Wednesday, July 12, 2006


Committee OKs CFIUS Reform Bill On Bipartisan Voice Vote

WASHINGTON - Legislation to repair the sputtering process by which government officials review the national security aspects of major foreign investments was approved with broad bipartisan support in the House Energy and Commerce Committee Wednesday.

The action follows proposals by China to buy an American oil company and from a Dubai firm to own and operate major ports in the U.S. Critics called the proposals threats to American security, and both ideas collapsed under the weight of public scrutiny.

"I want more foreign investment in America, not less, but I do not want the kind that would threaten our national security," Chairman Joe Barton, R-Texas, said.

He pointed out that the organization of department heads which permits or rejects certain investment proposals - the Committee on Foreign Investment in the United States, or CFIUS - "used to be nearly anonymous."

H.R. 5337, which was authored by U.S. Rep. Roy Blunt, R-Mo., amends the Defense Production Act of 1950 to provide new criteria and processes for CFIUS to evaluate proposed transactions involving foreign investment in U.S. corporations.

Committee lawmakers approved by voice vote an amendment that eliminated the CFIUS vice-chair position, which H.R. 5337 would have created. The amendment also would designate the secretary of commerce as the CFIUS chair. Members of both parties were concerned about the Homeland Security secretary becoming the permanent vice-chair.

"It is not clear to me why the newest member of the CFIUS process is better suited to evaluate the nature of these transactions than an agency, such as Commerce, that has been involved since the beginning," said Barton.

CFIUS attracted recent attention with its approval of the Dubai Ports World purchase of London-based Peninsular and Oriental Steam Navigation Co. Under the sale, DP World took over a U.S. subsidiary with operations at ports including New York, Miami and New Orleans. After lawmakers opposed DP World running American port terminals, the company announced plans to sell its U.S. operations.

And last July, a bid for Unocal by CNOOC, in which the Chinese government has a 70 percent stake, led the House and Senate conference committee on the Energy Policy Act of 2005 to require a 120-day study on the U.S. security implications of a purchase by a Chinese company before CFUIS could begin its formal review.

At Tuesday's hearing, the four witnesses were all supportive of H.R. 5337, saying that it improved transparency and congressional oversight over CFIUS, though some had further recommendations for the bill.

Douglas Holtz-Eakin with the Council on Foreign Relations echoed the concern about the newly minted vice-chair position.

"H.R. 5337 also designates Homeland Security to be the vice-chair of CFIUS, which raises the larger issue of the role of homeland security in national security reviews. A danger is setting a standard for national security that is either overly broad or indistinct," Holtz-Eakin said. "I believe that homeland security should be seen as an integral part of the traditional focus on national security and not as a separate, new or elevated consideration. From this perspective, the Department of Homeland Security has operational roles that contribute to national security."

U.S. Rep. Mike Rogers, R-Mich. agreed at the hearing that it was time to update the law regarding CFIUS. "We in Congress need to carefully balance the need for proper security actions with legitimate need for foreign investment in the United States," Rogers said. "The world has changed. We need CFIUS to change with it."
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