US Treasury issues new rules on foreign investments
THE UNITED States Treasury Department issued new rules on Wednesday on foreign investments into American companies that will give the government more power to block foreign transactions on national security grounds.
The rules, which represent the latest escalation in an intensifying economic conflict between the United States and China, will implement a programme for tougher reviews of foreign acquisitions that Congress approved this summer.
The regulations will require foreign investors to alert a Treasury-led inter-agency committee to all deals that would give the foreign investors access to critical technology covering 27 industries, including semiconductors, telecommunications and defence.
Treasury Secretary Steven Mnuchin said the new interim rules will “address specific risks to US critical technology”, while also giving officials critical information they can use in developing the final rules.
The law Congress passed in August did not single out China, but it was clear lawmakers and the Trump administration had Beijing in mind. The administration has accused China of using predatory tactics to steal American technology.
The administration has imposed penalty tariffs on about US$250 billion of Chinese imports, triggering retaliation by China, as a trade war between the world’s two biggest economies has widened.
As part of the trade battle, President Donald Trump had initially ordered the Treasury Department to draft investment restrictions aimed specifically at China. But in June, Trump decided to back Congress’ effort to tighten existing investment restrictions by increasing the powers of the existing Committee on Foreign Investment in the United States, or CFIUS.
This Treasury-led inter-agency panel was given the power to review investments that grant foreigners access to a US company’s high-tech secrets. Before the law was strengthened, the committee could only review foreign investments that were big enough to give the foreign group control of the US company.
The new rules, published on Wednesday in the Federal Register, will go into effect on November 10 and will implement a pilot programme covering an initial 27 industries. Officials will use the experience gained from these reviews to craft expanded regulations which will fully implement the new law.
The legislation received strong bipartisan support in Congress, with lawmakers from both parties expressing concerns about the need to prevent China from obtaining American technology by buying or investing in US companies.