Washington, D.C. – On April 18, 2019 FAO Global Associates attended The Evolution of CFIUS & Export Controls law brief held at American University College of Law. The event convened two separate panels. discussing the evolution of The Committee on Foreign Investment into the United States (CFIUS) and the impact of the recently passed Foreign Investment Risk Review Modernization Act (FIRRMA) of 2017.
Panel 1 was moderated by Hunter Deeley of the US. Department of Justice, Foreign Investment Review Section. The panelists included Ian Schlager (Skadden, Arps, Slate, Meagher & Flom LLP), Jonathan Wakely (Covington & Burling LLP), Richard Sofield (Wiley Rein LLP), David Sullivan (U.S. Department of Treasury, International Affairs), & David Poltinsky (U.S. Department of Justice, Foreign Investment Review Section).
Panel 2 was moderated by R. Elizabeth Abraham, Senior Counsel for the U.S. Department of Commerce, Office of Chief Counsel for Industry & Security. The panelists included Melanie Flaharty (U.S. Department of State, Directorate of Defense Trade Controls), Kevin Wolf (Akin Gump Strauss, Hauer, & Feld), Nathan Charles (U.S. Department of Justice Counterintelligence and Export Control Section), Adam Munitz (FH+H), and Joshua Fitzhugh (Clifford Chance, LLP).
All individual comments were off the record, but our associates provided the top 3 takeaways that pertain to our client interests.
Top 3 Takeaways
- The definition of national security is being used uniquely by the current U.S. administration led by President Donald Trump to regulate emerging technologies that are deemed critical to China’s 2025 industrial policy. This may cause issue with small and medium size technology companies that take in overseas investment.
- China is the current target. Fairly or unfairly, it appeared clear that Chinese companies and investors were the current target of many of the reforms.
- Export controls are very straightforward, but the CFIUS process is for the most part conducted behind closed doors with little avenues for recourse, creating conditions for abuse. Currently, less than half of projects that are reviewed by CFIUS are approved. However, foreign investors and U.S. businesses can do a significant amount of mitigation and preparation to avoid common pitfalls.
FAO Global Conclusion & Recommendations
U.S. companies are likely in violation of the current legislation that add restrictions to investments, partnerships, and M&A from foreign enterprises. Specific enforcement actions for those in violation of CFIUS are not clear. However U.S. companies can mitigate their risk exposure by understanding the current state of what constitutes emerging technology or national security. This definition continues to shift but staying on top of these trends can save future headaches.
Chinese companies interested to invest in the United States should also be aware of what is considered national security and work with their targeted companies to avoid and mitigate concerns that any investment or cooperation might create. It is important for Chinese firms to understand the political environment as well as the underlying concerns U.S. policy makers have towards Chinese investment. There are many industrial sectors where Chinese firms can get involved and investment is welcome. Conducting proper due-diligence and understanding the current environment is crucial for long-term success.
Author
Brandon Hughes is the lead strategy consultant and founder of FAO Global. He has over a decade of experience focused on international issues primarily in China & emerging markets. Brandon has previously served as a U.S. Army Officer in Afghanistan, the Balkans, and Western Europe. He has worked with such prestigious organiations as the Carngie-Tsinghua Center in Beijing and Asia Society of Northern California in San Francisco. He holds an LLM in International Relations and a B.S. in International Business and is currently pursuing Joint MBA from Columbia University – London Business School – Hong Kong University.
Custom Intelligence Briefs are available for our clients upon request. We can provide daily or weekly updates on local market conditions, policy impacts, regional events, or industry changes that affect operations or strategy.
Order a Customized Event Brief Today
FAO Global can attend a high-level event and provide a customized event brief tailored to your specific companies missions or goals. We can ask questions, share insights, and provide background research on the topic saving you time & money. Most importantly, our attendance provides you with valuable insights from trained analysts.
FAO Global is Your International Partner
FAO Global provides China Consulting services, USA Market Entry, tailored business missions, and many more services to build bridges between the U.S. and emerging markets. Contact us to discuss your next international business venture or investment.
Headquartered in Washington, DC with Affiliates in China
Our Analysts, Associates, Consultants, and Interns all possess extensive experience in a foreign country and a foreign language capability. Our talent pool includes graduates from the elite Tsinghua University in Beijing, Georgetown University, George Washington University, UC Berkeley, and University of South Carolina. Being based in the Washington, DC Metro Area provides our team the advantage to build relationships with policy makers, foreign diplomats, business leaders, and non-profit groups providing a holistic view of global policy and the impacts to the business community. In addition to being based in the Washington, DC area, we retain the input and advice from affiliates located in China. This allows us to maintain on-ground awareness of changing business and political environment conditions and facilitate client projects between the two countries and the greater Asia continent.
All Briefs are reviewed and guided by a Senior Analyst before publication.
