Foreign Investment: Implementation of Exon-Florio and Related Amendments
(Letter Report, 12/21/95, GAO/NSIAD-96-12).

Pursuant to a congressional request, GAO examined the Committee on
Foreign Investment in the United States (CFIUS) implementation of
Exon-Florio legislation, focusing on: (1) the characteristics of foreign
investments in the United States and the extent to which they are
reported to CFIUS; (2) the factors CFIUS considers in determining
whether a foreign investment results in foreign control of a U.S.
company; and (3) whether foreign control of U.S. companies threatens
U.S. national security.

GAO found that: (1) about two-thirds of the cases brought to CFIUS
attention involve defense-related or high technology industries and
raise national security concerns; (2) although many foreign companies
voluntarily notify CFIUS of their proposed investment in U.S. companies,
many aerospace, electronic, computer, and advanced material investors do
not notify CFIUS of proposed investments; (3) CFIUS does not base its
decision on whether a foreign company will gain control solely on its
percentage of ownership because a minority shareholder can exercise
control under various circumstances; (4) of the 174 transactions filed
between 1992 and 1994, CFIUS determined that there was foreign
government control in 18 cases; (5) CFIUS officials have difficulty
determining whether foreign investments in U.S. companies pose national
security risks and primarily rely on the Department of Defense's (DOD)
assessment of national security risks; and (6) DOD is required to direct
appropriate defense intelligence and other agencies to assess the risks
of diversion when it decides that a CFIUS case involves a company
engaged in the development of defense-critical technology or is
important to the defense industry or technology base.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-96-12
     TITLE:  Foreign Investment: Implementation of Exon-Florio and 
             Related Amendments
      DATE:  12/21/95
   SUBJECT:  Foreign investments in US
             Technology transfer
             Foreign corporations
             National defense operations
             Defense industry
             International economic relations
             National policies
IDENTIFIER:  National Industrial Security Program
             Japan
             United Kingdom
             France
             Germany
             South Korea
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to Congressional Requesters

December 1995

FOREIGN INVESTMENT -
IMPLEMENTATION OF EXON-FLORIO AND
RELATED AMENDMENTS

GAO/NSIAD-96-12

Foreign Investments

(705039)


Abbreviations
=============================================================== ABBREV

  CFIUS - Committee on Foreign Investment in the United States
  DOD - Department of Defense
  ESI - Economic Strategy Institute
  SDC - Securities Data Company

Letter
=============================================================== LETTER


B-256999

December 21, 1995

The Honorable Floyd Spence
Chairman
The Honorable Ronald V.  Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable Cardiss Collins
Ranking Minority Member
Committee on Government Reform and
 Oversight
House of Representatives

The Honorable William H.  Zeliff
Chairman, Subcommittee on National Security,
 International Affairs, and Criminal Justice
Committee on Government Reform and
 Oversight
House of Representatives

In 1988, Congress enacted the Exon-Florio legislation\1 authorizing
the President to suspend or prohibit foreign acquisitions, mergers,
or takeovers of U.S.  companies when there is credible evidence that
a foreign controlling interest might threaten national security and
when other legislation cannot provide adequate protection.  The
President delegated authority to review foreign investment
transactions to an interagency group, the Committee on Foreign
Investment in the United States (CFIUS). 

As requested, we examined CFIUS implementation of the Exon-Florio
legislation and related amendments.  Specifically, we focused on (1)
the characteristics of foreign investments and the extent to which
these investments are reported to CFIUS and (2) the factors CFIUS
considers in making decisions on whether the foreign investment would
result in foreign companies' control of U.S.  companies, whether the
acquiring company is controlled by a foreign government, and whether
there are associated national security risks.  We analyzed these
issues for a judgmentally selected sample of 16 cases that were
reviewed by CFIUS in 1992 and 1993.  Details on our objectives,
scope, and methodology are presented in appendix I.  Previous
products on this subject are listed on the last page of the report. 


--------------------
\1 The Exon-Florio legislation was a provision of the Omnibus Trade
and Competitiveness Act of 1988 and is part of the Defense Production
Act of 1950, 50 U.S.C.  app.  2170. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Preserving U.S.  industrial capabilities in sectors critical to
national security has been a traditional U.S.  policy goal.  An
important concern in the debate on foreign investment in the United
States is the possibility that key segments of industries critical to
the national security could come under foreign control through
foreign investments.\2 Because U.S.  defense strategy relies on the
deterrent effects of technological rather than numerical superiority,
concern about foreign investment focuses on the U.S.  government's
ability to identify technologies crucial to defense systems and to
act to preserve and promote U.S.  leadership in them. 

The United States does not screen inward investment but relies on
certain laws or regulations to ensure that foreign investment does
not assume forms harmful to the nation's interests.  For example,
specific restrictions are in place to protect classified defense
information from foreign access and to ensure U.S.  production of
vital defense goods in the event of a crisis.  Foreign investments in
U.S.  firms performing classified defense work are monitored under
the National Industrial Security Program.  Restrictions under this
program provide authority to restrict or deny foreign access to
classified information.  Although they do not authorize denials of
foreign investments, they can, in effect, deter potential investors
who are seeking access to classified information.  The U.S. 
government, in addition, restricts foreign investment in certain
sectors, such as energy resources, coastal and domestic shipping, and
air transport. 

To counter the loss of leading-edge or highly advanced technology and
processes that are important to the country's security through the
acquisition of U.S.  companies by foreign investors, Congress passed
the Exon-Florio legislation in 1988.  Congress was concerned that
foreign takeovers of U.S.  firms that harmed U.S.  security could not
be stopped unless the President declared a national emergency or
regulators invoked Federal antitrust, environmental, or securities
laws.  The Exon-Florio legislation grants the President the authority
to take appropriate action to suspend or prohibit foreign
acquisitions, mergers, or takeovers of U.S.  businesses that threaten
to impair the national security.  To exercise this authority, the
President must find that (1) credible evidence exists that the
foreign interest might take action that threatens to impair national
security and (2) provisions of law, other than the International
Emergency Economic Powers Act, do not provide adequate and
appropriate authority to protect the national security.  However,
Congress did not intend for the legislation to raise obstacles to
foreign investment. 

The President designated CFIUS as responsible for reviewing
transactions.  CFIUS is an existing Committee comprised of
representatives from
11 agencies or offices.  The Secretary of the Treasury chairs the
Committee and the Departments of State, Commerce, and Defense are
among the agencies represented.  The Defense Technology Security
Administration coordinates the positions of various Department of
Defense (DOD) components and provides the final DOD position for
CFIUS reviews. 

Notification to CFIUS of an acquisition is voluntary.  However, it is
in the interest of foreign investors to do so because CFIUS retains
the right to review in the future any acquisition not notified to the
Committee.  The Exon-Florio regulations also permit a Committee
member to submit a notice of a proposed or completed acquisition for
a national security review. 

The CFIUS review process serves both to protect national security and
to minimize any potential adverse effect of the Exon-Florio
legislation on foreign investment in the United States.  CFIUS
determination that there are no national security issues essentially
eliminates the risk that the President will at a later time block the
transaction or order a divestiture.\3

Once it is notified, CFIUS has an initial 30-day review period to
determine if the transaction involves foreign control and whether
there are national security concerns that warrant further
investigation.  If CFIUS decides that there will be foreign control
and that potentially serious national security concerns are present,
the Committee initiates a 45-day investigation.  It then submits a
report and recommendation to the President.  The President has 15
days to decide whether or not to take appropriate action.  The
President may exercise the authority conferred by the Exon-Florio
legislation, however, only if there is credible evidence that a
foreign controlling interest might threaten national security and
that other legislation cannot provide adequate protection. 

As shown in table 1, between October 1988 and December 1994, CFIUS
received 918 voluntary notifications.  Of these, 15 involved 45-day
investigations with recommendations to the President.  In 5 of the
15 investigations, the companies voluntarily withdrew their
investment offers.  Of the remaining 10 investigations, the President
decided not to intervene in 9 transactions and ordered divestiture in
1 case involving a Chinese company's acquisition of a U.S.  aircraft
parts company. 



                                Table 1
                
                Disposition of CFIUS Notifications (Oct.
                        1988 through Dec. 1994)

                           CFIUS  Notification                Presiden
                    notification             s  Notification         t
Year                           s  investigated   s withdrawn   blocked
------------------  ------------  ------------  ------------  --------
1988                          14             1             0         0
1989                         200             5             2       1\a
1990                         295             6             2         0
1991                         152             1             0         0
1992                         106             2           1\b         0
1993                          82             0             0         0
1994                          69             0             0         0
======================================================================
Total                        918            15             5         1
----------------------------------------------------------------------
Note:  The decrease in CFIUS notifications somewhat parallels the
decline in overall foreign direct investment in the United States. 

\a In this case, the President ordered China National Aero-Technology
Import and Export Corporation, a People's Republic of China aerospace
company, to divest from MAMCO, which involved a U.S.  aircraft parts
manufacturer. 

\b The investors withdrew their offer on the last day of the
investigation of this case, which involved the acquisition of LTV
Missiles Division by Thomson-CSF. 

Source:  CFIUS data as of January 1995. 

In 1992, Thomson-CSF, a French government-owned company, attempted to
acquire the LTV Corporation's Missile Division, which prompted
legislation aimed at strengthening Exon-Florio.\4 One provision made
a distinction between foreign control and foreign government control
and mandated 45-day investigations when the acquiring company is
controlled by or acting on behalf of a foreign government and the
acquisition could result in foreign government control that could
affect the national security.  Another provision required
intelligence agency assessments of the risk of diversion of a defense
critical technology when the U.S.  company is engaged in the
development of such a technology or is otherwise important to the
defense industrial and technology base. 


--------------------
\2 Foreign investment refers to foreign direct investment; that is,
investment resulting in foreign ownership or control of 10 percent or
more equity interest in a U.  S.  business. 

\3 The Exon-Florio regulations allow CFIUS to reopen its
consideration of a transaction if parties fail to provide material
information or submit false or misleading information. 

\4 See sections 837 and 838 of the Fiscal Year 1993 National Defense
Authorization Act (P.L.  102-484), Oct.  23, 1992, which amended 50
U.S.C.  app.  2170 and added 10 U.S.C.  2537, respectively. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

About two-thirds of the cases notified to CFIUS between October 1988
and May 1994 involved defense-related and high-technology industries
that raised possible national security concerns.  The remaining cases
involved transactions in industry sectors such as construction, real
estate, entertainment, and consumer products, which would be unlikely
to raise national security concerns. 

Many companies voluntarily notified CFIUS of proposed investments in
and acquisitions of U.S.  companies, but, according to two private
sector data bases, many others did not.  These data bases included
foreign acquisitions of or investments in U.S.  companies involved in
aerospace, electronics, computers, and advanced materials.  We do not
know if there is any significance to be attached to the fact that not
all foreign investments are notified.  The CFIUS process was not
intended to provide a comprehensive screening mechanism for all
foreign investment although CFIUS officials expressed the view that,
because CFIUS clearance essentially eliminates the risk of a forced
divestiture, most transactions affecting national security are
reported.  However, after discussing these unnotified transactions
with CFIUS officials, they advised us that other committee members
will be reminded of their authority under the regulations to bring
transactions to the committee's attention. 

In deciding whether a foreign investment will result in a foreign
company gaining control of a U.S.  company, CFIUS considers many
factors related to the investor's ability to affect key company
decisions.  CFIUS does not decide that a foreign company will gain
control based solely on the company's percentage of ownership because
a minority shareholder can exercise control under various
circumstances. 

When deciding on foreign government control, CFIUS examines the
extent to which a foreign government owns and controls the acquiring
company.  Of the 174 transactions filed between the 1992 legislation
and December 1994, CFIUS decided there was foreign government control
in
18 cases.  None of these cases were investigated since CFIUS decided
the national security concerns were not sufficient to warrant further
investigation. 

The Exon-Florio legislation does not provide a precise definition of
national security.  It does identify certain factors to consider in
deciding what constitutes a threat to national security, but neither
the statute nor the implementing regulations contain guidelines for
weighing the various factors considered in examining the national
security risks of a transaction.  As a result, CFIUS agencies have
significant flexibility in making such judgments.  Agency officials
noted that the threshold for determining a national security threat
is high and that the Exon-Florio provision requires them to consider
whether other laws provide adequate protection.  CFIUS members noted
that they rely primarily on DOD's assessment of national security
risks.  In evaluating those risks, DOD officials stated they consider
several factors, including whether the company being acquired is a
sole-source supplier to DOD, whether it has classified contracts, and
whether the diversion of critical technologies is a risk. 

The 1992 legislation requires DOD to direct appropriate defense
intelligence and other agencies to assess the risk of diversion when
DOD decides that a CFIUS case involves a company engaged in the
development of a defense-critical technology or is otherwise
important to the defense industrial and technology base.  Of the 174
cases reviewed between October 1992 and December 1994, the Office of
the Assistant Secretary of Defense for Economic Security found that 9
cases required a risk of diversion assessment. 


   CHARACTERISTICS OF INVESTMENTS
   REPORTED AND NOT REPORTED TO
   CFIUS
------------------------------------------------------------ Letter :3

Our analysis of data on CFIUS cases from October 1988 through May
1994 showed that about two-thirds of the filings involved
high-technology industries in which there could be potential national
security concerns.\5 Among these industries are computers and
semiconductors, electronics, aerospace, advanced materials,
chemicals, biotechnology, and telecommunications.  About one-third of
the notifications to CFIUS involved industries in which national
security concerns would be unlikely to arise.  Examples of these
industries include mining, plastics and rubber, construction,
retailing, real estate, and entertainment.  (App.  III contains
additional information on the industries with foreign investments
that were reported to CFIUS.)

Companies from Japan, the United Kingdom, France, and Germany
accounted for over 65 percent of the notifications to CFIUS since
1988.  Japanese companies were the leading investors notifying CFIUS,
primarily on investments in computers and semiconductors.  British
companies were the second most active investors filing with CFIUS,
most frequently on investments in advanced materials and electronics. 
French companies most frequently notified CFIUS of investments in
aerospace, computers, and telecommunications companies, while German
companies filed with CFIUS for investments in chemicals, industrial
controls, equipment and machinery, and energy industries.  Our
comparison of CFIUS data with two private sector databases on foreign
investments showed somewhat comparable investment concentrations by
country and by industry.  (Details on the four countries' CFIUS
filings by industry are in app.  IV.)

The 1992 legislation required the President to report on various
aspects of foreign investment in U.S.  critical-technology companies. 
The National Economic Council formed a working group to respond to
the requirement and reported its findings in 1994.  The group found
no credible evidence that a country or private companies had a
coordinated strategy to acquire U.S.  critical-technology companies. 
It also noted that the absence of credible evidence demonstrating a
coordinated strategy should not be viewed as conclusive proof that a
coordinated strategy does not exist.  The report also indicated that
foreign governments, including those of France, Germany, and Japan,
provide indirect assistance and guidance to their companies regarding
foreign investments in high-technology U.S.  firms. 


--------------------
\5 We used a Commerce Department database maintained on CFIUS cases
and other sources to develop high-technology and low-technology
industry categories.  We also consulted with government and private
sector experts to develop these categories. 


      INVESTMENTS NOT REPORTED TO
      CFIUS
---------------------------------------------------------- Letter :3.1

The Exon-Florio legislation and implementing regulations do not
define which investments are important to review for national
security reasons.  Moreover, notification to CFIUS is voluntary. 
CFIUS officials believe that the Committee has been notified of most
foreign investments in key or high-technology companies that could
affect national security.  CFIUS officials pointed out that investors
have a strong inducement to notify CFIUS and seek its prior approval
because the President retains the authority to order divestitures of
transactions not cleared by CFIUS.  However, we found that many
foreign investments occur in high-technology or defense-related
industries that were not reported to CFIUS.  While the significance
of the gap is unclear, it does suggest that the CFIUS process alone
cannot be relied on to surface transactions posing potential national
security concerns.\6

Our comparison of two private databases on foreign investment in the
United States with CFIUS data showed that many transactions occurred
in high-technology industries that were not filed with CFIUS.  Among
these industries were telecommunications, advanced materials,
biotechnology, electronics, computers, and aerospace.  We verified
selected transactions and determined that an acquisition of a U.S. 
aircraft parts manufacturer and investments in biotechnology and
chemical companies occurred without being reported to CFIUS. 
However, these databases do not contain sufficient information to
establish a link to national security, since they do not contain
information on, for example, whether the acquired company had DOD
contracts or produced products subject to U.S.  export controls. 
(See app.  I for an explanation of our comparison and app.  II for
details on transactions not notified to CFIUS, according to these
private databases.) Furthermore, because Exon-Florio was never
intended to be a comprehensive foreign investment review act, it is
to be expected that there would be foreign investments that are not
notified to CFIUS. 


--------------------
\6 The U.S.  government has other mechanisms to safeguard national
security, such as export control laws and industrial security
regulations that protect classified facilities. 


   CFIUS DECISIONS ON FOREIGN
   COMPANIES' CONTROL AND FOREIGN
   GOVERNMENTS' CONTROL OVER
   ACQUIRING COMPANIES
------------------------------------------------------------ Letter :4

Under the Exon-Florio legislation, CFIUS has considerable flexibility
to decide if a transaction results in foreign company control over a
U.S.  firm or if a foreign government has control over an acquiring
company.  The implementing regulations do not specify that a given
percentage of foreign ownership automatically results in control
because minority owners can exercise control under various
conditions.  For example, a minority owner might hold board
membership and have special voting rights over certain company
actions.  For this reason, the regulations broadly define control to
mean having the power to directly or indirectly effect key company
decisions and actions.  CFIUS generally relies on a company's stated
intentions regarding the structure of the investment and the
decision-making framework of the corporation.  While decisions about
foreign control are straightforward in complete acquisitions and
majority investments, such decisions can be complicated and difficult
in minority investment cases.  Also, deciding foreign government
control over the acquiring company can be difficult and involves a
high degree of judgment. 


      DECISIONS ON FOREIGN CONTROL
---------------------------------------------------------- Letter :4.1

Of the 16 cases we reviewed, 12 involved majority investments or 100
percent acquisitions, and 4 involved minority investments.  In two of
the minority investment cases, CFIUS found foreign control and in two
cases it determined there was no foreign control. 

  A British company notified CFIUS of its intention to acquire 20
     percent of a U.S.  company.  The U.S.  company had classified
     contracts and provided a critical U.S.  government emergency
     service.  The acquisition would give the British company 3 of
     the 15 seats on the company's board of directors and certain
     "consent rights" that would enable the British company to block
     several corporate actions.  CFIUS found that foreign control
     would result on the basis of the British company's right to veto
     certain acquisitions, joint ventures, and asset sales as well as
     any company charter amendment adversely affecting the British
     company.  CFIUS conducted a 30-day review.  However, this review
     determined that national security concerns were not sufficient
     to warrant an investigation. 

  A German company notified CFIUS of its intention to purchase 12.25
     percent of the common stock of a U.S.  company.  The U.S. 
     parent company controlled 51 percent of the stock, and three
     European companies controlled the remaining 49 percent.  The
     proposed investment would redistribute the stock among the
     foreign owners, leaving the U.S.  majority ownership intact. 
     The U.S.  company had classified DOD and other U.S.  government
     contracts that were protected by facility security clearances.\7
     CFIUS determined that the purchase of 12.25 percent of the
     company's voting stock constituted foreign control because of
     several minority veto rights.  These rights included the ability
     of any single foreign director to block decisions such as the
     adoption of a strategic plan or annual budget or the development
     of a new product that varies from the types of business stated
     in the strategic plan.  CFIUS reviewed the company's
     notification for national security concerns and decided to
     proceed with a 45-day investigation.  During the investigation,
     CFIUS addressed issues relating to DOD's ability to mitigate
     foreign control and influence over the company under the
     existing security agreement.  As required, CFIUS prepared a
     report to the President.  The transaction was not blocked. 

  A Singaporean company proposed acquiring 22.8 percent of the voting
     stock in an investor group formed to acquire all of a U.S. 
     company.  A majority of the investor group's voting stock was
     held by U.S.  entities.  The Singaporean company was indirectly
     owned by a holding company that was 99.9 percent owned by the
     Singapore Ministry of Finance.  The U.S.  company had classified
     contracts with DOD, necessitating a security agreement
     protecting classified information and technologies.  CFIUS based
     its finding that the foreign company would not have control
     partly on the minority investor's willingness to execute a proxy
     agreement under industrial security regulations that would give
     the minority investor's voting rights to two U.S citizens.\8
     (The minority foreign investor later entered into a security
     agreement that would allow the foreign investor to gain board
     membership.) In our discussions on this case, CFIUS officials
     agreed that a proposed security agreement should not be used to
     determine foreign control.  The Exon-Florio control standards
     are not comparable to the control issues under the industrial
     security regulations, which intend to isolate foreign control
     and influence over certain aspects of the business, not to
     determine whether the entire company will become foreign
     controlled.  Although CFIUS's letter to the company notifying it
     of its decision referenced the proxy agreement, CFIUS officials
     stated the finding of no foreign control was based on other
     factors, including a requirement for a two-thirds stockholder
     majority for certain decisions.  Because CFIUS found no foreign
     control, it did not review the transaction for national security
     concerns. 

  Two Israeli companies acquired a total of 35.6 percent of the
     outstanding stock of a U.S.  company.  One of the Israeli
     companies increased its ownership from 10.5 percent of the
     outstanding stock to 17.4 percent, while the second company
     acquired 18.2 percent of the outstanding stock.  The
     notification to CFIUS stated that the two companies were
     considering entering into a shareholders' agreement to vote
     their respective shares in concert.  In subsequent
     correspondence, CFIUS was informed that the two Israeli
     companies had not concluded a shareholders' agreement.  CFIUS
     found that there was no foreign control because the two firms
     were not acting together and did not either individually or
     collectively have the ability to control the U.S.  company. 
     Because CFIUS found no foreign control, it did not review the
     transaction for national security concerns. 


--------------------
\7 The industrial security regulations require a company to obtain a
security clearance when working on DOD classified contracts and
prescribe procedures for defense companies to protect classified
information.  A defense company under foreign ownership or control
can be eligible for a security clearance if it takes action to
effectively negate or reduce the risk posed by foreign ownership or
control.  See Defense Industrial Security:  Weaknesses in DOD
Security Arrangements at Foreign-Owned Defense Contractors
(GAO/NSIAD-96-64, forthcoming). 

\8 The proxy agreement was referenced in a letter to the company
notifying it of CFIUS's finding of no foreign control and explaining
the basis for this determination.  The letter also referred to
correspondence in which the company explains the proxy agreement it
planned to enter into in response to DOD industrial security
regulations. 


      DECISIONS ON FOREIGN
      GOVERNMENT CONTROL
---------------------------------------------------------- Letter :4.2

The 1992 legislation required mandatory investigations of CFIUS cases
in which the foreign company proposing an investment is controlled by
a foreign government and the transaction could result in foreign
control that "could affect the national security." As a result, CFIUS
also reviews cases for foreign government control.  Of the 174 cases
reviewed between October 1992 and December 1994, CFIUS found foreign
government control in 18 cases.  None of these cases resulted in
investigations.  CFIUS found the national security concerns in these
cases were not sufficient to warrant investigations.  In implementing
the legislative requirement, CFIUS has determined that even when
there is foreign government control, the provision does not mandate
an investigation for a notification that does not pose a credible
threat to the national security. 

Of the 16 cases we reviewed, 13 occurred after the 1992 legislation. 
Six cases involved some level of foreign government ownership of or
participation in the acquiring companies.  In two of these cases,
CFIUS determined there was foreign government control. 

  A subsidiary of a German company proposed acquiring a U.S. 
     manufacturer of large machine tools.  The U.S.  company had
     unclassified contracts with DOD, and its products were subject
     to export controls applying to dual-use products, but it did not
     possess unique capabilities, and its technology was not
     considered defense critical.  About one-third of the German
     company was indirectly owned by one German state government and
     two German city governments.  Under German law, this level of
     ownership gave the government-owned entities the power to block
     certain decisions, such as the acquisition or closing down of
     businesses.  The government-owned entities offered to abstain on
     shareholder decisions affecting the U.S.  company.  CFIUS found
     that there was foreign control because the acquiring company was
     German- owned and planned to purchase substantially all the
     assets of the U.S.  company.  Because the government entities
     had the power to block certain decisions, CFIUS determined there
     was foreign government control.  CFIUS also concluded that there
     were not sufficient national security concerns to warrant an
     investigation. 

  A subsidiary of a French company proposed purchasing a U.S. 
     developer and manufacturer of software tools.  The U.S.  company
     had unclassified contracts with DOD and other U.S.  government
     entities, but the technology was not militarily sensitive.  The
     ultimate parent of the acquiring company is 100 percent owned by
     the French government.  CFIUS determined that the acquiring
     company was foreign owned and that the outright acquisition of
     the U.S.  company would result in foreign control.  Because the
     buyer was owned by the French government, CFIUS decided that
     foreign government control would result from this acquisition. 
     CFIUS also concluded that there were not sufficient national
     security concerns to warrant an investigation. 

In the other four cases, CFIUS determined that there was no foreign
government control.  Two of these cases are discussed below for
illustrative purposes.  In the other two cases, CFIUS decided there
was no foreign government control because either multiple intervening
layers of ownership diluted government control or the foreign
government could not appoint board members. 

  A South Korean company notified CFIUS of its intent to acquire a
     U.S.  designer and manufacturer of semiconductor devices.  The
     U.S.  company was a defense subcontractor engaged in a
     defense-critical but not state-of-the-art technology.  The
     foreign buyer indicated its intention to transfer the U.S. 
     company's technology to Korea and establish a production
     facility there.  The foreign buyer received a small proportion
     of its total assets from two banks owned by the Korean
     government.  Because this was a 100-percent acquisition by a
     Korean-owned company, CFIUS made a determination of foreign
     control.  Although the foreign buyer had financing arrangements
     with the government-owned banks, CFIUS determined the amount of
     capital provided was not sufficient to constitute foreign
     government control.  CFIUS also determined that there were not
     sufficient national security concerns to warrant a 45-day
     investigation. 

  A British company notified CFIUS of its intention to acquire 20
     percent of a U.S.  company.  The U.S.  company had classified
     contracts and provided a critical U.S.  government emergency
     service.  Although the British government owned only 1.5 percent
     of the acquiring company's issued shares, it retained special
     powers over the acquiring company.  These powers included
     requiring the government shareholder's written consent to alter
     certain sections of the foreign buyer's articles of
     incorporation.  For example, consent must be obtained when there
     are changes in the limit of any single shareholder owning more
     than 15 percent.  The British government could also appoint two
     directors.  As discussed on page 8, CFIUS determined that the
     minority investment would result in foreign control.  CFIUS
     decided that there was no foreign government control because the
     government owned only a small amount of stock, had not recently
     appointed directors to the board, and had no significant consent
     rights over the acquiring company.  CFIUS conducted a 30-day
     review and determined that there were not sufficient national
     security concerns to warrant a 45-day investigation. 


   DOD'S REVIEWS OF CFIUS CASES
   FOR NATIONAL SECURITY RISKS
------------------------------------------------------------ Letter :5

DOD has no special statutory role in reviewing transactions for
national security concerns, and all other CFIUS members have equal
standing to raise such concerns.  However, officials from other CFIUS
agencies stated that they look to DOD to make key judgments regarding
the national security risks of a transaction.  DOD considers, among
numerous factors, whether (1) the technologies and products involved
are critical to the national security, (2) the firm being acquired is
a sole-source supplier to DOD, and (3) the U.S.  company has
classified contracts with the U.S.  government.  In addition, DOD
reviews and analyzes information from the intelligence community
regarding the foreign buyer's past record of compliance with export
controls, proliferation of sensitive weapons-related technologies,
and other matters.\9

Our sample included some cases involving intelligence information on
the acquiring company or its government's practices, including
violations of U.N.  sanctions and transfers of U.S.  technology to
proscribed countries; for most of these cases, DOD did not recommend
a 45-day investigation.  According to Defense Technology Security
Administration officials, this information alone did not provide
sufficient grounds to warrant investigations.  They said that in some
cases the technology at the U.S.  company was not deemed to be
critical and in others the intelligence information was not
sufficiently corroborated, did not show violations of U.S.  laws, or
had occurred so long ago that it was no longer relevant. 


--------------------
\9 The other CFIUS participants also receive and consider
intelligence information in their deliberations. 


   DOD DETERMINATIONS OF
   DEFENSE-CRITICAL TECHNOLOGIES
   FOR RISK OF DIVERSION
   ASSESSMENTS
------------------------------------------------------------ Letter :6

As required by the 1992 legislation, DOD agencies, including defense
intelligence entities, assess the risk of diversion when the
Secretary of Defense determines that a proposed merger, acquisition,
or takeover may involve a firm engaged in the development of a
defense-critical technology or is otherwise important to the defense
industrial and technology base.  These assessments are to be shared
with all the Committee members, according to CFIUS officials.  The
Office of the Assistant Secretary of Defense for Economic Security
found that 9 of the 174 CFIUS cases reviewed between October 1992 and
December 1994 required a risk of diversion assessment.  The
responsible DOD official noted that the legislation requires a risk
of diversion assessment only when the company is involved in the
development, not the application, of a critical technology or is
otherwise important to the defense industrial base.  DOD uses the Key
Technologies Plan, as authorized by the legislation, to decide
whether the company is developing a defense-critical technology. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

The Departments of Defense, State, and the Treasury generally agreed
with our draft report and provided minor technical comments.  The
Department of Defense said it concurred with the report as presented. 
The Department of State, in official oral comments, said that the
report fairly and thoroughly describes the activities of CFIUS and
accurately reflects the role of CFIUS members.  The Department of the
Treasury discussed the voluntary nature of CFIUS notification and
said it will remind agencies to bring to CFIUS's attention
transactions in high-technology industries that have not been
notified to CFIUS.  Treasury also stated that it believes Exon-Florio
implementation "has increased the awareness of investors to national
security issues, brought transactions into conformity with existing
laws where needed, and caused investors to consider explicitly
national security when putting together proposals to acquire U.S. 
businesses." The full text of the comments from the Departments of
the Treasury and Defense are included in appendixes V and VI,
respectively. 

The Department of Commerce reviewed the final draft and provided
minor technical comments.  The Department of Justice also reviewed
the report but did not comment. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to other congressional
committees; the Secretaries of the Treasury, State, Defense,
Commerce, and Justice; and the Director, Office of Management and
Budget.  We are also making copies available to other interested
parties upon request. 

Please contact me at (202) 512-4125 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix VII. 

David E.  Cooper
Director, Acquisition Policy,
 Technology, and Competitiveness Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Our examination of the implementation of Exon-Florio legislation and
its amendments was requested by the former Chairs of the Subcommittee
on Legislation and National Security and the Subcommittee on
Commerce, Consumer, and Monetary Affairs, House Committee on
Government Operations, and the Chairs and Ranking Minority Members of
the Subcommittee on Research and Technology and the Subcommittee on
Oversight and Investigation, House Committee on Armed Services. 
Specifically, we focused on (1) the extent foreign investments are
reported to the Committee on Foreign Investment in the United States
(CFIUS) and the characteristics of these investments and (2) the
factors CFIUS considers in making decisions on whether the foreign
investment would result in foreign companies' control of U.S. 
companies, whether the acquiring foreign company is controlled by a
foreign government, and whether there are associated national
security risks. 

To address these objectives, we interviewed officials and examined
records at the Departments of Defense (DOD), the Treasury, State, and
Commerce.  We also discussed CFIUS procedures and selected foreign
company notifications with officials from the Defense Technology
Security Administration and other DOD participants, including the
Office of the Under Secretary of Defense for Acquisition and
Technology; the Office of the Assistant Secretary of Defense for
Command, Control, Communications, and Intelligence; the military
services; the Defense Intelligence Agency; the National Security
Agency; the Defense Investigative Service; the Defense Logistics
Agency; and the Advanced Research Projects Agency.  We also obtained
information from other CFIUS participants, including the Department
of Justice, and contacted the Council of Economic Advisers, the
Office of Management and Budget, the Office of Science and Technology
Policy, and the National Security Council. 

To examine the scope of foreign investments voluntarily filed with
CFIUS, we used an unofficial Department of Commerce database on CFIUS
cases maintained by the Office of Strategic Industries and Economic
Security.\1 We also compared the CFIUS data with foreign investment
databases maintained by the Economic Strategy Institute (ESI) and
Securities Data Company (SDC).  The ESI database tracks foreign
investments in and acquisitions of U.S.  companies involved in high,
key, or critical technologies.  These technology categories are
developed by consultation with technical experts and generally follow
broad standard technology categories.  The SDC tracks investments,
acquisitions, and mergers worldwide, but we obtained selected data on
foreign investment in the United States in technology areas
comparable to those tracked by ESI.  SDC categorizes the technology
sector by ascertaining the primary business of each company and by
identifying pertinent standard industrial classification codes.  From
this comparison of the databases, we identified transactions not
reviewed by CFIUS.  We further selected transactions involving
foreign acquisitions of or majority investments in high-technology
industries and verified that these transactions were completed
without CFIUS review for foreign control and national security
concerns. 

We eliminated duplications in the Commerce database and deleted
notifications withdrawn from CFIUS review.  To develop industry
categories, we relied primarily on those used by Commerce but also
considered ESI's categories.  We divided the U.S.  industries listed
in the database into two categories, high technology and low
technology, by referring to DOD's Key Technologies Plan and the
Militarily Critical Technologies List.  We consulted with experts
within and outside the government on our industry groupings and made
changes in response to their recommendations. 

To evaluate the overall concentration or frequency of foreign
investments by country and industry, we obtained data from federal
government reports and interviewed agency officials at Commerce's
Bureau of Economic Analysis about aspects of their data collection
efforts.  We also obtained information from several private sector
firms tracking foreign investment in U.S.  companies, including SDC,
Ulmer Brothers, Inc., and Technology Strategic Planning, Inc.  We did
not independently verify the information in the Commerce, ESI, or SDC
databases. 

To examine the factors CFIUS considers in its decision-making
process, we selected a judgmental sample of notifications from 1992
and 1993.  We used the Defense Intelligence Agency's list of 188
CFIUS filings for these years to select 33 notifications that the
agency ranked high, moderate, and low risk.  After an initial
examination, we focused on 16 cases for in-depth review on the basis
of the following criteria:  (1) the technologies and industries
involved, including cases DOD found to involve critical technologies;
(2) the countries and companies involved in the transactions,
including foreign government-owned companies; (3) whether validated
export licenses are required; (4) the risk and intelligence analyses
done; (5) the presence of DOD classified contracts and associated
security agreements; and (6) the presence of sole-source or last
supplier considerations.  The 16 cases we reviewed covered 8 foreign
countries and 6 industrial sectors.  Table I.1 shows the 16 cases we
selected for review. 



                                                                      Table I.1
                                                       
                                                       Sixteen Selected CFIUS Notifications in
                                                                       1992-93

                       Foreign
CFIUS                  government   State       Commerce
file     Foreign       owner/       munitions   export      Classified       Percent  Risk of       Case
number   country       control      licenses    licenses    contracts       acquired  diversion     withdrawn     Investigated    Technology
-------  ------------  -----------  ----------  ----------  ----------  ------------  ------------  ------------  --------------  -------------------
92-022   United        N/A\a        Yes         No          Yes                100.0  N/A           No            No              Electronics
         Kingdom

92-027   France        N/A\a        Yes         No          Yes                100.0  N/A           Yes           Yes             Aerospace

92-057   Germany       N/A\a        Yes         No          Yes                 12.0  N/A           No            Yes             Aerospace

92-087   France        Yes          No          No          No                 100.0  No            No            No              Computers

92-105   Japan         No           No          Yes         No                 100.0  No            No            No              Computers

93-004   Israel        No           Yes         Yes         No                 100.0  No            No            No              Aerospace

93-013   South Korea   No           No          Yes         No                 100.0  Yes           No            No              Electronics-
                                                                                                                                  telecommunications

93-014   France        No           No          Yes         No                  51.0  No            No            No              Telecommunications

93-038   Germany       Yes          No          Yes         No                 100.0  No            No            No              Machine tools

93-054   Israel        No           No          Yes         No                17.4\b  No            Yes\c         No              Electronics
                                                                                18.2

93-059   Singapore     No           Yes         Yes         Yes                 23.0  No            Yes\c         No              Electronics

93-060   France        No           Yes         Yes         No                 100.0  No            No            No              Telecommunications-
                                                                                                                                  electronics

93-064   Israel        No           No          Yes         No                 100.0  Yes           No            No              Telecommunications

93-065   France        No           No          Yes         No                 100.0  No            No            No              Aerospace

93-069   Hong Kong     No           Yes         Yes         Yes                100.0  Yes           Yes\c         No              Advanced materials

93-078   United        No           No          Yes         Yes                 20.0  Yes           No            No              \d
         Kingdom
-----------------------------------------------------------------------------------------------------------------------------------------------------
\a These cases were reported before the October 1992 legislation
requiring (1) investigations of cases involving foreign government
control that could affect the national security and (2) intelligence
assessments of diversion risk in cases involving defense-critical
technologies. 

\b Represents two investors. 

\c Notifications were determined to involve no foreign control and
therefore did not come under Exon-Florio jurisdiction. 

\d Technology information is not included to avoid revealing the
transaction. 

The sampling is not statistically representative of the entire CFIUS
caseload, but these cases illustrate the CFIUS process and allowed us
to examine the more difficult cases (that is, those involving
minority investments, foreign government ownership and control,
critical defense technologies, and/or adverse intelligence
information). 

We reviewed records for each of the 16 cases at the Departments of
the Treasury, Defense, State, and Commerce because CFIUS does not
maintain a central file repository.  DOD and State screened their
CFIUS files and documents before making them available to us, which
may have impeded our scope.  The Defense Intelligence Agency and
Central Intelligence Agency also provided information on our sample
cases, where applicable. 

We reviewed the Exon-Florio legislation and subsequent amendments,
implementing regulations, and the legislative history.  We considered
DOD's role in the legislation and focused on the implementation of
recently related legislation. 

We performed our work between March 1994 and April 1995 in accordance
with generally accepted government auditing standards. 


--------------------
\1 CFIUS does not maintain an official database on its cases. 


FOREIGN INVESTMENT TRANSACTIONS
NOT REPORTED TO CFIUS
========================================================== Appendix II

Tables II.1 and II.2 provide information on foreign investment
transactions from two private databases that were not in the Commerce
Department's database on CFIUS notifications.  In our tables, we
include only those transactions involving high-technology industries. 



                                                                      Table II.1
                                                       
                                                           Data From the Economic Strategy
                                                        Institute on Transactions Not Reported
                                                        to CFIUS (Oct. 1988 through May 1994)

High-technology                 United                                                                                                  Other
industry               Japan   Kingdom    France   Germany    Canada   Switzerland    Taiwan   Australia   Finland  South Korea     countries   Total
------------------  --------  --------  --------  --------  --------  ------------  --------  ----------  --------  -----------  ------------  ======
Computers                 93        18         7         2         7             2        10           1         0            5            11     156
Semiconductor             27         1         1         1         0             3         0           1         0            0             0      34
 equipment
Semiconductors            39         2         0         1         1             0         1           0         0            1             1      46
Electronics               35        11         2         1         1             1         0           1         0            2            10      64
Aerospace                 11         3         1         1         4             1         0           0         0            0             1      22
Advanced materials        23         4         0         3         0             0         0           1         0            0             2      33
Chemicals                 19         5         9         6         3             1         0           0         0            0             5      48
Biotechnology             24         9         3        11         0             8         0           1         0            0             9      65
Telecommunications        29         7         2         3         4             2         1           2         0            1             5      56
 and information
Machine tools              9         2         0         0         1             0         0           0         0            0             2      14
Environmental              1         0         1         0         0             0         0           0         0            0             0       2
 technologies
Robotics                   3         0         0         0         0             1         0           0         0            0             0       4
Miscellaneous             25         6         2         0         0             0         0           0         0            0             1      34
=====================================================================================================================================================
Total                    338        68        28        29        21            19        12           7         0            9            47     578
-----------------------------------------------------------------------------------------------------------------------------------------------------


                                                                      Table II.2
                                                       
                                                       Data From the Securities Data Company on
                                                       Transactions Not Reported to CFIUS (Oct.
                                                                1988 through May 1994)

High-technology                 United                                                                                                  Other
industry               Japan   Kingdom    France   Germany    Canada   Switzerland    Taiwan   Australia   Finland  South Korea     countries   Total
------------------  --------  --------  --------  --------  --------  ------------  --------  ----------  --------  -----------  ------------  ======
Biotechnology             29        30         5         7        10             9         0           4         1            0            47     142
Computers                 62        27         4         1        27             6         8           4         0            3            58     200
Semiconductors            22         3         0         1         1             0         2           0         0            1             6      36
Electronics               19        26         2         4         4             3         0           2         0            1            17      78
Telecommunications        11         9         3         1         6             1         1           1         0            1            14      48
Advanced materials         5         2         1         0         0             1         0           0         1            0             3      13
Lasers                     6         3         0         0         0             0         0           0         0            0             1      10
Robotics                   3         2         0         1         0             0         0           0         0            0             2       8
Other                      2         5         1         0         2             0         0           0         0            0             4      14
=====================================================================================================================================================
Total                    159       107        16        15        50            20        11          11         2            6           152     549
-----------------------------------------------------------------------------------------------------------------------------------------------------

CFIUS CASES REVIEWED FOR NATIONAL
SECURITY CONCERNS
========================================================= Appendix III

From the Commerce Department's database on CFIUS cases, we obtained
data on cases reviewed for national security concerns between October
1988 through May 1994.  Table III.1 shows the number of CFIUS cases
reviewed during that period, by country, in high-technology and
non-high-technology industry categories.  Table III.2 provides
further details of CFIUS cases reviewed for national security
concerns by high-technology industry category and by country.  Table
III.3 illustrates CFIUS cases in non-high-technology industries by
country.  We developed these industry categories using the Commerce
Department's groupings and by consulting with industry experts within
and outside the U.S.  government. 



                              Table III.1
                
                  CFIUS Cases Involving All Industries
                Reviewed for National Security Concerns
                      (Oct. 1988 through May 1994)

                                         High-       Non-high-
                                    technology      technology
Country                                  cases           cases   Total
------------------------------  --------------  --------------  ======
Japan                                      134              73     207
United Kingdom                             131              53     184
France                                      62              25      87
Germany                                     41              18      59
Netherlands                                 20              21      41
Switzerland                                 25               9      34
Canada                                      20              10      30
Sweden                                      15               5      20
Taiwan                                      14               0      14
Australia                                    9               5      14
Finland                                      9               5      14
Italy                                        4               8      12
Belgium                                      7               5      12
South Korea                                  8               2      10
Norway                                       7               3      10
Singapore                                    8               0       8
Israel                                       5               2       7
South Africa                                 4               1       5
China                                        4               1       5
India                                        3               1       4
Austria                                      3               1       4
Venezuela                                    3               0       3
Mexico                                       0               3       3
Liechtenstein                                3               0       3
Kuwait                                       2               1       3
Bermuda                                      2               1       3
Spain                                        2               0       2
Soviet Union                                 1               1       2
Panama                                       2               0       2
Luxembourg                                   0               2       2
United Arab Emirates                         1               0       1
Thailand                                     1               0       1
Saudi Arabia                                 1               0       1
New Zealand                                  1               0       1
Malaysia                                     1               0       1
Ireland                                      1               0       1
Indonesia                                    0               1       1
Hong Kong                                    0               1       1
Greece                                       1               0       1
Denmark                                      1               0       1
British Virgin Islands                       0               1       1
British West Indies                          0               1       1
Brazil                                       0               1       1
======================================================================
Total                                      556             261     817
----------------------------------------------------------------------


                                                                     Table III.2
                                                       
                                                        CFIUS Cases Involving High-Technology
                                                           Industries Reviewed for National
                                                       Security Concerns (Oct. 1988 through May
                                                                        1994)

                                                                                                                                               Number
High-technology                 United                                                                                                  Other      of
industry               Japan   Kingdom    France   Germany    Canada   Switzerland    Taiwan   Australia   Finland  South Korea     countries   cases
------------------  --------  --------  --------  --------  --------  ------------  --------  ----------  --------  -----------  ------------  ======
Computers                 30        12         9         0         3             4         3           0         1            4            11      77
Energy                     4         9         6         5         6             3         2           2         1            0            17      55
Semiconductors            32         3         5         3         0             0         4           0         0            2             4      53
Electronics               12        17         3         4         0             1         3           1         1            0             7      49
Aerospace                  7        15        11         2         2             3         1           0         0            0             8      49
Industrial                 6        13         7         6         0             2         0           1         2            1            11      49
 controls,
 equipment,
 instruments, and
 machinery
Advanced materials         7        21         2         3         1             1         1           1         2            0             5      44
Chemicals                  7        12         1         7         0             0         0           1         1            0             8      37
Biotechnology,             7         4         2         3         0             5         0           0         0            0            15      36
 medical, and
 pharmaceutical
Telecommunications         6         5         8         1         5             1         0           0         0            0             8      34
 and information
Electrical                 6         4         3         4         1             1         0           0         1            0             1      21
 equipment
General components         3         5         1         3         1             0         0           1         0            1             3      18
Optics                     2         6         1         0         0             3         0           0         0            0             4      16
Coatings and               2         3         1         0         0             1         0           2         0            0             0       9
 adhesives
Analytical                 1         2         0         0         0             0         0           0         0            0             0       3
 instruments
Environmental              0         0         1         0         0             0         0           0         0            0             1       2
 technologies
Robotics                   1         0         0         0         0             0         0           0         0            0             0       1
Specialty gases            1         0         0         0         0             0         0           0         0            0             0       1
Micro-machines             0         0         0         0         1             0         0           0         0            0             0       1
Submersibles               0         0         1         0         0             0         0           0         0            0             0       1
=====================================================================================================================================================
Total                    134       131        62        41        20            25        14           9         9            8           103     556
-----------------------------------------------------------------------------------------------------------------------------------------------------


                                                                     Table III.3
                                                       
                                                           CFIUS Cases Involving Non-High-
                                                          Technology Industries Reviewed for
                                                        National Security Concerns (Oct. 1988
                                                                  through May 1994)

Non-high-                                                                                                                                      Number
technology                      United                                                                                                  Other      of
industry               Japan   Kingdom    France   Germany    Canada   Switzerland    Taiwan   Australia   Finland  South Korea     countries   cases
------------------  --------  --------  --------  --------  --------  ------------  --------  ----------  --------  -----------  ------------  ======
Mining, metals,           18        19        12         8         2             1         0           1         1            1            10      73
 and metal-
 working equipment
Plastics and               5         3         2         1         0             1         0           0         1            0            13      26
 rubber
Construction and           9         4         2         0         2             1         0           1         0            1             6      26
 construction
 material
Automotive                 5         4         0         2         2             0         0           0         0            0             6      19
Transportation             3         1         0         1         1             1         0           0         0            0             4      11
 services
Engineering                2         4         0         1         0             0         0           0         1            0             2      10
 services
Financial                  7         0         0         0         0             0         0           1         0            0            10      18
Printing and               1         2         0         1         0             1         0           2         0            0             3      10
 publishing
Food, beverage,            4         2         2         0         0             0         0           0         0            0             1       9
 and tobacco
Consumer products          2         3         0         0         2             1         0           0         0            0             0       8
Environmental              0         4         0         2         0             1         0           0         0            0             0       7
 services
Real estate                6         0         0         0         0             0         0           0         1            0             0       7
Entertainment              6         0         0         0         0             0         0           0         0            0             0       6
Retailing                  2         2         1         0         0             0         0           0         0            0             1       6
Information                0         0         1         1         1             1         0           0         0            0             1       5
 services
Consulting                 0         1         2         0         0             0         0           0         0            0             1       4
Textiles                   2         0         0         0         0             1         0           0         0            0             1       4
Small arms                 0         1         1         1         0             0         0           0         0            0             0       3
Educational                0         1         0         0         0             0         0           0         0            0             1       2
 services
Wood products              0         1         0         0         0             0         0           0         1            0             0       2
Cans and                   0         0         1         0         0             0         0           0         0            0             1       2
 containers
Photographic               1         1         0         0         0             0         0           0         0            0             0       2
Parts fabrication          0         0         1         0         0             0         0           0         0            0             0       1
=====================================================================================================================================================
Total                     73        53        25        18        10             9         0           5         5            2            61     261
-----------------------------------------------------------------------------------------------------------------------------------------------------

CFIUS FILINGS FROM JAPAN, THE
UNITED KINGDOM, FRANCE, AND
GERMANY
========================================================== Appendix IV

   Figure IV.1:  CFIUS Cases
   Involving Japanese Companies
   Investing in High-Technology
   Industries (Oct.  1988 through
   May 1994)

   (See figure in printed
   edition.)

Note:  Total does not equal 100 percent due to rounding. 

   Figure IV.2:  CFIUS Cases
   Involving British Companies
   Investing in High-Technology
   Industries (Oct.  1988 through
   May 1994)

   (See figure in printed
   edition.)

   Figure IV.3:  CFIUS Cases
   Involving French Companies
   Investing in High-Technology
   Industries (Oct.  1988 through
   May 1994)

   (See figure in printed
   edition.)

Note:  Total does not equal 100 percent due to rounding. 

   Figure IV.4:  CFIUS Cases
   Involving German Companies
   Investing in High-Technology
   Industries (Oct.  1988 through
   May 1994)

   (See figure in printed
   edition.)

Note:  Total does not equal 100 percent due to rounding. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
THE TREASURY
========================================================== Appendix IV



(See figure in printed edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix IV


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Davi M.  D'Agostino
Maria Cristina Gobin
Anne-Marie Lasowski
Russell Reiter
James J.  Ungvarsky
Karen S.  Zuckerstein

OFFICE OF GENERAL COUNSEL

Margaret Armen
Raymond J.  Wyrsch


RELATED GAO PRODUCTS
=========================================================== Appendix 0

Defense Industrial Security:  Issues in the Proposed Acquisition of
LTV Corporation Missiles Division by Thomson-CSF (GAO/T-NSIAD-92-45,
June 25, 1992). 

Foreign Investment:  Analyzing National Security-Related Investment
Under the Exon-Florio Provision (GAO/T-GGD-92-49, June 4, 1992). 

National Security Reviews of Foreign Investment (GAO/T-NSIAD-91-8,
Feb.  26, 1991). 

National Security Review of Two Foreign Acquisitions in the
Semiconductor Sector (GAO/T-NSIAD-90-47, June 13, 1990). 

Foreign Investment:  Analyzing National Security Concerns
(GAO/NSIAD-90-94, Mar.  29, 1990). 

The President's Decision to Order a Chinese Company's Divestiture of
a Recently Acquired U.S.  Aircraft Parts Manufacturer
(GAO/T-NSIAD-90-21, Mar.  19, 1990). 

Strategic Minerals:  Implications of Proposed Takeover of a Major
British Mining Company (GAO/NSIAD-89-123, Mar.  3, 1989). 

*** End of document. ***