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CFIUS Provision in Senate China Bill Would Slow US Research, University Groups Say

U.S. universities are opposing the Senate’s Strategic Competition Act of 2021 over a provision that would expand foreign investment screening to include foreign gifts over $1 million given to U.S. universities. In a letter to the Senate Foreign Relations Committee this month, four academic groups said the expanded jurisdiction awarded to the Committee on Foreign Investment in the U.S. would subject “many gifts” received by colleges to a CFIUS review and would make it “harder” for colleges to conduct research.

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“The proposed expansion of CFIUS’s role would damage U.S. research and our economic competitiveness,” said the letter, signed by the Association of American Universities, the Association of Public and Land-grant Universities, the American Council on Education and the Association of American Medical Colleges. They also said the provision “would create a process that will overwhelm CFIUS with a task it was never designed to undertake” and would establish “a policy mechanism without ever identifying the precise problem it is trying to solve, why CFIUS is an appropriate review mechanism, or how CFIUS would determine when a gift or contract is problematic.”

The provision, which was passed as part of the larger bill by the Senate Foreign Relations Committee last week (see 2104210038), would require universities to disclose transactions involving certain foreign gifts, including those from China. CFIUS would then determine whether the gifts were given to influence U.S. academic research or for other nefarious reasons. Lawmakers said the provision and the bill has strong bipartisan support within the Senate.

Antonia Tzinova, a trade lawyer with Holland & Knight, said CFIUS may not be “well positioned” to take on these added reviews. The committee also has a host of other responsibilities, including its recently expanded jurisdiction under the Foreign Investment Risk Review Modernization Act (see 2002110042). She also said universities have done “so much” over the past 15 or so years to implement “very robust” export compliance programs to ensure they are not sharing export controlled data or goods with restricted end users. “There's so much oversight over universities already and there's so many other agencies involved,” Tzinova said during an April 27 webinar hosted by the Association of Women in International Trade. “I don't think that would be a smart move.”

Although the proposed CFIUS regulations would be burdensome, they may be warranted to protect U.S. national security, said Nazak Nikakhtar, a Wiley Rein trade lawyer. She pointed to the recent uptick in indictments involving allegations of Chinese professors and researchers stealing technology from U.S. colleges (see 2012030033 and 2011170026). “Nobody likes regulation,” Nikakhtar said during the webinar. “But we are dealing with a country or countries -- if you want to throw in Russia -- of a size and scale and tactics that we've never really witnessed and encountered before.”

Nikakhtar, who served as the acting Bureau of Industry and Security undersecretary in 2019, said China is using universities as a way to circumvent export control regulations. “I think regulations over Chinese investments in universities are merited,” she said. “We have to be forward leaning and we have to be proactive, because if we're not, it's going to be too late.”

While U.S. universities “are very concerned with preventing foreign entities from taking undue advantage of our institutions and federal research funding,” the groups said in their letter that the CFIUS provision is overly broad and ambiguous. It would “require expensive and time-consuming reviews of a wide range of university gifts and contracts against unknown and ill-defined criteria by an agency not designed or equipped to carry out this task,” the groups said. “[I]t is not clear what a CFIUS review of gifts and contracts would be designed to counter or how proper review would be determined when applied to university gifts and contracts.”

The definitions in the provision are also unclear, the universities said, especially those that say CFIUS may review a gift that “relates to research, development, or production of critical technologies.” The language is “likely to result in significant uncertainty for universities and their potential donors and research collaborators,” which may decide to partner with non-U.S. colleges rather than “spend months awaiting a government review with results and timing that will be hard to predict.” The groups said this will damage U.S. research investment “at the very moment when our nation’s competitiveness is facing great challenges.” While they oppose the provision, the groups said they “stand ready to work with [the Senate] on alternative ways [to] address research security concerns.”