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CFIUS Releases 2023 Annual Report

On July 23, 2024, the Committee on Foreign Investment in the United States (“CFIUS“) released its 2023 Annual Report to Congress.  The Annual Report provides data on transactions filed with CFIUS in 2023, the third full calendar year following the introduction of the implementing regulations for the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA“).  Consistent with decreased global merger and acquisition activity in 2023, CFIUS received fewer notices and declarations of covered transactions or covered real estate transactions than in the previous year.  However, its overall efficiency improved in several respects, which included (i) an increased clearance rate for transactions that did not require mitigation measures, (ii) a reduced “withdraw and refile” rate, and (iii) an increased rate of concluded action regarding declarations.

Below, we have summarized the key takeaways from the Annual Report:

  • Fewer filings and increased clearance rate.  In 2023, CFIUS assessed 109 declarations and reviewed 233 notices of covered transactions.  This is a 23% decrease from the 440 transactions CFIUS reviewed in 2022.  CFIUS cleared 66% of transactions that did not require mitigation measures within either the 30-day assessment period for declarations or the initial 45-day review period for notices.  This is an 8% increase in the clearance rate from 2022.
  • Investors from China and US-allied countries submitted the most declarations and notices.  From 2021-2023, investors from Canada (13%), Japan (9%), Germany (7%), and South Korea (7%) accounted for the largest proportions of declarations, whereas investors from China (13.5%), Singapore (8.4%), Canada (8.1%), Japan (6.5%), and the United Kingdom (6.5%) accounted for the largest proportions of notices.
  • More than half of all notices proceeded into investigation.  In 2023, there were 128 notices that proceeded to investigation.  This is approximately 55% of notices, which is slightly less than 2022 (57%).  The number of notices that were withdrawn after the commencement of an investigation decreased from 24% to 18% of notices relative to 2022.  This is the first reduction in five years.
  • Fewer withdrawn notices and one filed agency notice.  CFIUS approved the withdrawal of 57 notices after the commencement of the investigation period compared to 87 withdrawn notices in the previous year.  In most instances, the notices were withdrawn after CFIUS informed the parties that the transaction posed a national security risk to allow the parties additional time to consider CFIUS’ mitigation terms.  In 43 of 57 instances, the parties filed a new notice in either 2023 (i.e., 34 notices refiled) or 2024 (i.e., 8 notices refiled).  Treasury filed an agency notice in one instance after parties declined to refile a rejected notice.
  • Increased monitoring of compliance with mitigation agreements.  The CFIUS Monitoring Agencies conducted 43 site visits in 2023, which involved interviews with senior executives and personnel, records checks, physical security assessments, and other activities intended to assess compliance in mitigation agreements.  CFIUS assessed or imposed four civil monetary penalties for breaches of material provisions of mitigation agreements, which is nearly double the number of civil monetary penalties that CFIUS has issued during its nearly 50-year history, and the first under the regulations implementing FIRRMA.  A list of CFIUS enforcement actions that imposed penalties are available on its website here.
  • Enforcement of compliance with mandatory filing requirements.  CFIUS commenced several investigations to ensure compliance with its mandatory filing requirements, some of which resulted in issuing formal determinations of noncompliance.  These determinations did not result in penalties after CFIUS considered the specific facts and circumstances.  Nonetheless, these matters of noncompliance led CFIUS to issue clarifying guidance on how it considers a transaction’s “completion date” for purposes of assessing when a mandatory filing should be submitted, where the foreign person first acquires equity interest but will not receive control or covered investment rights until after CFIUS’ review.  Our prior blog post on CFIUS’ May 2023 “completion date” FAQ is available here.  In addition, CFIUS received its first voluntary self-disclosure for a potential failure to file a mandatory declaration.
  • Some transactions cleared before the 45-day review or 90-day investigation.  On average, CFIUS closed reviews in 45.8 calendar days and closed investigations in 85.8 calendar days.  This reflects a continued decrease in the average days to close reviews and increase in the average days to close investigations over the past two years.  The mean calendar days for 2023 are 45.0 and 91.0 for reviews and investigations, respectively.  The Annual Report notes that these numbers may exceed the 45 or 90 calendar days required in the CFIUS regulations because, in certain cases, the 45th or 90th calendar days may fall on a weekend or public holiday.  In those cases, the next business day is considered the final day of the review or investigation based on the CFIUS regulations.

Our blog posts on CFIUS’ prior annual reports are available here and here.

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Author

Rod Hunter, a partner in the Washington, DC office, regularly advises on U.S. foreign investment regulation, including reviews conducted by the Committee on Foreign Investment in the United States (CFIUS) and procedures relating to mitigation of foreign ownership, control or influence (FOCI) under national industrial security regulations. He previously served as Special Assistant to the President for National Security Affairs and senior director for international economics at the National Security Council (NSC), the White House office that coordinates trade policy and supervises CFIUS. A recognized expert in the field, he has served as an expert witness on CFIUS in civil litigation and has testified before Congress during the legislative process leading to recent amendments to CFIUS’ authorizing legislation.

Author

Sylwia Lis is a partner in the Washington, DC office. She has extensive experience advising clients on national security reviews of foreign investments, including representation before the Committee on Foreign Investment in the United States (CFIUS). Sylwia also advises companies on US law relating to exports and reexports of commercial goods and technology (EAR), defense trade controls (ITAR), and trade sanctions (OFAC) - including licensing, regulatory interpretations, M&A due diligence and regulatory notifications (DDTC/ITAR notification process), compliance programs and enforcement matters.

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Justin Becker is a partner in Baker McKenzie's Trade Secrets practice, based in Washington, DC. Prior to joining the Firm, Justin worked at another international law firm in their Global Arbitration, Trade and Advocacy group. Justin advises clients in an array of anti-dumping and countervailing duty issues, including investigations and reviews before the Department of Commerce (DOC), the International Trade Commission (ITC), and Section 301 and Section 232 investigations before relevant US agencies and offices in the Executive branch. He has appeared before the US Court of International Trade, the US Court of Appeals for the Federal Circuit, and has argued before a Chapter 19 NAFTA panel. Justin is also on the 2024 USMCA Dispute Settlement Panels Roster (on behalf of the United States). In addition to his work on trade remedies and unfair competition cases, Justin also counsels US and foreign clients on national security and international legal issues, including national security screening mechanisms such as the Committee on Foreign Investment (CFIUS) in the United States.

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Lise Test is an of counsel in the Firm’s International Trade Group in Washington, DC and practices in the area of international trade regulation and compliance — with emphasis on US export control laws (Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR)), trade sanctions, and anti-boycott laws. Ms. Test advises clients on issues relating to product classifications, licensing, regulatory interpretations, risk assessments, enforcement actions, internal investigations and compliance audits, as well as the design, implementation, and administration of compliance programs. Ms. Test works regularly with companies across a wide range of industries, including the pharmaceutical/medical device, telecommunications, manufacturing, and technology sectors. She joined the Firm as a summer associate in 2007 and became a full-time associate in 2008. Prior to joining Baker McKenzie, Ms. Test served as a lawyer at the Danish Ministry of Defence.

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Daniel Andreeff is an associate in the Firm’s International Trade practice group in Washington, DC. Prior to joining the Firm, he interned with the Department of the Treasury’s Office of Foreign Assets Control.

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Alexandra Kumar is an Associate in Baker McKenzie, Washington, DC office. Alex’s practice focuses on international trade law, particularly compliance with US export controls, trade and economic sanctions, and anti-boycott laws. She also represents clients in national security reviews before the Committee on Foreign Investment in the United States (CFIUS).

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