Treasury Proposal to Give Foreign Investment Regulator New Power

U.S. Secretary of the Treasury Janet Yellen delivers a keynote address during the second annual Committee on Foreign Investment in the United States Conference at the Treasury Department in Washington on Sept. 14, 2023. Alex Wong/Getty Images

The federal government plans to strengthen the enforcement authority of a powerful committee that screens foreign investment in the United States for national security risks.

The proposed rules, made public on April 11, would expand the power of the Committee on Foreign Investment in the United States (CFIUS), an interagency panel led by the Treasury Department that is charged with reviewing foreign investment in U.S. businesses and certain real estate sectors.

Under the Treasury Department’s proposal, the committee could obtain more transaction information and issue subpoenas to third parties not involved in CFIUS-reviewed transactions. The proposed changes would authorize the committee to impose monetary penalties of up to $5 million for violations of CFIUS-related obligations. The current maximum fine is $250,000.

Paul Rosen, assistant secretary for investment security at the Treasury, said in a statement that the new rules are intended to “more effectively deter violations, promote compliance, and swiftly address national security risks in connection with CFIUS reviews.”

The proposed changes came as the planned sale of U.S. Steel Corp. to its Japanese competitor, Nippon Steel, for $14 billion drew scrutiny from CFIUS.

President Joe Biden has voiced opposition to the takeover deal, saying U.S. Steel must be “domestically owned and operated.”

“It is important that we maintain strong American steel companies powered by American steel workers,“ President Biden said in a March statement, calling the Pittsburgh-based firm ”an iconic American steel company.”

Japanese Prime Minister Fumio Kishida, during a recent state visit to Washington, expressed hopes that the process will “unfold in directions that would be positive for both sides” when asked about the planned acquisition at a joint press conference on April 10.

The Tokyo-based Nippon Steel announced in December 2023 that it would purchase its 122-year-old U.S. peer, U.S. Steel Corp., for $14.9 billion, drawing criticism from trade unions and lawmakers from both sides of the aisle. The Japanese steel giant defended the plan, calling the acquisition a way to “strengthen American supply chains and economic defenses against China.”

A worker leaves the U.S. Steel Corp. in Braddock, Pa., on March 10, 2018. Drew Angerer/Getty Images

Much of CFIUS’s high-profile work has focused on deals by entities with ties to adversarial nations, especially China. Officials are concerned about the Chinese communist regime’s interest in U.S. companies as a means of acquiring high-end technologies and intelligence. In recent years, some lawmakers have sought to expand CFIUS’s authority further to scrutinize foreign land purchases, especially near sensitive military sites. CFIUS can advise the president to block or suspend a deal that is deemed a threat to national security.

The CFIUS is also under pressure to complete its national security review of TikTok and impose strict restrictions on the social media giant. The committee has been investigating TikTok since at least 2020.

TikTok stated last year that CFIUS has warned of a U.S. ban if its parent company, China-based ByteDance, doesn’t sell its shares in the video-sharing app.

In Congress, lawmakers are pushing a bill that would legally require TikTok to divest from ByteDance. The legislation was passed by the House in March and now goes to the Senate. President Biden has indicated that he will sign it into law if it passes the upper chamber.

Treasury Secretary Janet Yellen, who chaired CFIUS, said Chinese officials brought up the TikTok issues during her four days of talks in China.

Ms. Yellen emphasized that she supported the Biden administration’s efforts to address national security issues that relate to sensitive personal data.

“This is a legitimate concern,” she told reporters at a press conference in Beijing.

“Many U.S. social apps are not allowed to operate in China. We would like to find a way forward.”

The Associated Press contributed to this report.