The Biden administration wants to significantly expand its powers to block foreign investment. For example, it wants to make it harder to buy land near military bases. The move could make it harder for Chinese companies to build factories in the United States.
The Treasury Department proposed a new rule Monday that would add more than 50 military installations in 30 states to a list of locations it has designated as sensitive to national security. If passed, the rule would strengthen a 2018 law that gave the Committee on Foreign Investment in the United States the ability to block purchases of foreign land within a certain distance of a base.
The proposal comes as Democrats and Republicans in Congress are increasingly concerned that Chinese investment in the United States is threatening national security. The Biden administration has also imposed new tariffs to curb imports of Chinese electric vehicles and solar panels.
The Finance Ministry said the measure was the result of a long-term review of the commission’s jurisdiction and was not targeted at investments from any specific country.
“CFIUS plays an integral role in U.S. national security by rigorously reviewing real estate transactions near sensitive military installations, and these proposed regulations will significantly expand its jurisdiction and ability to accomplish this vital mission,” Treasury Secretary Janet L. Yellen said in a statement, using the committee’s acronym.
The rule would give the committee authority to review real estate transactions within one mile of 40 additional military installations and within 100 miles of 19 new military installations. The additions to the list were the result of a review by federal agencies, including the Defense Department, to determine which facilities are most sensitive.
“This is really significant because it shows the Department of Defense is taking a more aggressive stance and becoming increasingly risk averse toward properties surrounding military installations,” said J. Philip Ludvigson, a partner at the law firm King & Spalding, who specializes in national security risks related to foreign direct investment.
The rule could further complicate efforts by Chinese entities to invest in the United States. Such investments have declined in recent years amid growing anti-China sentiment and increased scrutiny of deals by regulators.
In May, President Biden issued an executive order that a China-Backed Cryptocurrency Company to divest itself of a piece of land it owned near a nuclear missile base in Wyoming.
A Treasury Department official declined to say whether the new rules could affect a $2.4 billion manufacturing facility that Gotion, a Chinese maker of electric vehicle batteries, is building in Green Charter Township, Michigan. The project has drawn strong opposition from local residents who have argued that the plant would be too close to Camp Grayling, a National Guard training facility less than 100 miles away.
The department included Camp Grayling on its list of additional proposed sites. The rule would not apply retroactively to transactions that have already closed, but if a company sought to purchase additional properties related to a project, those acquisitions could be reviewed.
A spokesperson for Gotion did not respond to a request for comment.
The Biden administration is also looking at Nippon Steel’s acquisition of U.S. Steel, which Biden has made clear he does not want. The proposed real estate rules are unlikely to affect that review, which would be based on national security concerns that go beyond the location of the real estate the Japanese company would acquire.
John Kabealo, a Washington attorney who specializes in cross-border transactions, said the Treasury Department is likely expanding the list of military installations because CFIUS has been unable to review certain real estate transactions that have raised questions. There are currently 227 military bases on the commission’s real estate review list.
“The impact of the real estate transactions as originally formulated has been relatively minimal,” Mr Kabealo said.
Dozens of states have launched their own initiatives to restrict foreign investment, amid concerns that the federal government is being too lenient.
A new law in Florida is the most far-reaching, banning most Chinese citizens without a Green Card from purchasing property.
