The Biden administration is seeking to significantly expand its powers to block foreign investment by making it harder to buy land near military bases, a move that could make it harder for Chinese companies to build factories in the United States.
The Treasury Department on Monday proposed new rules that would add more than 50 military installations across 30 states to a list of locations deemed important to national security. If enacted, they would strengthen a 2018 law that gives the Committee on Foreign Investment in the United States the power to block foreign land purchases within a certain distance of bases.
The proposal comes after Democrats and Republicans in Congress grew increasingly concerned that Chinese investment in the U.S. could threaten national security, and the Biden administration imposed new tariffs to curb imports of Chinese-made electric vehicles and solar panels.
The Treasury Department said the measures were the result of a lengthy review of the commission's jurisdiction and were not targeted at investments from any particular country.
“CFIUS plays a vital role in protecting our national security by thoroughly reviewing real estate transactions near sensitive military installations, and this proposed rule would significantly expand CFIUS's jurisdiction and ability to carry out this important mission,” Treasury Secretary Janet L. Yellen said in a statement, using the committee's short name.
The rule gives the Commission the authority to review real estate transactions located within one mile of 40 new military installations and within 100 miles of 19 new military installations. The additions to the list are the result of a review conducted by federal agencies, including the Department of Defense, to determine which installations are the most sensitive.
“This is very significant in that it shows the Pentagon is taking a more proactive stance and becoming more risk averse about real estate around military installations,” said J. Philip Ludvigson, a partner at law firm King & Spalding who specializes in national security risks related to foreign direct investment.
The rules could further complicate investments by Chinese companies in the United States, which have declined in recent years due to rising anti-China sentiment and increased regulatory scrutiny of transactions.
In May, President Biden issued an order forcing a Chinese-backed cryptocurrency company to leave property it owns near a nuclear missile base in Wyoming.
Treasury officials declined to say whether the new rules would affect a $2.4 billion manufacturing facility that Goshon Corp., a Chinese maker of electric vehicle batteries, is building in Green Charter Township, Michigan. The project has faced strong opposition from local residents, who say the plant is too close to Camp Grayling, a National Guard training facility less than 100 miles away.
The department added Camp Grayling to a list of additional potential sites. The rule does not apply retroactively to transactions that have already been completed, but if a company seeks to purchase additional property related to the project, its acquisition may be subject to review.
Chuck Thelen, Gotion's vice president of North American manufacturing, said in a statement that the company is moving forward with building a factory and does not believe the new rules will apply to land it has already purchased.
“Gotion continues to welcome and encourage additional review by CFIUS if it decides to acquire additional properties in the future,” Thelen said.
The Biden administration is also considering a possible acquisition of U.S. Steel by Nippon Steel Corporation, but Biden has made clear he does not want the deal to go ahead. The proposed real estate restrictions are unlikely to affect that consideration, because it would be based on national security concerns that go beyond the location of the properties the Japanese companies would buy.
John Cavearo, a Washington-based lawyer who specializes in cross-border transactions, said the Treasury Department is likely expanding the list of military facilities because CFIUS has been unable to scrutinize the specific real estate transactions that it finds questionable. Currently, the committee's real estate review list includes 227 military bases.
“The impact of the real estate transaction as initially expressed was relatively minor,” Mr. Cavearo said.
Dozens of states are pursuing their own efforts to curb foreign investment, concerned that the federal government is too lenient.
Florida's new law is the most sweeping, effectively banning most Chinese without green cards from buying homes.
