recent years. Investors need to understand what
their obligations are and believe these restrictions serve a
legitimate public good. Frequent updates to investment rules
make the policy environment unstable and expectations for the
future regulatory landscape uncertain. Retroactive application
of law generates concern over future respect for property
rights and should be avoided.
Second, investment security should be consistently applied.
Investors and companies should not be differentially treated
based on personal relationships with or connections to
administration officials. For CFIUS, this means parties before
the committee should not receive favorable treatment if they
are well connected to the administration or to a Member of
Congress. For the Outbound Investment Security Program, this
means that the process for receiving an exception to
prohibition should be clearly publicized, subject to a rigorous
regularized review process, and the outcome of such
determination should be quickly notified to the public. In the
absence of oversight, CFIUS and the Outbound Program could
become the site of special dealing that is inconsistent with
the rule of law or the foundations of a dynamic market-based
economy.
Third, investment security tools should be contained to a
narrow set of clear national security concerns. Overregulation
would reduce investment in the United States, negatively
affecting jobs and innovation capacity. Congress should resist
the urge to further expand CFIUS' authorities to address broad
national interest concerns. It should also reaffirm that
mitigation agreements should be proportional to identified
risks and should only be used to address national security
concerns rather than expansive economic competitiveness issues.
Any outbound legislation should focus on national security
risks associated with a narrow set of technologies for which
the U.S. holds an innovation lead. The likely innovation costs
of restricting outbound investment in other technologies is too
high to entertain.
Fourth, investment security policies should be
collaborative. U.S. power benefits from centrality in global
innovation, finance, trade, and diplomatic networks, and our
strategies should function to further embed us in those
networks rather than insulate us from them. Building
multilateral support and coordination is necessary for
effectively countering PRC efforts to gain access to Western-
developed dual-use technologies to modernize their military
capabilities. Technology investment and know-how are very hard
to control unilaterally. Acting multilaterally also reduces the
cost of monitoring and enforcement, which saves U.S. taxpayer
money and frees additional resources for investments in
American families, workers, and communities.
Finally, investment security policies should be curious.
Many of the investment security policies that the United States
has implemented in recent years are addressing problems for
which there remains a great deal of uncertainty about the size
of the concern and the cost of potential solutions.
Consequently, policies in this area are risky. We have less
certainty over their effect and their unintended consequences.
Therefore, ongoing assessment of policy effectiveness is vital.
Investment security policies should be subjected to cost-
benefit analysis at regular intervals to better understand the
tradeoffs to economic dynamism and technological innovation
that investment restrictions induce. If measures of innovation
drop, Congress should be prepared to work with industry to
better understand why and should be willing to reverse course
if it becomes clear that a policy has failed or has
unacceptable unintended consequences.
Thank you, Mr. Chairman. I look forward to answering your
questions.
[The prepared statement of Dr. Bauerle Danzman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you very much. We will now turn to
member questions. I now recognize myself for 5 minutes of
questions.
I support President Trump's February National Security
Presidential Memorandum, which encourages foreign investment
while protecting national security. Specifically, it states
that ``CFIUS will be used to restrict Chinese investments in
strategic U.S. sectors, like technology, critical
infrastructure, healthcare, agriculture, energy and raw
materials,'' and that ``The United States will protect our
farmland and real estate near sensitive facilities, strengthen
CFIUS' authority over greenfield investments, and restrict
foreign adversary access to U.S. talent and operations in
sensitive technologies.'' Mr. Reissaus, in your testimony, your
opening statement, you said CFIUS only acts when other tools
are not available. Would you concede that tariffs can be used
for national security interests?
Mr. Reissaus. Thank you, Mr. Chairman, for the question.
When CFIUS looks at a transaction and identifies a risk, its
first step is, ultimately, to look at those other authorities
that are available and then determine whether they can actually
address that concern. That could be something as simple as
looking at export controls to determine whether that is
sufficient to address the transfer of a particular piece of
technology, but it could also be to look at other economic
tools that may relate to the national security risk.
Chairman Davidson. One of those tools would be tariffs,
right?
Mr. Reissaus. During my time, I had not seen tariffs used
as a potential consideration. However, I think tools that
address broader strategic issues can be an effective measure to
avoid transactions that do present concerns.
Chairman Davidson. Clearly, President Trump views it as a
national security thing, and when we design the tariffs, you
have 232 and 302 and other provisions in tariffs because
sometimes it is a very efficient tool. People could debate
whether it should be used the way that it is being used, but
clearly, it is a tool that is available, and I just think as we
are looking at CFIUS reviews, it is worth considering. It may
be a fast thing to do is get into a negotiation, use tariffs to
get the attention, and get the underlying issue addressed. As
we are looking at CFIUS, Mr. Samford, when your organization
emphasizes the importance of foreign investments into our
economy how have CFIUS' expanded reviews under FIRRMA impacted
multinational companies' investment decisions in the United
States?
Mr. Samford. Thank you for the question, Mr. Chairman. As
you are well aware, since 2018, international investment has
actually increased precipitously from friends and allies in the
United States. As I mentioned in my opening, eight countries
constitute 75 percent of all investment in the United States;
that is Japan, Canada, and European countries, all of them
longtime friends and allies of the United States. The top
investors in Ohio, for instance, reside from those countries as
well. What we have seen through FIRRMA is that Chinese
investment in the United States has dropped about 15 percent
since then. The reviews are less through the CFIUS process
around Chinese investment, as was mentioned earlier, but I
think that companies continue to value the United States
economy, America's workforce, and the opportunities to build
and create things here in the United States.
Chairman Davidson. Yes. We have certainly seen a brisk pace
this year. Hopefully, we keep building on it and we do it
efficiently so that we can get it done, and I think the
tailoring that you have all referenced has got the attention, I
think, in a bipartisan way. Mr. Reissaus, on the Outbound
Investment Security Program, I strongly agree with you on how
important clear definitions of covered transactions are in
order to implement the program. Could you elaborate on how
specific or narrow these definitions need to be for proper
enforcement? For instance, what if a large corporation has some
business that falls undercover transaction and some that does
not? I mean, you can think about Amazon in the United States as
Amazon Web Services (AWS). That might be considered sensitive
if it was a Chinese investment, but you might do their air
cargo business, and you are doing business with Amazon either
way, so how do you parse that?
Mr. Reissaus. Mr. Chairman, that is an excellent question,
and I think that is the exact challenge that many private
sector parties are dealing with right now under the Outbound
Investment Security Program, which is trying to understand what
activities may be captured, which ones are clearly the ones
that the government is concerned about and needs to be
addressed. I think the key thing that does need to happen with
the Outbound Investment Security Program is for it to go
through a process that Congress put FIRRMA through, and the key
elements of that which allow FIRRMA to be successful in
targeting the core national security issues is, first, defining
what that is that needs to be solved. I think there is a lack
of clarity in the private sector and amongst many to understand
what exactly the problem is that is trying to be solved.
Chairman Davidson. Yes, thank you, and I would submit that
the Office of Foreign Assets Control (OFAC) does get pretty
precise, so we will look at how we can do that. My time has
expired, and I now recognize the ranking member for her
questions.
Mrs. Beatty. Thank you, Mr. Chairman. Thank you to the
witnesses, and thank you, Mr. Samford, for acknowledging Ohio
and the 300,000-some employees. I hope I get to talk to every
one of them. We like numbers like that and people being
employed.
Let me go to my first question for you, Dr. Bauerle
Danzman, and I am probably going to, if I have time, ask
everybody else if they have an opinion on this. In your
testimony, you address the need for consistency in the CFIUS
review process. Can you address some of the concerns associated
with President Trump's response to certain high-profile CFIUS
cases, and what are the broader national security risk, which I
will ask everybody else, of this kind of approach to investment
security?
Dr. Bauerle Danzman. Thank you, Ranking Member Beatty, for
your question. I would start by saying that national security
is not a bargaining chip in any trade negotiation. If there is
a national security problem, you need to address the national
security problem, and it should not be traded away for other
unrelated issues. The second thing I will say without getting
into specifics of any deal is that, in general, and I did work
on the committee in 2019 and 2020, that in CFIUS world, any day
in which a CFIUS transaction is in the news is a bad day for
CFIUS. We want the committee to be able to employ a rigorous,
fact-based assessment of every single transaction, and the
point of the CFIUS process is to do that rather than employ a
politicized review of the transaction. We should try as much as
possible to keep the committee's work at the working level
until it rises up to a Presidential decision, and we should
refrain from situations in which elected officials are opining
on deals before the committee before they are determined.
Mrs. Beatty. Thank you. Anybody else have a comment that
they want to add on the broader national security risk of this
kind of approach to investment security?
[No response.]
Mrs. Beatty. Interesting. Experts in it, you have no
comment either way?
[No response.]
Mrs. Beatty. Let me go to my next question. I will come
back to you, Dr. Bauerle Danzman. As you know, the Outbound
Investment Security Program, which has been active for 6
months, we do not have any reporting from Treasury on that
process yet. What factors or data would you expect to see
demonstrate that the program has been successful, or what
questions should this committee ask of Treasury regarding the
activities?
Dr. Bauerle Danzman. Of course, we are in very early days
of the Outbound Program. I think when you think about the sorts
of information that you would like to have Treasury provide,
that would be information on what types of transactions are
going before the committee. Actually--excuse me--for Outbound,
that is a notification and a prohibition, so understanding how
many transactions are being notified, what is the process of
looking for non-notified transactions that should have been
prohibitive, have any been found. As the program matures,
understanding how this is affecting things like innovation
capacity is really important, so doing reviews over time about
what is happening to the innovation ecosystem around these
technologies that are scoped into review is an important thing
that the committee should be assessing.
Mrs. Beatty. Thank you. Let us try this again with the
other members. Is there anything that this committee should be
asking of Treasury regarding activities?
Mr. Reissaus. One recommendation I would have is trying to
understand the number of transactions that Treasury is looking
into from an enforcement matter, and the percentage of those
that end up being either failure to notifies or were violations
of the prohibition. I think that would provide a clear
indication of what is actually occurring, or is this creating a
significant burden on parties on the enforcement side, despite
the lack of evidence of noncompliance.
Mrs. Beatty. Thank you. I yield back, Mr. Chairman.
Chairman Davidson. Thank you Mrs. Beatty. I now recognize
the gentleman from Oklahoma, Mr. Lucas, who is also the
Chairman of the Monetary Policy Task Force.
Mr. Lucas. Thank you, Mr. Chairman, and I would like to
start with Mr. Joseloff and Mr. Reissaus. In your experience,
would it be helpful to finally place the Secretary of
Agriculture as a permanent member on CFIUS for ag-related
transactions, like my bill, the Agricultural Risk Review Act
would? How does having subject matter expertise in specific
industries help inform the CFIUS review process?
Mr. Joseloff. I am happy to start. Thank you for the
question. I think it is absolutely critical that the Department
of Agriculture be involved in CFIUS reviews of transactions
that involve agriculture or food security issues. In my
experience, when I was serving in government, the Department of
Agriculture was involved in transactions that raised those
issues. I think the committee does a good job of recognizing
the different subject matter expertise around the U.S.
Government and calling in that expertise, as appropriate, in
reviewing transactions.
Mr. Reissaus. I would agree with Mr. Joseloff. In my
experience, the Department of Agriculture not only was
consulted on those transactions, but often served as a co-lead,
so certified to Congress at conclusion of those deals. So, it
is very important that the United States Department of
Agriculture (USDA) is included in those matters, and I think I
understand there was a memorandum of understanding (MOU) signed
between the Department of Treasury and the Department of
Agriculture that memorializes the process to ensure that
continues.
Mr. Lucas. Absolutely, and I thank you both for those
comments, and my bill passed the House this month, and based on
your testimony, our friends of U.S. Senate will actually take
it up. Mr. Reissaus, Mr. Samford has recommended a fast-track
pathway for trusted investors to go through the CFIUS review
process. What guardrails would be appropriate for a program
like that so that we are re-incentivizing the right type of
investment?
Mr. Reissaus. Thank you, sir, for your question. I think
the first one is the committee needs the ability to still
assess both the threat, so receiving the intelligence
community's assessment of the particular investor, and they
still need to be able to look at the context of the deal
itself. What is the U.S. business, and what does it do that is
important for national security so that it can act if it needs
to? I think what needs to be focused on, though, is how do you
streamline the process so that the committee is focused on
those narrow issues and is not looking into unrelated matters;
so, how can it be more targeted in the questions that it poses
to parties? How can it streamline the submissions of
information so that can happen more quickly, and how can it
improve its decision making so that those timelines are much
shorter to then facilitate that benign investment?
Mr. Lucas. Absolutely. Mr. Samford, in your view, are
national security and an open investment climate inherently at
odds, or can we encourage foreign direct investment without
compromising our security interest and why is it important that
we have policies that support both of those values?
Mr. Samford. Absolutely, Congressman. Thank you for your
leadership in this space. I think they are complementary
objectives, and I think CFIUS is a good example. Over its
transformation since its inception in the 1970s to today,
Congress has met the challenge through the framework of CFIUS
as threats have emerged and changed, and I think your
leadership in this space is reflective of that with your
legislation. I think that it is important to remember that the
vast majority of investment into the United States comes from
longtime friends and allies, and it is into sectors and
businesses that are wholly unrelated to national security.
These are great-paying jobs, many of them in the manufacturing
sector. About 40 percent of all foreign direct investment (FDI)
jobs are in U.S. manufacturing, and so having the ability to
provide good-quality jobs, high-paying jobs that do not require
mountain of debt and college debt is a benefit. One of the
things that international companies bring to the U.S. is not
just the capital they need to operate here, but they also bring
world-class know-how; importing that best practice is not only
beneficial to the companies, but also the communities where
they operate.
Mr. Lucas. Thank you, and thank you to the panel, and I
yield back, Mr. Chairman.
Chairman Davidson. Thank you, Mr. Lucas. The gentleman from
California, Mr. Liccardo, is now recognized for 5 minutes.
Mr. Liccardo. Thank you, Mr. Chair. I represent a
significant portion of Silicon Valley, and we have gotten an
awful lot of folks who are very frustrated the CFIUS process
and would like to see many reforms aligned with what has been
discussed here, so I appreciate the testimony of everyone here.
Particularly, as we think about consistency and some of the
challenges Mr. Joseloff referred to with regard to defining
jurisdiction, I understand it is something that consumes an
awful lot of time and legal analysis, and that creates a lot of
sand in gears. I guess the question I have is, really, are
there specific proposals out there, either that have already
been introduced or language that you see organizations working
on, like the Land Council or others, that could help us better
define jurisdiction so at least parties can get to the question
more quickly of whether this is governed by CFIUS or not?
Mr. Joseloff. Thank you very much for the question. As I
said in the written testimony that I submitted, I think one of
the key improvements that could be made to the kind of
jurisdictional process would be a review of the definition of
``critical technology,'' specifically as it applies in kind of
mandatory filings, to see if there is a way to reduce the
burden on companies of having to perform export control
analysis, which can be timely and costly on things that they do
not actually export. So, that is one concrete idea.
Mr. Liccardo. Thank you, and do any of the other witnesses
have any specific suggestions?
Mr. Reissaus. Not necessarily from a legislative
standpoint, but I think, from my experience, especially in the
government, I did recognize that there were challenges in the
venture capital (VC) space because of the need for companies to
receive capital quickly. I think focusing on, whether it is
even from congressional oversight, to ensure that the committee
is processing transactions quickly so that, essentially, benign
capital through VC investment can occur within the timelines
that are often very short for those types of transactions, is a
way to kind of help ensure that the committee is not
unnecessarily impeding. I think that important investment.
Mr. Liccardo. Thank you. I am sorry. Doctor?
Dr. Bauerle Danzman. I will just add as well----
Mr. Liccardo. Yes.
Dr. Bauerle Danzman [continuing]. that outreach is very
important here. Treasury already does outreach to the venture
community, but I think continued outreach and really
emphasizing educating venture on their obligations is an
important part of the puzzle here.
Mr. Liccardo. Thank you. Dr. Bauerle Danzman, since you
just spoke, I am curious to follow up on the concerns about
consistency. Are there specific examples under this
administration where you are seeing considerations outside of
national security playing into a negotiation?
Dr. Bauerle Danzman. I am not privy to the inside
negotiations on CFIUS, and I hesitate to opine too directly on
specific transactions, but I do think that there is a sense
that, in some transactions, there has been a desire to also put
in place obligations that have more to do with economic
competitiveness as opposed to national security specifically,
and the use of mitigation agreements that have a lot of various
components to it that seem quite far away from national
security, especially if a transaction is not related to an
entity that is directly integrated into the defense industrial
supply chain. I would be worried and cautious about those kinds
of mitigation terms.
Mr. Liccardo. Doctor, I know a colleague of yours at the
Atlantic Council wrote a piece back in February specifically
expressing concern about limitations in cross-border
investments imposed by the NSPM in this administration. Are
there other elements that you would point to, other concerns in
addition to the ones you just raised?
Dr. Bauerle Danzman. With respect to inbound or outbound? I
am sorry.
Mr. Liccardo. In this case, well, I guess it was cross-
border, so that would be either.
Dr. Bauerle Danzman. Yes. I think that there are two
things. First is that we should be really cautious about
putting too many restrictions on outbound investment in
technologies for which the U.S. is not at the cutting edge
because by investing abroad, that is a way for us to bring back
technology to the United States that is important and that we
could use.
Mr. Liccardo. Thank you, Doctor.
Chairman Davidson. Thank you, Mr. Liccardo. The gentleman
from Kentucky, the Chairman of the Subcommittee on Financial
Institutions, Mr. Barr, is now recognized for 5 minutes.
Mr. Barr. I want to start by picking up right where Mr.
Liccardo left off and where Ranking Member Beatty, where she
was in her line of questioning about the importance of keeping
the CFIUS process and a prospective outbound regime
depoliticized, and that is precisely why I was so concerned
about the prior administration's politicization of the Nippon
Steel deal. I am respectful of the fact that the ranking member
represents Ohio where Cleveland-Cliffs is, but this was a deal
that was highly politicized right before a national election
where the United Steelworkers came into the Oval Office and
helped the prior President kill a very beneficial investment
that advanced American national security.
Remember, Nippon Steel is a very technologically advanced
steel company domiciled in an ally nation: Japan. This was an
investment that was providing competition and preventing a
monopoly in the United States on steelmaking. It strengthened
U.S. Steel and enhanced U.S. national security. The fact that
CFIUS did a rigorous re-review away from politics, made the
correct recommendation, and then the President followed the
career advice of CFIUS was a rectification of a politicization
in the previous administration. I think the points made by my
friends on the other side of the aisle of keeping politics out
is very, very important, and I think we should take a lesson
from the politicization of CFIUS from the prior administration
here. I appreciate the current administration fixing that.
Let me ask a question about outbound because we should
learn from the virtues of CFIUS and also maybe some of the
shortcomings of CFIUS as we work on an outbound regime. Mr.
Reissaus, let me ask you, last year, the Select Committee on
the Strategic Competition with China found that five venture
capital firms funneled more than $1.9 billion to AI companies
supporting China's human rights abuses and military
modernization. At least $1.2 billion went into the PRC
semiconductor industry. Clear controls are needed in respect to
outbound investments into Chinese entities, and that is why I
appreciate President Trump's National Security Memorandum,
America First Investment Policy, and it is why I introduced the
Fight China Act, which takes both an entity-and sensitive-
technologies-based approach. Do you agree that using all of the
tools in the toolbox--time-tested sanctions and forward-looking
prohibitions on sensitive technologies--is the best way to
ensure we are spreading the net wide enough to prohibit
investments that progress Chinese military and surveillance
ambitions, but not too much to impede benign and beneficial
outbound investment?
Mr. Reissaus. Thank you, Congressman, and appreciate the
question. It is an important one, and I think the answer to
understand whether or not you are using all of the tools
necessary is first understanding what is the problem that needs
to be solved. Is it the fact of an investment, or is it, I
think, what President Biden's order was attempting to address,
which was smart money? I think once we can understand what that
is, the appropriate tool or tools will then I think flow from
that, which is, is it a sanctions-based approach, an entities-
based approach, or is it a transactional approach as was taken
by the Biden Administration.
Mr. Barr. Mr. Samford, as a fellow Kentuckian, it is no
surprise that a Centre College graduate has risen to such
influence as you, so congratulations on your new position. You
are going to do a great job there advocating for beneficial
foreign investment in the United States that makes the United
States competitive. As we think about the outbound investment
regime, how can we make it easier for U.S. investors in terms
of making these decisions through a red light/green light
system easier than maybe even CFIUS is for companies to
navigate the CFIs process? How important is it to have a red
light/green light clarity as opposed to uncertainty that
sometimes comes with CFIUS?
Mr. Samford. Thank you for that question. To be succinct, I
think CFIUS provides a nice framework. CFIUS is designed to
look at specific threats and specific circumstances. I think
those same principles could be applied to the outbound.
Obviously, the Global Business Alliance, we represent U.S.
subsidiaries. Most of our focus is on the inbound business, the
insourcing of jobs to the United States. Very few of our
companies outsource or are investing abroad from the subsidiary
here in the United States, but I think for those that are U.S.
companies investing abroad, CFIUS provides a framework in that
it looks at deals on a case-by-case basis, looking for specific
threats and working to mitigate those specific concerns.
Mr. Barr. Thank you. I yield.
Chairman Davidson. Thank you, Mr. Barr. The gentleman from
Illinois, who is the Ranking Member of the Financial
Institutions Subcommittee, Mr. Foster is now recognized for 5
minutes.
Mr. Foster. Thank you, Mr. Chair, and I appreciate the
bipartisan concern over trying to depoliticize the things that
ought to be purely national security concerns. I think it is a
very useful principle, and I look forward to my colleagues'
public comments on, say, the tariff thing of Canadian steel and
aluminum, which was done on allegedly national security
grounds. It is something that we will have to continue talking
about, and I think, in the end, Congress is going to have to be
more explicit, given the behavior of the current
administration.
Let us see. One specific thing that came up, are China's
capabilities in, say, integrated circuit manufacture, limited
in any way by the amount of capital, or is it simply technology
that limits them right now, because my feeling, it is just
technology. They are putting in so much capital that they do
not know how to spend it sensibly. Does anyone agree or
disagree with that?
Ms. Bauerle Danzman. I would say that China is very good at
the extensive margin and less good at the intensive margin, and
so, yes, they can throw a lot of capital at a problem. One of
the points of the Outbound Program was that, along with
capital, at least outbound foreign direct investment and
venture capital comes with know-how and technology alongside
that capital. That is really what China wants from U.S. capital
markets and U.S. companies, and that is the reason why outbound
was focused----
Mr. Foster. Sure.
Dr. Bauerle Danzman [continuing]. not on portfolio flows.
Mr. Foster. Yes. No, I understand. We should keep our eyes
on the technology. It is not money that limits Chinese progress
in many things. Let us see. Several members have emphasized the
need for technical expertise both inside CFIUS and in the
agencies it partners with. Now, do you believe that the recent
attacks on civil servants, generally, and the steep budget cuts
and staff of CFIUS member agencies are going to support the
efforts of this, or is it going to be a negative in recruiting
people going forward? Comments from anyone? Dr. Bauerle
Danzman, I guess.
Dr. Bauerle Danzman. I will start by saying that it is
always hard to attract subject matter experts in emerging
technologies to work in the U.S. Government, and during my time
on the committee, that was a concern that came up often. We
need to do more to attract those subject matter experts to be
willing to bring their gifts, bring their talents and their
expertise to the U.S. Government.
Mr. Foster. Any other comments?
Mr. Reissaus. I would like to point back to FIRRMA, and I
think Congress did two really important things in 2018 that
greatly expanded the committee's ability to address this issue.
One is it provided direct hire authority so the committee and
members could directly recruit these types of people, and two,
it provided significant resources to do that. Over the years,
what I saw was, one, the committee could leverage expertise
from individuals within the Department of Defense that are very
familiar with sensitive technologies, experts and Ph.D.s at
National Labs but what you were seeing and I think you continue
to see is, there are more technical experts, Ph.D.s that work
in, for example, the department of Treasury because of these
resources that Congress provided.
Mr. Foster. Yes. I am very familiar with National Labs,
having worked there for 25 years, and I can tell you they are
hemorrhaging talent because of the actions of this
administration. It is really bad, and when you reach out to
partner organizations, you will find in many instances that the
experts you used to deal with there have quit in disgust. It is
really bad out there, and at least, for sure, in the Department
of Energy that I am very familiar with.
Now, Dr. Bauerle Danzman, the U.S. has long been an
attractive location for foreign investment. I believe this is,
in large part, due to our stable economy and financial markets,
talented workforce, and commitment to promoting fair and
orderly business dealing. The U.S. has been also historically a
leader in anticorruption efforts. The Corporate Transparency
Act and the Foreign Corrupt Practices Act are two pieces of
legislation that really aim to crack down on corruption and
illicit finance but since taking office, President Trump has
demonstrated his willingness to backtrack on anticorruption
efforts and rolling back on enforcement of both the CTA and the
Foreign Corrupt Practices Act (FCPA). Is this going to cause
long-term problems for the enthusiasm for just investment in
the United States?
Dr. Bauerle Danzman. If we are talking specifically about
the CTA, I think that the CTA would provide really important
information to investment screening professionals so that we
could actually move forward with review, including by
increasing the pace of an ultimate beneficial owner (UBO)
discovery and so forth.
Chairman Davidson. The gentleman's time has expired. I
would ask for further comments to be submitted for the record.
Chairman Davidson. The gentlewoman from California, Mrs.
Kim, is now recognized for 5 minutes.
Mrs. Kim. Thank you, Chairman Davidson and Ranking Member
Beatty, for holding today's hearing. Thank you, witnesses, for
joining us.
Foreign direct investment has been a key part of making
America one of the greatest countries in the world, and it has
ensured the Americans remain employed, and FDI-related
employments in the United States is really highest in the State
of California with 15 percent related to that. I just
appreciate the FDIs coming into our country, but we also want
to also ensure that our American direct investments going
abroad is also protected. None of that could occur without the
balanced role that the Committee on Foreign Investment in the
United States plays in shielding national security while still
facilitating our foreign investment.
First question to you, Mr. Joseloff. For those who have not
gone through that CFIUS process, could you detail how that
process works and what kind of information companies are
expected to provide?
Mr. Joseloff. Thank you, yes. The process usually starts at
the very earliest stages of a cross-border transaction with the
parties thinking about whether their transaction would be
within the jurisdiction of CFIUS. If so, whether it would
trigger a mandatory filing requirement, or if the parties are
at liberty to choose whether to file voluntarily, and then,
ultimately, they have to think about will their transaction
likely raise national security concerns. If they do file with
CFIUS, either because they have to or because they have chosen
to do so voluntarily, the committee requires a wide range of
information from both the foreign investor and the U.S.
business. That information on the foreign investor side touches
on who are the ultimate owners of the company, what is their
business, where are they located, what connections do they have
to other countries. On the U.S. business side, it looks at what
type of technology do they have--do they have government
contracts, where are their facilities located--a whole range of
information on both sides trying to get at this question of
does a national security concern arise from the transaction.
Mrs. Kim. Thank you. I want to do a follow up question to
you, Mr. Samford, and ask, what do you see the Known Investor
Pilot Program fitting into the CFIUS mandate of balancing
national security while securing the greater investments from
our allies and partners?
Mr. Samford. Thank you for that question, Congresswoman. I
think that this has tremendous potential. That was one of the
facets of FIRRMA, when it was passed in 2018, was to create a
mechanism for those that are frequent filers of CFIUS to be
able to expedite the process. There have been a couple of
iterations on that. This proposal, I think, is still being
worked through in terms of what it will look like, but I think
anything we can do to ensure that resources are used
efficiently, that is to say that CFIUS is focused on the
highest-risk transactions, and where you have well-established,
well-known investors, frequent investors, that those can be
handled efficiently.
Mrs. Kim. Improvements like that Known Investment Program
are what we need to continue to see CFIUS to ensure there is
strong foreign investments in national security. I fear that
under the previous administration, we saw the mission of CFIUS
thrown to the side, and, instead, the committee was close to
becoming a political tool. How does U.S. become less
competitive for foreign investments since CFIUS become a
political tool?
Mr. Samford. There is no doubt that the world watches what
happens with CFIUS reviews, and I think you are referencing the
Nippon Steel-U.S. Steel acquisition. That was a situation where
you had a well-known investor company that is operating in the
United States, from our largest country, investing in Japan, a
country with whom we have a mutual defense treaty. I think that
deal was largely handled outside of the CFIUS process where you
had the previous administration weighing in prior to a formal
review taking place.
Mrs. Kim. Thank you. I do want to make a last comment and
highlight the Outbound Investment Security Program. When
President Xi Jinping first rose to power in China, he stated
that the Chinese Communist Party's (CCP's) foundation within
the private sector was weak, and he outlined an economic
philosophy where private sector existed to carry out the
party's work and enhance the party's philosophy. I just wanted
to point that out because in 2017, nearly three-quarters of
private enterprises had an established CCP cell, and by 2021,
the CCP took complete coverage of all 500 of the Nation's
largest firms. As we consider investment security, it is
important that we not just look at the investment dollars that
are coming into America, but also the dollars going out to
China, so----
Chairman Davidson. The gentlelady's time has expired.
Mrs. Kim [continuing]. I just wanted to make that point,
and thank you so much for allowing me to go over time, and I
yield back.
Chairman Davidson. The gentleman from Texas and also the
Chairman of the Small Business Committee, Mr. Williams is now
recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
all of you for being here today. As the global economy becomes
more competitive, especially in advanced technologies like AI
and semiconductors, American investors are trying to position
the capital where it matters most. Under the Biden
Administration's Outbound Investment Rule, U.S. firms are now
required to self-determine if a transaction might raise
national security concerns without a clear guidance or a
published list of restricted entities. This creates legal
uncertainty, compliance risk, and could drive up the cost of
doing business abroad. Meanwhile, state-backed competitors from
China and the Middle East faced none of those constraints and
are aggressively expanding. Mr. Reissaus, if a Texas-based
investor wants to put capital into a tech firm overseas to stay
globally competitive, how do these new outbound rules impact
that decision, and are we at risk of forcing American investors
to sit on the sidelines where others move in?
Mr. Reissaus. Congressman, thank you for your question, and
I think the challenge with the Outbound Investment Security
Program, as it has currently been constructed, is it did not
fully account for those types of cost considerations when the
rules went into place. So, I think it is really important that
a policy process, and one that Congress could lead, could
consider these types of issues to ensure that the cost of
implementing this type of regime does not make our businesses
or U.S. investors less competitive in the long run.
Mr. Williams of Texas. Thank you. When U.S. investors
participate in overseas ventures, such as emerging
technologies, they often bring more than capital. They bring
standards, accountability, and transparency to markets that
would otherwise fall under the influence of authoritarian
regimes. Again, we see that under the Biden Administration's
outbound investment framework, we may unintentionally undermine
this leverage. We have already seen U.S. firms spin off or walk
away from foreign investments that once helped shape tech
ecosystems, and in that vacuum, others, like Saudi Arabia and
China, are stepping in and aligning themselves in markets with
their own values and strategic objectives. Again, Mr. Reissaus,
with the outbound rules tightening, are we giving up our
ability to influence the standards, culture, and direction of
foreign tech firms, and letting regimes like China and Saudi
Arabia take that seat at the table?
Mr. Reissaus. I think that is another key cost, which is
the ability for the U.S. to project its values into businesses
when that is restricted. I think another piece of that is also
our ability to learn things from those investments. I think a
lot of investors are able to bring expertise back or get access
to technology, and that is equally potentially lost depending
on how proud the regime is.
Mr. Williams of Texas. One more question. Texas plays a
massive role in U.S. energy security, as we know, from refining
capacity and export terminals to pipeline systems and electric
grid infrastructure. Those sites are critical not just for the
State, but for the entire country's energy independence. With
foreign-backed firms seeking to acquire assets or real estate
near these facilities, the threat is real. I have it in my
district. I see it. As our adversaries become more
sophisticated in exploiting economic access points, we need to
ensure our investment screening tools are capable of
identifying and acting on those risks early, largely when the
infrastructure in question supports the national defense and
economic resilience. Mr. Reissaus again, how has CFIUS adapted
to the growing risk of foreign actors seeking strategic
footholds in our energy sector?
Mr. Reissaus. Thank you, Congressman, for your question. I
think, first, in my experience, energy security has been a
critical area of concern that the committee has focused on,
and, in fact, the Department of Energy wields a significant
number of transactions to look at that specific issue. So,
trying to assess whether in any particular deal the transaction
may pose a risk, whether to energy production, resource
extraction, or even present vulnerabilities to critical energy
infrastructure, whether it is supply of power or distribution
of power. So, the Department of Energy (DOE), when it looks at
this, it is obviously looking for problematic investors, but
are trying to assess whether the transaction could result in
vulnerabilities being inserted into those types of assets and
protecting against that. The Department of Defense also will
look at those deals closely to assess whether or not proximity
to defense facilities or test ranges is also factored in when a
foreign investor acquires, say, an oil field and is looking to
do resource extraction.
Mr. Williams of Texas. Thank you for that, and with that, I
yield my remaining time back.
Chairman Davidson. Thank you, Mr. Williams. I would like to
thank all our witnesses for your testimony today.
Without objection, all members will have 5 legislative days
to submit additional written questions to the chairman for the
record. The questions will be forwarded to the witnesses for
response. The witnesses, if you get them, please respond no
later than August 21.
[The information referred to can be found in the appendix.]
Chairman Davidson. This hearing stands adjourned.
[Whereupon, at 1:07 p.m., the subcommittee was adjourned.]
APPENDIX
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