White House Issues Guidance on Foreign Investment.

• Author: Buker, Charles

As experienced operators in the defense space are aware, foreign investment in industries impacting national security may be subject to review by the Committee on Foreign Investment in the United States, or CFIUS.

On Sept. 15, President Joe Biden signed the "Executive Order on Ensuring Robust Consideration of Evolving National Security Risks by the Committee on Foreign Investment in the United States."

The order has no direct legal or regulatory effect, but rather highlights the specific areas on which the Biden administration and CFIUS are currently focused. The order is most helpful as an aid to businesses who are looking for formal guidance as to the types of transactions and issues that would attract the committee's attention.

The executive order highlights several key issues, starting with U.S. supply chain resilience.

The Biden administration has made supply chain resilience a priority from its start. The order emphasizes that the committee should consider the effects of a particular transaction on supply chain resilience and security, both within and outside the defense industrial base, including specifically regarding microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, climate adaptation technologies, critical materials and elements of the agriculture industrial base that have implications for food security.

CFIUS is also directed to consider the degree of diversification across the supply chain, including alternative suppliers located in allied or partner economies; whether the U.S. business that is party to the covered transaction supplies, directly or indirectly, the U.S. government, the energy sector industrial base, or the defense industrial base; and the concentration of ownership or control by the foreign person in a given supply chain.

The executive order also focuses on U.S. technological leadership, which has been the crux of the United States' strategic competition with China. It also has been the focus of other recent legislation and regulation, most notably the CHIPS and Science Act. The order highlights certain sectors that are fundamental to U.S. technological leadership in areas relevant to national security, including many of the same areas noted under supply chain resilience.

Parties should expect that CFIUS will continue to be particularly interested in reviewing transactions involving these technologies.

The executive order also directs the...