US Administration Tightens Foreign Transaction Focus
The White House issued an executive order today that references the Committee on Foreign Investment in the US (CFIUS) review of transactions between US companies and foreign, specifically those transactions that involve the purchase of company assets and IP that might be considered sensitive to US security or its place in the world economy. As ‘foreign adversaries’ are the focus, which translates to China, Russia, Iran, and a few others, what the order is considering is the potential for transactions that could affect the US supply chain, essentially those that could allow a foreign power to place restrictions on or limit completely access to assets that the US deems necessary.
Noted are technology, which certainly has been a focus, manufacturing, services, and mineral resources, and how they relate to national security, with the subset of microelectronics, AI, biotechnology and bio-manufacturing, quantum computing, advanced clean energy (including battery, storage and hydrogen), critical materials such as Lithium and rare earths, and food security. While the EO does not change the committee’s powers, the order reinforces the mandate of the committee to protect the US when it comes to transactions by said ‘foreign adversaries’ or 3rd parties that might give access to those adversaries. It further warned of the potential for ‘incremental investments’ that, over time, could lead to control over a sector or technology, essentially a series of transactions that might look disparate individually but could, in the aggregate, cause the US to lose control over resources or technological leadership.
Outside of the reminders on the risk of transactions made by foreign entities, the EO also focuses on cybersecurity risks, that is, allowing foreign entities access to systems and data that could be used maliciously. US elections were referenced, as was critical infrastructure and defense, including the personal data of US citizens, especially identification and health data, citing the potential for the use of that data to target various US population sub-sectors, tacitly referring to data that would help a foreign entity to influence or incite a particular group that it believes would be more receptive to such disruptive influences.
The EO doesn’t actually change anything but it paints a more aggressive picture of the current administrations face on China as the mid-term elections approach, while making almost any transaction that falls to CFIUS one in which they could cite a threat to national security. Should a Chinese entity want to buy a US farming firm, CFIUS could cite a potential threat to the US food supply years down the road as a reason to disallow, and any transaction that involves personal data could be nixed under the increased focus on data protection. Unfortunate as these ‘reminders’ tighten the potential reign of CFIUS, it also increases the number of transactions that can be rejected, which will likely cause foreign entities to take less interest in purchasing US companies and could result in additional trade sanctions by those entities. China recently banned the purchase of certain medical equipment made outside of the Mainland and has at times restricted the export of even more basic medical supplies in response to increasing US trade sanctions or similar issues. While the EO will not actually force a change, it is another public slap that will likely elicit a response, making the tightrope that we walk with China that much thinner.
Noted are technology, which certainly has been a focus, manufacturing, services, and mineral resources, and how they relate to national security, with the subset of microelectronics, AI, biotechnology and bio-manufacturing, quantum computing, advanced clean energy (including battery, storage and hydrogen), critical materials such as Lithium and rare earths, and food security. While the EO does not change the committee’s powers, the order reinforces the mandate of the committee to protect the US when it comes to transactions by said ‘foreign adversaries’ or 3rd parties that might give access to those adversaries. It further warned of the potential for ‘incremental investments’ that, over time, could lead to control over a sector or technology, essentially a series of transactions that might look disparate individually but could, in the aggregate, cause the US to lose control over resources or technological leadership.
Outside of the reminders on the risk of transactions made by foreign entities, the EO also focuses on cybersecurity risks, that is, allowing foreign entities access to systems and data that could be used maliciously. US elections were referenced, as was critical infrastructure and defense, including the personal data of US citizens, especially identification and health data, citing the potential for the use of that data to target various US population sub-sectors, tacitly referring to data that would help a foreign entity to influence or incite a particular group that it believes would be more receptive to such disruptive influences.
The EO doesn’t actually change anything but it paints a more aggressive picture of the current administrations face on China as the mid-term elections approach, while making almost any transaction that falls to CFIUS one in which they could cite a threat to national security. Should a Chinese entity want to buy a US farming firm, CFIUS could cite a potential threat to the US food supply years down the road as a reason to disallow, and any transaction that involves personal data could be nixed under the increased focus on data protection. Unfortunate as these ‘reminders’ tighten the potential reign of CFIUS, it also increases the number of transactions that can be rejected, which will likely cause foreign entities to take less interest in purchasing US companies and could result in additional trade sanctions by those entities. China recently banned the purchase of certain medical equipment made outside of the Mainland and has at times restricted the export of even more basic medical supplies in response to increasing US trade sanctions or similar issues. While the EO will not actually force a change, it is another public slap that will likely elicit a response, making the tightrope that we walk with China that much thinner.
Tightrope walker - Source: sportsnhobbies.org
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