Defense Trade: Identifying Foreign Acquisitions Affecting National Security Can Be Improved   [open pdf - 553KB]

"The identification process the Committee on Foreign Investment currently uses does not enable it to effectively identify all foreign acquisitions with possible effects on national security. The Committee depends on a system of voluntary reporting by the parties to foreign acquisitions. The Committee also encourages each member agency to inform the Committee of any acquisitions that comes to the agency's attention. We did not attempt to identify foreign acquisitions of U.S. companies with potential national security implications that were not reported voluntarily. However, we did find that member agencies become aware of such acquisitions in the course of their daily operations. In some instances member agencies reported foreign acquisitions to the Committee, but in other instances agencies did not. Defense and Treasury Department officials informed us of three acquisitions that were known to officials in these agencies but the agencies did not inform the Committee. For example, in March 1999, a German owned firm acquired a U.S. manufacturer of ceramic body armor. The U.S. company reported the acquisition to the Defense Security Service and the State Department's Office of Defense Trade Controls because the company manufactures classified defense products and was required by law to report the acquisition to the Defense and State Departments (but not to the Committee). The company, the Defense Security Service and the Office of Defense Trade Controls did not inform or report this acquisition to the Defense, State, or Treasury Departments' Committee representatives because there is no requirement to do so. As a result, the Committee did not conduct a full assessment of this acquisition."

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