Reed Smith Client Alerts

On September 15, 2022, President Biden issued the Executive Order on Ensuring Robust Consideration of Evolving National Security Risks by the Committee on Foreign Investment in the United States (CFIUS or the Committee). This is the first time in the Committee’s history that a president has expressly directed CFIUS to prioritize certain national security risks when reviewing covered transactions. Although this Executive Order does not change the Committee’s review process or legal jurisdiction, it elaborates on existing factors and adds new national security factors for CFIUS to examine when evaluating covered transactions.

Specifically, the Executive Order requires CFIUS to consider:

(1) Critical supply chain resilience, including the covered transaction’s effect on supply chain security and resilience, both within and outside the defense industrial base. Specifically, consideration of:

  • The degree of involvement a foreign person who is a party to the covered transaction has in the U.S. supply chain, including the foreign person’s concentration of ownership or control.
  • U.S. manufacturing, services, critical mineral resources, and technology capabilities.
  • The degree of diversification through alternate suppliers.
  • Whether the U.S. business that is a party to the covered transaction directly or indirectly supplies the U.S. government, energy sector industrial base, or defense industrial base.

The Executive Order directs CFIUS to focus on supply chain resilience in critical sectors, including artificial intelligence, advanced clean energy, aspects of the agricultural industrial base that have implications relating to food security, biomanufacturing and biotechnology, climate adaptation technologies, and quantum computing.

(2) U.S. technological leadership in critical sectors, especially when foreign investments deal with sectors crucial to U.S. national security. Critical sectors include, but are not limited to, those described above. This factor also instructs the Committee to consider whether a covered transaction involves critical mineral resources, manufacturing capabilities, services, or technologies in those fields.

By evaluating the implications on U.S. technological leadership, the Committee must consider whether “a covered transaction could reasonably result in future advancements and applications in technology that could undermine national security, and whether a foreign person involved in the transaction has ties to third parties that may pose a threat to U.S. national security.”