A bipartisan group of senators has proposed legislation that would expand the Committee on Foreign Investment in the United States (CFIUS) to include the Agriculture and Health and Human Services department secretaries. The act also would require CFIUS to consider the impact of foreign investment in U.S. food, beverage, and agribusiness (FB&A) companies on food safety and food security.
Regardless of whether the act becomes law, leading members of Congress will likely continue to press CFIUS to consider food safety and food security issues in cross-border deals in the FB&A sector, and CFIUS will certainly continue to do so.
Largely, the act is symbolic because CFIUS already has the power to review many foreign investment and acquisition transactions in such companies. However, even the proposed act signals to transaction parties in this sector that FB&A companies have an increasing impact on U.S. national and homeland security.
Increasingly, FB&A companies have critical technologies, collect sensitive personal data and are subject to the threats of cyberattacks and climate change. Parties to foreign investment transactions in U.S. FB&A companies should consider the impacts of CFIUS on their deals early in the transaction process.
Some of the technologies relied upon or developed by FB&A companies are, or may become, “critical technologies” controlled for U.S. export purposes. For example, U.S. companies’ use of unmanned aerial vehicles and certain robotics continues to grow.
The Department of Commerce has also been exploring whether to control various emerging technologies under its Export Administration Regulations (“EAR”). Many of the emerging technologies being considered – such as biotechnology; artificial intelligence/machine learning; position, navigation, and timing (“PNT”) technology; logistics technology; and robotics – are technologies that are increasingly relied upon within the FB&A sector.
CFIUS will thus continue to be keenly interested in foreign investments in or acquisitions of FB&A companies that work with such new technologies. As the FB&A sector continues to adopt such technologies to increase productivity, CFIUS will likely become more concerned about foreign investment in or acquisitions within the sector, particularly if the foreign persons are from countries that CFIUS views as U.S. adversaries.
Within the past five years, CFIUS’s interest in protection of sensitive personal data and the impact of cyberattacks on U.S. businesses has increased dramatically. For example, the proposed foreign acquisition of StayNTouch (a hotel management platform company) ultimately had to be dropped because of CFIUS concerns related to data and potential cyberattacks.
The evolving business models of some FB&A companies now require them to collect significant volumes of sensitive personal data, bringing such data-driven FB&A companies within these CFIUS data privacy and security concerns.
CFIUS could easily see the crippling effects of the spring 2021 cyberattack on JBS, the world’s largest meat processing company, which caused the temporary shutdown of JBS facilities that supplied roughly one-quarter of the total meat supply to American consumers. That attack highlighted particular vulnerabilities of FB&A companies in terms of the nation’s food safety and food security.
During the COVID-19 pandemic, it has become painfully clear the impact that FB&A companies can have on the nation’s food supply and safety. Going forward, Monitoring & Enforcement will undoubtedly ensure that CFIUS will continue to be involved in foreign company investment in or acquisition transactions with U.S. companies in the FB&A sector, closed or otherwise.
Failure to consider such CFIUS issues early in the transaction process may result in unexpected delays and significant disruption to the parties and their business plans.
