Commentary:
CFIUS – it’s not a new disease making people sick, an ancient Greek mythological figure or a planet in another galaxy. CFIUS stands for Committee on Foreign Investment in the United States. CFIUS was established in 1975 by President Gerald Ford’s administration, mostly due to concern of increased Japanese investment in the U.S. CFIUS allows the Executive Branch to reject foreign projects attempting to establish themselves in the U.S., based on national security. CFIUS is chaired by the U.S. Secretary of the Treasury, and includes representatives from 16 executive entities, such as Commerce, Defense, and Homeland Security. Other agencies directly reporting to the President can also participate.
CFIUS establishes protocols for foreign companies starting operations in the U.S., based on a certain geographical distance of a sensitive areas, such as military installations and what are referred to as covered ports, which are different classes of airports and seaports. The objective of these protocols is to monitor foreign companies that want to locate within a certain distance of these areas, and determine whether a background check is warranted with the goal of protecting national security.
I got to know CFIUS and its operations when recently attempting to recruit companies from Asia that were interested in moving operations to southern New Mexico. Or maybe I didn’t really get to know CFIUS at all. Being aware of CFIUS and its powers to investigate foreign companies, and possibly deny them from locating in strategic areas in the U.S., I decided that I would set up a zoom call with CFIUS representatives. What transpired was one of the strangest and most frustrating phone calls I have ever had with federal officials.
The call started with me explaining the project that I was working on involving foreign companies. When I was done, I was peppered with specific and detailed questions about the companies, questions I could not answer because I did not know their inner operations, simply what I knew through face-to-face conversations and my own investigation of their background via the internet. CFIUS wanted to know who ultimately the foreign investment in the U.S. is benefiting, such as the investors and board of directors of the foreign companies. This was something I definitely did not know.
I mentioned that I had helped recruit foreign companies to southern New Mexico for many years, and I was not aware that CFIUS had done a background check on these companies. I was told that I would never know if background checks were conducted. CFIUS does not acknowledge or reveal whether it has intervened in a project. I would never know if a deal involving a foreign company involved a CFIUS investigation or not, and that the foreign companies I worked with could possibly have been investigated.
A foreign company can self-report to CFIUS that it intends to establish operations in a CFIUS-deemed sensitive area. If the company intends to lease its space, the landlord of the land or building can also self-report the details of the project. At this point, I did mention to the CFIUS officials that in almost all cases, landlords will do their own background check on the company, along with a financial report to make sure that the potential client is capable of paying the rent. No landlord I know has ever investigated the background of every board of directors involved in a deal or the individual investors in the company. If a company or landlord self-reports, CFIUS will conduct a 45-day background check on the company, of which CFIUS retains the right to extend indefinitely.
This last part concerned me, because I could be working hard on a deal only to find out that CFIUS deemed it not appropriate to locate at the chosen site in the U.S. I asked more questions about the CFIUS process and was told that they could not reveal the answers to my questions. After a while, one of the officials remarked that if he were in my shoes he would be just as frustrated as I was. Both of the officials were extremely polite, but I felt like I was dealing with some kind of mysterious intelligence agency, which ultimately, I was. I totally understand that these officials are there to protect U.S. interests, but the secrecy unnerved me.
The officials were kind enough to send me some general follow-up information so that I would know which military or port installations were sensitive areas for foreign projects, and what distance from these installations – generally 100 miles, in the case of my projects – could trigger a CFIUS investigation. They supplied me with the CFIUS Part 802 Geographic Reference Tool, which allowed me to enter an address for a potential foreign project and see which sensitive installations are nearby within 100 miles - in my case Fort Bliss, the Las Cruces Airport, White Sands Missile Range, and Holloman Air Force Base. I also was told that all foreign companies coming to the U.S. could be subject to CFIUS, but lately there has been a focus on Chinese companies.
Finally, I said to the CFIUS officials, “So, it is a case of I do my job and you do yours, and if I don’t succeed in landing a project involving a foreign company I will never know if you pulled the plug on it?” The CFIUS official said, “Precisely.”
Jerry Pacheco is president of the Border Industrial Association. Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.