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“Treasury Seeks Expanded Authority for Foreign Investment Review Amid Congressional Scrutiny of Nippon and TikTok Agreements”

The U.S. Treasury is pushing for expanded authority for a discreet government body to scrutinize agreements between American companies and foreign investors. This initiative arises amidst heightened attention on prominent deals involving foreign investment in the U.S., notably the ownership of the popular social media app TikTok by the Chinese firm ByteDance, and Japanese firm Nippon Steel’s proposed acquisition of Pittsburgh-based U.S. Steel Corp, which have drawn scrutiny from lawmakers and President Joe Biden.

A newly proposed rulemaking aims to bolster the powers of the interagency Committee on Foreign Investment in the United States (CFIUS), tasked with probing corporate deals for national security implications and empowered to compel divestment or significant alterations to firms. If enacted, the proposed rule would expand the committee’s subpoena authority, enable broader requests for information from involved parties, and increase the scope and size of fines—ranging from $250,000 to $5 million—in cases of misstatements, omissions, or failure to submit mandatory declarations.

This move comes amid mounting concerns over national security implications tied to foreign investment, particularly as global powers vie for dominance and the U.S. seeks to bolster its domestic supply chains. President Biden has openly opposed Nippon Steel’s bid for U.S. Steel, emphasizing the importance of maintaining robust American steel companies driven by domestic labor.

Nippon Steel’s proposed acquisition, announced in December, has raised concerns regarding its potential impact on unionized workers, supply chains, and U.S. national security. Assistant Secretary for Investment Security at the Treasury, Paul Rosen, clarified that the rulemaking aims to enhance deterrence, promote compliance, and swiftly address national security risks within CFIUS reviews.

John Carlin, former national security chief at the Justice Department, highlighted the proposed rule’s significance in empowering CFIUS to investigate and enforce its authority more rigorously, likening it to an incentive for scrutinizing deals for compliance requirements.

Moreover, ongoing CFIUS scrutiny includes the ownership of TikTok, dating back to at least 2019. The U.S. House of Representatives has passed legislation mandating ByteDance to sell TikTok or face a ban in the U.S., reflecting growing concerns over national security and sensitive personal data.

Treasury Secretary Janet Yellen affirmed support for addressing national security issues concerning personal data, emphasizing the need for reciprocity in market access between the U.S. and China. J. Philip Ludvigson, a former CFIUS director, underscored the proposed regulations’ indication of a more assertive stance in safeguarding national security interests, signaling a readiness to impose substantial penalties using enhanced subpoena powers as deemed necessary.

Furthermore, the U.S. has initiated reviews of certain transactions between American and Chinese firms, exemplified by President Biden’s executive order in August aimed at regulating high-tech U.S. investments in China.

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