Wallowa Lake Dam Rehabilitation and Water Management Act of 2007

Madam President, section 721 of the Defense Production Act, also known as the Exon-Florio amendment, Exon-Florio, established a statutory framework for the U.S. Government to analyze foreign acquisitions, mergers, and takeovers of privately owned entities within the United States to determine whether such transactions affect the national security of the United States. The Foreign Investment and National Security Act of 2007 amends section 721 for the purpose of strengthening the process by which such transactions are reviewed and, when warranted, investigated for national security concerns. In addition, the act provides for a system of congressional notification so that Congress is able to conduct proper oversight of the national security implications of foreign direct investment in the United States to ensure that it is beneficial and has no adverse impact on U.S. national security.

Exon-Florio established a four-step process for examining a foreign acquisition: (1) voluntary notice by the companies; (2) a 30-day review to identify any national security concerns; (3) an optional 45-day investigation to determine whether identified concerns require more extensive mitigation efforts or a recommendation to the President for possible action; and (4) a Presidential decision to permit, suspend, or prohibit an acquisition in those instances where potential national security concerns cannot be mitigated.

During the standard review period, CFIUS conducts a national security analysis to determine whether any national security issues exist with a particular transaction, and if so, whether those concerns can be mitigated. In practice, companies sometime ``pre-file'' with CFIUS, providing information about the transaction in order to ensure that CFIUS has all necessary information during the formal review period. Further, companies may withdraw from the formal review in order to address concerns on the condition that they re-file promptly with CFIUS or abandon the transaction.

Therefore, while the vast majority of CFIUS transactions are approved by the end of the 30-day review, the total time devoted to transactions is sometimes longer. If national security concerns have not been resolved during the 30-day review, CFIUS can extend its review to a second stage 45-day investigation. At the end of a 45-day investigation, the transaction is sent to the President for a decision, accompanied by a CFIUS report and recommendation. Any transaction that goes to the President must be reported to Congress. Transactions that enter investigation may also be terminated before reaching the President, with the companies voluntarily withdrawing and abandoning the investment. Presidential decisions are also avoided in cases where a mitigation agreement has been reached during the investigation period and the companies withdraw from investigation and immediately refile.

Mitigation agreements, which are contracts with CFIUS or CFIUS agencies entered into by the parties to the transaction, are an important element of the CFIUS review and investigation process. These agreements are intended to mitigate possible national security threats posed by a transaction short of requiring that the parties abandon the transaction altogether. The Department of Defense, hereafter DOD, has for many years used various types of mitigation agreements under existing DOD authority and regulations such as the National Industrial Security Program Operating Manual, NISPOM, to address the impact of foreign ownership and control over companies that have classified contracts with the Pentagon or intelligence agencies. In recent years, the Departments of Justice and Homeland Security have also done so.

S. 1610 reinforces CFIUS's capacity to refuse, suspend, modify or reverse any transaction if a written notice of such transaction is not filed with CFIUS or if there is an intentional material omission or falsehood in connection with a completed CFIUS review or investigation, or an intentional material breach in any posttransaction mitigation agreement, and establishes a formal requirement that all filings with CFIUS must be complete and accurate to the best of the filing party's ability. Thus, the committee establishes a

clear signal that all violations of such notice certification should be considered in the context of title 18, section 1001, and all intentional breaches or misstatements could also lead to severe modification or divestment of an acquisition of a previously reviewed transaction at any time.

The bill also establishes a mechanism by which CFIUS can unilaterally reopen a transaction that had previously been approved. My expectation is that this authority will only be used in exceptional circumstances when no other remedies exist and where there has been an intentional breach that affects national security. For that reason, the bill requires important procedural safeguards to ensure that this authority is not used lightly--among other safeguards, it requires, for example, that the decision to reopen a case is made at the same level of seniority as is required in the bill for the approval of transactions. The bill makes clear that CFIUS can only reopen a transaction if these threshold tests are met.

Of necessity, the reviews and investigations, which contain classified evaluations of national security vulnerabilities as well as extensive proprietary business information, remain highly confidential. Given this lack of transparency, there have been concerns over the years about CFIUS's accountability to Congress and to the public, particularly with regard to fundamental questions of whether CFIUS policies are consistent with the statute, executive orders, and regulations that govern its operations and whether CFIUS policies are applied consistently from transaction to transaction.

CFIUS has explicit authority in the regulations to open a case in the event that CFIUS discovers there has been a material misstatement or omission in the information provided by the parties to the transaction. CFIUS agencies also have all of the remedies that are normally available under a contract in order to enforce the terms of the mitigation agreement. In addition, in a large number of CFIUS cases, and particularly those involving the Defense Department, CFIUS approvals can be effectively nullified simply by ending the federal agency's contracting relationship with the company. Defense-related contracts are often a central element of CFIUS transactions, so the threat of being denied a contract going forward ensures compliance with the terms of mitigation agreements or other conditions agreed to by the foreign investor.

On October 6, 2005, under the leadership of then-Chairman Richard Shelby, the Committee on Banking, Housing, and Urban Affairs conducted a hearing into the findings of the GAO report. Discussion between the GAO witnesses and Banking Committee members further highlighted deficiencies in implementation of Exon-Florio and the level of dissatisfaction with the lack of communication between CFIUS and the appropriate oversight committees of Congress. That hearing was followed on October 20, 2005, by another hearing that allowed the Banking Committee to hear directly from many of the agencies that comprise CFIUS, including the Department of the Treasury, which has the lead role in implementing Exon-Florio, as well as private sector representatives.

In late January 2006 congressional offices became aware of the proposed acquisition of terminal operations at a number of U.S. maritime ports by Dubai Ports World, hereafter DPW, an established port operator owned by the government of the Emirate of Dubai. Concern within Congress about a transaction that would transfer control of terminal operations to a company owned by a Persian Gulf emirate through whose financial system funds had been transferred to the terrorists who carried out the September 11, 2001, attacks upon the United States, and that had been a central conduit for nuclear weapons components being smuggled to hostile regimes, provided further impetus for review of the manner in which foreign transactions were being analyzed by CFIUS.

That senior White House officials, and the Secretaries and Deputy Secretaries of the Departments of the Treasury and Homeland Security were unaware of the Dubai Ports World transaction, combined with the fact this transaction was not subjected to a formal investigation in violation of the Byrd amendment, compounded congressional concerns about the nature of the underlying transaction.

In response to congressional criticism related to the DPW case in 2006, CFIUS agencies pledged to address flaws in the CFIUS process identified by Congress. There were 113 transactions filed with CFIUS in 2006, up 74 percent from the previous year. Because companies seek CFIUS consideration voluntarily, this increase reflected greater sensitivity among foreign investors, which in turn may reflect a more aggressive stance from CFIUS. CFIUS conducted seven second-stage investigations, the same number of investigations that had been conducted over the previous five-year period. There was also an increase in the number of companies withdrawing from CFIUS reviews and investigations, which suggests a higher degree of scrutiny: either companies withdrew for the purpose of terminating the underlying transaction or in order to restructure the transaction to address CFIUS concerns.

The number of cases in which CFIUS approved transactions with conditions attached through mitigation agreements also increased. CFIUS has also increased its Congressional outreach, notifying the Congressional leadership and committees of jurisdiction upon completion of CFIUS action on each transaction. Treasury also finally produced the long-overdue quadrennial report on CFIUS-related issues as mandated by the Defense Production Act of 1950.

In response to continued concerns regarding implementation of Exon- Florio, on April 30, 2006, the Committee on Banking, Housing, and Urban Affairs reported an original bill, S. 109-264, which made significant amendments to Section 721 to strengthen the review and oversight process. Senate bill 109-264 passed the Senate on July 26, 2006. On the same day the House passed its own reform legislation, H.R. 5337. No further action occurred on the bills prior to the adjournment of the 109th Congress.

On February 28, 2007, The House once again passed legislation amending section 721 to strengthen the foreign investment review process, H.R. 556--The National Foreign Investment Reform and Strengthened Transparency Act of 2007. On May 16, 2007, the Senate Committee on Banking, Housing and Urban Affairs convened to consider and report an original bill--the Foreign Investment and National Security Act of 2007--Proposed by Chairman Christopher J. Dodd, working closely with Ranking Member Richard Shelby and drawing upon the extensive work that members of the committee had undertaken on this subject in the 109th Congress.

Let me offer a brief summary of the most important provisions of the bill.

The Foreign Investment and National Security Act of 2007--

Establishes the membership of the Committee on Foreign Investment in the United States, CFIUS, in statute;

Strengthens the role of the Director of National Intelligence, hereafter DNI, by making the DNI an ex-officio member of CFIUS and requiring that the Director undertake a thorough analysis of the transaction with respect to any national security implications, engage the intelligence community, and report the DNI's findings to the committee within 20 days of the commencement of the CFIUS review. Requires the DNI to update CFIUS with any additional relevant intelligence information that becomes available during the course of a review and/or investigation;

Mandates the designation of a lead agency or agencies for each covered transaction, in addition to the Treasury Department, charged with negotiating any mitigation agreement or other conditions to ensure that national security is protected, and for follow-up compliance with the terms of the agreement after the transaction has been approved by

Madam President, I rise today to commend Chairman Dodd and Ranking Member Shelby on their work regarding the Committee on Foreign Investment in the United States, CFIUS.

Last year, a company called Dubai Ports World sought to purchase labor management rights to several U.S. ports, a proposal that was approved by CFIUS. However, numerous Members of Congress, the media and the American public quickly and loudly voiced concerns over the way in which the CFIUS process had occurred. Because of the enormous outcry, Senator Shelby, then Chairman of the Banking Committee, worked with then-Ranking Member Senator Sarbanes, to make the CFIUS process more transparent and much more effective.

I want to commend both Senators for their work on this legislation, and I believe that their hard work has produced legislation that will bolster American support for foreign investments.

Many different agencies within the Federal Government have the responsibility to investigate foreign investment proposals before they can be approved. Those agencies, including our intelligence community, have a serious responsibility to ensure that each proposed foreign investment in our country will not jeopardize national security. It is my understanding that currently, the Director of National Intelligence has the authority to tap any of the intelligence agencies within our Federal Government to conduct analysis of technology transfers and economic impacts of any foreign investment proposals. Senator Shelby, is that your understanding of the responsibilities held by the Director of National Intelligence?

I thank the Senator. Madam President, the reason I bring up that concern is that I do not believe that such analyses are occurring, or that very little economic analysis is being conducted by our intelligence communities.

I am hopeful that this legislation crafted by Senators Shelby and Dodd will pass the Senate quickly and that it can be signed into law, because America should be a country that welcomes foreign investment. However, we must be absolutely certain that any investment into our country will not have a negative economic impact or impair our national security. I sincerely hope that the Director of National Intelligence will participate fully in the CFIUS process and use all available resources to ensure that all foreign investment proposals receive very thorough and timely analysis to ensure congressional and public support for increased investment in our country, while at the same time ensure our national security is not placed in jeopardy.

Again, I would like to commend the chair and ranking member of the Senate Banking Committee for their hard work and dedication to this legislation and I will strongly support its passage.

Mr. President, the Committee on Energy and Natural Resources has reported over 70 individual bills and resolutions this Congress. Most of these bills are authorizations for specific projects and activities in the Department of the Interior, although we have also reported several measures involving National Forest lands under the jurisdiction of the Department of Agriculture, as well as a few authorizations related to the Department of Energy.

Typically these bills would be considered in the Senate under a unanimous consent procedure. Unfortunately, although all of these bills are noncontroversial and all were reported unanimously by the Energy and Natural Resources Committee, we have been unable to get consent to pass these bills.

In an effort to facilitate passage of these bills, today I am introducing two bills which contain the individual measures reported by the committee. The first bill, the National Forests, Parks, Public Land, and Reclamation Projects Authorization Act of 2007, includes the text of 25 bills and 1 resolution which have been passed by the House of Representatives and which were reported, or their Senate companion measure was reported, without substantive amendment by the committee. If considered as individual bills, upon passage in the Senate, these bills would have been cleared for the President. Since they will now be included as part of this comprehensive bill, it will require additional action by the House of Representatives, but I am hopeful that because all of the measures included in this bill were previously approved by the other body that they will be able to approve this bill expeditiously.

The second bill, the Natural Resource Projects and Programs Authorization Act of 2007, includes the text of 44 bills which originated in the Senate, or which passed the House of Representatives and were substantively amended in committee. Like the previous bill, all of the individual bills were reported unanimously by the Energy and Natural Resources Committee. While the House of Representatives has not previously acted on all of the individual components of this new bill, I believe these bills are non-controversial, and I hope that the House will be able to consider this bill in a timely manner as well.

Mr. President, I have prepared a table identifying the individual measures that are included in both comprehensive bills, including references to the corresponding calendar numbers. I ask unanimous consent to have printed in the Record the table to which I just referred.

Madam President, I rise in support of the Senate's passage of the Foreign Investment and National Security Act of 2007. This important bill reforms the process through which the Committee on Foreign Investment in the United States reviews foreign investment in our country. It establishes a process for reviewing foreign investment transactions that thoroughly examines issues relating to national security, involves clear lines of responsibility, and is flexible to meet the demands of the market.

I appreciate the leadership and hard work of Chairman Dodd on this matter.

labor management rights

The Senator is correct. Currently the DNI can use different intelligence agencies to conduct economic analysis, including technology transfers, to ensure that such foreign investment proposals will not jeopardize our national security.

Madam President, I ask unanimous consent that the Senate proceed to the consideration of Calendar No. 197, S. 1610.

Madam President, I ask unanimous consent that a Dodd-Shelby substitute amendment, which is at the desk, be agreed to, the bill, as amended, be read the third time; further, I ask unanimous consent that the Banking Committee be discharged from the consideration of H.R. 556, and the Senate proceed to its consideration; that all after the enacting clause be stricken, and the text of S. 1610, as amended, be inserted in lieu thereof; the bill, as amended, be read the third time and passed, and the motions to reconsider be laid upon the table, without any intervening action or debate; that S. 1610 be placed back on the calendar; that any statements relating to the bill be printed in the Record.