CFIUS Annual Report Shows Uptick in Declarations, Notices

The Committee on Foreign Investment in the U.S. this week issued its annual report to Congress, outlining statistics from the first full calendar year in which CFIUS operated under expanded authorities granted to it by the Foreign Investment Risk Review Modernization Act (see 2002270049 and 2001140060). CFIUS said it received 164 declarations in 2021, an increase from the 126 it received in 2020 2107260017, and 272 notices, up from the 187 from 2020.

Of the 164 declarations, 47 were subject to mandatory filing requirements. The committee said it asked filers of 30 of the declarations to file a written notice, was unable to conclude action on 12 declarations and rejected two other declarations. During 2021, CFIUS averaged 5.48 days from the date it received a declaration to the date when it accepted the declaration, the report said, and averaged 29.9 calendar days to complete reviews of declarations, about the same as 2020.

Of the 272 notices, CFIUS conducted an investigation into 130 of them, the report said, and adopted mitigation measures to resolve national security concerns with respect to 26 of the notices. Seventy-four of the notices were withdrawn, with 52 of them refiled in 2021 and 11 in 2022. CFIUS said it didn’t reject any notices in 2021 and there were no presidential decisions. CFIUS averaged 6.2 days from the date it received a draft notice to the date when it provided written comments on the notice, about the same number of days between when the committee received a formal written notice and the date it accepted the notice. CFIUS took an average of 46.3 days to close a review of a notice and an average of 65 days to close an investigation, compared with the 45 days to close a review and 86 days to close an investigation in 2020.

CFIUS said about 55% of the non-real estate notices involved transactions in the finance, information and services sector, and about 28% of the notices involved the manufacturing sector. Other top sectors include the mining, utilities and construction sectors; and the wholesale trade, retail trade and transportation sector.

The committee in 2021 received the highest number of notices -- 44 -- from Chinese investors, an increase from the 17 it received in 2020 and the 25 it received in 2019. The next highest number of notices came from investors in Canada (28) and Japan (26).

CFIUS said it imposed a range of mitigation measures to address national security concerns with certain notices, including placing restrictions on the sharing of certain intellectual property and trade secrets and establishing “guidelines and terms” for handling contracts with the U.S. government. Other conditions ensured that only “authorized persons” had access to certain technology, facilities or sensitive information; created a “corporate security committee” to “limit foreign influence and ensure compliance”; introduced third-party monitors or security officers; and excluded “certain sensitive U.S. assets from the transaction.”

The committee said it identified 135 non-notified transactions during 2021, eight of which led to a request for filing. CFIUS said it plans to improve its methods to identify transactions that aren’t notified to the committee, including through more hiring of staff dedicated to finding non-notified transactions. It also said it plans to increase training for existing staff across CFIUS member agencies to “increase coordination and effective identification of transactions of interest to pursue.” Paul Rosen, who oversees the Treasury Department’s role on CFIUS, said during his nomination hearing that he hopes to encourage more voluntary disclosures and doesn’t want CFIUS to lean too heavily on the non-notified process (see 2204060059).

CFIUS also said it reviewed 184 covered transactions involving acquisitions of critical technologies during 2021. The top foreign acquirers of U.S. critical technology last year were Germany and the U.K. (16 transactions), Japan (15), South Korea (13), the Cayman Islands (12), Israel (11) and China and Canada, (10) each.