How the Department of Commerce Reviews Foreign Investments for National Security Risks

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At the heart of United States economic policy lies a fundamental tension: the nation actively encourages foreign direct investment for its immense economic benefits while simultaneously needing to safeguard its national security from potential threats that such investment can pose.

To manage this balance, the U.S. government relies on an interagency body: the Committee on Foreign Investment in the United States. This committee serves as the nation’s gatekeeper, scrutinizing a small fraction of foreign investments to identify and mitigate risks.

The Department of Commerce plays a critical role within this national security function, serving as the committee’s primary expert on U.S. industry, technology, and the supply chains that underpin the nation’s economic and national security.

Understanding CFIUS: The Nation’s Investment Gatekeeper

To appreciate the Department of Commerce’s contribution, it’s essential to first understand the purpose, structure, and authority of the committee in which it operates. CFIUS is not a single agency but a collaborative body of experts from across the executive branch, whose powers have evolved over decades in response to a changing global landscape.

Balancing Open Investment with National Security

The United States has a long-standing “open investment policy,” making it the world’s largest recipient of foreign direct investment, as Congressional Research Service and government analyses document. The economic benefits are substantial.

Foreign investment boosts productivity, strengthens the U.S. manufacturing and services sectors, increases exports, and creates high-paying jobs, according to government publications and California Chamber of Commerce advocacy.

U.S. affiliates of foreign companies support an annual payroll of hundreds of billions of dollars, with average compensation per employee often exceeding the U.S. average, as government data and Trade.gov reports show.

In 2024 alone, new FDI expenditures totaled $151.0 billion, a figure that underscores the massive scale of capital flows into the U.S. economy, according to Bureau of Economic Analysis data.

Despite these clear benefits, a security review is essential because the nature of national security has evolved. Threats are no longer confined to traditional military concerns but now encompass economic security, technological leadership, and the protection of critical infrastructure and citizens’ sensitive data, as Congressional Research Service, George Washington University research, and Berkeley Law analysis explain.

CFIUS is designed to review only a small subset of foreign investments that might pose such risks, operating with an exclusive focus on national security.

The existence of CFIUS is not meant to undermine the U.S. open investment policy but rather to protect it. The committee’s function is to surgically identify and address national security threats so that the broader, beneficial flow of investment can continue with confidence, as Trade.gov documentation explains.

By providing a robust backstop against malign actors who might exploit the nation’s economic openness, CFIUS allows policymakers to advocate for open investment without reservation. Without this targeted risk-management function, political pressure for broader, more restrictive protectionist policies could grow, potentially harming the very economic prosperity the policy is designed to foster.

A Committee of Experts

CFIUS is an interagency committee, reflecting a whole-of-government approach to national security. By statute, it is composed of nine voting members, each bringing a unique perspective to the table, according to Congressional Research Service documentation and law firm analyses.

The members are:

• The Secretary of the Treasury (Chair)
• The Secretary of State
• The Secretary of Defense
• The Secretary of Homeland Security
• The Secretary of Commerce
• The Secretary of Energy
• The Attorney General
• The United States Trade Representative
• The Director of the Office of Science and Technology Policy

In addition, the Secretary of Labor and the Director of National Intelligence serve as non-voting, ex officio members. Several White House offices, including the National Security Council and the Council of Economic Advisers, also observe and participate as appropriate, according to Congressional Research Service and Treasury documentation.

The Department of the Treasury serves as the committee’s chair and handles most of the day-to-day administrative functions and communications with parties, as law firm resources explain.

This interagency structure is CFIUS’s greatest strength, ensuring that a transaction is viewed through multiple lenses—diplomatic, military, law enforcement, economic, and technological. This prevents a single, narrow viewpoint from dominating the analysis.

However, this structure also contributes to the process’s complexity. The need to coordinate and achieve consensus among these powerful agencies can lead to lengthy and detailed reviews, which sometimes draw criticism from the investment community, as White & Case and Davis Polk analyses note.

The Evolution of CFIUS Authority

The authority and scope of CFIUS have not been static; they have expanded over nearly 50 years in direct response to specific geopolitical events and perceived gaps in national security.

1975 – CFIUS was first established by President Gerald Ford’s Executive Order 11858. Initially, it was a relatively powerless advisory body tasked with monitoring foreign investment trends and providing policy recommendations, according to law firm documentation and Wikipedia.

1988 – Congress passed the Exon-Florio Amendment to the Defense Production Act, which codified the review process and gave CFIUS the authority to review foreign acquisitions and recommend that the President block deals that threaten national security. This legislative action was largely a response to public and congressional concern over a wave of acquisitions of U.S. defense-related firms by Japanese companies, as Congressional Research Service and law firm analyses document.

2007 – In the wake of intense controversy over the proposed purchase of commercial operations at six U.S. ports by Dubai Ports World, a firm based in the United Arab Emirates, Congress passed the Foreign Investment and National Security Act. This act formally established CFIUS in statute and further clarified and expanded its review mandate, according to Congressional Research Service and Baker Botts documentation.

2018 – The most significant expansion of CFIUS’s powers came with the passage of the Foreign Investment Risk Review Modernization Act. Enacted with broad bipartisan support, FIRRMA was explicitly designed to “strengthen and modernize” the committee to address a new generation of threats.

It significantly broadened CFIUS’s jurisdiction to include certain non-controlling investments, specific real estate transactions near sensitive government sites, and any investment in a so-called “TID business”—a U.S. company involved with critical Technology, critical Infrastructure, or sensitive personal Data.

This modernization was a direct reaction to growing concerns about the national security risks posed by investments from state-directed economies, particularly the People’s Republic of China, as Congressional Research Service, Sayari research, and Federal Lawyer analysis explain.

This history reveals a clear pattern: CFIUS is a reactive entity. Its authority has been incrementally built up not based on abstract theory, but as a direct legislative and executive response to real-world events that exposed perceived vulnerabilities in the nation’s economic security.

How the CFIUS Review Process Works

The CFIUS review process is governed by specific rules, timelines, and potential outcomes. For businesses and investors, understanding these mechanics is crucial for navigating the U.S. investment landscape.

What Gets Reviewed: Covered Transactions

CFIUS has the authority, or “jurisdiction,” to review specific types of transactions known as “covered transactions.” FIRRMA significantly expanded the scope of what falls under this definition.

Control Transactions – This is the traditional foundation of CFIUS jurisdiction. It covers any merger, acquisition, or takeover that could result in a “foreign person” gaining “control” of a “U.S. business,” according to Congressional Research Service and Baker Botts documentation.

The definition of “control” is intentionally broad and is not limited to majority ownership; it is defined as the power, whether exercised or not, to direct or decide important matters affecting an entity.

Covered Investments (TID Businesses) – FIRRMA extended jurisdiction to certain non-controlling investments in U.S. businesses that operate in sensitive sectors. These are known as “TID businesses,” as Congressional Research Service, law firm resources, and Federal Lawyer explain.

This category includes companies that:

• Produce, design, test, manufacture, fabricate, or develop one or more critical technologies, according to Trade.gov documentation
• Own, operate, manufacture, supply, or service critical infrastructure, as law firm analyses detail
• Maintain or collect sensitive personal data of U.S. citizens that could be exploited to threaten national security

Real Estate Transactions – FIRRMA also authorized CFIUS to review certain purchases or leases of U.S. real estate that is located in or near specific airports, maritime ports, or sensitive military installations, according to Trade.gov, Treasury summaries, and law firm documentation.

The expansion of jurisdiction under FIRRMA represents a fundamental shift in the government’s approach to investment risk. Previously, the primary concern was whether a foreign entity could control a U.S. company and direct its actions.

The new rules reflect a modern understanding that national security can be compromised more subtly. The focus now includes whether a foreign investor gains certain access or rights—such as access to material nonpublic technical information, a board seat, or involvement in substantive decision-making—that could allow for the exfiltration of intellectual property, sensitive data, or critical supply chain knowledge, even without formal control of the company.

Filing Requirements: Voluntary and Mandatory

For a transaction that falls under CFIUS’s jurisdiction, the parties must decide whether and how to file with the committee.

Voluntary vs. Mandatory Filing – For most transactions, filing with CFIUS is voluntary. Parties choose to file to obtain a “safe harbor” letter, which provides legal certainty by preventing CFIUS from initiating a review of the transaction in the future, except in very limited circumstances, as Congressional Research Service and Baker Botts explain.

If parties choose not to file, the transaction remains subject to a potential CFIUS review indefinitely. The committee can initiate a review of a “non-notified” transaction at any time, and if a risk is found, it can lead to a presidential order to unwind the deal, even years after it has closed.

Mandatory Filings – FIRRMA made filings mandatory in two specific, high-risk scenarios:

• Transactions where a foreign government acquires a “substantial interest” (typically a voting interest of 25% or more) in a U.S. TID business, according to Congressional Research Service and Torres Trade Law
• Certain investments in U.S. businesses that produce, design, test, or develop one or more “critical technologies” for which a U.S. regulatory authorization, such as an export license, would be required to export the technology to the foreign investor, as Orrick analysis details

Declarations and Notices – Parties can file using one of two formats. A “declaration” is an abbreviated, short-form filing that triggers a 30-day assessment by CFIUS. A “notice” is a more formal and comprehensive written submission that initiates a longer, more in-depth review process, according to Treasury summaries and Congressional Research Service.

Failure to submit a mandatory filing can result in substantial civil penalties, up to $250,000 or the value of the transaction, whichever is greater, as Sayari and law firm documentation note.

The introduction of mandatory filings, combined with increased resources dedicated to monitoring deals that were not filed, signals a fundamental change in CFIUS’s posture. The committee has evolved from a passive reviewer of transactions submitted to it into a proactive enforcement body that actively seeks out deals of concern.

Data from the 2023 CFIUS Annual Report shows that its “non-notified” team identified 60 past transactions for review and formally requested filings for 13 of them. This active market monitoring creates a new layer of risk for investors and makes the legal certainty provided by the “safe harbor” more valuable than ever.

The Review Timeline

Once a formal notice is filed and accepted by CFIUS, a statutory timeline begins. This process is structured to ensure a thorough but reasonably paced review.

Review Period (45 Days) – The process starts with a 45-day review period. During this time, all CFIUS member agencies conduct a risk-based assessment of the transaction. This assessment analyzes three core elements: the threat posed by the foreign investor, the vulnerabilities of the U.S. business being acquired, and the potential consequences to U.S. national security if that threat were to exploit those vulnerabilities.

A key input during this stage is a formal threat analysis prepared by the Director of National Intelligence, as Congressional Research Service documents.

Investigation Period (45 Days) – If the committee identifies national security concerns that cannot be resolved during the initial review, it can initiate a 45-day investigation. An investigation is required if a transaction threatens to impair national security and the risk has not been mitigated, if the acquirer is controlled by a foreign government, or if the deal would result in foreign control of U.S. critical infrastructure.

In “extraordinary circumstances,” this period can be extended by an additional 15 days, according to Congressional Research Service and Treasury summaries.

Presidential Decision (15 Days) – If, at the end of the investigation, CFIUS determines that a transaction poses an unresolved national security risk and the parties have not voluntarily abandoned the deal, the committee can refer the matter to the President with a recommendation to suspend or prohibit it.

The President has the ultimate authority and must announce a decision within 15 days, as Congressional Research Service and Wikipedia document.

These rigid statutory timelines create significant pressure on both the government agencies and the transacting parties. In practice, when a complex case requires more time for negotiation than the law allows, a common strategy is for the parties to “withdraw and refile” their notice.

This action effectively resets the clock, allowing for continued discussion without violating the statutory deadlines, as White & Case and law firm documentation explain.

In 2023, 57 notices were withdrawn during the process, with the majority being refiled later, according to Torres Trade Law and Congressional Research Service. This reveals a crucial, informal mechanism that allows the formal process to adapt to the complexities of modern national security reviews.

Possible Outcomes

A CFIUS review can conclude in one of three ways, with the vast majority of cases being cleared, either with or without conditions.

Clearance – If CFIUS concludes that the transaction poses no unresolved national security risks, it will notify the parties that it has concluded action. This provides the “safe harbor” from future review, as Federal Lawyer explains.

Mitigation – This has become the most important tool in the CFIUS toolkit. If the committee identifies a national security risk, but determines that the risk can be managed, it can clear the transaction subject to the parties entering into a legally binding National Security Agreement.

These agreements can impose a wide range of conditions, such as requiring the company to appoint a U.S. government-approved security officer, establishing firewalls to prevent foreign access to sensitive data or technology, ensuring a continued supply of products to the U.S. government, or even requiring that certain business functions be handled only by U.S. citizens, according to Congressional Research Service and Federal Lawyer.

CFIUS actively monitors compliance with these agreements and has recently ramped up enforcement, imposing significant penalties for violations, as Treasury reports and Davis Polk analysis document.

Prohibition or Divestment – This is the rarest outcome. If CFIUS determines that the national security risks cannot be mitigated, it can recommend that the President block a pending transaction or force a foreign owner to divest a U.S. business it has already acquired.

Presidential blocks are rare—only nine have occurred to date—but they include high-profile cases like President Trump’s 2020 order requiring the Chinese firm ByteDance to divest its U.S. operations, which became TikTok, according to Congressional Research Service and Wikipedia.

More commonly, if faced with insurmountable CFIUS concerns or unacceptable mitigation terms, parties will choose to voluntarily abandon the transaction, as Torres Trade Law notes.

The increasing use of mitigation has transformed CFIUS from a simple “yes-or-no” gatekeeper into an ongoing regulator for a growing number of U.S. businesses. In 2023, mitigation measures were adopted in 43 cases. This means that for a significant portion of reviewed deals, CFIUS’s involvement does not end when the transaction closes. Instead, it becomes a long-term supervisory partner with the power to dictate and enforce security practices within the company.

The Commerce Department’s Crucial Role

While CFIUS is chaired by the Treasury Department and heavily influenced by the defense and intelligence communities, the Department of Commerce plays a unique and indispensable role. It serves as the committee’s primary expert on U.S. industry, technology, and the intricate web of supply chains that underpin the nation’s economic and national security.

Commerce’s CFIUS Team: Industry and Technology Experts

Within the Department of Commerce, the CFIUS mission is primarily carried out by two key offices that work in close coordination:

The International Trade Administration – The ITA’s Office of Investment Security is the central coordinator for all of Commerce’s CFIUS-related activities, according to Trade.gov and BIS documentation.

OIS provides CFIUS with vital analysis of the economic context of a transaction, including market trends, the competitive landscape, potential impacts on economic vulnerabilities, and the underlying business rationale for the deal, as BIS documentation and Senate testimony explain.

The Bureau of Industry and Security – BIS, through its Office of Strategic Industries and Economic Security, provides the hard security analysis related to technology and industrial capacity. It assesses the dual-use export control implications of a transaction and evaluates its potential impact on the U.S. defense industrial base, according to BIS documentation and Senate testimony.

This internal division of labor allows Commerce to provide a comprehensive techno-economic analysis that is distinct from the perspectives of other CFIUS members. While the Department of Defense focuses on military requirements and the Department of Justice on law enforcement concerns, Commerce acts as the primary bridge between the national security apparatus and the nation’s industrial and economic engine.

Its unique value is its ability to translate economic, industrial, and technological data into a national security context, answering the critical question: “How does this deal affect our country’s ability to produce and innovate what we need to remain secure?”

Protecting the Defense Industrial Base

A core function of the Commerce Department in the CFIUS process is to assess the health and resilience of the U.S. defense industrial base. This responsibility is rooted in the Defense Production Act, the same law that grants CFIUS its authority, according to BIS documentation and Senate testimony.

Through its SIES office, BIS conducts surveys and assessments of defense-related sectors to monitor their capabilities and identify vulnerabilities.

In a CFIUS review, Commerce analyzes whether a proposed transaction could harm the DIB by, for example, leading to the loss of a last-remaining domestic supplier for a critical component, creating a dangerous dependency on a foreign adversary, or otherwise weakening the manufacturing ecosystem that the military relies on, as BIS documentation, Business Defense reports, and House testimony detail.

This role has become increasingly critical as the DIB has faced decades of consolidation and erosion. Since the end of the Cold War, the number of prime defense contractors has shrunk from 51 to just five, with thousands of sub-tier suppliers disappearing, according to House testimony.

Business practices that prioritized short-term cost efficiency, such as “just-in-time” manufacturing, have left the industrial base optimized for efficiency but not for resilience.

Within this context, Commerce’s analysis provides the critical justification to block or place conditions on a deal that, while perhaps economically sound on paper, could result in the permanent loss of a strategic industrial capability. This function is not just about preventing technology theft; it is about actively preserving the physical and intellectual capacity of the United States to produce what it needs for its own defense.

Supply Chain Resilience Analysis

The COVID-19 pandemic and rising geopolitical tensions have starkly revealed the dangers of relying on foreign adversaries for critical goods. In response, supply chain security has become a paramount national security concern, a priority that was formally codified for CFIUS in President Biden’s 2022 Executive Order 14083, according to Congressional Research Service, law firm analyses, and trade law resources.

The Department of Commerce is the lead agency for this analysis within CFIUS, as Senate testimony confirms. Its Industry and Analysis unit examines whether a transaction could disrupt critical U.S. supply chains, create dangerous chokepoints, or grant a foreign power undue influence over them.

This review extends far beyond the traditional defense base to include sectors essential to the functioning of the country, such as energy, public health and medical products, and information and communications technology, according to Trade.gov reports and Federal Register documentation.

The elevation of supply chain analysis represents a significant expansion of the definition of “national security” to explicitly include economic security. A threat is no longer just a weapon or a spy; it can also be the ability of an adversary to cut off the supply of a critical input, such as a pharmaceutical precursor, a specialized chemical, or a key semiconductor material.

Consequently, a foreign acquisition of a seemingly non-sensitive U.S. company might now be flagged by Commerce if that company is identified as a critical node in a vital supply chain.

Vetting Critical Technology Transfers

The Bureau of Industry and Security at Commerce brings its deep expertise in administering the U.S. export control system to the CFIUS process, according to BIS documentation and Senate testimony.

When reviewing a transaction, BIS assesses whether the U.S. company is involved with “critical technologies,” a term defined in the CFIUS regulations that is directly linked to government export control lists like the Commerce Control List, as BIS documentation and Treasury FAQs explain.

BIS analysts determine if the technology in question would require a license to be exported to the foreign acquirer’s country and review the compliance history of all parties to the transaction. This role has become even more central since FIRRMA, which created a powerful, self-reinforcing loop between the export control and investment screening regimes.

Specifically, FIRRMA expanded CFIUS jurisdiction to cover certain non-controlling investments in companies precisely because they deal in “critical technologies,” as Orrick analysis details.

Furthermore, one of the key triggers for a mandatory CFIUS filing is tied directly to U.S. export licensing requirements. This means that a technical classification decision made by BIS under the Export Administration Regulations can now have direct and immediate consequences for a company’s ability to accept foreign investment, potentially triggering a mandatory CFIUS review and heightened scrutiny.

The Other Side: Promoting Investment with SelectUSA

To fully understand the Commerce Department’s role, it’s crucial to recognize its dual mandate. While BIS and OIS scrutinize investments for risk, another part of the department, SelectUSA, is dedicated to attracting foreign investment into the United States, according to California Chamber advocacy, Trade.gov, and Commerce documentation.

SelectUSA is a government-wide program led by Commerce with the mission to facilitate job-creating business investment, as Congressional Research Service explains. It provides information to potential investors, helps companies navigate the U.S. regulatory system, and connects them with economic development organizations at the state and local levels.

Since its inception in 2011, SelectUSA has facilitated more than $270 billion in investment projects, supporting the creation or retention of over 240,000 U.S. jobs, according to California Chamber advocacy, Trade.gov, and SelectUSA materials.

The fact that this major investment promotion agency coexists within the same department as the security-focused CFIUS teams demonstrates that the U.S. government’s default stance on foreign investment is “yes.” It shows that the government dedicates significant resources to encouraging and facilitating investment, while the security review function performed by CFIUS is a targeted, specialized process designed to handle the specific exceptions that pose a genuine risk to the nation.

Modern Challenges and Evolving Priorities

The world of foreign investment and national security is dynamic. CFIUS and the Department of Commerce must constantly adapt to new threats, new technologies, and a shifting political environment.

New Presidential Priorities

In September 2022, President Biden issued Executive Order 14083, the first-ever formal presidential guidance clarifying the specific risk factors that CFIUS should consider in its reviews, according to Treasury press releases and George Washington University research.

While the committee was already examining many of these areas, the order formalized their importance and sent a clear signal to the global investment community. The order directed CFIUS to focus on five key areas:

Supply Chain Resilience – A transaction’s effect on the resilience of critical U.S. supply chains, both inside and outside the defense sector, according to Congressional Research Service and law firm analyses.

U.S. Technological Leadership – A transaction’s impact on U.S. leadership in sectors fundamental to national security, such as microelectronics, artificial intelligence, biotechnology, and quantum computing, as trade law resources and George Washington University research detail.

Aggregate Investment Trends – The cumulative risk created by multiple acquisitions or investments in a single sector by a single foreign country or investor, according to law firm documentation.

Cybersecurity Risks – The potential for an investment to provide a foreign person with the ability to conduct malicious cyber activities against the U.S., as Congressional Research Service and trade law analysis explain.

Risks to U.S. Sensitive Data – The threat posed by a foreign person gaining access to large sets of Americans’ sensitive personal data, according to Congressional Research Service and law firm resources.

By issuing this public order, the President provided clear, top-down direction to ensure these priorities are applied consistently across all member agencies. It moved these critical concerns from the confidential “black box” of internal CFIUS deliberations into the open domain of official U.S. policy.

CFIUS by the Numbers: Recent Trends

Data from recent CFIUS annual reports to Congress reveal a committee that is busier and more assertive than ever before.

Source: Data compiled from official CFIUS Annual Reports and analyses by Davis Polk and Torres Trade Law

The data illustrates several key trends. While the total number of filings dipped in 2023, the overall caseload since FIRRMA’s passage remains historically high, as Treasury press releases confirm.

A high percentage of cases—more than half in recent years—proceed to the more intensive investigation phase. The rate of transactions requiring mitigation measures has risen significantly, nearly doubling from 2021 levels, according to Davis Polk analysis and Debevoise research.

Perhaps most telling is the trend in non-notified transactions: while the number of inquiries has decreased as CFIUS works through a backlog, the percentage of those inquiries that result in a formal request for a filing has nearly quadrupled since 2021, showing a more targeted and effective enforcement effort.

This is complemented by a new focus on enforcement; CFIUS assessed more civil monetary penalties for non-compliance in 2023 than in its entire previous history, according to Treasury reports.

The “Reverse CFIUS”: Outbound Investment Screening

A paradigm shift in U.S. economic security policy occurred with the 2023 establishment of an outbound investment security program, often dubbed “Reverse CFIUS,” according to Justice Department documentation and Senate testimony.

Established by Executive Order 14105, this Treasury-led program is not a case-by-case screening regime like CFIUS. Instead, it either prohibits or requires notification for certain U.S. investments in “countries of concern” (currently defined as China, including Hong Kong and Macau) in three specific, sensitive technology sectors: semiconductors and microelectronics, quantum information technologies, and artificial intelligence.

This is documented by Holland & Knight, Treasury FAQs, O’Melveny analysis, and Jones Day research.

The Department of Commerce plays a significant consultative role, providing its deep industry and supply chain expertise to help Treasury implement the program, as Senate testimony and Treasury documentation confirm.

The program’s creation acknowledges that U.S. investment provides not just capital, but also intangible benefits like managerial expertise, network access, and enhanced legitimacy that can accelerate an adversary’s technological development in ways that harm U.S. national security.

This new outbound tool, alongside inbound screening and enhanced export controls, demonstrates a more holistic, 360-degree strategy to manage technological competition.

Debates and Criticisms

As CFIUS has grown in power and prominence, so too have concerns and criticisms from various quarters about its process, scope, and potential for misuse.

Political Interference Concerns

As CFIUS has grown in power and prominence, so too have concerns that its process could be used for political purposes rather than for its intended national security mission. The most prominent recent example is the proposed acquisition of U.S. Steel by Japan’s Nippon Steel.

The transaction drew loud public opposition from high-level political figures from both parties, seemingly driven by electoral politics in an election year, particularly given that Japan is one of America’s closest allies, as Debevoise research and Berkeley Law analysis document.

Defenders of the process argue that a critical distinction exists between the politicization of the public discourse surrounding a deal and the politicization of the committee’s internal review. They maintain that CFIUS remains a fact-based, apolitical body whose career staff make recommendations based on a rigorous and confidential analysis of genuine national security risks, according to House Financial Services documentation and Global Business advocacy.

The eventual approval of the U.S. Steel deal, albeit restructured as a “partnership,” following a re-review was cited by some as evidence that the professional, security-focused process ultimately prevailed over political rhetoric.

The real danger, however, is that the perception of political interference, whether real or not, could have a chilling effect on beneficial foreign investment, discouraging investors from allied countries from entering a process they fear could be derailed by political whims, as Global Business notes.

The Investor’s Perspective

From the perspective of the international business and legal communities, the CFIUS process, while necessary, is not without its frustrations. Common criticisms include:

Length, Cost, and Uncertainty – The review process can be long, costly, and unpredictable. Timelines often stretch to the statutory maximum and are frequently extended by the “withdraw and refile” tactic, adding months to a deal’s closing, as White & Case and Davis Polk analyses note.

The broad and evolving definition of “national security” creates ambiguity for investors trying to assess risk upfront, according to law firm documentation.

Lack of Transparency – The confidentiality that is essential to protecting national security also creates a “black box” for the transacting parties, who often have limited insight into the specific concerns driving the committee’s questions, as Columbia Law Review notes.

Onerous Mitigation – As mitigation becomes more common, so do concerns about the burdens it imposes. National Security Agreements can require significant, long-term operational changes and compliance costs, effectively making the U.S. government a perpetual regulatory partner in the business, according to Debevoise and Davis Polk analyses.

Many of these criticisms highlight a fundamental trade-off. The very features that make CFIUS an effective national security tool—its confidentiality, broad jurisdiction, and deliberative interagency process—are the same features that create friction and uncertainty for global commerce.

The ongoing challenge for policymakers, and for the Department of Commerce as a key member, is to continually refine this process to minimize those frictions without compromising its core security mission.

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