CFIUS to Get Expanded Military Base Scope, Including Near Chinese Land Purchases

Paul Rosen, Treasury’s top CFIUS official, called the change a “significant milestone in safeguarding critical U.S. military and defense installations.” Treasury Secretary Janet Yellen said it will “significantly increase” CFIUS jurisdiction over sensitive U.S. real estate and will “allow us to deter and stop foreign adversaries from threatening our Armed Forces, including through intelligence gathering.”

The rule will specifically add 40 military bases to Part 1 of the CFIUS covered military installation list, over which the committee’s jurisdiction generally extends one mile from the site’s boundary, and 19 installations to Part 2 of the list, over which the committee’s jurisdiction generally extends for 100 miles outside the base. The rule also would move eight military bases from Part 1 to Part 2.

The rule will take effect 30 days after Federal Register publication.

The additions come amid increasing concern from some lawmakers that entities tied to the Chinese government are buying land to spy near sensitive American military sites or to undermine the U.S. agricultural and food supply chains (see 2303010036 and 2302070025).

One new base Treasury will soon add to the list, Camp Grayling in Michigan, is near land purchased by Chinese lithium battery supplier Guoxuan High-Tech and its U.S. subsidiary, Gotion. Lawmakers have asked CFIUS to block the deal, including as recently as last month, when 10 Republicans said the committee had apparently declined to review the transaction (see 2410170054 and 2309200080).

The lawmakers noted that CFIUS planned to use this final rule to add Camp Grayling to CFIUS jurisdiction, and they also asked Treasury to make sure the rule allows the committee to review the Gotion project retroactively.

While the rule now allows CFIUS to review land purchases within 100 miles of Camp Grayling -- and the Gotion plant is located about 60 miles from the base -- the committee declined to say in its final rule whether CFIUS would look into the deal. It also said the rule “does not apply retroactively” to any deal with a completion date prior to the effective date of the final rule. It also doesn’t apply to situations wherein the transaction parties have in place “a binding written agreement … establishing the material terms of the transaction” that was executed before the rule’s effective date.

The rule will also add Whiteman Air Force Base in Missouri to the portion of the list under which CFIUS has jurisdiction for purchases within 100 miles. The base is about 70 miles away from a planned EV battery parts plant in Kansas by Cnano Technology USA, a subsidiary of China-based Cnano Jiangsu Technology Co. Ltd. At least one Republican lawmaker has asked Treasury to intervene (see 2401160077).

In its final rule, the agency also declined to say whether CFIUS would review this plant.

“It would be inappropriate and outside the scope of the Committee’s rulemaking authority to specify the application of the regulations to a particular entity or a specific transaction in the course of a rulemaking,” Treasury said. The agency stressed that filing a transaction with CFIUS is a “voluntary process,” and CFIUS reviews deals “on a case-by-case basis in light of the specific facts and circumstances.”

Treasury also noted that it received several public comments asking it to block “foreign persons” from buying any land in the U.S., including near military installations. One suggested that no foreign company should be allowed to build on real estate within 100 miles of a military base.

The agency rejected those comments, saying that a “categorical prohibition on real estate transactions by foreign persons would not be consistent with CFIUS’s statutory authority or the open investment policy of the United States.” If the committee believes a land purchase may threaten U.S. national security, Treasury said it will look to impose conditions on the deal or recommend that the president block it.

“Accordingly, the risk-based approach and the authority provided in the CFIUS statute allow the Committee and the President to take action as necessary in light of national security considerations without unduly restricting broad categories of foreign investment in the United States,” it said.

Other public commenters noted that some U.S. states are increasingly looking to restrict land purchases. The Congressional Research Service in August said at least 22 states recently approved legislation regulating foreign ownership of U.S. land (see 2408290043).

Two nonprofit groups, Asian Americans Advancing Justice and the National Iranian American Council, recently urged Treasury to make sure its investment screening regulations don’t unfairly discriminate against foreigners and said the U.S. should do more to curb a rise in “xenophobic” state and federal land laws (see 2408200031).

CFIUS “values the views of civil society and recognizes the importance of educating the public regarding CFIUS jurisdiction and processes,” Treasury said. “The Committee welcomes those who wish to communicate on matters relating to investment security more broadly to reach out to the Treasury Department.”