CFIUS Reports Record Year in 2021, Including an Increased Focus on China

In August, the Committee on Foreign Investment in the United States (“CFIUS”) released its annual report for the 2021 calendar year. The report summarizes the number of filings submitted to CFIUS and investigations conducted by the Committee in the relevant calendar year, filtered through various criteria, including countries and industries involved.

Overall Statistics

Overall, 2021 was a record year for CFIUS, with statistical increases in the filings reviewed by the Committee. This increase is unsurprising, as it was the first full year since the implementation of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which expanded CFIUS’s jurisdiction and allowed for the submission of short-form Declarations, entered into force. In 2021, CFIUS reviewed 272 Notices for covered transactions, or the traditional written filing presented to CFIUS, a 15 percent increase from the previous record high for any prior year.¹ CFIUS also identified 135 transactions where the parties did not submit a Declaration or Notice in 2021, a 15 percent increase from the 117 identified in 2020.² Finally, CFIUS reviewed 164 short-form Declarations, which are intended to be less detailed filings for transactions that the parties believe pose limited national security risk in 2021, up from the 126 it reviewed in 2020.³ Of these 164 Declarations, 47 were subject to a mandatory filing requirement.

On the enforcement side, 120 of the 164 filed Declarations ended with CFIUS concluding all action and approving the transaction.⁴ 30 were re-filed as a notice upon CFIUS’s request, 12 were inconclusive, and two were rejected.⁵ 130 of the 272 filed Notices proceeded to an investigation, and CFIUS imposed mitigation measures on 26 of the investigated Notices, proportions consistent with previous years.⁶

Increased Focus on China

Of the 272 filed Notices, 44 came from Chinese investors, more than any other country.⁷ Some of this increase from prior years may be due to a change in reporting requirements for CFIUS. Executive Order 13936 on Hong Kong Normalization, issued in July 2020, requires CFIUS to treat foreign investors from Hong Kong and China as Chinese for reporting purposes.⁸ However, this only partially explains the large number of reviewed Notices from China, as Notices from Hong Kong and China combined made up only 20 and 29 Notices in 2020 and 2019, respectively.⁹ The increase indicates that Chinese investors are regaining some interest in US investments, and CFIUS continues to take a more prominent role in China-related inbound investments into the United States.

Chinese investors only submitted one short-form Declaration to CFIUS in 2021;¹⁰ this may demonstrate a common belief among Chinese investors that CFIUS concerns related to their US investments are unlikely to be resolved via a short-form Declaration. Similarly, Chinese investors only submitted three and five Declarations in 2019 and 2020, respectively, indicating that the Declaration is not a common tool for Chinese investors. Industries where Chinese investors frequently submit notices for review include the finance, information and services, and manufacturing sectors.¹¹

 

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¹ Committee on Foreign Investment in the United States, Annual Report to Congress (Aug. 2022) at 15, available at https://home.treasury.gov/system/files/206/CFIUS-Public-AnnualReporttoCongressCY2021.pdf (hereinafter CFIUS Report CY21).

² Id. at 45.

³ Id. at 4.

⁴ Id. at 4.

⁵ Id. at 4.

⁶ Id. at 15.

⁷ Id. at 32.

⁸ Id. at fn.8, 85 Fed. Reg. 43413 (July 17, 2020).

⁹ CFIUS Report CY21, at 32.

¹⁰ Id. at 11.

¹¹ Id. at 34.