The Committee on Foreign Investment in the United States (CFIUS) recently published its 2024 Calendar Year Annual Report, which illustrates recent and historical trends relating to CFIUS’s review of investments in U.S. business interests, including key issues that CFIUS considers when initiating investigations of these transactions.
CFIUS, an interagency committee chaired by the Department of Treasury, possesses jurisdiction to review various foreign investments in the United States, including acquisitions resulting in foreign control of U.S. businesses, non-controlling investments in U.S. businesses by foreign persons, and real estate transactions that meet specific factors set forth in CFIUS’s regulations (i.e., in proximity to a U.S. military installation). CFIUS conducts its review of these transactions through both mandatory and voluntary filings made by transaction parties (determined based on the contours of the U.S. business and the relevant foreign investor).
Those filings, in turn, can occur through one of two means, either Declarations or Notices as further explained below.
Key Takeaways from 2024 Annual Report
Overall Filings
Slight increases for Declarations (+7) and decreases for Notices (-24) from 2023 to 2024, but both showing marked decreases from the number of filings in 2021 and 2022.
Continuing Trends
CFIUS continues to clear a high percentage of Declarations (78%), while being unable to conclude its review for only 7 of 116 total Declarations (6%). This represents a continuing trend for both matters since roughly 2021.
CFIUS continues to initiate investigations at a stable level for Notices, with roughly 55% of Notices reaching the investigation phase from 2022 through 2024.
Common Foreign Investors
The most frequent foreign investors for Declarations generally relate to close U.S. allies, including Japan (16), Canada (11), France (9), and Germany (8). The United Arab Emirates (7) also saw a relatively high number of Declarations, while South Korea (4) saw a continued decrease in submissions from 2022-24.
For Notices, investors from China submitted the highest number of filings (26), with France (25) and Japan (24) shortly behind. Similar to Declarations, the United Arab Emirates submitted a relatively high number (21), which continues a trend from 2023.
Mitigation
CFIUS continues to use its authority to institute mitigation measures in a minority of filed notifications. For those 2024 Notices reaching the investigation phase (116 in total), roughly 15% ultimately required some form of mitigation by CFIUS.
Presidential Declarations
2024 saw two instances of Presidential action relating to a CFIUS filing, the most since CFIUS began reporting in 2018 and the first instances of any Presidential action since 2020.
Key Topics in Reviews
CFIUS evaluates all transactions based on any relevant national security considerations. However, it has identified recurring issues arising from its review of transactions such as:
- Connection points to the U.S. government, whether through cybersecurity infrastructure, direct/indirect procurements, or physical infrastructure.
- Products, services, or operations relating to energy production, telecommunications systems, financial services, or advanced technologies such as semiconductors, integrated circuits, or cybersecurity.
- Risks of exploitation of cybersecurity in the supply chain.
- Research & development or production items/products controlled for export by the Export Administration Regulations or the International Traffic in Arms Regulations.
- U.S. companies related to the defense or national security sectors.
Non-Notified Transactions
CFIUS continues to examine transactions for which no filing was made to determine whether a filing was either required or if the transaction itself results in identified national security concerns. For those filings that were required to be filed pursuant to CFIUS’s mandatory regulations, transaction parties face significant financial penalties that could rise to the value of the transaction.
CFIUS states it considered thousands of potential non-notified transactions, and ultimately investigated 98 for potential formal inquiry, with 76 resulting in a formal inquiry, and finally 12 resulting in a request for a filing of a non-notified transaction.
