Representatives of the technology industry are warning lawmakers that a plan to give an interagency panel authority over offshore sales or transfers of sensitive technology would impede routine business deals.
The House Financial Services Monetary Policy and Trade Subcommittee held its fourth and final hearing Thursday on a bill by Rep. Robert Pittenger, R-N.C., that would broaden the authority of the Committee on Foreign Investment in the United States (CFIUS) to include a range of business deals involving U.S. and foreign companies, including offshore joint ventures involving technology transfer.
Jonathan S. Kallmer, senior vice president of global policy for the Information Technology Industry Council, a trade group representing about 60 companies, criticized language in the bill giving CFIUS purview over joint ventures involving the contribution by a critical U.S. technology company of intellectual property and associated support to a foreign person through any type of arrangement.
“This is about finding the right tool. You’ve got the right tool. It’s the export control system,” Kallmer said. He voiced interest in making revisions in the bill to address the concerns of members of his group. The Commerce Department now manages the export control system for sensitive technology.
Subcommittee Chairman Andy Barr, R-Ky., said the panel will consider changes.
“Members are going to look at offering some possible revisions to the bill. And we’ll move to a markup,” he said after the hearing.
Financial Services Chairman Jeb Hensarling, R-Texas, has signaled interest in holding a markup soon. Hensarling sat through part of the hearing, but did not participate in asking questions.
Senate Majority Whip John Cornyn, R-Texas, has offered a similar proposal and has been pushing for committee action in both chambers. Both bills are designed to expand CFIUS’ reach beyond corporate acquisitions to cover other types of deals that bridge borders, including investments that involve minority stakes.
Pittenger said that CFIUS needed to take over reviews of joint ventures in China involving mandatory technology transfers. He argued the Commerce Department’s export control program was “lacking in its capabilities and hasn’t been successful in the past” in stopping the acquisition of sensitive U.S. technology by Chinese manufacturers.
Clay Lowery, managing director of Rock Creek Global Advisors, an economic policy consulting firm, echoed some of Kallmer’s concerns about the legislation. He said employees in the export control program had more experience dealing with many types of technology, while staff employees for member agencies of CFIUS would have less knowledge of products and systems that would be subject to national security reviews.
“People who have no experience will have to look at it as opposed to people who do have experience,” said Lowery, a former vice president for international government affairs of Cisco Systems and a Treasury assistant secretary under President Barack Obama.
David Marchick, managing director of the Carlyle Group, an asset and private equity investment group with interests in defense, telecommunications and other industries, urged lawmakers to strengthen the export control system, draft precise provisions and “ensure that the system is not overwhelmed with hundreds or thousands of cases.”
Cornyn, Pittenger and other proponents have looked to seize momentum from President Donald Trump’s decision in March to block the acquisition of San Diego-based wireless chipmaker Qualcomm by Singapore-based Broadcom, after conferring with CFIUS.
But lawmakers such as Rep. Tom Emmer, R-Minn., voiced concern that the legislation could have unintended effects on businesses including makers of medical technology products. Emmer called for clarification of the bill language to make sure there are no “unnecessary impacts on industries such as this.”
Companies such as IBM, a member of Kallmer’s group, and General Electric have been pushing back hard against the proposals, arguing they would hinder ordinary business activities. They particularly oppose the expansion of CFIUS authority to joint ventures around the world.
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