A New Paradigm for CFIUS: Considerations for Parties Seeking CFIUS Clearance

The Committee on Foreign Investment in the United States (“CFIUS”) was established more than 50 years ago, and since 1988, it has had the authority to review and investigate transactions to determine their effects on national security, and to mitigate national security risk. 

“National security,” however, is not defined in the statute authorizing CFIUS (Section 721 of the Defense Production Act, as amended, 50 U.S.C. § 4565) or its implementing regulations (31 C.F.R. Parts 800 and 802). The absence of a definition is a reasonable approach to regulation since national security risks evolve over time and at a faster pace than legislation can be passed and regulations can be updated. Instead, Section 721 identifies factors to be considered during reviews as they relate to national security, which, for example, President Biden’s 2022 Executive Order 14083—“Ensuring Robust Consideration of National Security Risks by the Committee on Foreign Investment in the United States”—expanded to address new risks, including cybersecurity and sensitive U.S. person data.

Even with an evolving and expanding scope of what constitutes national security, however, the legal framework for CFIUS is still focused solely on national security risks. Unlike foreign direct investment review regimes in certain other countries, CFIUS is not authorized to use a “national interest” or “economic security” test.

Looking at transactions with publicly reported CFIUS involvement over the last decade, it is difficult to escape the conclusion that political considerations have increasingly filtered into the CFIUS decisionmaking process during both Democratic and Republican administrations, and that clearance decisions now more than ever are conditioned on mitigation requirements that can arguably be considered beyond the bounds of addressing risks to “national security.”

The recent transaction between Nippon Steel and U.S. Steel is illustrative. In 2023, Nippon Steel announced a deal to acquired Pennsylvania-based U.S. Steel, and the parties voluntarily sought CFIUS clearance. Following a lengthy review process, which reportedly included disagreement within CFIUS regarding potential national security risks, President Biden blocked the transaction in January 2025 before he left office. Pennsylvania is a swing state, and during their respective campaigns both Vice President Harris and President Trump also opposed the deal.

Following his inauguration, President Trump directed CFIUS to conduct a new review of the transaction, and in June 2025 reversed President Biden’s blocking order, allowing the deal to close, albeit with mitigation requirements imposed by CFIUS. Per the companies’ public statements, the mitigation terms include typical national security-driven requirements such as U.S. citizenship requirements for members of U.S. Steel’s board and management. The terms also include requirements that are unique among publicly reported mitigation agreements, including: (1) an investment commitment of $11 billion by 2028, and (2) the issuance of a “Golden Share” to the U.S. Government, which grants the government the right to appoint an independent director and provides the President with consent rights over certain matters, including reductions on capital investment commitments and the transfer of production or jobs outside the United States.

Non-national security-related commitments and the granting of a Golden Share to the United States is a major shift in the U.S. Government’s use of CFIUS. It is particularly impactful in a regulatory regime in which decisions on the merits are not reviewable by courts, such that parties who do not agree to CFIUS’ terms have limited alternatives to their deals being blocked. The Nippon Steel-U.S. Steel case highlights the impact that politics and public perception, presidential administration policies and priorities, and other factors not directly related to national security can have on a transaction subject to CFIUS review.

Considerations for Parties Seeking CFIUS Clearance

In this current CFIUS environment, both foreign investors and U.S. businesses contemplating or entering acquisitions and investment transactions subject to CFIUS jurisdiction must have heightened situational awareness and consider a host of factors as they assess deal risk and terms, timing considerations, and costs. 

Traditionally, parties assessing whether to file with CFIUS (when such filings are not otherwise mandatory), the likelihood of clearance, and potential mitigation terms would look at national security threat and vulnerability factors including, among others: (1) the country of the foreign investor; (2) whether it is state-owned or controlled; (3) the economic sector in which the U.S. business operates; (4) whether the U.S. business is involved with critical technologies, critical infrastructure, or sensitive personal data; (5) whether the U.S. business maintains government contracts and/or holds security clearances; and (6) the proximity of the U.S. business’s offices and facilities to ports and military facilities. All of those factors remain relevant.

Parties should also consider an expanding set of other non-national security-related factors as part of their CFIUS risk assessments. A non-exhaustive list includes the following:

• Is the U.S. business in a swing state or a congressional district represented by powerful members of Congress?
• Will the transaction be reviewed in an election year?
• Does the U.S. business employ workers who generally vote for one political party, and are they represented by a union?
• Does the U.S. business have a long history, and is there widespread brand awareness and use of the company’s products?
• Is the U.S. business in a sector of the economy that is key to the administration’s economic and industrial policies?
• Is the country of the foreign investor negotiating trade or other deals with the administration, or are such negotiations expected during the CFIUS review process? Could the CFIUS process be used as leverage in such negotiations?
• Would the foreign investor accept mitigation terms that required giving the U.S. Government an economic stake in the U.S. business, governance rights, or consent rights over strategic or operational decisions?

All of the above factors may not be relevant to every foreign investment, but it is prudent for parties to transactions subject to CFIUS jurisdiction to consider such factors at the outset of new deals in order to comprehensively understand and assess the risk of seeking CFIUS clearance and potential mitigation requirements that the U.S. Government may impose.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. David J. Ribner, an O’Melveny partner licensed to practice law in the District of Columbia and New York; Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia; and David N. Kelley, an O’Melveny partner licensed to practice law in New York and Connecticut, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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