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Committee on Foreign Investment in the U.S. (2)
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Committee on Foreign Investment in the U.S. (2)
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L. William Seidman Files (Ford Administration)
William Seidman's Subject Files
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Investments, Foreign
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The original documents are located in Box 115, folder "Committee on Foreign Investment
in the U.S. (2)" of the L. William Seidman Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
DOCUMENT
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
memo case: Griffin to members of the Committee on
Foreign Investment in the United States 10/3/75
1a. minutes
Summary of Minutes 66 the July 18, 1975 meeting of
7/18/75
C(A)
CFIUS 6 pp.
memo case: Griffin to members of CFIUS 10/24/75
2a. minutes
Summary of Minutes of the September 18, 1975
9/18/75
C(A)
meeting of CFIUS 4 pp.
FILE LOCATION
Seidman Subject File; Committee on Foreign Investment in the U.S. 9/75 - 10/75
LET 10/82
RESTRICTION CODES
(A) Closed by Executive Order 11652 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (7.72)
DEPARTMENT OF THE
THE TREASURY
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
September 16, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT:
Meeting of Committee on Foreign Investment
September 18, 1975
Attached is a copy of a letter from Mr. Phillip H.
Smith, Chairman and President of the Copperweld Corpora-
tion, to the Committee on Foreign Investment in the
United States concerning the proposed takeover of the
Copperweld Corporation by Societe Imetal. We would be
grateful if you would review this letter and believe that
it would be desirable for the Committee to meet to con-
sider a reply.
Accordingly, we would appreciate it if you or your
representative would attend a Committee meeting on
Thursday, September 18, 1975, at 3:00 P.M. in Room 4426
of the Main Treasury Building.
Pursuant to Under Secretary Yeo's memorandum to the
Committee of September 9, 1975, Assistant Secretary Parsky
will chair the meeting.
John D. W. Lange, Range,Ja.
Acting Secretary
Committee on Foreign Investment
in the United States
GERALD LIBRARY R FORD
SEP 17 REC'D
OF
THE
THE TREASURY
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
September 16, 1975 ws
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT: Meeting of Committee on Foreign Investment
September 18, 1975
Attached is a copy of a letter from Mr. Phillip H.
Smith, Chairman and President of the Copperweld Corpora-
tion, to the Committee on Foreign Investment in the
United States concerning the proposed takeover of the
Copperweld Corporation by Societe Imetal. We would be
grateful if you would review this letter and believe that
it would be desirable for the Committee to meet to con-
sider a reply.
Accordingly, we would appreciate it if you or your
representative would attend a Committee meeting on
Thursday, September 18, 1975, at 3:00 P.M. in Room 4426
of the Main Treasury Building.
Pursuant to Under Secretary Yeo's memorandum to the
Committee of September 9, 1975, Assistant Secretary Parsky
will chair the meeting.
John D. W. Lange, Range,Ja.
Acting Secretary
Committee on Foreign Investment
in the United States
GERALD LIBRARY R. FORD
Copperweld Corporation
FRICK BUILDING
PHILLIP H. SMITH
PITTSBURGH, PA. 15219
CHAIRMAN AND
412 263-3232
September 10, 1975
PRESIDENT
Committee on Foreign Investment in the U. S.
U. S. Treasury Department
Room 5100
Main Treasury Building
Washington, D. C. 20220
GERALD LISSANY ? FORD
Attention: Mr. James A. Griffin, Secretary
Gentlemen:
Society Imetal, a French corporation, has proposed a tender
offer for any or all of the Common Stock of Copperweld Corporation,
a Pennsylvania corporation with headquarters located at 422 Frick
Building, Pittsburgh, Pennsylvania 15219. Societe Imetal is a
holding company with mining and metallurgical interests in nickel,
copper, lead, zinc, silver, uranium, aluminum, tin, iron and
manganese and is owned principally by Compagnie du Nord, a
French Rothschild interest.
We believe that this potential acquisition of an American
corporation by a French interest is a matter for study and action
by the Committee on Foreign Investment in the U. S. under Executive
Order 11858 since such an acquisition could have major implications
for United States national interests. It is our belief and under-
standing that the Rothschild interests are, through their Imetal
interest in LeNickel-SLN, and in other ways directly linked with
those of the French Government through banking interests and through
joint financial interests in certain assets, for example, in Societe
National des Petroles d'Aquitaine. In view of this connection, it
would appear that there could be a very direct influence brought to
bear by the French Government on the activities of Copperweld if
Societe Imetal is successful in acquiring all or part of an owner-
ship interest in Copperweld.
We believe that Copperweld, with annual sales of $322,000,000
and 4,654 employees, plays a vital part in U. S. domestic commerce
through its several operating divisions. Copperweld's major sub-
sidiary is Copperweld Steel Company located at Warren, Ohio where
high strength alloy steel bars are produced. This facility is one
of the three major suppliers of this commodity competing principally
with the Timken Company and Republic Steel. This facility was
originally constructed in the early years of World War II for the
production of armor piercing shell steel. Indeed, in both the
Korean Conflict and the early years of the Vietnam War, shell steel
was again supplied to U. S. ordnance plants for the manufacture of
Copperweld Corporation
-2-
September 10, 1975
Committee on Foreign Investment in the U. S.
FORD & LIBRARY GERALD
U. S. Treasury Department
shells. This company still is a significant producer of ordnance
steels, particularly of the shot, shell, and armor piercing grades
as well as aircraft steels. This company is also the country's
largest producer of free-machining alloy steels, and heat-treated
alloy steels.
At Copperweld's Ohio Steel Tube Company located in Shelby,
Ohio, alloy and carbon seamless tubing is produced together with
heavy wall welded Drawn Over Mandrel tubing. These materials are
used in such vital applications as ball and roller bearings and
races and steel hydraulic cylinders used to automate industrial,
farm, and earth-moving equipment. Such products also have many
applications in mobile armor and aircraft manufacture.
At the Bimetallics Division of Copperweld Corporation, the
Corporation produces Copperweld wire (copperclad wire) which has
been used extensively by the U. S. Army Signal Corps during war-
time and peacetime years, and is currently being used by the Corps
of Engineers for its work on erosion control of the Mississippi
River. Fine Gauge sizes of Copperweld wire manufactured at the
Corporation's Flexo Wire Division at Oswego, New York are used
in various electric and electronic applications (some of which
are military in nature) where the added strength of the steel
core is of benefit. The Bimetallics Division is also the prime
supplier of Alumoweld strand used for the U. S. Navy's Omega
Navigational Antennas. As you know these have been supplied
to Hawaii, Liberia, and we are currently supplying material for
one to be installed on the island of LaReunion in the Indian Ocean.
We strongly believe that the capability to manufacture this material
for these antennas should remain under U. S. corporation control.
At Copperweld's Regal Tube Company in Chicago, Illinois diameters
of DOM tubing, larger than those processed at the Shelby facility, are
manufactured for the ever growing needs for high-strength hydraulic
cylinders used in a variety of peacetime and military applications.
The range of products produced are supplied to a great range
of metal-working plants throughout the U. S. and to utilities, tele-
phone companies, and railroads, as well as manufacturers of special-
ized electrical equipment. As such, Copperweld considers itself a
vital supplier to American industry, both in peactime and in times
of national emergency.
While the future intentions of Societe Imetal cannot be deter-
mined at the present time, it is apparent that the domination and
control of Copperweld's properties by a foreign interest could affect
the type of manufacturing engaged in and the distribution of Copper-
weld's products for essential peacetime and military use. In addition,
Copperweld Corporation
-3-
September 10, 1975
Committee on Foreign Investment in the U. S.
U. S. Treasury Department
such manufacturing know-how and plant technologies as Copperweld
possesses could be exported to a foreign country for the economic
and military benefit of that country.
It is our belief that there are major implications affecting
the U. S. national interests by the takeover bid submitted by Societe
Imetal, and Copperweld respectively requests a prompt review and im-
mediate action by the U. S. Treasury to protect American interests.
Sincerely,
Phillip Phillip H. H. Smith Smith
PHS/pm
GERALD LLBRARY ? FORD
THE TREANINA
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1789
September 16, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT: Meeting of Committee on Foreign Investment
September 18, 1975
Attached is a copy of a letter from Mr. Phillip H.
Smith, Chairman and President of the Copperweld Corpora-
tion, to the Committee on Foreign Investment in the
United States concerning the proposed takeover of the
Copperweld Corporation by Societe Imetal. We would be
grateful if you would review this letter and believe that
it would be desirable for the Committee to meet to con-
sider a reply.
Accordingly, we would appreciate it if you or your
representative would attend a Committee meeting on
Thursday, September 18, 1975, at 3:00 P.M. in Room 4426
of the Main Treasury Building.
Pursuant to Under Secretary Yeo's memorandum to the
Committee of September 9, 1975, Assistant Secretary Parsky
will chair the meeting.
Job Acting John D. W. Secretary Lange, Jr
Committee on Foreign Investment
in the United States
FORD & LIBRARY GERALD
OF
TREASURY THE
DEPARTMENT OF THE TREASURY
1789
WASHINGTON. D.C. 20220
(if
weg)
September 25, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT:
Materials Relating to CFIUS Consideration
of Copperweld Case
Attached for your information are some materials
relating to the Committee's consideration of the proposed
acquisition of Copperweld Corporation by Societe Imetal.
They include copies of (1) Assistant Secretary Parsky's
reply to Mr. Smith of Copperweld; (2) testimony Mr. Parsky
gave to a House subcommittee on Wednesday; and (3) a
form letter which we have prepared to answer letters from
the public on the Copperweld case.
Mr. Smith has asked us not to release to the public
the substance of our response to him. Since his pre-
ferences coincided with ours, we limited our comment on
the Committee's action in Mr. Parsky's testimony to a
statement that "the Committee concluded that it had no
basis for interposing itself in this transaction". We
ask that you observe similar limitations in your
communications with the public on this matter.
Secretary
Committee on Foreign Investment
in the United States
FORD. & LIBRARY GERALD
SEP 29 REC'D
OF
THE THE TREASURY
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
September 29, 1975
MEMORANDUM FOR THE MEMBERS OF THE COMMITTEE ON
FOREIGN INVESTMENT IN THE UNITED STATES
SUBJECT: Meeting of the Committee on
October 7, 1975
This is to confirm that Under Secretary Yeo
will hold a meeting of the Committee on Tuesday,
October 7 at 3:00 P.M. in room 4426 at the
Treasury. Attached is the agenda for the meeting.
Other papers will be distributed as they become
available.
Please confirm with my office (tel. 964-2386)
that you will be able to attend the meeting.
James A. Griffin
Secretary
Committee on Foreign Investment
in the United States
LGERALD LIBRARY R. FORD
Agenda for Meeting of Committee on
Foreign Investment in the United States
3:00 p.m., October 7, 1975
1.
Minutes of previous meeting
2.
Guidelines for the Committee
3.
Report from Commerce Department's New Office
of Foreign Investment in the United States
4.
Report on Foreign Investment Study Act
a.
Commerce Department
b.
Treasury Department
5.
Other business
a.
New Inouye legislation
b. Other
FORD of GERALD LIBRARY
DEPARTMENT THE OF TREASURY
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1789
September 29, 1975
MEMORANDUM FOR THE MEMBERS OF THE COMMITTEE ON
FOREIGN INVESTMENT IN THE UNITED STATES
SUBJECT:
Meeting of the Committee on
October 7, 1975
This is to confirm that Under Secretary Yeo
will hold a meeting of the Committee on Tuesday,
October 7 at 3:00 P.M. in room 4426 at the
Treasury. Attached is the agenda for the meeting.
Other papers will be distributed as they become
available.
Please confirm with my office (tel. 964-2386)
that you will be able to attend the meeting.
James A. Griffin
Secretary
Committee on Foreign Investment
in the United States
FORD & GERALD LIBRARY
a Tuesday mty.
GERALD R. FORD
Is someone
attending for you ?
just a report for
CIEP on meeting
OF
DEPARTMENT THE THE TREASURY
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
October 3, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT:
Materials for Discussion at the
Meeting of October 7, 1975
The attached are for discussion at the Committee
meeting on Tuesday, October 7 at 3:00 P.M., at the
Treasury in room 4426.
Secretary
Committee on Foreign Investment
in the United States
Attachments:
Guidelines for Committee on
Foreign Investment in the United States
Summary of minutes - Second Meeting
of the Committee on Foreign Investment
in the United States - July 18, 1975
FORD & GERALD LIBRARY
GERALD R. FORD LIBRARY
This form marks the file location of item number la, ,
as listed on the pink form (GSA form 7122, Withdrawal Sheet) at
the front of the folder.
LIMITED OFFICIAL USE
October 1, 1975
Guidelines for
Committee on Foreign Investment in the U.S.
Introduction
Since its inception, the Committee on Foreign Investment
in the United States has been operating on the basis of some
very general criteria and guidelines on a number of important
procedural questions. Our original intention was to leave
these criteria and guidelines vague in order to avoid giving
the impression that establishment of the Committee was the
first step toward a U.S. screening mechanism with respect
to inward investment. A degree of ambiguity was also
considered beneficial insofar as it allowed us maximum
flexibility in interpreting the ground rules under which
the Committee operated on a case-by-case basis. It is
becoming apparent, however, that it would be advisable for
us to have more explicit guidelines in order to avoid mis-
understandings and mishandling of cases.
It is also important in terms of our Congressional
relations that we take steps to ensure that the Committee
operates effectively. If its policies and procedures appear
to be confused or if a significant foreign investment takes
place without prior consultation, Congress could conclude
that the Administration's informal approach to protecting
U.S. interests in this area is too unreliable and that
GE
LIBRARY
stronger legislative measures are necessary.
LIMITED OFFICIAL USE
- 2 -
Review of Foreign Investments
Background
The genesis and rationale for reviewing foreign in-
vestments in the U.S. as provided for in E.O. 11858 was
that the unique circumstances arising from the large
accumulations of investable funds by the OPEC countries
warranted special measures tailored to the new situation.
The basic premise of the long-standing U.S. policy of
neutrality toward foreign investments in this country is
that the free inflow of economically motivated in-
vestments will be to the economic advantage of the U.S.
as well as the rest of the world. In the case of the
OPEC countries, however, the possibility was raised for
the first time of politically motivated investments in
the U.S. on a large scale for which the traditional
rationale of neutrality was not necessarily applicable.
Because of this new political element, it was decided
to establish special measures to deal with potential
investments in the U.S. by foreign governments, viz.
advance consultation with governments on prospective in-
dividual investments and review by the Committee of
those which might have major implications for the national
interests.
It was not envisioned, however, that investments
would be investigated and passed on as a matter of course
GERALD FORD LIORARY
- 3 -
simply because they were made by Arab or any other foreign
governments or because they were major in amount. Nor
was it felt that investments in companies closely asso-
ciated with our military programs would necessarily trigger
the review procedure since the Administration believes that
other safeguards are adequate for this purpose. Also, as
discussed below, the provision for advance consultation with
foreign government's does not mean that the Committee should
automatically review, in any comprehensive sense, every invest-
ment of which it is notified by a foreign government. Hence,
EO 11858 limits the review of foreign investments to those
"which might have major implications for United States national
interests." Furthermore, this judgment is left to the Com-
mittee to make.
The special attention which we give to investments in
this country by foreign governments does not mean that such
investments are necessarily less welcome than private invest-
ments. The economies of many countries happen to be controlled
by the central government, hence any foreign investments by
those countries will perforce be governmental investments.
There should be no presumption, however, that any particular
investment in the U.S. by these governments is politically
FORD of LIBRARY GENATO
motivated. The advance consultation procedure is designed
merely to give the U.S. Government an opportunity to satisfy
itself that
1/ Section 1 (b) (3) of Executive Order 11858 directs the Com-
mittee to "review investments in the United States which, in
the judgment of the Committee, might have major implications
for United States national interests."
- 4 -
there is no evidence that the investment is anything other
than politically benign.
While the Committee has no legal power to block or
modify a foreign investment in the U.S., if it should find
that a particular investment by a foreign government was
objectionable, it would not be necessary to invoke legal
powers to stop it. It is almost inconceivable that a
foreign government would persist in undertaking an investment
in the U.S. over the strong objections of the USG. Even if
it were insensitive to the implications of such actions for
its overall relations with the U.S., it would realize that
the U.S. could always take action after the fact to abort
the investment, one way or another.
The fact that E.O. 11858 does not limit the review
procedure to government investments does not imply that
private investments are on the same basis as government
investments in this respect. There were two major reasons
why it was decided not to specify that only government
investments would be reviewed by the Committee. First,
such specificity could give rise to definitional problems,
since it might not always be clear as to how much govern-
ment involvement is required in order for an investment
to be considered a government investment. Second, to
FORD & LIBRARY CERALD
specify only government investments for review would, by
implication, exclude the possibility that a private
- 5-
investment could be contrary to the national interest
and deny the Committee the right to review it. This
would have the effect of circumscribing the Committee
and, by implication, the Executive Branch in a way
that the Executive Branch has never been circumscribed
before. While it is highly improbably that a private
investment would be considered as having "major impli-
cations" for the national interest, it would obviously
be imprudent to exclude the possibility.
Another important consideration in drafting E.O. 11858
was the danger that the Committee could be drawn into
reviewing investments as a matter of course and become
in effect a general screening board. It was recognized
that persons with interests in individual investments
unrelated to the national interests might want to exploit
the Committee for their own purposes. For this reason,
the words "in the judgment of the Committee" were in-
serted in Section 1. (b) (3) of the Executive Order so that
the decision as to which investments would be reviewed
would be for the Committee to make. Thus, the initiative
to undertake a review is the sole prerogative of the
Committee and the Committee has no obligation to undertake
reviews proposed by persons outside the Committee, nor
does it have an obligation to explain to such persons why
it is not reviewing any particular investment.
FORD & 07V830 LIBRARY
- 6 -
Basis and procedure for review: It should be recognized
that the mere fact that the Committee has reviewed or is
reviewing a particular investment implies that the USG is
something less than neutral on the investment. There will
always be the danger of the review process distorting the
subject investment as well as establishing a precedent or
regarding
presumption in the public mind / similar investments in the
future. Also, the more cases the Committee reviews, the more
it will come to be viewed as a general screening board and
find it increasingly difficult to avoid reviewing any case
which interested parties bring to its attention. Hence,
the Committee should scrupulously avoid reviewing any in-
vestments which do not qualify as having "major implications"
for the national interests.
It is neither feasible nor desirable to attempt to establish
criteria for determining what kinds of investments might have
major implications for the national interests. We should
bear in mind that the establishment of the Committee does
not represent a departure from the traditional role of non-
intervention by the USG in individual foreign investments.
Our policy continues to be based on the presumption that the
national interest is not involved in individual investments.
In observing the numerous investments which have taken place
or are in the offing there is no obligation for the Committee
to make assessments as to whether or to what extent each in-
GERALD LERRARY
- 7 -
vestment relates to the national interest. The Committee
should assume a passive but alert attitude in this
respect and simply be prepared to select from the passing
parade investments for review whenever major implications
for the national interests appear to be involved. We can
also expect that the Committee will be assisted in its
"watchdog" role by other persons since most investments
which might meet the criterion of "major implications for
the national interests" will receive considerable publicity
and be discussed by the press and others from the standpoint
of national interest.
If the Committee adheres closely to these terms of
reference, the major problem will be how to avoid becoming
entangled in individual transactions which are of no
legitimate concern to it. This is no problem in the case
of investments which come to the Committee's attention
purely as a result of its own observations, e.g., from
news media or from the ongoing reporting to the Committee
by the Office of Foreign Investment in the Commerce Depart-
ment. Individual investments which are brought before the
Committee by outside persons, however, will require some kind
of response in writing. Leaving aside for the moment the
exceptional cases which might warrant review by the Committee,
a procedure should be established whereby the involvement or
concern of the USG in these cases is held to the absolute
minimum.
GERALD
LEBRARY
- 8 -
This would best be achieved by having the Secretariat,
in consultation with the staffs of the other member agencies,
as well as any other agencies which might have an interest
from time to time, notify the proferring party or parties in
writing that the subject investment does not appear to come
within the terms of reference of the Committee, thus there
is no basis for any action by the Committee.
Such a "dead pan" handling of cases at the staff level
would have two advantages. First, it would avoid the implica-
tion that the investment had been reviewed and assessed on
its merits by the Government. Secondly, it would insulate
the political level of the Government from apparent or
suspected involvement in individual cases which should be
of no concern to the Government.
This procedure would not be an abdication by the
principals of responsibilities charged to them by E.O. 11858.
The Order charges the Committee with reviewing investments
which might have major implications for the national interests.
It does not state or infer that the members of the Committee
have an obligation to examine all or most potential invest-
ments to first determine whether they might have such
implications. It is accepted procedure and a practical
imperative for principals to rely on their staffs to sort
out what matters the principals should focus on. The extent
of this practice varies from person to person, of course, FORD
GERALD LIBRARY
- 9 -
and each principal could lay out the guidelines for his staff
as to how much, if any, flexibility the latter should have.
Any member could, if he chose, require his staff for the
Committee work to clear with him before assenting to the
response proposed by the Secretary of the Committee.
Furthermore, there would be various "failsafe" mechanisms
built into the proposed procedure. First, while the Secre-
tary should, as a practical matter, be permitted to proceed
on the basis of a consensus of the interagency staff group,
any staff member who dissented from the decision could demand
that the response be held up until he checked with his principal.
If the principal agreed that the investment warranted review
by the Committee he could contact the Chairman to this effect.
Secondly, the Committee members would be informed of all
actions taken by the Secretary after the fact. The Committee
would thus have a continuing check as to whether the staff
group was exercising proper judgment. Finally, in cases where
an outside interested party disagreed with the conclusion of
the Secretary and felt strongly that the investment should
come to the attention of the policy level, he could contact
the Chairman, or another member of the Committee directly.
In the event that the Chairman felt that the case should be
reviewed by the Committee, his reversal of a staff level
decision would not be embarrassing or damaging in any way to
the Administration.
LIBRARY GERALD
- 10 -
The responsibility for making an initial determina-
tion as to the disposition of cases which are brought
to the Committee would lie, then, with the Secretary.
He would receive the notification of projected invest-
ments. Upon receipt of this information, he would
evaluate it to determine whether the investment in
question came within the Committee's terms of reference
for review, i.e., might have major implications for the
national interest, and decide how to proceed next.
In the case of an investment that did not merit
review under this standard, the Secretary would prepare
a suitable reply. This would most commonly be in the
form of letter or cable to the proferring party which
was carefully worded to indicate that the investment
in question did not warrant review and to avoid giving the
impression that the Committee had actually reviewed it.
The operative portion of the message might say, for
example, "There does not appear to be a basis for the
Committee to concern itself with the investment in
question, and consequently, no further action on your
part for the Committee's purpose is required."
FORD & LIBRARY GERALD
In most cases, communications would be signed
by the Secretary of the Committee. There would, however,
be provisions made for a few to be sent under the
Chairman's signature -- for instance, where the initial
notification was sent directly to him by a high official
- 11 -
in a foreign government.
All messages of this type would be circulated to
the appropriate staff level officials in the member
and interested non-member agencies for clearance.
Normally, this process would be conducted by telephone,
but meetings would be convened to discuss the investment
in question as needed.
When notification was received of investments
which did appear to have significant national interest
implications, the Secretary -- either on his own initia-
tive or after consulting with the relevant staff
members in other agencies -- would recommend to the
Chairman that he convene a meeting of the Committee
to formally review the investment. If the Chairman
concurred, the Secretary with the assistance of the
Commerce Department's Office of Foreign Investment
in the United States, would prepare and distribute
material relating to the investment in question to the
members of the Committee.
The key questions in the review process will be,
of, course, what are the implications of the investment
under consideration? and what action should the
Committee (or in the most serious cases, the U.S.
FORD is GERALD LIBRARY
Government) take? Although the precise answers to these
questions will vary with the specifics of the case under
review, one can conceive of three general combinations
- 12 -
of findings and appropriate action the Committee would
probably decide upon in the majority of cases it reviews.
These are outlined briefly as follows:
A. The Committee may determine that the investment
does not have major implications for the national
interest. It would then inform the proferring party
that the Committee had reviewed the investment and
concluded that the Committee saw no basis for it to
interpose itself in the transaction.
B. The Committee may decide that the investment
in question has major but not adverse implications. It
would then. give the same answer as in (A) above to the
proferring party.
C. The Committee may conclude that the investment
has major and adverse implications. The Committee would
then have to decide what if any, action to take in
accordance with the specific circumstances of the case.
It should be noted that in some cases the Committee
consultations with
will have available information obtained from/ parties
associated with the investment under review. The
nature and guidelines for the consultation process are
discussed, however, in a later section of this paper.
to
As discussed above in regard/what investments
warrant review, we should not attempt to set criteria
FORD & GERATO LIBRARY
- 13 -
to be used by the Committee in reviewing investments.
Just as accused persons under criminal law are presumed
innocent until proven guilty, the Committee should start
with the assumption that investments under review
do not have adverse implications for the national
interests until the contrary case is demonstrated. Thus,
each agency involved in the Committee's review of a
particular investment will be invited to show whether
it would affect the national interest, to what extent,
whether these effects are adverse, and what action would
be appropriate. Since all agencies which have respon-
sibility for the national interest relating to each
investment being reviewed will be present at the
meeting, this approach should be sufficient to assure that
the national interest is fully protected in each case.
FORD & LIBRARY GERALD
- 14 - -
Advance Consultations
Government Investments: Executive Order 11858 and the
May 21 press release issued by CFIUS refer to advance
consultations with foreign governments on their "major
prospective investments" in the U.S. A cable sent to
all our embassies on May 23 said, "we expect foreign
governments that are contemplating major investments
in the U.S. to consult with us on such investments."
However, we have never given any indication of what
constitutes a "major" investment, leaving this entirely
up to the foreign governments.
While we should continue to avoid any specific
guidelines or criteria on what investments might require
review by the Committee we should have specific guide-
lines as to which ones foreign governments should notify
the Committee about. Otherwise, we run the risk of a
foreign government failing to notify us of a significant
investment that warranted our review because they
mistakenly concluded that it did not constitute a
"major" investment. In order to minimize this possibility
we should establish the following guidelines:
Foreign governments should notify the U.S.
Government of any direct investments which they
intend to make in this country. This would
GERALD LIBRARY R. FORD
include any investment which gives the foreign
- 15 -
government 10 percent or more of the voting
stock of a U.S. company, or effective control
of or significant influence on the management of
a U.S. company with a lesser percentage of the stock.
In addition, foreign governments should notify
us of any investment in U.S. companies in the form
of debt which would give the foreign government
future rights to purchase stock (e.g. convertible
debentures) which would constitute direct invest-
ment as defined above or which would give the
foreign government significant influence or
leverage on the company.
This would not change our position that we want
consultations only on major investments. Rather, it
would simply leave it to the Committee, rather than the
foreign government, to make the judgment as to whether a
potential investment warrants consultations.
We should also have clear guidelines on how foreign
government's should notify us of pending investments.
Following are recommended steps:
(1) A prospective foreign government investor
should refer to the guideline outlined above in
determining whether or not to notify us of its intentions
to make a particular investment.
(2) Notification should be directed to the
Secretary of the Committee on Foreign Investment in
GERALD LIBRARY FORD
the United States and may be sent through whatever
- 16 -
diplomatic channel the investor may prefer.
(3) Notification should be given early enough --
preferably at least 30 days prior to the date on which
a final commitment is to be made -- to allow adequate
time for consultations should they be required.
(4) At a minimum, the notification should include
the following information: (a) the name, address, and
type of business of the U.S. party (or parties) involved;
(b) the form of the investment (debt or equity); (c)
the amount of money involved; and (d) the percentage of
the total equity of the U.S. enterprise involved which
is being obtained in the transaction, plus the percentage
already held by the investor (if any).
After receipt of the notification, the Secretariat
would proceed as discussed on pages 10-11 above.
Private investments: The advance consultations and
review procedures were originally designed only for
foreign government investments in the U.S. However,
after the Committee was formed it was apparent that the
possibility of the Committee reviewing a private
investment could not be excluded and the May 21 press
release on the first meeting of the Committee states:
"Private investors wishing to consult on major foreign
GERALD LISAARY ? FORD
investments in the United States should contact the
Secretary of the Committee on Foreign Investment in the
United States." " This statement should not be construed
as an invitation to private investors to consult on
- 17 -
investment in the sense of having the Committee review
their investments. Rather it should be interpreted as
an informational type statement, to inform interested
persons where they can obtain information and
guidance on the Committee and on U.S. policy on foreign
investment in the United States.
While it is conceivable that a private investment
could have major inplications for the national interest,
such a case would be so noteworthy and will publicized
that it would come to the attention of the Committee
and the Office of Foreign Investment from their own
sources. Thus, there is no need to take special measures
to put private investors in general on notice about the
Committee, as we have done for foreign government's.
On the contrary, we should lean in the direction of
discouraging private investors, or anyone connected with
a private investment, from putting their case to the
Committee for review, to avoid the impression that the
Committee is a general screening board. Accordingly,
the Secretary should respond to inquiries on private
investment as follows:
(1) The consultations and review procedure is
designed for foreign government investments.
SERVICE FORD & LIBRARY GERALD
(2) Regarding foreign private investments the
Committee is concerned only with those which
might have major implications for the national
interest.
- 18 -
(3) If the inquirer feels that his investment
is of this nature, he should respond with a
letter to the Secretary explaining how and
to what extent the national interest is
affected.
Public Information on CFIUS Business
So far we have been operating on the general
principle that only a minimum of information about the
Committee's business should be released to the public
but that exceptions
FORD & LIBRARY GERALD
- 19 -
to this rule may be made as appropriate. However, some
be
refinements of this rule should/made to accommodate the
differing needs for secrecy on the different aspects of its
activities. The following are four areas on which requests
from the outside are likely to be received and proposed
guidelines that should be observed:
A. Individual Foreign Investments.
We may be asked to comment on foreign investment trans-
actions that may or may not have come before the Committee.
We should have a rule that we do not comment on either type
of investment regardless of whether or not the investment has
already taken place.
An important reason for this position is that much of
the information we will receive in connection with specific
investments will be confidential and investors with whom we
deal must have assurances that it will be protected. This
is both an ethical and practical imperative -- practical in
the sense that since the review process has no legal basis
the effectiveness of the Committee is dependent on the co-
operation of foreign investors.
In addition, any comment by the USG officials or even an
indication. that the U.S. Government is interested in an
investment could be misinterpreted with adverse effects for
the transaction. False implications could be drawn as to the
GERALD LIBRARY R FORD
U.S. Government viewpoint on the importance, lack of importance,
or merits of the investment ,in question. Also this would be
contrary, at least implicitly, to the basic U.S. policy of
- 20 -
neutrality with respect to foreign investment.
B. Review Criteria
If asked about the criteria used in the Committee's
review of investments, we should explain that the Committee
has none other than the general standard in Executive Order
11858 to the effect that it should review investments which
"might have major implications for United States national
interests." The lack of criteria is a result of an early
decision that they would be inappropriate. The purpose of
the Committee is not to pass judgment on the desirability
of individual investments. Rather it was established only
as a mechanism for the U.S. Government to review those
extraordinary investments which might have major adverse
implications for the national interest. In these reviews
the Committee members and other participating agencies are
asked to give their views on the investments in question,
and each brings to bear its own unique concerns.
C. Committee Procedures
The "no comment" guideline need not apply to questions
concerning Committee procedures (as outlined on pages 10-13
above).
D. Published Reports
LIBRARY
Under Executive Order 11858 the Committee is required
to "arrange for the preparation and publication of periodic
reports," and the Commerce Department's new office of Foreign
Investment in the United States is to submit to the Committee
"appropriate reports, data, analyses and recommendations.
- 21 -
Since no mention is made, however, of procedures for handling
these reports, this question requires some clarification.
Consequently, the following are suggested as guidelines the
Committee might adopt:
(1) The new Office of Foreign Investment in the United
States should periodically, e.g. every six months, prepare
a report incorporating the data on inward investment it is
collecting on a continuing basis. The Committee will give
guidance to the Office from time to time as to the contents
and coverage of the report.
(2) These reports will be published along with any reports
which the CFIUS may wish to issue on its activities.
(3) The nature and timing of the release of any other
material should be decided by the Committee on an ad hoc basis.
FORD & QERATITY LIBRARY
OF
STATEMENT THE THE THE
DEPARTMENT OF THE TREASURY
1739
WASHINGTON, D.C. 20220
October 3, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT:
Materials for Discussion at the
Meeting of October 7, 1975
The attached are for discussion at the Committee
meeting on Tuesday, October 7 at 3:00 P.M., at the
Treasury in room 4426.
Secretary
Committee on Foreign Investment
in the United States
Attachments:
Guidelines for Committee on
Foreign Investment in the United States
Summary of minutes - Second Meeting
of the Committee on Foreign Investment
in the United States - July 18, 1975
GREATE FORD LIBRARY
OCT 10 REC'D
OF THE
THE TREASURY
DEPARTMENT OF THE TREASURY nj
WASHINGTON, D.C. 20220
1789
DEPUTY ASSISTANT SECRETARY
October 7, 1975
MEMORANDUM TO COMMITTEE ON FOREIGN INVESTMENT IN THE
UNITED STATES
Subject: Capital Markets Working Report on
Accounting Principles Board Opinion 17
On behalf of the Capital Markets Working Group,
I hereby submit the Group's report on APB Opinion 17,
as requested by the Committee on Foreign Investment
in the United States. This report reflects the views
of all the participants in the Group's deliberations
on this issue: Treasury, Justice, SEC, OMB, Domestic
Council, Comptroller of the Currency, FDIC and the
Federal Reserve Board.
RMAR Robert A. Gerard
Deputy Assistant Secretary
(Financial Resources
Policy Coordination)
Attachment
GERALD FORD LIBRARY
Report on APB Opinion 17
The Capital Markets Working Group was asked to evaluate
the question whether Accounting Principles Board Opinion 17
imposed a competitive disadvantage by U.S. firms in making
acquisitions. We cannot conclude that this ruling is a
major factor in the ability of U.S. firms to compete with
foreign firms for U.S. acquisitions.
It is important to note at the outset that the require-
ments of APB Opinion 17 are not imposed solely on U.S. owned
or domiciled firms. Rather, they are imposed on any firm,
wherever located, which seeks to raise capital in the
U.S. securities markets and therefore must register its
securities with the S.E.C. Like all other securities laws
and regulations, it can be viewed as a cost of access to our
capital markets.
For the company which must amortize goodwill, an
acquisition selling above book value will appear to have a
higher price/earnings ratio and therefore to be a more expensive
purchase than it would be for a foreign firm not subject
to the ruling. While an important factor, it is unlikely
that price/earnings ratio analysis is the prime consideration
in evaluating the attractiveness of a potential acquisition
in these cases. Not only are other more realistic measures
of value used - - e.g. the internal rate of return of the
company being acquired - - but there are also non-financial
considerations. These might include entry into new markets,
acquisition of advanced technology and obtaining the services
of key personnel.
Proponents of the abolition of APB Opinion 17 argue that
existing shareholders and potential investors in a U.S. company
will be negatively influenced by the reduced earings figure
reflecting the charge off. While such charges do reduce
reported earnings, reasonably astute investors should be aware
that the fundamental value and performance of the company is not
affected. To the contrary, a more realistic value is being
FORD
attributed to the company's assets.
GERALD
LIBRARY
Moreover, to the extent US firms have in fact been outbid,
it is doubtful whether APB Opinion 17 is the primary cause.
First, firms which sell securities in our capital markets
are subject to a number of laws and regulations, all of which
- 2 -
impose costs and some of which impact reported earnings levels.
Second, access to a particular U.S. market through an established
firm may in some cases be worth more to a foreign firm. Third,
laws or economic conditions in certain countries may lead to
rates of return which are much lower than ours. Firms domiciled
in those countries may find an investment here at below the
prevailing U.S. rate of return -- i.e. at a higher price than
a U.S. firm would pay - - more desirable than investing at home.
Finally, exchange rates and accumulations of dollar surpluses
are also important factors.
In summary, the Capital Markets Working Group cannot
conclude that APB Opinion 17 has had the effect of placing
U.S. firms at a severe disadvantage vis-a-vis. foreign firms
in the acquisition of other U.S. firms. Accordingly, we
cannot recommend that the Committee take affirmative steps
to attempt to limit or rescind APB Opinion 17.
It should be emphasized, however, that the Capital
Markets Working Group has made no inquiry into, and takes no
position on the merits of APB Opinion 17. We understand that this
issue will be considered by the Accounting Principles Board
later this year.
FORD & LIBRARY GERALD
STATE OF THE
THE FREASURE
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1789
DEPUTY ASSISTANT SECRETARY
October 7, 1975
MEMORANDUM TO COMMITTEE ON FOREIGN INVESTMENT IN THE
UNITED STATES
Subject: Capital Markets Working Report on
Accounting Principles Board Opinion 17
On behalf of the Capital Markets Working Group,
I hereby submit the Group's report on APB Opinion 17,
as requested by the Committee on Foreign Investment
in the United States. This report reflects the views
of all the participants in the Group's deliberations
on this issue: Treasury, Justice, SEC, OMB, Domestic
Council, Comptroller of the Currency, FDIC and the
Federal Reserve Board.
BARAR Robert A. Gerard
Deputy Assistant Secretary
(Financial Resources
Policy Coordination)
Attachment
SEPAL R. FORD LIBRARY
OF
THE
THE TREASURE
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
February 17, 1976
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT: Meeting of the Committee on February 20, 1976
This is to confirm that there will be a meeting of
the Committee on Friday, February 20 at 2:00 P.M. in
Room 4426 at the Treasury. Attached is an annotated
agenda for the meeting.
If you have not done so already, please inform my
office, tel. 964-2386, as to whether you will be able
to attend.
James A. Griffin
Secretary
Committee on Foreign Investment
in the United States
CIBRARY
E565
0 J606 55
DJ IRBGE
-COPPERNELD COURT HEARING ENDS IN DHID
COLUMBUS, GHIO-(DJ)--R COURT HEARING DN THE STATE'S
EFFORT TD STOP R FRENCH HOLDING COMPANY'S TAKEDVER OF COPPER-
NELD CORP. UNTIL 17 COMPLIES WITH STATE SECURITIES REBULATIONS
NB5 COMPLETED THURSDAY, WITH R DECISION EXPECTED IN NOVEMBER.
ATTORNEYS FOR SOCIETE IMETAL, THE COPPERWELD CORP. AND
THE STATE OF OHIO COMPLETED PRESENTATIONS THURSDAY. JUDGE PAUL
N. MARTIN OF FRANKLIN COUNTY COMMON PLEASE COURT GRVE THE LANVERS
UNTIL NOV. 17 TO FILE BRIEFS, RETER WHICH HE WILL DECIDE THE
CASE
INETAL HAS MADE PUBLIC OFFERING FOR ALL STOCK IN COPPERNELD.
THE STATE OBTAINED R TEMPORARY RESTRAINING ORDER,
CONTENDING IMETAL FRILED TO COMPLY WITH STATE LANS RESURDING
CORPORATE TAKEOVERS.
THETAL'S $ BID 15 ALSO BEING CARLLENGED IX U.S. DISTRICT COURT
IN PITTSBURGH AND IS BEING STUDIED BY VARIDUS CONGRESSIONAL
COMMITTEES.
-0- GFJ
19876 23 OCT 75
GENALD FORD LIBRARY
OCT 23 RECD
E565
0 J606 55
DJ !RBGE
-COPPERWELD COURT HEARING ENDS IN DHID
COLUMBUS, OHIO-(DJ)--A COURT HEARING DN THE STATE'S
EFFORT TO STOP A FRENCH HOLDING COMPANY'S TAKEDVER OF COPPER-
WELD CORP. UNTIL IT COMPLIES WITH STATE SECURITIES REGULATIONS
NB5 COMPLETED THURSDAY, WITH A DECISION EXPECTED IN NOVEMBER.
ATTORNEYS FOR SOCIETE IMETAL, THE COPPERWELD CORP. AND
THE STATE OF OHIO COMPLETED PRESENTATIONS THURSDAY. JUDGE PAUL
W. MARTIN OF FRANKLIN COUNTY COMMON PLEASE COURT GAVE THE LANYERS
UNTIL NOV. 17 TO FILE BRIEFS, AFTER WHICH HE WILL DECIDE THE
CASE.
IMETAL HAS MADE PUBLIC OFFERING FOR ALL STOCK IN COPPERNELD.
THE STATE OBTAINED A TEMPORARY RESTRAINING ORDER,
CONTENDING IMETAL FRILED TO COMPLY WITH STATE LBW5 REGARDING
CORPORATE TAKEOVERS.
TMETAL'S BID 15 ALSO BEING CHALLENGED IN U.S. DISTRICT COURT
IN PITTSBURGH AND IS BEING STUDIED BY VARIOUS CONGRESSIONAL
COMMITTEES.
-6- GFJ
19876 23 BCT 75
GERALD LIBRARY FORD
OF
THE THE TREASURY
OCT 23 RECD
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
October 24, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT: Materials for Committee Meeting of October 24
Attached are the following materials for the CFIUS
meeting of October 24.
(1) Agenda for CFIUS meeting of October 24.
(2) Summary minutes of CFIUS meeting of
September 18, 1975.
(3) Revised draft paper on suggested CFIUS
guidelines.
Other materials for discussion at the meeting have
been sent earlier under separate cover.
James A. Griffin
Secretary
Committee on Foreign Investment
in the United States
GEIALD FORD LIBRARY
AGENDA
Meeting of
Committee on Foreign Investment
in the United States
October 24, 1975
3:30 p.m.
Treasury Department, Room 4426
1. Minutes of previous meetings
2, Guidelines for CFIUS
3. Proposed IEA Agreement on Foreign Investment
in U.S. Energy Sector
4. Capital Markets Working Group Report on
APB Opinion 17
5, Report from Commerce Department's New Office
of Foreign Investment in the United States
6, Report on Foreign Investment Study Act
7, Other business:
a. New Inouye legislation
b, Other
FORD & LIBRARY GENALD
GERALD R. FORD LIBRARY
This form marks the file location of item number 2a
,
as listed on the pink form (GSA form 7122, Withdrawal Sheet) at
the front of the folder.
October 20, 1975
Guidelines for
Committee on Foreign Investment in the U.S.
Introduction
Since its inception, the Committee on Foreign Investment
in the United States has been operating on the basis of some
very general criteria and guidelines for a number of important
procedural questions. Our original intention was to leave
these criteria and guidelines general in order to avoid giving
the impression that establishment of the Committee was the
first step toward a U.S. screening mechanism with respect
to inward investment. It is becoming apparent, however, that
it would be advisable for the Committee to make them more
explicit in order to ensure that the Committee operates
effectively, and thus reduce the potential for possible mis-
understandings of the role of the Committee and for possible
mishandling of cases. Accordingly, following some background
information, this paper suggests some principles on which
review of investments by the Committee should be based,
procedures for review, advance consultation procedures for
government and private investments, and public information
procedures on Committee business.
Review of Foreign Investments
FORD LIBRARY
A. Background
The rationale in Executive Order 11858 for reviewing
foreign investments in the United States was that the unique
circumstances arising from the large accumulations of
investable funds by the OPEC countries warranted special
- 2 -
measures tailored to the new situation. The basic premise
of the long-standing U.S. policy of neutrality toward foreign
investments in this country is that the free inflow of economically
motivated investments will be to the economic advantage of the
U.S. as well as the rest of the world. With the increase in the
OPEC countries, surplus revenues, however, the possibility
was raised for the first time that investments which were
politically motivated might be made in the United States on a
large scale by foreign governments. Consequently, it was
decided to establish special measures to deal with potential
investments in the United States by foreign governments, viz.,
advance consultation with them on their prospective individual
investments and formation of the Committee to review those
which might have major implications for the national interests.
It was not envisioned, however, that foreign investments
would be reviewed as a matter of course simply because they
were: (1) made by Arab or any other foreign governments; (2)
involved large sums of money; or (3) were in companies closely
associated with our defense effort (since the Administration
believes that other safeguards are adequate for this purpose).
Also, as discussed below, the Committee will not automatically
review, in any comprehensive sense, every investment of which
it is notified by foreign governments. Hence, Executive
GERALD FORD LIBRARY
Order 11858 limits the Committee's terms of reference to
those foreign investments "which might have major implications
for United States national interests." Furthermore, the
- 3 -
Executive Order leaves it to the Committee to decide which
1/
investments fall into this category.
The special attention which we give to investments in
this country by foreign governments does not mean that such
investments are necessarily less welcome than private ones.
The economies of many countries are controlled by their
central governments, hence any foreign investments by those
countries will perforce be governmental in nature. There
should be no automatic presumption, however, that investments
in the United States by these governments will be politically
motivated. The advance consultation and review procedures are
designed merely to give the U.S. Government an opportunity
to satisfy itself that the investment is politically benign.
The Committee has no legal power to block or modify
particular investments by foreign governments that it may
find objectionable. In such a case, the Committee would seek
the concurrence of the Economic Policy Board or the National
Security Council. Should a case get that far, however,
it is almost inconceivable, that a foreign government would
persist in undertaking an investment in this country over the
strong objections of the U.S. Government. Even if it were
insensitive to the implications of such actions for its
FORD & GERALD LIBRARY
overall relations with the United States, it would realize
1/ Section 1 (b) (3) of Executive Order 11858 directs the
Committee to "review investments in the United States
which, in the judgment of the Committee, might have
major implications for United States national interests."
- 4 -
that the U.S. Government could always take action after the
fact.
Although the Committee's review procedure was established
to cover investments by governments, the possibility of
the Committee reviewing foreign private investments could not
be excluded for two reasons. First, it was anticipated that
it would be quite difficult, if not impossible, to define
criteria for determining whether or not a particular
investment was governmental. Second, such a limitation
would have unduly circumscribed the power of the Committee,
and, by implication, that of the U.S. Government. While it
is unlikely that any private investments which take place
would be viewed as having "major implications" for the national
interest, it would obviously be imprudent to exclude the
possibility of the Committee's reviewing any that might fall
in that category.
Another important consideration in drafting Executive
Order 11858 was the danger that the Committee might be drawn
into reviewing investments as a matter of course and thus
become in effect a general screening board. It was recognized
that some parties might conceivably want to exploit the
Committee for their own purposes. For these reasons, the
words "in the judgment of the Committee" were inserted in
Section 1 (b) (3) of the Executive Order so that the
Committee would have the authority to determine which
FORD & LIBRARY
- 5 -
investments it would review.
B. Basis for review
The Committee should scrupulously avoid reviewing any
investments which do not qualify as having "major implications"
for the national interests. The mere fact that the Committee
has reviewed or is reviewing a particular investment may be
interpreted as an implication that the U.S. Government is more
than neutral on the investment, with adverse effects on foreign
investment generally. In addition there is a danger that
with each case reviewed, there will develop a presumption in
the public mind that the Committee will review similar
investments in the future. Also, the more cases the Committee
reviews, the greater is the likelihood that it will come to be
viewed as a general screening mechanism and find it increasingly
difficult to avoid reviewing any case brought to its attention.
We should bear in mind that the establishment of the
Committee does not represent a departure from the traditional
role of non-intervention by the USG in individual foreign
investments. Hence, in observing the numerous investments
which have taken place or are in the offing, the Committee
has no obligation to make assessments as to whether or to
what extent each investment relates to the national interest.
Accordingly, it should assume a passive but alert attitude
GERALD R. FORD LIBRARY
and simply be prepared to select an investment for review
from the passing parade whenever major implications for the
national interests appear to be involved in it.
- 6 -
Furthermore, the Committee should operate on the
assumption that it would be neither feasible nor desirable to
establish criteria for determining what kinds of investments
might have major implications for the national interests.
Rather the Committee should approach each case on the
presumption that it does not have "major implications" and
in the review process it will be up to individual member
agencies and non-member participants to prove the contrary.
Each agency involved in the review of a particular invest-
ment will be invited to show whether the investment would
affect the national interest, to what extent, whether
these effects are adverse, and what action would be appropriate.
Since all agencies which have responsibility for the national
interest relating to each investment being reviewed will be
participating, this approach should be sufficient to assure
that the national interest is fully protected in each case.
C. Procedure for Review
The problem the Committee faces is to devise procedural
guidelines that will enable it to adhere closely to these
FORD & GERALD LIBRARY
principles. One solution might lie in establishing a
preview by staff level officials of the agencies represented
on the Committee and of interested non-member agencies in the
case of investments which are put before the Committee by
outside parties.
Under such an arrangement, the Secretary of the Committee
- 7 -
would receive the notification of a projected investment.
Upon its receipt, he would consult with the appropriate staff
members in other agencies to determine (1) whether the invest-
ment in question came within the Committee's terms of reference
for review, i.e., might have major implications for the national
interest, and (2) how to proceed next.
In the case of an investment that did not merit review
under this standard, the Secretary of the Committee would
prepare a suitable reply for the signature of the Committee's
Chairman and clear it with his staff-level contacts in the other
agencies. This would most commonly be in the form of letter
or cable to the initiating party which was carefully worded
to indicate that the investment in question did not warrant
review in the Committee's judgment and to avoid giving the
impression that the Committee had actually reviewed it. Where
the investor was a foreign government, the message might say,
for example, "The Committee has concluded that it has no
objections to this investment and no further consultations
on this investment will be necessary." In cases in which a
private investor was involved, it might say, "the Committee
has concluded that there is no basis for it to intervene in
this investment."
FORD LIBRARY
When notification was received of an investment which
did appear to have significant national interest implications,
the Secretary of the Committee -- after consulting with the
relevant staff members in other agencies -- would recommend
- 8 -
to the Chairman that he convene a meeting of the Committee to
formally review it. If the Chairman concurred, the Secretary
of the Committee, with the assistance of the Commerce Department's
Office of Foreign Investment in the United States, would
prepare and distribute material relating to the investment to
the members of the Committee.
The key questions in the review process will be, of course,
what are the implications of the investment under consideration
and what action should the Committee (or in the most serious
cases, the U.S. Government) take. Although the precise answers
to these questions will vary with the specifics of the case
under review.
The presumption should be in each
case that the investment in question does not have major adverse
implications for the national interests and each participant
demonstrate
in the review will be invited to / the contrary if he wishes
to. In cases where the Committee concluded that the invest-
adverse
ment under review did not have major/implications for the
national interest, an appropriate response to the proferring
party would be drafted as outlined in the discussion of the
staff-level preview procedure above. In the event that the
Committee decided that a particular investment might have adverse
for the national interests,
implications /it would refer the case to the Economic Policy
Board and the National Security Council, together with any
recommendations for action the Committee might consider
FORD & GERALD LIBRARY
were appropriate.
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Advance Consultations
In some cases the Committee will have available
information obtained from consultations with parties associa-
ted with the investment under review. The nature of and guide-
lines for the consultation process are discussed below.
A. Government Investments
Executive Order 11858 and the May 21 press release
issued by CFIUS refer to advance consultations with foreign
governments on their "major prospective investments" in the
United States. A cable sent to all our embassies on May 23
said, "we expect foreign governments that are contemplating
major investments in the U.S. to consult with us on such
investments."
We have not given any indication of
what constitutes a "major" investment, leaving the
responsibility for determining whether a particular investment
falls in this category up to the foreign governments.
We should, however, have clear guidelines on the
procedures foreign government's should follow in notifying
us of pending investments, as follows:
GERALD FORD LIBRARY
(1) Notification should be directed to the Secretary
of the Committee on Foreign Investment in the United States
and may be sent through whatever diplomatic channel the
investor may prefer.
(2) Notification should be given early enough to allow
adequate time for consultations should they be required.
(3) We would anticipate that the notification would
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include basic information about the proposed investment,
including, for example, the following: (a) the name,
address, and type of business of the U.S. party (or parties)
involved; (b) the form of the investment (debt or equity);
(c) the amount of money involved; and (d) the percentage of
the total equity of the U.S. enterprise involved which is
being obtained in the transaction, plus the percentage
already held by the investor (if any).
B. Private investments
The advance consultation and review procedures were
originally designed only for foreign government investments
in the U.S. However, as explained above, after the Committee
was formed it was apparent that the possibility of the
Committee reviewing a private investment could not be excluded.
The May 21 press statement released after the first meeting of
the Committee states: "Private investors wishing to consult
on major foreign investments in the United States should
contact the Secretary of the Committee on Foreign Investment
in the United States." This statement was not intended to be
an invitation to private investors to consult on investments
in the sense of having the Committee review their investments. ORD
Rather it was designed to inform interested persons where
GERALD
LIBRARY
they can obtain information and guidance on the Committee's
purpose and procedures and on U.S. policy on foreign invest-
ment in the United States.
Accordingly, the Secretary should respond to inquiries on
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private investments as follows:
(1) The consultations and review procedure is designed
primarily as a means to facilitate U.S.G. review of foreign
government investments.
(2) The Committee is concerned only with those foreign
private investments which might have major implications for the
national interest.
(3) If the inquirer feels that his investment is of this
nature, he should send a letter to the Secretary of the
Committee explaining how and to what extent the national
interest is affected.
Public Information on Committee Business
Another question on which clearer guidelines are needed
is that of how much and what types of information the Committee
should make public concerning its operations and, in particular,
the cases it reviews. The following guidelines are proposed
for four areas on which requests from the outside are likely
to be received:
A. Individual Foreign Investments
We may be asked to comment on foreign investment trans-
actions that may or may not have come before the Committee.
We should have a rule that we do not comment on either public
or private investments, regardless of whether or not the
investment has already taken place.
FORD DENTAL LIBRARY
This position is based on the premise that much of the
information we will receive in connection with specific
investments will be of a private and privileged nature and
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investors with whom we deal must have assurances that it will
be protected. In addition, if an investment is pending, any
comment by the U.S. Government officials or even an indica-
tion that the U.S. Government is interested in it could
be misinterpreted and affect the transaction. Even after
the transaction has taken place, comment by a US official
could affect similar investments in the future. False
implications could be drawn as to the U.S. Government view-
point on the importance, lack of importance, or merits of
the investment in question or similar investments in the
future. Also this would be contrary, at least implicitly,
to the basic U.S. policy of neutrality with respect to foreign
investment.
B. Review Criteria
If asked about the criteria used in the Committee's
review of investments, we should explain that the Committee
has none other than the general standard in Executive Order
11858 to the effect that it should review investments which
"might have major implications for United States national
interests." The discussion of the Committee's philosophy
with respect to criteria on page 6 above can be used as a
basis for any further discussion on this question.
FORD & LIBRARY GENALD
C. Committee Procedures
The "no comment" guidelines need not apply to questions
concerning Committee procedures (as outlined above).
D. Published Reports
Under Executive Order 11858 the Committee is required
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to "arrange for the preparation and publication of periodic
reports," and the Commerce Department's new office of Foreign
Investment in the United States is to submit to the Committee
"appropriate reports, data, analyses and recommendations."
Since no mention is made, however, of procedures for handling
these reports, this question requires some clarification.
Consequently, the following are suggested as guidelines the
Committee might adopt:
(1) The new Office of Foreign Investment in the United
States should periodically, e.g. every six months, prepare
a report incorporating the data on inward investment it is
collecting on a continuing basis. The Committee will give
guidance to the Office from time to time as to the contents
and coverage of the report.
(2) These reports will be published along with any
reports which the Committee may wish to issue on its
activities.
(3) The nature and timing of the release of any other
material should be decided by the Committee on an ad hoc basis.
FORD & CENTAC LIBRARY
DELIVERY THE 1789 TREASURY
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
October 24, 1975
MEMORANDUM FOR MEMBERS OF THE COMMITTEE ON FOREIGN
INVESTMENT IN THE UNITED STATES
SUBJECT: Materials for Committee Meeting of October 24
Attached are the following materials for the CFIUS
meeting of October 24.
(1) Agenda for CFIUS meeting of October 24.
(2) Summary minutes of CFIUS meeting of
September 18, 1975.
(3) Revised draft paper on suggested CFIUS
guidelines.
Other materials for discussion at the meeting have
been sent earlier under separate cover.
James A. Griffin
Secretary
Committee on Foreign Investment
in the United States
FORD AIBRARY
IMENT
OF
THE
JUL 18 RECD
DEPA THE 1789 TREASURY
[1976]
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
OFFICE OF
ASSISTANT SECRETARY
FOR INTERNATIONAL AFFAIRS
MEMORANDUM FOR THE MEMBERS OF THE COMMITTEE ON
FOREIGN INVESTMENT IN THE UNITED STATES
SUBJECT: Attached Letter to Ambassador Zahedi
Attached is a redraft of the proposed letter
to Ambassador Zahedi regarding the Occidental
Petroleum Corporation transaction. This letter
has also been circulated as background for the
briefing of the EPB/ERC on this matter on
Wednesday, July 14.
Secretary
Committee on Foreign Investment
in the United States
GERALD R. LIBRARY FORD
OF
DEPARTMENT THE TREASURY
THE
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1789
ASSISTANT SECRETARY
Dear Ardeshir:
Thank you for your letter of June 29, 1976
transmitting a copy of the letter of intent regarding
the proposed purchase of stock of the Occidental
Petroleum Corporation by the Government of Iran.
You and your Government have always been most
cooperative in consulting with us on significant
investments in this country and I want to thank
you again for the openness with which you have con-
sulted with my Government on this matter.
This proposed transaction has been brought to
the attention of the Committee on Foreign Investment
in the United States. Based on the facts presented
to it, the Committee concluded that it has no
objections to this investment. Should the conditions
of this investment change, we would appreciate your
consulting with us further.
Thank you again for your help in this matter. I
look forward to seeing you again soon.
Sincerely,
Gerald L. Parsky
His Excellency
Ardeshir Zahedi
Ambassador
Imperial Embassy of Iran
Washington, D. C.
20008
FORD & LIBRARY GERALD