Last December, the Committee on Foreign Investment in the United States (CFIUS) determined that it did not have jurisdiction to review Chinese company Fufeng Group Limited’s (“Fufeng”) proposed $700 million corn milling project in North Dakota. The news came after CFIUS completed a three-month review and investigation of Fufeng’s purchase from a private citizen of a 370-acre greenfield site in Grand Forks, North Dakota, to build a wet corn mill.
Under CFIUS regulations, CFIUS has jurisdiction to review foreign acquisitions of or investments in US businesses. However, the regulations provide an exception for “greenfield investments,” which are truly start-up investments not involving existing US business entities or assets comprising a US business. For example, a “greenfield investment” involves only such activities as “incorporating a newly formed subsidiary” and “separately arranging for the financing of and the construction of a plant to make a new product, buying supplies and inputs, hiring personnel, and purchasing the necessary technology.”1 CFIUS could still have jurisdiction over such a transaction, however, under another part of its regulations, which addresses certain real estate transactions. Specifically, CFIUS has jurisdiction to review foreign acquisitions or investments in real estate in close proximity to designated US military installations, ports, and other sensitive facilities.
The 370 acres are located approximately 12 miles from Grand Forks Air Force Base, which is home to a US military drone facility and a new space networking center that is central to US military communications globally. A US Air Force officer stationed at the base issued a report raising concerns about the Government of China conducting covert surveillance through Fufeng. In addition, US lawmakers expressed concern with Fufeng’s alleged ties to the Chinese government and the Chinese Communist Party. Senators John Hoeven and Kevin Cramer of North Dakota, as well as Senator Marco Rubio of Florida, submitted a formal request for CFIUS to conduct a review of the purchase. North Dakota Governor Doug Burgum submitted his own request for CFIUS review shortly thereafter. In response, the parties to the deal submitted the transaction to CFIUS for review.
CFIUS ultimately determined that the transaction was not a “covered transaction” and thus not within CFIUS’s authority to review. While CFIUS’s letter to Fufeng does not explain why it came to this decision, CFIUS appears to have determined that the transaction is a greenfield investment and exempt from its jurisdiction over US businesses. Furthermore, despite concerns regarding the land’s proximity to the Grand Forks Air Force Base, the base is not one of the military installations that has been designated as sensitive under the CFIUS regulations. As such, CFIUS likely could not rely on its jurisdiction over investments in real estate either, notwithstanding the many concerns expressed by members of the US Government.
In its letter to Fufeng announcing its decision, CFIUS stated that it will not take further action regarding the transaction. However, the agency added that it reserves the right to start a new review if it was revealed “that the parties omitted material information or submitted false information in the . . . filing[.]”2 Members of the US Congress expressed dismay over CFIUS’s decision: Senator Kevin Cramer (R-ND) called the decision “underwhelming” and stated he requested “a classified briefing from the Treasury Department . . . and from the Department of the Air Force if not the entire Department of Defense,” to learn more about this decision,3 while Senator Marco Rubio (R-FL) released a statement that the “Chinese Communist Party should not be allowed to purchase land near our military bases.”4 Even before the Fufeng transaction, members of Congress had introduced legislation either expanding CFIUS’s jurisdiction or prohibiting companies from certain countries, including China, from purchasing US agricultural land. CFIUS’s decision likely will lead to renewed attention regarding such legislation.