CFIUS Proposes to Expand Real Estate Jurisdiction Following China Firm’s North Dakota Factory Plans
On May 5, 2023, the Committee on Foreign Investment in the United States (CFIUS) published a proposed rule that would subject more real estate transactions to its review by adding eight new military installations in Arizona, California, Iowa, North Dakota, South Dakota, and Texas to Appendix A to Part 802. Appendix A consists of military installations and other qualifying U.S. government property that are deemed sensitive for national security reasons. Certain transactions involving the purchase or lease by, or a concession to, a foreign person of real property in or around such listed military installations may be subject to CFIUS’s jurisdiction, even where there is no accompanying investment in a U.S. business that would otherwise trigger CFIUS jurisdiction. CFIUS maintains authority to review transactions within its jurisdiction for U.S. national security concerns and to recommend that the president block or otherwise intervene with regard to such investments.
The eight new sites include:
- Air Force Plant 42, located in Palmdale, California
- Dyess Air Force Base, located in Abilene, Texas
- Ellsworth Air Force Base, located in Box Elder, South Dakota
- Grand Forks Air Force Base, located in Grand Forks, North Dakota
- Iowa National Guard Joint Force Headquarters, located in Des Moines, Iowa
- Lackland Air Force Base, located in San Antonio, Texas
- Laughlin Air Force Base, located in Del Rio, Texas
- Luke Air Force Base, located in Glendale, Arizona
Under CFIUS’s proposed rule, certain proposed transactions by non-U.S. persons involving property within an “extended range” (i.e., within 100 miles of the property) of the eight added sites will fall under CFIUS’s review power unless an applicable exemption or exception applies.
The proposed rules follow a controversial November 2021 announcement by the Fufeng Group, a China-based company, to build a US$700 million wet corn milling plant on a 370-acre greenfield site in Grand Forks, North Dakota, about 12 miles from the Grand Forks Air Force Base, which supports U.S. governmental air and space operations. Late last year, CFIUS ultimately concluded the planned plant fell outside of its review authority under the then-listed military installations found in Appendix A. Although the Fufeng Group’s plans to proceed with the project were ultimately blocked by local authorities, the proposed rule, if adopted, will provide CFIUS jurisdiction to review similar foreign investments in the future.
The seven other newly added locations likely were selected due to the sensitivity of current or future missions that would be based there. For example, the Ellsworth Air Force Base is the main operating base for the B-21 Raider, the nation’s future stealth bomber currently in development. B-21 production activities also are underway at Air Force Plant 42, while Ellsworth Air Force Base and Dyess Air Force Base will serve as future operating locations for the aircraft.
Interested parties have until June 5, 2023 to comment on the proposed rule. While not yet effective, individuals contemplating future transactions — or in the midst of current transactions — near these eight installations should take note and evaluate planned approaches to such transactions. For questions about the proposed rule or Part 802, contact any of the authors listed here or their colleagues in Arnold & Porter’s White Collar Defense & Investigations or Export Control & Sanctions practice groups.
© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.