In a global economy, foreign investment is becoming increasingly common in this country. Some of these transactions raise national security and homeland security concerns.
The recent controversy over the potential sale of terminal operations at U.S. ports to Dubai Ports World (DPW), owned by the United Arab Emirates, exposed serious flaws in the current law governing such foreign investments. That is why I have introduced a bill to reform and strengthen the national security review process for foreign investment in the United States.
In 1988, Congress passed provisions of the Defense Production Act to give the President the authority to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten our national security. Through an Executive Order, the President gave the Committee on Foreign Investment in the United States (CFIUS) responsibility to review these transactions and to make recommendations to the President.
The CFIUS is supposed to identify transactions that could affect our national security. But neither the Department of Homeland Security, nor the Department of Defense, or even the Department of Justice chairs this Committee. Instead, it is the Treasury Department. Moreover, the intelligence community is not even represented on the committee.
Furthermore, the Government Accountability Office (GAO), in a report issued last September, found that the law’s “effectiveness in protecting U.S. national security may be limited because the Department of the Treasury, as Chair of CFIUS, narrowly defines what constitutes a threat to national security.” The CFIUS focuses too much on the financial component and not enough on security.
These are serious concerns that we simply cannot tolerate given today’s threat environment. That is why, as Chairman of the Senate Committee on Homeland Security, I have introduced legislation to abolish the CFIUS process and to create a new, interdepartmental mechanism, chaired by the Department of Homeland Security, to analyze transactions for both homeland security and national security implications. The bill, cosponsored by my colleague Senator Joseph Lieberman, is designed to fix the process through the following changes:
First, the bill would establish a new committee - the Committee for Secure Commerce (CSC) - to replace the CFIUS. The CSC would be chaired by the Secretary of Homeland Security. The Secretaries of Defense and Treasury would serve as Vice Chairmen. The Director of National Intelligence is specifically designated as a standing member, in order to ensure that important intelligence information is part of the deliberative process. With respect to other members, the President would name appropriate agencies and offices to the committee.
Second, the bill would explicitly include homeland security among the factors the Committee would consider in deciding whether to review or investigate a transaction.
Third, the Secretary of Homeland Security would establish the process by which the committee reviews transactions, including the role and responsibilities of each member. In addition, each member would establish the process and procedure by which its agency would conduct its review. It is important that committee members each have a general understanding of the scrutiny being applied to a transaction both within their own agencies and across the government. Such understanding was not evident in the current CFIUS process.
Fourth, this legislation would strengthen the reporting requirements to Congress. The existing process lacks transparency and does not allow sufficient oversight by Congress. It may be appropriate for the reviews, which may involve proprietary data and classified information, to be conducted confidentially. However, it is wholly appropriate that Members of Congress be briefed in a timely manner.
The bill would also make clear that an investigation is required when the entity would be controlled by a foreign government. In looking at the plain language of the existing statute, a 45-day investigation should have taken place in the DPW purchase of Peninsular & Oriental Steam Navigation Company. However, for nearly 15 years, the Treasury Department’s interpretation of the statute has been contrary to congressional intent, and thus, Treasury found there was no need for the 45-day investigation. That ambiguity has been ended in my bill. The bill would require a 45-day investigation in cases where an acquirer is controlled by a foreign government, as in the case of DPW.
If there is any silver lining to the port controversy, it is that it has highlighted the vulnerability of our ports and the need for a greater emphasis on security. Senator Patty Murray and I introduced legislation last November that would help ensure that our cargo coming into America’s ports is secured through a layered system to protect the American people and global commerce.
Despite the fact that DPW recently announced that it would fully transfer the U.S. operations to a U.S. entity, serious concerns about this review process remain. That is why I am committed to ensuring that Congress takes action to reform and strengthen the review process for foreign investment in the United States.
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