International Trade Law News

The Treasury Department yesterday issued the long-awaited proposed regulations to implement the changes in the Committee on Foreign Investment in the United States (CFIUS) review process as required by the Foreign Investment and National Security Act of 2007 (FINSA) (Public Law 110-49).

FINSA, which was passed by Congress in July 2007 and became effective on October 24, 2007, was passed after the furor over the proposed acquisition of certain U.S. port facilities by UAE-owned Dubai Ports World in early 2006.

The proposed regulations will be published in the Federal Register later this week, but in the meantime a copy of the document can be found here (this document is 90 pages).

Treasury is requesting comments on the proposed regulations and the public comment period will end 45 days after the notice is published in the Federal Register.

Treasury will be holding a public meeting on the proposed regulations on May 2, 2008 in Washington, DC. Details on the meeting can be found in the "Supplementary Information" section in the Federal Register notice.

UPDATE: The proposed changes to the Treasury Department's Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons that was published in the Federal Register on April 23, 2008 can be found at the following link: edocket.access.gpo.gov/2008/08-1172.htm.

Labels: CFIUS, Treasury Department

The House Committee on Financial Services has unanimously (64-0) approved H.R. 5337 the National Security Foreign Investment Reform and Strengthened Transparency Act of 2006 ("National Security FIRST Act"), legislation that would reform the process by which the Committee on Foreign Investments in the United States (CFIUS) reviews acquisitions of US companies by foreign companies under the Exon-Florio provision of U.S. law. Among other things, H.R. 5337 would make the following changes to the CFIUS review process:

• Require an additional 45-day review period when the acquiring company is controlled by a foreign government;
  
• Require signatures by the Secretary of the Treasury and the Secretary of Homeland Security or their deputy secretaries on all transactions;
  
• Require an analysis of any potential threat on each transaction by the Director of National Intelligence;
  
• Establish a process to monitor and enforce post transaction compliance with mitigation agreements;
• Ensure that all appropriate factors are considered by CFIUS and add "critical infrastructure" as a factor;
  
• Require CFIUS to conduct roll call votes;
• Require the President’s approval if there is a single dissent on a decision after the investigation;
• The bill would provide additional funding to CFIUS.

Labels: CFIUS

The Treasury Department issued a rare Sunday press release stating that "the Committee on Foreign Investment in the United States (CFIUS) today welcomed the announcement by Dubai Ports World that it will submit for review its proposed acquisition of control of U.S. port terminal operations." The press release states that Dubai Ports World "asked for a CFIUS review, including the 45-day investigation under the Exon-Florio amendment, based on a restructured transaction that the company intends to file with the Committee. Upon receipt of the new notification, CFIUS will promptly initiate the review process and fulfill DPW's request for a full investigation."

For those interested in the CFIUS process, see the Treasury Department's website for detailed information on the Exon-Florio law and the CFIUS process.

Customs and Border Protection (CBP) also posted information on its web site with facts on U.S. port security and the DP World transaction. Contrary to the reports in the mainstream press stating that DP World "take over six U.S. ports" the CBP website states that under the proposed transaction DP World operate the following terminals at the following six ports that are currently operated by U.K.-based P&O:

• Baltimore - 2 of 14 total
• Philadelphia - 1 of 5 (does not include the 1 cruise vessel terminal)
• Miami - 1 of 3 (does not include the 7 cruise vessel terminals)
• New Orleans - 2 of 5 (does not include the numerous chemical plant terminals up and down the Mississippi River, up to Baton Rouge)
• Houston – 3 of 12 (P&O work alongside other stevedoring contractors at the terminals)
• Newark/Elizabeth – 1 of 4
• (Note: also in Norfolk - Involved with stevedoring activities at all 5 terminals, but not managing a specific terminal.)

Labels: CFIUS

Mr. Fu Chengyu, Chairman and CEO of the China National Offshore Oil Corporation (CNOOC) Ltd., said Friday that his company is ready to participate in an investigation conducted by the Committee on Foreign Investment in the United States (CFIUS) if its offer to purchase Unocal is accepted by Unocal's board of directors.

According to Mr. Fu, CNOOC anticipated that its merger with Unocal would be reviewed by the CFIUS and they are fully prepared to participate in such a review. CNOOC indicated that it is ready to provide assurances to Unocal to address concerns relating to energy security and ownership of Unocal assets located in the U.S. CNOOC also stated that it is open to placing non-exploration and production assets under U.S. management through arrangements that CFIUS has approved in the past and are prepared to sell or take other actions with respect to Unocal's minority pipeline interests and storage assets.

The Exon-Florio provision of U.S. law (Section 5021 of the Omnibus Trade and Competitiveness Act of 1988, which amended Section 721 of the Defense Production Act of 1950) gives the President the authority 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 Exon-Florio 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.

Labels: CFIUS

The U.S. Government's Committee on Foreign Investments in the United States (CFIUS) will conduct an extended review of China-based Lenovo Group's planned $1.75 billion acquisition of IBM's personal computer (PC) business. The extended review by CFIUS will last 45 days and will result in a report submitted to President Bush on whether the sale threatens U.S. national security interests. The President will then have 15 days to announce a final decision on whether the transactions should proceed or not.

The Exon-Florio provision of U.S. law (Section 5021 of the Omnibus Trade and Competitiveness Act of 1988, which amended Section 721 of the Defense Production Act of 1950) gives the President the authority 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 Exon-Florio 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.

Labels: CFIUS