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Managing America: National Security

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Week Ending July 13, 2007

H.R.556 To ensure national security while promoting foreign investment and the creation and maintenance of jobs, to reform the process by which such investments are examined for any effect they may have on national security, to establish the Committee on Foreign Investment in the United States, and for other purposes.

Prior law is amended to direct the President to review business transactions to determine their affect on national security. Such transactions would include a possible merger, acquisition or takeover which could result in foreign control of any person engaged in interstate commerce. Should the President move to scrutinize a transaction further the Committee on Foreign Investment in the United States (CFIUS) will review the transaction to determine its effects on national security.

CFIUS is directed in the bill to investigate a covered transaction which it determines is a foreign government-controlled transaction. Any review or investigation must be approved by a majority roll call vote of CFIUS members and must be signed by the Secretaries of Treasury, Homeland Security and Commerce.

CFIUS may enter agreements with a transaction party to mitigate any threat to national security but the negotiations would be designated to a lead federal agency to negotiate, modify, monitor and enforce such agreements. CFIUS is expanded to a multi-agency committee.

The President is further directed to investigate the effects of certain covered transactions on national security and to take necessary steps to protect national security. Although prior law gave the President the authority to evaluate transactions at his discretion the bill creates specific factors for evaluation of a transaction.

The Director of National Intelligence is ordered to conduct an analysis of any threat to national security posed by such transactions. Transactions that are withdrawn from the investigative process will still be tracked. The DNI will not be a member of CFIUS and will act independently.

The Secretary of Treasury is charged with studying investments in critical US infrastructure or businesses related to national security by foreign governments and others that comply with boycotts of Israel or which do not ban foreign terrorist organizations in particular.

A transaction may be withdrawn from review if a written request from any party to the transaction is approved in writing by the Chair and Vice Chair of CFIUS but discussion on the deal can continue. The president can return to a previously reviewed transaction if a party submitted false or misleading material information to CFIUS relating to the review or investigation of if any party to the deal breaches a mitigation agreement if the breach is considered intentional.

Should it be decided that a transaction threatens to impair the national security and that the threat has not been mitigated or is a foreign government controlled transaction a CFIUS vote must prevail with at least a one vote majority and the DNI agrees upon measures to satisfactorily mitigate the threats the President shall immediately initiate an investigation to protect national security and must do so within 45 days. Investigations are not considered final until signed off by the President.

Transaction parties are not prohibited from submitting additional information on the transaction while a review is ongoing.

Reporting to Congress is ordered.

The Senate amendment the bill with the content of S 1610. That bill provided further that a deal should be analyzed in the light of the adherence of the subject country to nonproliferation control regimes, including treaties and multilateral supply guidelines, the relationship of such country with the United States, specifically on its record on cooperating in counter-terrorism efforts, the potential for transshipment or diversion of technologies with military applications, including an analysis of national export control laws and regulations;  the long-term projection of United States requirements for sources of energy and other critical resources and material; and  such other factors as the President or the Committee may determine to be appropriate, generally or in connection with a specific review or investigation.'.

Sponsor:  Rep. Carolyn B. Maloney (D-NY-14^th)

Vote: Passed House 423 to 0 (RC 110). HR 556 was amended by the Senate to include content from S 1610, the Senate companion measure. The bill passed the Senate on June 29, 2007 by Unanimous Consent. The House passed the amended bill 370 to 45 (RC 614). The Minority motion to recommit the bill failed

A Motion to Recommit the bill with instructions included a new paragraph that required a report with a detailed analysis of factors in the US on deleterious effect of burdensome regulations;  fair, equitable and nondiscriminatory treatment of entrepreneurs, businesses and other sources of capital; the stability of the financial markets; and economic competitiveness driven by innovation that, when compared to other countries may negatively impact the number and type of investments from other countries and that may induce retaliatory actions from other countries that impair US global investments.

Opposition to the Motion held that the Motion says we “do not want foreign investment which is good for this country, which is job producing and economically stimulative (to be) prevented by fears that unnecessary security interests will be raised.” Opposition held that the committee created in this bill to determine if a foreign investment is also a threat to national security should not have to report on the stability of financial markets and other market assessments. The Motion to recommit with instructions failed 192 to 229 (RC 109) February 28, 2007.

Cost to the taxpayers: The bill authorizes $10 million for each fiscal year 2007 through 2010.

Earmark Certification:   Not applicable to this bill.

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MORE INFORMATION

AMENDMENTS

CFIUS MEMBERSHIP

MEMBERSHIP- The Committee shall be comprised of the following members or the designee of any such member:

`(A) The Secretary of the Treasury.

`(B) The Secretary of Homeland Security.

`(C) The Secretary of Commerce.

`(D) The Secretary of Defense.

`(E) The Secretary of State.

`(F) The Attorney General.

`(G) The Secretary of Energy.

`(H) The Chairman of the Council of Economic Advisors.

`(I) The United States Trade Representative.

`(J) The Director of the Office of Management and Budget.

`(K) The Director of the National Economic Council.

`(L) The Director of the Office of Science and Technology Policy.

`(M) The President's Assistant for National Security Affairs.

`(N) Any other designee of the President from the Executive Office of the President.

`(3) CHAIRPERSON; VICE CHAIRPERSONS- The Secretary of the Treasury shall be the Chairperson of the Committee. The Secretary of Homeland Security and the Secretary of Commerce shall be the Vice Chairpersons of the Committee.

`(4) OTHER MEMBERS- Subject to subsection (b)(4)(B), the Chairperson of the Committee shall involve the heads of such other Federal departments, agencies, and independent establishments in any review or investigation under subsection (b) as the Chairperson, after consulting with the Vice Chairpersons, determines to be appropriate on the basis of the facts and circumstances of the transaction under investigation (or the designee of any such department or agency head).

`(5) MEETINGS- The Committee shall meet upon the direction of the President or upon the call of the Chairperson of the Committee without regard to section 552b of title 5, United States Code (if otherwise applicable).

`(6) COLLECTION OF EVIDENCE- Subject to subsection (c), the Committee may, for the purpose of carrying out this section--

`(A) sit and act at such times and places, take such testimony, receive such evidence, administer such oaths; and

`(B) require the attendance and testimony of such witnesses and the production of such books, records, correspondence, memoranda, papers, and documents as the Chairperson of the Committee may determine advisable.

AMENDMENTS

Mr. Frank (MA).

An amendment numbered 3 printed in the Congressional Record making sundry changes to the bill.

Passed by voice vote Feb.28, 2007

Mr. King (IA).

An amendment numbered 4 printed in the Congressional Record to add a requirement that the President consider the potential effects of a covered transaction on the efforts of the United States to curtail human smuggling.

Passed by voice vote Feb 28, 2007

Mr. Barrow.

An amendment numbered 12 printed in the Congressional Record to add language to section 7 (which deals with Oversight by the Congress) providing that Senators representing States and Members of Congress representing congressional districts that would be significantly affected by a covered transaction should be affected by the reporting requirements.

Passed by voice vote Feb. 28, 2007

Mr. McCaul (TX).

An amendment numbered 5 printed in the Congressional Record, to insert a new paragraph entitled Contents of Report Related to Barriers to Investment into the United States and specifies for inclusion in the report a detailed discussion of factors including the effective rate of taxation on entrepreneurs and businesses and other sources of capital in the U.S. as compared to other countries.

Failed 198 to 228 Feb. 28, 2007 (RC 106)

Mr. McCaul (TX).

An amendment numbered 6 printed in the Congressional Record, to insert a new paragraph entitled Contents of Report Related to Barriers to Investment into the United States and specifies for inclusion in the report a detailed discussion of factors including the amount of burdensome regulation in the United States as compared to other countries that affect the number of filings, changes in the types of business sectors involved in filings, and changes in the number of investments originating from specific countries.

Failed 197 to 231 Feb. 28, 2007 (RC 107)

Mr. McCaul (TX).

An amendment numbered 7 printed in the Congressional Record, to insert a new paragraph entitled Contents of Report Related to Barriers to Investment into the United States and specifies for inclusion in the report a detailed discussion of factors including trend information on the number of jobs in the United States related to foreign investment resulting from covered transactions, that affect the number of filings, changes in the type of business sectors involved in filings, and changes in the number of investments originating from specific countries.

Failed 197 to 231 Feb. 28, 2007 (RC 108)

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