US State Department, WASHINGTON: In the wake of a critical report by Congress' investigative arm, Bush administration officials representing six departments told the Senate Committee on Banking, Housing and Urban Affairs that some aspects of the review process for acquisitions of U.S. companies by foreign entities could be improved but the program does not need a major overhaul.
The committee heard testimony October 20 from representatives of the departments of the Treasury, State, Defense, Commerce, Justice and Homeland Security, which are members of the interagency body that examines such transactions, the Committee on Foreign Investments in the United States (CFIUS).
CFIUS, chaired by the secretary of the Treasury, implements a 1988 amendment to the Defense Production Act of 1950 known as the Exon-Florio provision. The provision seeks to balance the United States' traditional open policy toward foreign direct investment with the need to protect against threats to national security. It also grants authority to the president to suspend or prohibit foreign acquisitions, mergers and takeovers that pose a security risk.
The Government Accountability Office (GAO) undertook its study of CFIUS procedures, the fourth such evaluation over the last several years, in response to a February 2004 request from Senator Richard Shelby (Republican from Alabama), chairman of the Banking Committee, Senator Paul Sarbanes (Democrat from Maryland), the ranking minority member, and Senator Evan Bayh (Democrat from Indiana).
In its final report, released September 28, GAO found that component agencies of CFIUS use an excessively vague definition of what constitutes a national security threat, and often have inadequate time to collect and analyze information about foreign corporations and governments that may be involved in their operations. In addition, the report asserted that inadequate transparency in the review process prevented the Congress from meeting its oversight function.
Cabinet department officials agreed that some aspects of the review process could be improved. But they argued against drastic change, maintaining that current procedures are generally effective.
SOME LAWMAKERS CALL FOR OVERHAUL OF PROCESS
Following the high-profile June bid by state-owned China National Offshore Oil Company (CNOOC) to buy California-based Unocal Corporation, some members of Congress called for an overhaul of CFIUS that would strengthen Congress' oversight capacity. Lawmakers said the deal highlighted a weakness in CFIUS, as the committee did not explicitly define
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