Committee on Foreign Investment in the United States

Based on Wikipedia: Committee on Foreign Investment in the United States

In January 2025, President Joe Biden killed a fourteen-point-nine billion dollar deal. With the stroke of a pen, he blocked the proposed merger between United States Steel—an American industrial icon since 1901—and Japan's Nippon Steel. The decision wasn't based on tariffs, trade disputes, or corporate malfeasance. It came down to three words: national security concerns.

The recommendation to block this massive deal came from a committee most Americans have never heard of, one that operates almost entirely in secret, uses classified intelligence, and answers to virtually no one except the President. Its name is unwieldy: the Committee on Foreign Investment in the United States. Insiders just call it CFIUS, pronounced "SIFF-ee-us."

The New York Times once described CFIUS as "powerful and unseen," noting its ability to "kill the biggest multibillion-dollar global deals." That's not hyperbole. This interagency panel has become one of the most consequential gatekeepers in the global economy, wielding enormous power over which foreign companies can acquire American businesses—and which cannot.

What Exactly Is CFIUS?

At its core, CFIUS is a government committee that reviews foreign investments in American companies to determine whether they pose risks to national security. Led by the Treasury Secretary, it includes heavyweights from across the federal government: the Departments of Defense, State, Commerce, and Homeland Security, along with the Attorney General and the Director of National Intelligence. When stakes are high enough, the National Security Council weighs in too.

The committee doesn't just look at full acquisitions. It scrutinizes any transaction that might give a foreign entity meaningful control over an American business. This includes mergers, acquisitions, takeovers, and even minority investments that provide access to sensitive technology or business information. Real estate deals near military installations? Those are on the table too.

Here's where it gets interesting—and a bit unsettling. CFIUS doesn't have to tell anyone which deals it's investigating. It uses classified intelligence from the American spy community. It doesn't publicly announce its findings. And perhaps most remarkably, there's no statute of limitations. A company that completed a foreign acquisition a decade ago without notifying CFIUS could still face investigation today, potentially being forced to unwind the entire deal.

The Birth of the Committee

CFIUS didn't emerge from some dramatic national security crisis. President Gerald Ford created it in 1975 through Executive Order 11858, and its original purpose was almost academic: study foreign investment trends and provide policy recommendations. The Cold War was still raging, but the immediate concern wasn't Soviet spies buying American companies. It was simply understanding how foreign capital was flowing into the United States economy.

The committee's mandate was modest. It was supposed to analyze investment trends, coordinate with foreign governments about major governmental investments, and review deals that might affect national interests. Think of it as a research body with an advisory role—influential perhaps, but without real teeth.

That changed in the 1980s, when Japan's economic rise triggered genuine anxiety in Washington.

The Fujitsu Moment

In 1987, Japanese technology giant Fujitsu attempted to purchase Fairchild Semiconductor. On its face, this seemed like a straightforward business deal. Fairchild was struggling financially. Fujitsu had deep pockets. Both companies made semiconductors.

But Fairchild wasn't just any chip maker. It was one of the founding companies of Silicon Valley, a pioneer in integrated circuits whose alumni had gone on to start Intel and AMD. More importantly to national security hawks in Congress, semiconductors were increasingly critical to American military technology. The prospect of Japanese ownership over this capability set off alarm bells.

The deal ultimately fell apart under political pressure, but the controversy had lasting consequences. In 1988, Congress passed the Exon-Florio Amendment, named after its sponsors Senators J. James Exon and Representative James Florio. This legislation fundamentally transformed CFIUS from a research committee into an enforcement body. For the first time, it gave the President explicit authority to block foreign acquisitions on national security grounds—but only after CFIUS conducted a formal review.

President Ronald Reagan implemented the new law by delegating the review process to CFIUS through executive order. The sleepy study group now had power.

How the Process Works

When a foreign company wants to acquire an American business, the parties involved are supposed to voluntarily notify CFIUS. The word "supposed to" is doing a lot of work in that sentence. There's no legal requirement to file, but failing to do so is increasingly risky. CFIUS can initiate its own review of any transaction it learns about, and its jurisdiction over "non-notified transactions" never expires.

Once CFIUS receives notification, the clock starts ticking. The committee has forty-five days to either approve the deal or open a formal investigation. If it opens an investigation, it gets another forty-five days to reach a decision. Most deals sail through the initial forty-five-day period without incident—CFIUS approves them, and everyone moves on.

But the trend is toward greater scrutiny. In 2012, about forty percent of submitted cases proceeded to investigation. By 2022, that number had jumped to fifty-six percent. Nearly three hundred cases were submitted that year alone.

If CFIUS still has concerns after its investigation, it can recommend that the President block or restrict the transaction. The President then has just fifteen days to make a decision. There are provisions for extensions, but the basic structure creates real urgency. When billions of dollars are at stake, those fifteen days can feel like an eternity—or like the blink of an eye.

The Penalties Are Severe

Companies that willfully violate CFIUS regulations face civil penalties of up to two hundred fifty thousand dollars per violation—or the entire value of the transaction, whichever is greater. For a multi-billion dollar deal, that means the penalty could theoretically equal the purchase price itself.

But the real enforcement mechanism is simpler and more brutal: CFIUS can force companies to unwind completed transactions. Imagine spending years negotiating an acquisition, integrating operations, and building a combined business—only to be told you must reverse everything because you failed to get government approval. The uncertainty alone is often enough to kill deals before they even reach CFIUS.

The China Pivot

For decades, CFIUS operated in relative obscurity. It reviewed deals, occasionally raised concerns, and rarely made headlines. That changed as American policymakers grew increasingly alarmed about China's technological ambitions and its strategy of acquiring American companies to access their intellectual property and trade secrets.

In 2018, President Donald Trump signed the Foreign Investment Risk Review Modernization Act, commonly known as FIRRMA. This legislation dramatically expanded CFIUS's jurisdiction and capabilities. The committee gained authority over new categories of transactions that particularly concerned policymakers watching Chinese investment patterns: real estate purchases near sensitive facilities, minority investments through private equity that provide access to American technology companies' business information, and joint ventures between American and Chinese firms.

FIRRMA also gave CFIUS more money, more staff, and a longer review period. The message to Chinese investors—and to foreign investors generally—was unmistakable: the era of relatively frictionless cross-border investment in the United States was ending.

President Joe Biden continued this trajectory. In September 2022, he signed an executive order directing CFIUS to pay particular attention to investments affecting cybersecurity, quantum computing, biotechnology, and sensitive personal data. These aren't random categories. They represent the technological battlegrounds where the United States and China are competing for dominance.

The Black Box Problem

CFIUS operates under extraordinary secrecy, and this has generated persistent criticism. Journalists and legal scholars have described the committee's investigations as a "black box"—information goes in, decisions come out, and almost no one outside the process understands what happens in between.

Defenders of this opacity argue it's unavoidable. CFIUS relies on classified national security information. Intelligence agencies share sensitive assessments about foreign companies, their ownership structures, their government connections, and their potential motivations. Making this information public would compromise sources and methods, potentially endanger human intelligence assets, and undermine the entire purpose of national security review.

But the secrecy creates real problems. Foreign investors often don't know what concerns CFIUS has about their proposed transactions. They can't effectively respond to classified allegations they're never shown. And there's virtually no judicial review—courts have traditionally deferred to executive branch national security decisions, leaving companies with few options if CFIUS rules against them.

When Nippon Steel and United States Steel challenged President Biden's decision to block their merger, legal experts immediately noted the uphill battle they faced. National security determinations enjoy enormous judicial deference. The companies argued the decision was politically motivated and lacked legal basis, but proving that in court is extraordinarily difficult when the government can point to classified intelligence the challengers have never seen.

Notable Cases Through History

The story of CFIUS is really the story of specific deals that revealed the tensions between open markets and national security concerns.

In 1990, President George H.W. Bush took the unusual step of ordering China National Aero-Technology Import and Export Corporation to sell its stake in MAMCO Manufacturing, a Seattle-based company. This was one of the first times a president used CFIUS authority to actually unwind a completed transaction, setting a precedent that continues to haunt foreign investors today.

The 2005 saga of CNOOC and Unocal demonstrated how politically charged these reviews could become. CNOOC, a Chinese state-owned oil giant, offered eighteen and a half billion dollars in cash for American oil company Unocal—topping an earlier bid from ChevronTexaco. The CFIUS review hadn't even concluded when Congress intervened, voting to refer the deal to President George W. Bush for additional national security review. Facing insurmountable political opposition, CNOOC withdrew its bid. Chevron got Unocal for a lower price.

The following year brought the Dubai Ports World controversy, which briefly made CFIUS a household name. The state-owned company from the United Arab Emirates had acquired P&O, a British firm that operated terminals at several major American ports including New York and New Jersey. CFIUS actually approved the deal—as did President Bush. But Congress revolted, with members from both parties expressing outrage that a company from the Middle East would control access to American ports. Dubai Ports World eventually agreed to divest its American operations, demonstrating that even CFIUS approval couldn't protect a deal from political firestorm.

More recently, the committee has focused intensely on technology acquisitions. When Lenovo acquired IBM's personal computer business in 2005, CFIUS reviewed the deal extensively before allowing it to proceed. The acquisition of Sequoia Voting Systems by Smartmatic—a Dutch company that had done business with Venezuela's Hugo Chávez government—raised different concerns about election security. Each case reflected the anxieties of its moment.

The Institutional Design

One of CFIUS's underappreciated features is its interagency structure. The committee isn't controlled by any single department. Treasury, Commerce, Defense, State, Justice, Energy—they all have seats at the table, and they all bring different institutional perspectives.

Legal scholar Jon D. Michaels has argued this design helps offset some of the accountability problems created by CFIUS's secrecy. When multiple agencies with different missions must reach consensus, they naturally check each other's excesses. The Defense Department might see threats everywhere. Treasury might prioritize economic openness. Commerce might focus on competitive implications. The process of reconciling these perspectives can produce more balanced outcomes than any single agency would reach alone.

Whether this institutional diversity actually compensates for the lack of transparency is debatable. But it does mean that CFIUS decisions emerge from genuine deliberation among officials with genuinely different priorities.

The Economic Counterargument

Not everyone celebrates CFIUS's expanded role. Critics worry that aggressive national security screening discourages beneficial foreign investment, harming the American economy.

The United States has historically been one of the world's most attractive destinations for foreign capital. International investors bring not just money but expertise, technology, and global business relationships. When a German manufacturer builds a plant in South Carolina, it creates American jobs and transfers valuable skills to American workers. When a Japanese automaker opens a research center in Michigan, it advances the state of automotive technology on American soil.

Foreign direct investment has been essential to American economic vitality. As one former Reagan administration official noted in 2006, the United States needs massive daily inflows of foreign capital to sustain its economy. Signals that foreign investors aren't welcome—or face opaque, unpredictable regulatory obstacles—can redirect that capital elsewhere.

The challenge is distinguishing between beneficial investment and investment that genuinely threatens national security. Not every Chinese company is an arm of the Chinese state. Not every acquisition of an American technology firm transfers sensitive capabilities to a foreign adversary. But when the stakes are nuclear weapons, artificial intelligence, or critical infrastructure, erring on the side of caution seems prudent.

The Cybersecurity Dimension

In January 2025, news broke that Chinese hackers had breached CFIUS itself, accessing internal documents. The irony was bitter: the committee responsible for protecting American companies from foreign threats had itself become a target of foreign espionage.

This breach underscored a troubling reality. CFIUS reviews involve extraordinarily sensitive information—intelligence assessments, corporate secrets, national security vulnerabilities. Protecting this information is crucial not just for the integrity of individual reviews but for maintaining the trust that makes the entire system function. Companies are more willing to share sensitive business information with CFIUS if they believe that information will remain confidential.

Shortly after reports of the breach, President Trump signed an executive order directing CFIUS to restrict Chinese investment in strategic economic areas. The era of relatively open investment flows between the world's two largest economies appeared to be ending.

Looking Forward

CFIUS has traveled an extraordinary distance from its origins as Gerald Ford's advisory committee. What began as a research body now wields power that can reshape global industries. The committee's recommendations have blocked deals worth tens of billions of dollars and forced the unwinding of transactions that companies thought were complete.

The tensions embedded in CFIUS's mission aren't going away. Open markets and national security will always exist in tension. Foreign investment brings genuine benefits but also genuine risks. Distinguishing between the two requires judgment calls that reasonable people can and do dispute.

What seems certain is that CFIUS's role will only grow more significant. As technology becomes more central to national security, and as great power competition intensifies, the question of who owns American companies—and what access that ownership provides—will remain urgent. The committee that operates in secrecy, uses classified intelligence, and answers to the President alone will continue making decisions that shape the global economy.

For better or worse, CFIUS has become exactly what the New York Times called it: powerful and unseen.