Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Ms. COLLINS (for herself, Mr. Lieberman, Mr. Coleman, Mr. Akaka, Mr. Talent, and Mr. Graham):

S. 2400. A bill to transfer authority to review certain mergers, acquisitions, and takeovers of United States entities by foreign entities to a designee established within the Department of Homeland Security, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.

Ms. COLLINS. Mr. President, I rise today to introduce legislation to reform and strengthen the national security review process for foreign investments in the United States. I am very pleased to be joined by three of my colleagues--Senator Lieberman, Senator Coleman, and Senator Akaka--in introducing this legislation.

In a global economy, foreign investment in this country is becoming increasingly common. The national security and homeland security implications of those investments must be scrutinized by the departments with responsibility for those critical matters.

The controversy over the Dubai ports transaction has exposed serious flaws and shortcomings in the current law and process that is used to review foreign investments in our country.

In 1988, Congress passed the Exon-Florio provision of the Defense Production Act to get the President the authority to suspend or prohibit any foreign acquisition, merger, or takeover of a U.S. corporation that is determined to threaten our national security.

Through an Executive order, the President gave a new committee--known as the Committee on Foreign Investment in the United States, often referred to as CFIUS--the responsibility of reviewing transactions pursuant to the Exon-Florio law and to make recommendations to the President.

The law is something of an anachronism because of what it doesn't say. It focuses on acquisitions of American companies that are either important to our military industrial base or have technology that could help a terrorist state develop weapons of mass destruction. Obviously, both of those concerns are very important. We do want to preserve our military industrial base, and we do want to safeguard technology that could help terrorists or anyone else develop weapons of mass destruction. But neither of those transactions or those requirements address transactions that could assist terrorists in threatening our security right here at home.

Obviously, there are other ways for terrorists to undermine our security that might be completely separate from the military industrial base issues or the technological issues related to weapons of mass destruction. In other words, the law is simply too narrow in its application. The current CFIUS process is not designed to analyze transactions that involve a port terminal or other critical infrastructures within our borders.

The Government Accountability Office, in a report issued last September, found that the Exon-Florio law's effectiveness in protecting U.S. national security may be limited--limited because the Department of Treasury, as the chairman of the Committee on Foreign Investment in the United States, narrowly defines what constitutes a threat to our national security. The Committee on Foreign Investment in the United States, CFIUS, focuses too much on the financial component and not enough on security.

I think that is what many of us concluded happened in the review of the Dubai ports transaction. The focus was on investment, needed investment in our ports, rather than being focused on the national security or homeland security implications that could possibly arise from that transaction. The committee is supposed to identify transactions that could affect our national security. It doesn't say ``harm'' our national security; it says ``affect'' our national security. That is supposed to be sufficient to trigger a full 45-day investigation. But, unfortunately, that is not initially what happened with the proposed Dubai ports transaction.

I would like to draw the attention of my colleagues to a broader issue, and that is the composition of CFIUS. Remember, this is supposed to be a national security review, but who chairs the committee? Not the Department of Homeland Security, not the Department of Defense, not the Department of Justice. The committee is chaired by the Department of the Treasury, and chairing this committee is meaningful because the chairman's interpretation of the law, including the provision that makes a 45-day investigation mandatory in the case of foreign government control to entities that could affect national security, tends to govern. In other words, what the chairman decides in interpreting whether the 45-day investigation is triggered tends to be what happens.

I suggest to you, and to my colleagues that the system is fundamentally flawed if it has the Secretary of Treasury, no matter how capable and well qualified he is--and I believe he is all of those things--chair a committee that is supposed to be looking at national security. Thus, I believe the CFIUS process has been weighed too much toward investment considerations and not sufficiently attentive to the national security and homeland security implications. Indeed, the GAO found that Treasury is ``reluctant to initiate investigations to determine whether national security concerns require a recommendation for possible Presidential action.'' That is what GAO found, and that certainly seems to be an accurate finding.

These are concerns which we simply cannot tolerate given today's threat environment, and that is why I am introducing legislation to abolish the CFIUS process and to create a new interagency, interdepartmental mechanism chaired by the Department of Homeland Security to analyze transactions for both their homeland security and national security implications. Our bill is designed to fix the process through the following changes:

First, the bill would establish a new committee, the Committee for Secure Commerce, to replace the old CFIUS. The Committee for Secure Commerce would be chaired by the Secretary of Homeland Security, and the Secretary of Defense would serve as the vice chairman. The Director of National Intelligence would be specifically designated as a standing member of the committee in order to ensure that important intelligence information is part of the deliberative process. The Department of Treasury will still be represented on the committee, but with respect to the other members, the President shall name the appropriate agencies and departments to sit on the committee. This is an important change because it helps ensure that the focus will, indeed, be national homeland security, and it corrects what I believe to be a major shortcoming in the composition of the current committee, and that is that the intelligence community is not represented. That is extraordinary, given the purpose of this committee.

Second, the bill would explicitly include homeland security among the factors the committee would evaluate in deciding whether to review or investigate a transaction.

Third, the Secretary of Homeland Security would establish a process by which the committee reviews transactions and would establish the role and responsibility of each member.

In addition, each member would establish the process and procedure by which each respective agency would conduct its review, sharing that with the other committee members. It is important that committee members each have a general understanding of the scrutiny being applied to a transaction both within their own agencies and across the government. Such understanding was not apparent in the current CFIUS process.

Should a transaction warrant an investigation, the bill would require the Director of National Intelligence to consolidate intelligence assessments.

Lastly, this legislation would strengthen the reporting requirements to Congress. The existing process lacks transparency and does not allow sufficient oversight. It may be appropriate for the reviews, which may involve proprietary data and classified information, to be conducted confidentially. However, it is wholly appropriate that Members of Congress be briefed in a timely manner.

The bill would also address the so-called Byrd amendment loophole, requiring an investigation where the entity would be controlled by a foreign-government. In looking at the plain language of the existing statute, a 45-day investigation should have taken place in the Dubai Ports World purchase of Peninsular & Oriental Steam Navigation Company. However, the Treasury Department interpretation of the statute for nearly 15 years has been contrary to congressional intent, and thus, Treasury found there was no need for the 45-day investigation. That so-called ambiguity has been clarified in our bill. The law requires a 45-day investigation in cases where an acquirer is controlled by a foreign government, as in the case of DP World, and the acquisition could affect the national security of the U.S.

It is important that Congress take action to reform the review process for foreign investment in the U.S. This bill provides a new structure, appropriately focused on national security and homeland security. I seek my colleagues support in moving this legislation forward.

The Dubai ports controversy may have temporarily or perhaps permanently been set aside, but that does not mean we should abandon the efforts to reform and strengthen the law to ensure a proper review of foreign transactions.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the text of the bill was ordered to be printed in the RECORD, as follows:

S. 2400

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