James K. Jackson
Specialist in International Trade and Finance
The Exon-Florio provision grants the President the authority to block proposed or pending foreign acquisitions of “persons engaged in interstate commerce in the United States” that threaten to impair the national security. This provision came under intense scrutiny with the proposed acquisitions in 2006 of major operations in six major U.S. ports by Dubai Ports World and of Unocal by the China National Offshore Oil Corporation (CNOOC). The debate that followed reignited long-standing differences among Members of Congress and between Congress and the Administration over the role foreign acquisitions play in U.S. national security. The public debate underscored the differences between U.S. policy, which is to actively promote internationally the national treatment of foreign firms, and the concerns of some over the way this policy applies to companies that are owned by foreign governments that have unlimited access to the nation’s industrial base. Much of this debate focused on the activities of a relatively obscure committee, the Committee on Foreign Investment in the United States (CFIUS) and the Exon- Florio provision, which gives the President broad powers to block certain types of foreign investment.
In the first session of the 110th Congress, Representative Maloney introduced H.R. 556, the National Security Foreign Investment Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The measure was approved by the House Financial Services Committee on February 13, 2007, with amendments, and was approved with amendments by the full House on February 28, 2007, by a vote of 423 to 0. On June 13, 2007, Senator Dodd introduced S. 1610, the Foreign Investment and National Security Act (FINSA) of 2007. On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by unanimous consent. On July 11, 2007, the House accepted the Senate’s version of H.R. 556 by a vote of 370-45 and sent the measure to the President, who signed it on July 26, 2007. It is designated as P.L. 110-49.
On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. The Executive Order also establishes some caveats that may affect the way in which the law is implemented. These caveats stipulate that the President will provide information that is required under the law as long as it is “consistent” with the President’s (1) authority to conduct the foreign affairs of the United States; (2) authority to withhold information that would impair the foreign relations, the national security, the deliberative processes of the executive, or the performance of the executive’s constitutional duties; or (3) ability to supervise the unitary executive branch. Despite the recent changes to the Exon-Florio process, some Members continue to question the way in which the changes in the law are being interpreted by the Obama Administration and the way in which the law is being used to address cases involving foreign governments, particularly with the emergence of direct investments through sovereign wealth funds (SWFs). In the 112th Congress, some Members expressed their concerns to the Obama Administration over the national security implications of a proposed acquisition of U.S. technology company by the Chinese-owned Huawei Technologies. The Obama Administration issued a statement on June 30, 2011, supporting an open investment policy, a commitment to treat all investors in a fair and equitable manner, and support for business investment from sources both home and abroad in the economy. On September 28, 2012, President Obama used the authority granted to him under FINSA to block a Chinese acquisition of a U.S. energy firm.
Date of Report: March 29, 2013
Number of Pages: 30
Order Number: RL33312
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