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The U.S. Treasury Department wants to increase the power of a little-known, secretive government commission to review deals between American companies and foreign investors.
This comes as high-profile deals involving foreign investment in the US include Chinese company ByteDance’s ownership of popular social media app TikTok and Japanese company Nippon Steel’s bid to acquire Pittsburgh-based US Steel Corp. to take over, is gaining increasing attention from lawmakers and even President Joe Biden.
A new proposed regulation would strengthen the powers of the United States’ interagency Committee on Foreign Investment, known as CFIUS, which is charged with scrutinizing corporate deals for national security concerns and has the power to force the company to divest ownership or change large parts of the company.
If finalized, the rulemaking would expand subpoena power, allow the commission to request more information from parties to a proposed sale and expand the circumstances in which fines can be imposed and their size from $250,000 to $5 million, where there are incorrect statements, omissions and non-compliance with the rules. make a mandatory declaration.
The proposed change comes as the convergence of national security concerns related to foreign investment has increased as competition among the world’s major powers increases and the U.S. focuses on expanding its domestic supply chains.
President Joe Biden opposed the planned sale of US Steel to Japan’s Nippon Steel, saying in March that the US must maintain strong American steel companies powered by American steelworkers. Japanese Prime Minister Fumio Kishida said at a press conference at the White House on Wednesday that he hopes discussions on Nippon will develop in a direction that would be positive for both sides.
Nippon Steel announced in December that it planned to acquire the Pittsburgh-based steelmaker for $14.1 billion in cash, raising concerns about what the deal could mean for union workers, supply chains and the U.S. national safety.
Paul Rosen, the Treasury Department’s assistant secretary for investment security, said the regulations are intended to more effectively deter violations, promote compliance and quickly address national security risks associated with CFIUS assessments.
John Carlin, former Justice Department national security chief and partner at law firm Paul Weiss, said the proposed rule shows how companies are on the front lines of national security policy and how seriously the administration takes foreign investment.
Today’s announcement is all about adding tools to help them more actively and aggressively investigate and enforce their authorities, he said. He added that it would be an incentive for people to actually close deals to see whether or not they need to file.
It really makes CFIUS more of an enforcement agency by expanding their subpoena power, he said.
Another deal under review by CFIUS is the ownership of popular social media app TikTok. CFIUS’s review of the social media app goes back at least to 2019, although no movement has been made on that review. The US House of Representatives has since passed a bill that would force ByteDance to sell or ban the app in the US.
Asked at a news conference in Beijing on Monday about TikTok, Treasury Secretary Janet Yellen said she supports the administration’s efforts to address national security issues related to sensitive personal data. This is a legitimate concern, she said.
Many American social apps are banned from operating in China, Yellen said. We would like to find a way forward.
J. Philip Ludvigson, a partner at law firm King & Spalding, said the proposed regulations are yet another indicator of an increasingly aggressive stance in protecting national security. Ludvigson is a former director of CFIUS Monitoring & Enforcement.
CFIUS clearly intends to issue more and harsher penalties than ever before, using enhanced subpoena authority where necessary,” he said.
The US has also begun reviewing certain transactions between US companies and companies in China.
President Joe Biden signed an executive order last August to block and regulate high-tech US investments toward China.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: April 12, 2024 | 6:36 am IST