CFIUS Annual Report to Congress (2019)

The Committee on Foreign Investment in the United States (CFIUS), an interagency body of the U.S. Government that reviews certain transactions involving foreign investment in the United States, submitted its annual report to Congress covering the 2019 reporting period. Some key highlights in their report included:

Covered transactions, and withdrawals:

• 231 notices of covered transactions were filed in 2019 of which 113 notices were reviewed by CFIUS.
• Eight transactions were withdrawn as CFIUS and the parties to the transaction could not agree on mitigation measures and one transaction was referred to President Trump, who issued an order prohibiting an acquisition by a Chinese company.
• Withdrawals decreased approximately 55% from 2018 with CFIUS approving 30 notices in 2019 after the commencement of the investigation.

Covered transactions by sector:

• Majority of notices filed (83%) were from the Manufacturing, Finance, Information, and Services sectors.
• Manufacturing accounted for 44% of the notices filed in 2019; that sector also accounted for the highest increase of notices amongst the different sectors.
• The Mining, Utilities and Construction sector experienced the highest decrease between sectors and accounted for 9% of the filings in 2019.
• Finance, Information Services, and Wholesale Trade Retail Trade and Transportation sectors remained relatively unchanged year over year.

Covered transactions by Acquirer Home Country:

The report also looked at the filings by Country or Economy between the years 2017-2019.

• Canada, China and Japan accounted for 49% of notices filed in 2019.
• China experienced a significant decrease in the number of filings during the 2017 to 2019 period while Japan experienced a significant increase, replacing China as the country with the most filings in 2019. 

The table below highlights the top five countries that reported. 

Covered Transactions by Acquirer Home Country or Geographic Economy, 2017-2019

(Source: Annual Report to Congress; Report Period 2019)

With the implementation of the Foreign Investment Risk Review Modernization Act (FIRRMA) regulations in February 2020, CFIUS expects the additional requirements of FIRRMA to be covered in the next annual report which could change the trend for investors. Some of the changes are highlighted below:

• Investors should expect an increase in transactions reviewed as the scope has expanded to include certain real estate transactions that would normally not fall under CFIUS purview.
• Although the process still remains largely voluntary, another change includes mandatory filings for certain transactions.
• A new filing system has been introduced for inputting basic information to CFIUS for voluntary filings in lieu of a full notice, which may streamline and ease the process for filings.
• Any violations of the new CFIUS review process can also result in penalties being imposed by FIRRMA.

Overall, the number of filings has remained relatively consistent; Japan has surpassed China as the most reviewed country; and there is an expectation that the number of filings going forward will increase based upon additional FIRRMA requirements.

If you have any questions, we’d like to hear from you.