Congress Could Expand CFIUS After Decision Not to Review Chinese Purchase of Land, Law Firms Say

The U.S. may look to expand the jurisdiction of the Committee on Foreign Investment in the U.S. after CFIUS determined it couldn’t intervene in China-based Fufeng Group's purchase of North Dakota farmland, law firms said this month. Congress could make a push to expand CFIUS next year, some firms suggested, especially after several lawmakers said the real estate transaction should have fallen under the committee's authority.

CFIUS earlier this year told Fufeng its plan to acquire the land, which is near the Grand Forks Air Force Base in North Dakota, wasn’t a covered transaction (see 2212150035). Torres Trade Law called the deal “highly controversial,” saying in a client alert that it “may bring changes in the regulations due to the public’s perceived loopholes in the law.”

Although CFIUS has “historically interpreted the greenfield exception narrowly,” Linklaters said “it appears that Fufeng’s investment met all of the qualifications” for the carve-out. As a result, Congress could begin a push to expand CFIUS’ jurisdiction to cover a broader set of greenfield investments, the law firm said.

Several lawmakers criticized the CFIUS decision, including Sen. Kevin Cramer, R-N.D., who said the committee briefed him about its determination. “And they made it very clear that their conclusion was that it is non-jurisdiction, not that it was a green light,” Cramer told KX News Dec. 27. He said he plans to continue to question CFIUS about the deal.

“It is really obvious that China uses corporate relationships” to “both spy on and then to undermine the credibility of the United States and other countries,” Cramer said. “And I just don’t think we should be a participant in that.”

Although Congress may try to amend the committee’s regulations, CFIUS could also expand its jurisdiction to review the Fufeng deal without any formal input from Congress, Linklaters said. The committee may simply decide to add the Grand Forks Air Force Base to its Part 802 list, the firm said, which includes military bases, ports and other sensitive “installations” over which CFIUS has jurisdiction. But Linklaters said the North Dakota base, which “operates remotely-piloted Global Hawk aircraft around the world,” may not be on the list for good reason, including “because the activities performed there are not as vulnerable to intelligence collection from nearby locations.”

“Still, if CFIUS wants to be able to review future Fufeng-like transactions, it can add more sensitive sites to Part 802, thereby extending its jurisdiction to more real estate transactions,” the firm said. This “change could be made through the normal CFIUS regulatory process -- no new legislation would be required.”

Thompson Hine noted CFIUS could begin a new review of the Fufeng deal “if information comes to light demonstrating that the transaction parties omitted material information or submitted false or misleading material” in the committee’s initial investigation. Parties in other deals should continue to monitor this case and assess whether land they plan to purchase is located near any U.S. ports or military bases listed in Part 802, which would likely require “further review and analysis” to determine if the deal is a covered transaction, the firm said.

If the transaction is “significant” enough, parties to the deal should consider reaching out to local and state officials as well, Thompson Hine said. The firm said several states are considering creating their own CFIUS-like tool, including South Dakota. “If approved, the resulting state board would investigate proposed purchases of agricultural land by foreign parties and recommend either approval or denial to the governor,” the firm said.

Linklaters noted Texas' 2021 Lone Star Infrastructure Protection Act, which bars “control of or access to critical infrastructure by certain foreign countries.” To “avoid state competition with CFIUS and a potential patchwork of inconsistent state processes and standards for review, Congress” may look to amend CFIUS regulations in the Defense Production Act “to include a clear statement of federal preemption.”