[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3549 Referred in House (RFH)]
109th CONGRESS
2d Session
S. 3549
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 26, 2006
Referred to the Committee on Financial Services, and in addition to the
Committees on International Relations, and Energy and Commerce for a
period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
_______________________________________________________________________
AN ACT
To amend the Defense Production Act of 1950, to strengthen Government
review and oversight of foreign investment in the United States, to
provide for enhanced Congressional oversight with respect thereto, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Foreign Investment and National
Security Act of 2006''.
SEC. 2. AMENDMENTS TO THE DEFENSE PRODUCTION ACT OF 1950.
Section 721 of the Defense Production Act of 1950 (50 U.S.C. App.
2170) is amended to read as follows:
``SEC. 721. REVIEW AND INVESTIGATION OF TRANSACTIONS INVOLVING FOREIGN
PERSONS AND GOVERNMENTS.
``(a) Review of Transactions Involving Foreign Persons and
Governments.--
``(1) Reviews required.--
``(A) In general.--CFIUS shall review any
transaction proposed or pending on or after the date of
enactment of this section by, with, or on behalf of a
foreign person or foreign government which could result
in foreign control of a person engaged in interstate
commerce in the United States, for which a review is
requested, in the manner prescribed by regulations
promulgated under this section.
``(B) Purposes.--The purpose of such review shall
be to determine the effect on national security of such
transaction, whether an investigation of such
transaction is required under subsection (b), or both.
``(2) Timing of reviews.--
``(A) In general.--A review of a proposed or
pending transaction described in paragraph (1) shall be
completed not later than 30 days after the date of
receipt by CFIUS of a written request for review by a
person involved in the transaction, or by one or more
members of CFIUS, of the proposed or pending
transaction, as prescribed by regulations promulgated
in accordance with paragraph (1)(A).
``(B) Extensions upon request.--Upon written
request by the Secretary, Deputy Secretary, or Under
Secretary, or the equivalent thereof, of one or more of
the agencies that make up CFIUS (including any agency
described in subsection (c)(4)(I)) for additional time
to review a case, the 30-day period described in
subparagraph (A) shall be extended by not longer than
an additional 30 days, if the Secretary, Deputy
Secretary, or Under Secretary, or the equivalent
thereof, concludes that there is credible evidence to
believe that if permitted to proceed with the
transaction, the foreign acquiring person may take
action that threatens to impair the national security.
``(b) Investigations of Certain Transactions.--
``(1) In general.--CFIUS shall undertake an investigation
to determine the effects on national security of any
transaction described in subsection (a)(1) proposed or pending
on or after the date of enactment of this section--
``(A) which would--
``(i) result in control of any person
engaged in interstate commerce in the United
States by a foreign government, or a person
acting by, with, or on behalf of a foreign
government; or
``(ii) result in control of any critical
infrastructure of or within the United States
by, with, or on behalf of any foreign person,
if CFIUS determines that any possible
impairment to national security has not been
mitigated by assurances provided or renewed
with the approval of CFIUS, as described in
subsection (i), during the review period under
subsection (a); or
``(B) if the review by CFIUS under subsection (a)
produces sufficient information to indicate the
possibility of an impairment to national security,
after consideration of the factors listed in subsection
(g), and the issues that could result in an impairment
to national security are not resolved through
negotiation of assurances between one or more members
of CFIUS and the entities involved in the transaction.
``(2) Timing of investigations.--An investigation required
to be undertaken under this subsection--
``(A) shall commence at such time as CFIUS
determines under subsection (a) that such investigation
is required, as prescribed by regulations promulgated
pursuant to this section; and
``(B) shall be completed not later than 45 days
after the date of its commencement.
``(3) Resubmitted filings.--An investigation of a
transaction under this subsection which is interrupted because
the notification or filing is withdrawn by the applicant, and
which is subsequently resubmitted, shall require up to a 45-day
investigation from the date on which CFIUS receives the new
submission. The investigation shall include a review of the
rationale for the withdrawal and resubmission of the proposed
transaction to CFIUS.
``(4) Monitoring of withdrawn transactions.--If the
notification or filing with respect to a proposed transaction
is withdrawn or rescinded, CFIUS shall continue to monitor such
transaction, unless the transaction is terminated by agreement
of the parties to the transaction. If CFIUS has reason to
believe that the proposed transaction has not been so
terminated, CFIUS shall initiate a review or investigation
under this section if the parties do not resubmit the
notification or filing within an appropriate period of time.''
``(5) Mandatary notification related to certain
transactions affecting national security.--The chairperson and
vice chairperson of CFIUS shall, not later than 90 days after
the date of enactment of the Foreign Investment and National
Security Act of 2006, issue rules, including the imposition of
appropriate penalties for failure to comply with this
paragraph, that require each person controlled by or acting on
behalf of a foreign government to notify the chairperson of
CFIUS in writing of any proposed transaction involving such
person and United States critical infrastructure relating to
United States national security.''
``(c) Committee on Foreign Investment in the United States.--
``(1) Establishment.--There is established the Committee on
Foreign Investment in the United States, which shall serve as
the President's designee for all purposes under this section.
``(2) Chairperson.--The Secretary of the Treasury shall
serve as the chairperson of CFIUS.
``(3) Vice chairperson.--The Secretary of Defense shall
serve as the vice chairperson of CFIUS.
``(4) Membership.--The members of CFIUS shall include--
``(A) the Secretary of the Treasury;
``(B) the Secretary of State;
``(C) the Secretary of Defense;
``(D) the Secretary of Commerce;
``(E) the Secretary of Homeland Security;
``(F) the Attorney General of the United States;
``(G) the Director of the Office of Management and
Budget;
``(H) the Director of National Intelligence; and
``(I) the heads of those other executive
departments or agencies as the President determines
appropriate, on a case-by-case basis.
``(5) Referral to appropriate members of cfius.--Upon
receipt of notification of a proposed or pending transaction
under this section, the chairperson of CFIUS shall assign the
appropriate member of CFIUS to lead the review and
investigation of such proposed or pending transaction under
this section.
``(6) Intelligence reviews.--The Director of National
Intelligence shall--
``(A) direct the intelligence community, to collect
and analyze information related to any proposed or
pending transaction pursuant to this section, and to
prepare a report of its findings, which the Director
shall make available to members of CFIUS not later than
15 days after the date of the commencement by CFIUS of
a 30-day review of any such transaction under
subsection (a), and before the commencement of any
investigation under subsection (b); and
``(B) ensure that the intelligence community
remains engaged in the collection, analysis, and
dissemination to CFIUS of any additional relevant
information that may become available during the course
of any investigation conducted under subsection (b)
with respect to a transaction.
``(7) Assessments of foreign countries for use in reviews
and investigations.--
``(A) In general.--Not later than 120 days after
the date of enactment of the Foreign Investment and
National Security Act of 2006, the chairperson and vice
chairperson of CFIUS, in consultation with the
Secretary of State, the Secretary of Commerce, the
Secretary of Energy, the Chairman of the Nuclear
Regulatory Commission, and the Director of National
Intelligence, shall develop and implement a system for
assessing individual countries, including--
``(i) an assessment of the adherence of the
country to nonproliferation control regimes,
including treaties and multilateral supply
guidelines, which shall draw on, but not be
limited to, the annual report on Adherence to
and Compliance with Arms Control,
Nonproliferation and Disarmament Agreements and
Commitments required by section 403 of the Arms
Control and Disarmament Act;
``(ii) an assessment of the relationship of
such country with the United States,
specifically on its record on cooperating in
counter-terrorism efforts, which shall draw on,
but not be limited to, the report of the
President to Congress under section 7120 of the
Intelligence Reform and Terrorism Prevention
Act of 2004; and
``(iii) an assessment of the potential for
transshipment or diversion of technologies with
military applications, including an analysis of
national export control laws and regulations.
``(B) Confidentiality.--The assessment system
required by subparagraph (A) and any information or
documentary material maintained or developed
thereunder--
``(i) shall be used solely by those
agencies involved in reviewing and
investigating acquisitions, mergers, and
takeovers pursuant to this section;
``(ii) may not be made available to the
public; and
``(iii) shall be exempt from disclosure
under section 552 of title 5, United States
Code.
``(8) Staff of cfius.--Employees of the Department of the
Treasury who serve as staff for CFIUS shall report directly to
the Deputy Secretary of the Treasury, and shall perform no
official functions other than as CFIUS staff.
``(d) Action by the President.--
``(1) In general.--Subject to subsection (e), the President
may take such action for such time as the President considers
appropriate to suspend or prohibit any transaction which would
result in control of any critical infrastructure or person
engaged in interstate commerce in the United States, proposed
or pending on or after the date of enactment of this section,
by or with a foreign person or government, so that such control
will not threaten to impair the national security.
``(2) Announcement by the president.--The President shall
announce the decision on whether or not to take action pursuant
to this subsection not later than 15 days after an
investigation described in subsection (b) is completed.
``(3) Enforcement.--The President may direct the Attorney
General to seek appropriate relief, including divestment
relief, in the district courts of the United States in order to
implement and enforce this subsection.
``(e) Findings of the President.--The President may exercise the
authority conferred by subsection (d) only if the President finds
that--
``(1) there is credible evidence that leads the President
to believe that the foreign interest exercising control might
take action that threatens to impair the national security; and
``(2) provisions of law, other than this section and the
International Emergency Economic Powers Act, do not, in the
judgment of the President, provide adequate and appropriate
authority for the President to protect the national security in
the matter before the President.
``(f) Actions and Findings Nonreviewable.--The actions of the
President under subsection (d) and the findings of the President under
subsection (e) shall not be subject to judicial review.
``(g) Factors To Be Considered.--For purposes of determining
whether to take action under subsection (d) and for purposes of reviews
and investigations under this section, the President and CFIUS,
respectively, shall consider, among other factors--
``(1) potential effects on United States critical
infrastructure, including major energy assets;
``(2) potential effects on United States critical
technologies;
``(3) domestic production needed for projected national
defense requirements;
``(4) the capability and capacity of domestic industries to
meet national defense requirements, including the availability
of human resources, products, technology, materials, and other
supplies and services;
``(5) the control of domestic industries and commercial
activity by foreign citizens as it affects the capability and
capacity of the United States to meet the requirements of
national security;
``(6) the potential effects of the proposed or pending
transaction on sales of military goods, equipment, or
technology to any country--
``(A) identified by the Secretary of State--
``(i) under section 6(j) of the Export
Administration Act of 1979, as a country that
supports terrorism;
``(ii) under section 6(l) of the Export
Administration Act of 1979, as a country of
concern regarding missile proliferation; or
``(iii) under section 6(m) of the Export
Administration Act of 1979, as a country of
concern regarding the proliferation of chemical
and biological weapons;
``(B) identified by the Secretary of Defense as
posing a potential regional military threat to the
interests of the United States; or
``(C) listed under section 309(c) of the Nuclear
Non-Proliferation Act of 1978, on the `Nuclear Non-
Proliferation-Special Country List' (15 C.F.R. Part
778, Supplement No. 4) or any successor list;
``(7) the potential effects of the proposed or pending
transaction on United States international technological
leadership in areas affecting United States national security;
``(8) the long term projection of United States
requirements for sources of energy and other critical resources
and materials; and
``(9) the assessments developed under subsection (c)(7) of
the country in which the foreign persons acquiring United
States entities are based.
``(h) Confidentiality of Information.--
``(1) In general.--Any information or documentary material
filed with CFIUS pursuant to this section shall be exempt from
disclosure under section 552 of title 5, United States Code,
and no such information or documentary material may be made
public, except as may be relevant to any administrative or
judicial action or proceeding.
``(2) Notification to governor.--Notwithstanding paragraph
(1), CFIUS shall notify the Governor of any State regarding a
transaction involving critical infrastructure in that State for
the purpose of discussing any security concerns that arise or
may arise from that transaction. Information or documentary
material made available to a Governor under this paragraph may
not be made public, including under any law of a State
pertaining to freedom of information or otherwise, but the
exception in paragraph (3) for disclosures to either House of
Congress or Congressional Committees shall not apply to
Governors who receive information under this paragraph.
``(3) Disclosure.--Nothing in this subsection shall be
construed to prevent disclosure to either House of Congress or
to any duly authorized committee or subcommittee of Congress.
``(i) Assurances.--
``(1) In general.--This subsection shall govern the
provision of any assurances to one or more agencies of the
United States in connection with the review or investigation
of, or any Presidential decision concerning, any transaction
under this section.
``(2) Condition to determination.--Any such assurances
shall be deemed to be a continuing covenant of the persons on
whose behalf such review is sought (and of all persons
controlling such person), the observance of which shall be a
condition of the determination of CFIUS, the President, or
both, on whether to take any action with respect to such
transaction.
``(3) Contract with the united states.--Such assurances
shall be embodied in an agreement executed by the foreign
person or foreign government on whose behalf a review of a
transaction is sought under this section and the chairperson or
vice chairperson of CFIUS, on behalf of the United States.
``(4) Monitoring of agreement.--Compliance with assurances
provided under this subsection shall be monitored, and may be
investigated, in the same manner as a violation of a civil
statute, by the agency designated by the chairperson of CFIUS,
in consultation with the vice chairperson of CFIUS and the
Attorney General of the United States.
``(5) Grant of jurisdiction; remedies.--The United States
District Court for the District of Columbia shall have
jurisdiction to enforce an agreement referred to in this
subsection upon application by the Attorney General. Available
remedies shall include divestiture, injunctive relief,
enforcing the terms of such agreement, and monetary damages, as
appropriate.
``(j) Notice and Reports to Congress.--
``(1) Notice regarding reviews.--
``(A) Notice at initiation of review.--CFIUS shall
transmit written notice of a proposed or pending
transaction subject to this section to the members of
Congress specified in paragraph (3)(C), not later than
10 days after the date of receipt of a notice of such
proposed or pending transaction, including the
identities of all parties involved and any foreign
government ownership or control of any such party.
``(B) Certification at completion of review.--Upon
completion of a review under subsection (a), the
chairperson and vice chairperson of CFIUS and the head
of the lead agency assigned under subsection (c)(5),
shall transmit a certified notice to the members of
Congress specified in paragraph (3)(C).
``(2) Notice regarding investigations.--
``(A) Notice at initiation of investigations.--Upon
commencement of an investigation under subsection (b),
CFIUS shall notify in writing the members of Congress
specified in paragraph (3)(C).
``(B) Certification at completion of
investigations.--As soon as practicable after
completion of an investigation under subsection (b),
the chairperson and vice chairperson of CFIUS and the
head of the lead agency assigned under subsection
(c)(5), shall transmit to the members of Congress
specified in paragraph (3)(C) a certified written
report (consistent with the requirements of subsection
(h)) on the results of the investigation, unless the
matter under investigation has been sent to the
President for decision.
``(3) Certifications.--
``(A) In general.--Each certified notice and report
required by this subsection shall be submitted to the
members of Congress specified in subparagraph (C), and
shall include--
``(i) information on whether or not an
investigation occurred under subsection (b) and
has been completed;
``(ii) a description of the actions taken
by CFIUS with respect to the transaction; and
``(iii) identification of the determinative
factors considered under subsection (g).
``(B) Content of certification.--Each notice
required to be certified by this subsection shall be
signed by the chairperson and vice chairperson of CFIUS
and the head of the lead agency assigned under
subsection (c)(5), and shall contain a specific
attestation of each such person that, in the
determination of CFIUS, the transaction that is the
subject of the notice does or does not impair the
national security.
``(C) Members of congress.--The notices and reports
required by this subsection shall be transmitted to--
``(i) the Majority Leader and the Minority
Leader of the Senate;
``(ii) the chair and ranking member of the
Committee on Banking, Housing, and Urban
Affairs of the Senate and of any committee of
the Senate having oversight over the agency
assigned to lead a review or investigation
under subsection (c)(5);
``(iii) the Speaker and the Minority Leader
of the House of Representatives; and
``(iv) the chair and ranking member of the
Committee on Financial Services of the House of
Representatives and of any committee of the
House of Representatives having oversight over
the agency assigned to lead a review or
investigation under subsection (c)(5).
``(D) Transmittal to other members of congress.--
The Majority Leader or the Minority Leader, in the case
of the Senate, and the Speaker or the Minority Leader,
in the case of the House of Representatives, may
provide the notices and reports required by this
paragraph regarding a proposed or pending transaction
involving critical infrastructure--
``(i) in the case of the Senate, to members
of the Senate from the State in which such
critical infrastructure is located; and
``(ii) in the case of the House of
Representatives, to a member from a
Congressional District in which such critical
infrastructure is located.
``(E) Limitation on delegation of certifications.--
Notices and reports required to be certified under this
subsection shall be signed by the chairperson and vice
chairperson of CFIUS, and such certification
requirement may not be delegated.
``(4) Annual reports.--
``(A) Report required.--The Secretary of the
Treasury, on behalf of and after consultation with the
members of CFIUS, shall submit to the Committee on
Banking, Housing, and Urban Affairs of the Senate and
the Committee on Financial Services of the House of
Representatives, on or before March 15 of each year, a
written report on the policy of the United States with
respect to the preservation of the Nation's defense
production and critical infrastructure. The Secretary
shall appear before both committees to provide
testimony on such reports.
``(B) Contents of report.--Each report submitted
under subparagraph (A) shall contain--
``(i) an analysis of each transaction
involving a foreign person or foreign
government affecting national security that has
occurred during the preceding year to which the
report relates, including the nature of the
acquisitions and the effect or potential impact
of such acquisitions on the United States
defense industrial base and critical
infrastructure;
``(ii) a similar updated analysis for any
transaction that occurred during the 4 years
immediately preceding the year dealt with in
the report in clause (i), including a separate
section discussing the impact of transactions
involving foreign governments or persons acting
on behalf of or in concert with foreign
governments;
``(iii) a detailed discussion of all
perceived risks to national security or United
States critical infrastructure that CFIUS will
take into account in its deliberations during
the year in which the report is delivered to
the committees;
``(iv) a table showing on a cumulative
basis, by sector, product, and country of
foreign ownership, the number of acquisitions
reviewed, investigated, or both, by CFIUS, to
provide a census of production potentially
relevant to the Nation's defense industrial
base owned or controlled by foreign persons or
foreign governments;
``(v) an evaluation of whether there is
credible evidence of a coordinated strategy by
1 or more countries or companies to acquire
critical infrastructure of or within the United
States or United States companies involved in
research, development, or production of
critical technologies for which the United
States is a leading producer;
``(vi) an evaluation of whether there are
industrial espionage activities directed or
directly assisted by foreign governments
against private United States companies aimed
at obtaining commercial secrets related to
critical technologies or critical
infrastructure; and
``(vii) such other matters as are necessary
to give a complete disclosure and analysis of
the work of CFIUS during the year to which the
report relates.
``(C) Classified reports.--The evaluations required
by clauses (v) and (vi) of subparagraph (B) may be
classified. If they are submitted in classified form,
an unclassified version of such evaluations shall be
made available to the public.
``(D) Other information withheld from public
reports.--
``(i) Proprietary information.--The
chairperson of CFIUS, in consultation with the
vice chairperson of CFIUS, may withhold from
public release other such information as the
chairperson determines is proprietary
information.
``(ii) Rule of construction.--Nothing in
this subparagraph shall prohibit such
information from being provided to relevant
Committees of Congress.
``(5) Appearances before congress.--The chairperson and
vice chairperson of CFIUS, and the heads of such additional
CFIUS member agencies specified in a written request by the
Chairman of the Committee on Banking, Housing, and Urban
Affairs of the Senate shall annually appear before the
Committee on Banking, Housing, and Urban Affairs and the
Committee on Financial Services of the House of Representatives
to provide testimony on the activities of CFIUS.
``(k) Regulations.--
``(1) In general.--The Secretary shall issue regulations to
carry out this section. Such regulations shall, to the extent
possible, minimize paperwork burdens and shall, to the extent
possible, coordinate reporting requirements under this section
with reporting requirements under any other provision of
Federal law.
``(2) Regulations relating to definitions.--Not later than
30 days after the date of enactment of the Foreign Investment
and National Security Act of 2006, the Secretary of the
Treasury and the Secretary of Defense shall jointly agree to
and issue rules concerning the manner in which the definition
of the term `critical infrastructure' in subsection (m)(2)
shall be applied to particular acquisitions, mergers, and
takeovers, for purposes of the mandatory investigation
requirement of subsection (b)(1)(A), except that, until such
rules are issued in final form and become effective, such
definition shall be applied without regard to any such rules
(whether proposed or otherwise).
``(l) Effect on Other Law.--Nothing in this section shall be
construed to alter or affect any existing power, process, regulation,
investigation, enforcement measure, or review provided by any other
provision of law, including the International Emergency Economic Powers
Act, or of the President or Congress.
``(m) Definitions.--As used in this section--
``(1) the term `assurances' means any term, understanding,
commitment, agreement, or limitation, however described, that
relates to ameliorating in any way the potential effect of a
transaction on the national security;
``(2) the term `critical infrastructure' means, subject to
rules issued under subsection (k)(2), any systems and assets,
whether physical or cyber-based, so vital to the United States
that the degradation or destruction of such systems or assets
would have a debilitating impact on national security,
including national economic security and national public health
or safety;
``(3) the term `critical technologies' means technologies
identified under title VI of the National Science and
Technology Policy, Organization, and Priorities Act of 1976, or
other critical technology, critical components, or critical
technology items essential to national defense identified
pursuant to this section;
``(4) the terms `Committee on Foreign Investment in the
United States' and `CFIUS' mean the committee established under
subsection (c);
``(5) the term `foreign government' means any government or
body exercising governmental functions, other than the
Government of the United States or of a State or political
subdivision thereof, and includes national, State, provincial,
and municipal governments, including their respective
departments, agencies, government-owned enterprises, and other
agencies and instrumentalities;
``(6) the term `foreign person' means any non-United States
national, any organization owned or controlled by such a
person, and any entity organized under the laws of a country
other than the United States, and any entity owned or
controlled by such entity;
``(7) the term `intelligence community' has the same
meaning as in section 3 of the National Security Act of 1947
(50 U.S.C. 401a); and
``(8) the term `transaction' means a proposed or pending
merger, acquisition, or takeover''.
Passed the Senate July 26, 2006.
Attest:
EMILY J. REYNOLDS,
Secretary.