CES: A Look at the U.S. Security Risks of Foreign Investment

CTA Vice President of International Trade Ed Brzytwa discussed the sensitive topic of foreign investment transactions with U. S. Department of the Treasury Assistant Secretary for Investment Security Paul Rosen, who runs the Committee on Foreign Investment in the U.

S. (CFIUS). Rosen stated that CFIUS was established almost 50 years ago and has been reauthorized by Congress many times.

“The mission is to review foreign investments that come into U. S. businesses for national security risks,” he said.

“We’re looking to assess who’s getting access to sensitive U. S. assets or getting control of a U.

S. company. ” Rosen stressed that CFIUS has “tremendous authority over these private transactions,” including requiring conditions or even recommending that the U.

S. president block it. Last year, said Rosen, CFIUS reviewed 450 transactions.

“It’s largely a voluntary process,” he noted. The benefit of a voluntary filing is that “when CFIUS reviews the transaction, it won’t come back. ” “Conversely if the transaction isn’t put before us, we often will knock on that company’s door for a transaction done ten years ago and end up imposing conditions or even unwinding a closed transaction,” he said.

“We want to educate companies on the things that get our attention. ” The potential for national security risk is often informed by the U. S.

intelligence community. “The general things we consider are, for example, a purchase of a critical technology or something that’s dual use or something that’s part of a Department of Defense supply chain,” he said. “To assess the risk, we conduct a balancing test of the threat of who is doing the buying and what’s being purchased.

” In October 2023, President Biden signed an executive order to consider the “safe, secure and trustworthy development and use of artificial intelligence. ” “We’re very focused on this,” explained Rosen. “We want to encourage the advancement of these technologies.

They have great potential but also raise risks in terms of what can happen in the wrong hands. ” Brzytwa brought up the topic of KYC (Know Your Customers) as related to an op-ed on “Know Your Investor” written by Rosen and published in Barron’s . In it, says Rosen, he alerted startups and new companies to be aware of who their investors are.

“When you’re raising rounds, conduct sufficient due diligence to understand who wants to invest,” he pointed out. ” “Sometimes [these companies] don’t understand the downstream potentials of the technology. ” Rosen says that, while CFIUS examines “inboard investments,” the Investment Security Office (which he also runs) looks at the outflow of U.

S. capital into “very specific investments,” including AI and advanced semiconductors. “We want to make sure we’re not fueling and propelling advancement by certain entities and countries that could use them to harm us,” he said, noting that an upcoming draft rule will describe “how this will be administered.

”.