Dubai Ports World - UAE - Exon-Florio Provision - CFIUS

Department Of The Treasury ^ | US Dept of the Treasury

[deport]

Committee on Foreign Investments in the United States (CFIUS)

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U.S. DEPARTMENT OF TREASURY

OFFICE OF THE ASSISTANT SECRETARY INTERNATIONAL AFFAIRS

OFFICE OF INTERNATIONAL INVESTMENT

EXON-FLORIO PROVISION

Introduction. The United States has traditionally welcomed Foreign Direct Investment (FDI) and provided foreign investors fair, equitable and nondiscriminatory treatment with few limited exceptions designed to protect national security. The Exon-Florio provision is implemented within the context of this open investment policy. The intent of Exon-Florio is not to discourage FDI generally, but to provide a mechanism to review and, if the President finds necessary, to restrict FDI that threatens the national security.

The Exon-Florio provision is implemented by the Committee on Foreign Investment in the United States ("CFIUS"), an inter-agency committee chaired by the Secretary of Treasury. CFIUS seeks to serve U.S. investment policy through thorough reviews that protect national security while maintaining the credibility of our open investment policy and preserving the confidence of foreign investors here and of U.S. investors abroad that they will not be subject to retaliatory discrimination.

The Statute. Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to provide authority to the President to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under section 721 (also known as the "Exon-Florio provision") to block a foreign acquisition of a U.S. corporation only if he finds:

(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and

(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.

To assist in making this determination, Exon-Florio provides for the President or his designee to receive written notice of an acquisition, merger or takeover of a U.S. corporation by a foreign entity. Once CFIUS has received a complete notification, it begins a thorough review of the notified transaction. In some cases, it is necessary to undertake an extended review or "investigation." An investigation, if necessary, must begin no later than 30 days after receipt of a notice. Any investigation is required to end within 45 days.

Information provided by companies contemplating a transaction subject to Exon-Florio is held confidential and is not made public, except in the case of an administrative or judicial action or proceeding. Nothing in section 721 shall be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress.

Factors To Be Considered. The Exon-Florio provision lists the following factors that the President or his designee may consider in determining the effects of a foreign acquisition on national security. These factors are:

(1) domestic production needed for projected national defense requirements;

(2) 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;

(3) the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the U.S. to meet the requirements of national security;

(4) the potential effects of the transaction on the sales of military goods, equipment, or technology to a country that supports terrorism or proliferates missile technology or chemical and biological weapons; and

(5) the potential effects of the transaction on U.S. technological leadership in areas affecting U.S. national security.

Amendments. Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993, called the "Byrd Amendment," amended Section 721 of the Defense Production Act (the "Exon-Florio provision"). It requires an investigation in cases where:

o the acquirer is controlled by or acting on behalf of a foreign government; and

o the acquisition "could result in control of a person engaged in interstate commerce in the U.S. that could affect the national security of the U.S."

Legislative Cite. Section 721 of Pub. L. 100-418, 102 Stat. 1107, made permanent law by section 8 of Pub. L. 102-99, 105 Stat. 487 (50 U.S.C. App. 2170) and amended by section 837 of the National Defense Authorization Act for Fiscal Year 1993, Pub. L. 102-484, 106 Stat. 2315, 2463.

CFIUS

Executive Order. The Committee on Foreign Investment in the United States ("CFIUS") was originally established by Executive Order 11858 in 1975 mainly to monitor and evaluate the impact of foreign investment in the United States. In 1988, the President, pursuant to Executive Order 12661, delegated to CFIUS his responsibilities under Section 721. Specifically, E.O. 12661 designated CFIUS to receive notices of foreign acquisitions of U.S. companies, to determine whether a particular acquisition has national security issues sufficient to warrant an investigation and to undertake an investigation, if necessary, under the Exon-Florio provision. This order also provides for CFIUS to submit a report and recommendation to the President at the conclusion of an investigation.

In 1993, in response to a sense of Congress resolution, CFIUS membership was expanded by Executive Order 12860 to include the Director of the Office of Science and Technology Policy, the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy. In February 2003, the Department of Homeland Security was added to CFIUS. This brought the membership of CFIUS to twelve under the chairmanship of the Secretary of Treasury. The other members are the Secretaries of State, Defense, and Commerce, the Attorney General, the Director of the Office of Management and Budget, the U.S. Trade Representative, and the Chairman of the Council of Economic Advisers.

Regulations. The Exon-Florio provision requested that the President issue implementing regulations. These regulations were issued in 1991. They set up a voluntary system of notification with the possibility of CFIUS member-agency notice for non-notified transactions. The President retains full authority to protect the national security with respect to any acquisition covered by this statute, regardless of whether the parties file a notification.

The Exon-Florio regulations do not define national security. The preamble to the regulations provides guidance that products, services and technologies important to U.S. defense requirements would be significant to national security. Even though notification is voluntary, CFIUS would consider notification of these transactions appropriate.

Code of Federal Regulations Citation. Office of International Investment, Department of Treasury -- Regulations pertaining to mergers, acquisitions, and takeovers by foreign persons, 31 CFR Part 800.

Procedures. Treasury, acting at the staff level through the Director of the Office of International Investment in the Office of the Assistant Secretary of International Affairs, acts as the secretariat for CFIUS. It receives and circulates notices to CFIUS agencies and coordinates reviews. Reviews are conducted on a case-by-case basis.

The Exon-Florio statute established a 30-day review following receipt of a notification. For those transactions for which an extended 45-day review (or "investigation") is completed, a report must be provided to the President, who must by law announce the final decision within 15 days. In total, the process can not exceed 90 days. The statute requires the President to inform Congress of his determination of whether or not to take action under section 721.

The parties to an acquisition subject to section 721 may submit a voluntary notice to CFIUS of the proposed or completed acquisition by sending 13 copies of the information requested in part 800.402 of the Exon-Florio regulations to:

Ms. Gay Hartwell Sills
Staff Chair
Committee on Foreign Investment in the United States ("CFIUS")
Office of International Investment
Department of Treasury
1500 Pennsylvania Avenue, N.W., Room 4201 NY
Washington, DC 20220

Phone: (202) 622-9066
Also: (202) 622-1860

E-Mail: gay.sills@do.treas.gov

[deport]

The above is from the US Treasury and gives an overview of the process regarding Foreign Direct Investments in the US. In addition other info can be found at the following two links:

Code of Federal Regulations.. PART 800—REGULATIONS PERTAINING TO MERGERS, ACQUISITIONS, AND TAKEOVERS BY FOREIGN PERSONS

US CODE, TITLE 50, APPENDIX App. > DEFENSE > ACT > TITLE VII > § 2170 Prev | Next § 2170. Authority to review certain mergers, acquisitions, and takeovers

Code of Federal Regulations.. PART 800—REGULATIONS PERTAINING TO MERGERS, ACQUISITIONS, AND TAKEOVERS BY FOREIGN PERSONS

[kiriath_jearim]

Thanks for the post.

[Deagle]

This situation has become both a political problem and a possible terrorist threat problem.

Politically, it is a disaster...mainly due to catching the White House off-guard and responding incorrectly. The opening to the Democrats is certaintly not a good thing...

The possible terrorist threat is there and it should be interpretred differently. One, do we combine forces with the UAE (hopefully our friends against terrorists - at least in the last 3 years) and combat problems in the Middle East or do we assume that they may be complicit with the terrorists and prevent their control/ownership of our ports. Tough question...for both us and the administration.

What do you think?

[Howlin]

Bump.

[onyx]

BTTT

Good researched info here.

[BigSkyFreeper]

Thanks for the ping onyx! Good stuff here deport! BTTT!

[onyx]

Bookmark it. And that's an order.

:)

[BigSkyFreeper]

Roger Wilco Skypilot!

:)

[Owen]

>>(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and

(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.
>>

This looks like the ball game.

Does anyone have any explicit and credible evidence that this particular company might take action to threaten the national security AND that other laws do not provide adequate authority to protect national security?

If not, then in the absence of evidence it would be illegal for the president to undo this selection, which seems to have been done according to a defined process that looks like a good one.

[p23185]

If not, then in the absence of evidence it would be illegal for the president to undo this selection, which seems to have been done according to a defined process that looks like a good one.

And I think GWB is taking such a hard stand with a threatened veto because behind the scenes he wants UAE to remain an ally especially in order to use the Al Dhafra Air Base should Iran require further persuasion to knock off their nuke ambitions.

[John Valentine]

NOW, here's a nugget of truth. And, don't forget Oman, right next door, also Muslim, also a friend, also just last month signing a Free Trade Agreement with the US, and also haveing a history of making key airfields available to the US in time of conflict.

Are friends in this part of the world are watching this to see if we really mean what we say. Right now, I think that we are making hypocrites of ourselves. I know Democrats don't care, but it has been eye-opening (not to say completely disgusting) to me to see how easily Republicans and conservatives have been stampeded by the Dems.

[calcowgirl]

Question. I read this Act a few times yesterday and couldn't figure out how it even applies to the DPW acquisition. DPW is acquiring P&O, a publicly traded British firm. How does Exon-Florio apply?

The Statute. Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to provide authority to the President to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under section 721 (also known as the "Exon-Florio provision") to block a foreign acquisition of a U.S. corporation only if he finds:

[Milligan]

Don't you think this is profiling?

[Smartaleck]

If the law, which the WH followed is crap, the question remains, when will Congress accept responsibility for a crappy law?

Of note, there has been much ado about the President didn't know the implication being he's out of the loop or stupid yet -
"This order also provides for CFIUS to submit a report and recommendation to the President *****at the conclusion of an investigation."****

In other words, he didn't know by design!!!

[CharlesWayneCT]

P&O owns U.S. companies as subsidiaries. Some of these companies (U.S.) are the ones that actually RUN the port management operations now. They would still run the operations after the purchase. So the U.S. companies are in effect changing hands, and the law applies.

BTW, the P&O Stockholder report detailing the sale has a section which makes the deal dependent on making it through the Exon-Florio process. I reprint it At this post in another thread

You will see if you go there references to the time frames specified in the law above.

[deport]

How does Exon-Florio apply?

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As I read the following it seems that this gives Exon-Florio the authority....... [from the above posted article]

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Amendments. Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993, called the "Byrd Amendment," amended Section 721 of the Defense Production Act (the "Exon-Florio provision"). It requires an investigation in cases where:

o the acquirer is controlled by or acting on behalf of a foreign government; and

o the acquisition "could result in control of a person engaged in interstate commerce in the U.S. that could affect the national security of the U.S."

[deport]

Also the section I posted in #18 covers the DPW more specifically I think.....

[deport]

when will Congress accept responsibility for a crappy law?

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Not in our lifetime would be my guess.... They may tinker with the provisions some but will do it under the need to curb abuses by some other entity is my speculation.