US Needs to More Aggressively Track Non-Notified CFIUS Deals, Former BIS Official Says
The U.S. needs to more aggressively monitor transactions that aren't reported to the Committee on Foreign Investment in the U.S., said Nazak Nikakhtar, former acting head of the Bureau of Industry and Security. Nikakhtar, speaking during a Jan. 27 panel discussion hosted by China Tech Threat, said that the transfer of technologies to China, particularly semiconductor production equipment, has allowed it to outpace America in hypersonic missiles and has “placed the U.S. and the world in incredible jeopardy.”
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Nikakhtar placed the blame primarily on CIFIUS's inability to accurately monitor transactions between U.S. companies doing business in China. CFIUS has placed a major focus recently on finding non-notified deals, including the recent failed Magnachip merger (see 2109010051). A spokesperson for the Treasury Department, which chairs CFIUS, didn't immediately comment.
One solution proposed by Nikakhtar was an increase in the use of mitigation agreements with companies even if there is no suspected technology transfer currently happening. These deals “impose guardrails” and create a legal obligation for companies to report threats of coercive technology transfers in the future, she said.
There is often a conflict between U.S. and Chinese laws for companies operating in both countries, she said. The U.S. can block technology transfers but China's "national security mandate" often requires companies operating there to turn over technology to domestic partner companies in China. These two opposing requirements are a tricky legal situation to navigate for companies leaving many agreements that are "likely not legally feasible due to inherent conflict," she said.