Touted as the first official presidential guidance to the Committee on Foreign Investment in the United States ("CFIUS" or "the Committee") since CFIUS's inception, the Executive Order ("EO") emphasizes supply chain resilience, protecting Americans' sensitive data, and maintaining America's technological leadership as a means to respond to new and emerging threats in the foreign investment context.
On September 15, 2022, President Biden issued an EO "elaborating and expanding" upon the factors CFIUS must consider as part of its national security review process. Although the EO does not change the formal CFIUS process or CFIUS' legal jurisdiction, the President plays a critical role in the CFIUS process as the single individual authorized to prohibit or "block" transactions on CFIUS's recommendation, and President Biden's personal directive will almost certainly influence CFIUS's day-to-day conduct of reviews. The EO directs CFIUS to consider the following criteria, which parties should consider and address in future evaluations of cross-border investment opportunities:
- The effect of the transaction on supply chain resilience and security—both within and outside the United States' defense industrial base, in manufacturing capabilities, services, critical mineral resources, or technologies that are fundamental to national security. Sectors identified in the EO include microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy (e.g., battery storage and hydrogen), climate adaptation technologies, critical materials (e.g., lithium and rare earth elements), elements of the agriculture industrial base with implications for food security, and other sectors identified in EO 14017, "Executive Order on America's Supply Chains."
- The effect of the transaction on U.S. technological leadership in areas affecting national security, including biotechnology and biomanufacturing, artificial intelligence, microelectronics, quantum computing, advanced clean energy, and climate adaptation technologies.
- Industry investment trends, including incremental investments over time in a sector or technology, that indicate that a transaction would facilitate "harmful technology transfer in key industries" or otherwise harm national security.
- Cybersecurity risks (including in the "cybersecurity posture, practices, capabilities, and access of both the foreign person and the United States business") that could impair national security or support cyber intrusion and other malicious cyber-enabled activity within the United States.
- Risks to the protection or integrity of data in databases or systems housing sensitive data, and the risk of exploitation of U.S. persons' sensitive data.
The EO does not mention any particular country, yet references the threat posed by investments "directly or indirectly involving foreign adversaries and other countries of special concern" that may present an unacceptable risk to U.S. national security "due to the legal environment, intentions, or capabilities of the foreign person, including foreign governments, involved in the transaction." The EO comes at a time when U.S. officials have expressed concerns about the security dimensions of U.S.-China trade and investment, particularly in the technology sector, and have significantly expanded trade controls targeting Russia.
The EO also requires the Committee to provide periodic reports on its processes, practices, and regulations to the National Security Advisor. These reports must also contain policy recommendations that the Committee considers necessary to meet evolving national security risks, signaling the White House's intent to be actively involved in how CFIUS administers its review authority.
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