Overview
In July 2020, the Committee on Foreign Investment in the United States (“CFIUS”) released its Annual Report to Congress for Calendar Year (“CY”) 2019. The Annual Report, which fulfills certain statutory reporting requirements, provides information on covered transactions filed with CFIUS during 2019. Among other things, the 2019 Annual Report provides some initial data and other insights into CFIUS’s administration of the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded the jurisdiction of CFIUS and included new reporting requirements.
A number of facts and data from the 2019 Annual Report may be of interest:
- Filing figures and timeliness: About half of CFIUS filings were completed in roughly 65 calendar days from the time a draft notice is submitted, which would cover a 20-day period for reviewing and perfecting a draft notice, and a 45-day review period without further investigation by CFIUS. The number of notices filed have remained steady over the last three years, whereas the number that resulted in investigations have decreased. The report attributes this decrease in investigations to FIRRMA’s extension of the statutory review period from 30 days to 45 days.
- CFIUS “vetoes” are down: 2019 saw a significant decrease in withdrawals of filings where CFIUS could not identify mitigating measures or proposed measures that the parties chose not to accept, causing the parties to withdraw the filing prior to CFIUS making a recommendation to the President that the transaction be blocked. The number of cases in this category was reduced from 18 in 2018 to 8 in 2019, suggesting that CFIUS has chosen to effectively “veto” fewer transactions.
- China is involved in fewer transactions: In 2017 and 2018, Chinese investors were the most frequent filers of notices, representing roughly one-fifth of all notified covered transactions with 55 and 60 transactions, respectively. In 2019, this number dropped to 25, representing roughly one-tenth of all notified covered transactions. Fewer Chinese acquirers filing notices in 2019 may help explain the decrease in CFIUS effective vetoes in 2019.
- Japan’s representation is increasing: In conjunction with a decrease in Chinese acquirers filing notices, Japanese acquirers have increased from 20 notices filed in 2017 to 31 in 2018. Japan is now the top acquirer home country with 46 notified covered transactions in 2019, roughly 20 percent. Japan is also by far the largest foreign acquirer of critical technology in 2019, with the next-highest country being Germany. By comparison, in 2018, Japan, China, and Canada were roughly equal top-acquirers of critical technology in 2018.
- Semiconductor manufacturing is the most-represented sector: Semiconductor and Other Electronic Computer and Electronic Product Component Manufacturing was the largest business sector represented, with 25 notices, representing over 10 percent of all filings. This is a substantial increase from the 10 notices filed in 2018.
- CFIUS requested one in four companies participating in the Pilot Program to file notices: Roughly one in four companies that submitted short-form declarations under the Pilot Program were asked to file notices, meaning time and money spent on those declarations did not result in an overall savings in either. In another roughly 30 percent of cases, CFIUS did not require the parties to submit a notice, but also did not clear the transaction on the basis of the declaration, leaving the parties in a somewhat ambiguous situation.