On September 11, 2024, the House passed the Protecting American Agriculture from Foreign Adversaries Act of 2024 (H.R. 9456) which seeks to increase governmental oversight of certain foreign acquisitions in U.S. agriculture, including investments in farmland. Specifically, this measure seeks to amend certain portions of the Defense Protection Act (“DPA”) of 1950 to require the Committee on Foreign Investment in the United States (“CFIUS”) to review transactions involving foreign investments in U.S. agriculture. In the Senate, a bipartisan group of Senators, led by Senator Mike Braun (R-IN), have introduced a companion bill (S. 5007) to H.R. 9456. According to some proponents of these measures, placing USDA as a permanent member of CFIUS will provide leverage to protect the interests of the agricultural industry in foreign investments and acquisitions of U.S. agricultural businesses and land.

This is the first article of a series discussing federal proposals which seek to increase oversight and restrict foreign investment in U.S. agriculture.

Background

Currently, no federal law exists that restricts foreign persons from acquiring or holding U.S. agricultural land. While there are approximately twenty-five states that specifically forbid or limit foreign ownership of farmland within the boundaries of their state, the federal government only monitors certain foreign acquisitions and landholdings in agricultural land through the Agricultural Foreign Investment Disclosure Act (“AFIDA”) of 1978. Essentially, AFIDA requires certain foreign persons to disclose their interests in U.S. farmland to USDA.

Over the past few years, federal policymakers have become increasingly concerned about foreign investment in U.S. agriculture, particularly agricultural land. Because there is no federal law that imposes a restriction on the amount of farmland that can be foreign owned, Congress has proposed several measures that seek to increase oversight and restrict foreign investments and acquisitions of land located within the U.S. Other measures proposed by Congress, such as H.R. 9456 and S. 5007, would place the Secretary of the U.S. Department of Agriculture (“USDA”) as a permanent member of CFIUS.

In general, CFIUS is an interagency committee headed by the U.S. Department of the Treasury that is authorized by the DPA (50 U.S.C. § 4565) to serve the President in reviewing certain transactions involving foreign investments and acquisitions of American companies and real estate to determine whether a transaction presents a threat to U.S. national security. Investments and acquisitions that could give a foreign person—whether that be an individual, business, or government—control over a U.S. business or that may pose a threat to national security are known as “covered transactions,” and these are the types of transactions CFIUS has jurisdiction to investigate and review. Transactions that may pose a risk to the national security, for example, are investments and acquisitions of critical infrastructure, such as transportation, telecommunication, public health, and energy. CFIUS also closely reviews investments in critical technologies. These technologies are created or used by certain U.S. businesses and industries that are essential to the nation’s economic and national security.

Essentially, CFIUS has the power to renegotiate, enforce, and impose conditions to covered transactions (whether pending or already completed) that could potentially impair U.S. national security. In other words, the Committee uses these measures to mitigate any threat to national security that arises from a covered transaction. CFIUS also makes recommendations to the President on whether to suspend or prohibit a transaction. Ultimately, the President has the authority to suspend or prohibit a transaction that would threaten U.S. national security.

In March 2024, President Biden signed a spending bill, the Consolidated Appropriations Act (“CAA”) of 2024 (H.R. 4366), that contains a provision that adds USDA as a member of CFIUS—on a case-by-case basis—with respect to transactions involving foreign purchases of U.S. agricultural land. In other words, the CAA extended CFIUS’s jurisdiction to include certain foreign investments in agriculture. Nevertheless, H.R. 9456 and S. 5007 seeks to extend CFIUS’s jurisdiction by including USDA as a permanent member of CFIUS for transactions involving certain foreign investments in the broader U.S. agricultural industry. Also, these measures seek to require CFIUS to review agricultural land acquisitions, particularly from investors of countries the federal government deems a “foreign adversary,” to determine if they pose a threat to U.S. national security.

Protecting American Agriculture from Foreign Adversaries Act of 2024

Under H.R. 9456 and S. 5007, USDA would be added as a member of CFIUS for transactions involving U.S. agriculture. Specifically, USDA is a member of CFIUS when a covered transaction involves agricultural land, agricultural biotechnology, such as a seed development company, or the agricultural industry, including businesses involved in the transportation, storage, and processing of agricultural products. Aside from being included as a member of CFIUS for transactions involving agriculture, the legislation specifically authorizes USDA to evaluate certain foreign investments in U.S. agricultural land to determine whether a CFIUS review of the transaction is necessary.

Both H.R. 9456 and S. 5007 authorize USDA to provide notice to CFIUS of any “reportable agricultural land transaction.” A reportable agricultural land transaction is defined as a transaction that USDA “has reason to believe is a covered transaction” or a transaction that involves the investment or acquisition of U.S. agricultural land by a foreign individual, business entity, or government of China, North Korea, Russia, or Iran. Thus, if USDA believes a transaction gives a foreign person control over agricultural land or if agricultural land is being acquired by a foreign person of the four listed countries, the agency is authorized to report the transaction to CFIUS.

However, USDA’s notice requirement terminates for transactions involving a foreign investor from China, North Korea, Russia, or Iran if the country is removed from the “foreign adversary” list established by the U.S. Secretary of Commerce under 15 C.F.R. § 791.4. For instance, if the U.S. Secretary of Commerce removed only Russia from the foreign adversaries list, USDA would not have to provide notice to CFIUS of a transaction involving a Russian buyer of U.S. agricultural land, but foreign acquisitions from investors of countries remaining on the list would trigger USDA’s notice authority.

Furthermore, the legislation defines reportable agricultural land transaction as a transaction that requires an AFIDA report. As previously mentioned, AFIDA requires certain foreign persons to report their agricultural land investments to USDA. Specifically, any foreign individual, entity, or government, including domestic entities in which a foreign person has “significant interest or substantial control” of a domestic entity, is required to disclose certain information concerning their investments and acquisitions in U.S. agricultural land. Therefore, H.R. 9456 and S. 5007 would authorize USDA to notify CFIUS of any investment in U.S. agricultural land by a foreign person of any country if the transaction requires the filing of an AFIDA report. Importantly, the definition does not require an AFIDA disclosure to be filed to provide USDA the ability to notify CFIUS of the investment. Rather, USDA’s authority to notify CFIUS of a transaction involving agricultural land is triggered when an AFIDA report is required for a transaction, not whether the investor actually submitted the necessary disclosure.

Overall, any foreign acquisition or investment that satisfies the definition of reportable agricultural land transaction provides USDA the ability to notify CFIUS. Such notice directs CFIUS to determine whether the transaction could potentially impair U.S. national security.

Once CFIUS receives notice of a reportable agricultural land transaction, H.R. 9456 and S. 5007 require CFIUS to determine whether the transaction is a covered transaction. If CFIUS concludes the transaction is a covered transaction, CFIUS must then determine whether they should initiate a review or some other investigative measure to determine the threat the transaction poses to U.S. national security. Accordingly, as a member of CFIUS, USDA will be involved in the decision-making process to determine if a transaction involving U.S. agriculture is a covered transaction and whether CFIUS should initiate a review of the transaction.

Conclusion

Essentially, H.R. 9456 and S. 5007 seek to extend CFIUS’s jurisdiction to include not just agricultural land by certain foreign investors, but a large portion of the U.S. agricultural industry. The legislation also seeks to provide USDA authority to investigate agricultural land investments by foreign persons, particularly of countries deemed a foreign adversary by the federal government. Although H.R. 9456 has passed the House, it must still pass the Senate and be signed by the President before becoming law. However, as Congress continues to work towards enacting a Farm Bill, it is possible that H.R. 9456 and S. 5007, or some form of these measures could be added to the House (H.R. 8467) and/or Senate (H.R. 7444) 2024 Farm Bill proposals.

To read H.R. 9456, click here.

To read S. 5007, click here.

For more NALC resources on foreign ownership of ag land, click here.

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