On May 5, 2023, the U.S. Department of Treasury, the agency tasked with administering the Committee on Foreign Investment in the United States (CFIUS), published a Proposed Rule (88 Fed. Reg. 29003) expanding the list of “military installations” that could trigger CFIUS authority over certain real estate transactions in 31 C.F.R. Part 802 (“Part 802”).  The expansion would give CFIUS authority over certain transactions by foreign persons involving real restate located with 99 miles of eight facilities located in Arizona, California, Iowa, North Dakota, South Dakota, and Texas. 

CFIUS Real Estate Authority Background   

As part of a sweeping expansion to CFIUS authority, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) granted CFIUS authority over certain real estate transactions involving property in specific maritime ports or airports, or within defined proximities to specific “military installations.”  Part 802, effective February 13, 2020, implemented this new real estate authority. 

CFIUS real estate authority applies when a transaction confers, directly or indirectly, any three of the following four property rights in any property located in specific maritime ports or airports, or within defined proximities to listed military installations in Part 802, unless an exception applies:

• To physically access the real estate;

• To exclude others from physically accessing the real estate;

• To improve or develop the real estate; or

• To attach fixed or immovable structures or objects to the real estate.

Part 802 defines the types of airports and maritime ports, and lists the specific military installations, that could trigger CFIUS authority.  (See Accounting for CFIUS Regulatory Risk in Transactions Involving Property Rights at Airports and Maritime Ports, June 2020, for a discussion about this authority relating to maritime ports and airports.)  The listed military installations are included in Appendix A to Part 802 and allocated into several groups. Depending on the allocation of military installations in Part 802, CFIUS’s real estate authority could be triggered if one of three proximity thresholds is met: the subject property is within one mile, 99 miles, or 12 nautical miles (for offshore projects) from the military installation. 

Included in the definition of military installations, under § 227(m) of Part 802, are certain “[m]ilitary ranges . . . owned by the Navy or Air Force, or joint force training centers located in . . . Oregon, Nevada, Idaho, Wisconsin, Mississippi, North Carolina, and Florida.” For these § 227(m) installations listed in Appendix A to Part 802, the 99-mile proximity threshold applies.  

Proposed Rule: Expanding Geographic Reach of Real Estate Authority

The Proposed Rule expands the geographic reach of CFIUS’s real estate authority by increasing the number of installations under § 227(m), which triggers the 99-mile threshold for CFIUS’s real estate authority.  The Proposed Rule amends § 227(m) to include facilities in Arizona, California, Iowa, North Dakota, South Dakota, and Texas, and adds the following eight installations to Appendix A:

• 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

Effect and Context for Proposed Rule

With the exception of Air Force Plant 42 in Palmdale, California, the Proposed Rule adds military installations that are in geographic areas of the United States where CFIUS real estate authority was predominately not applicable.  Air Force Plant 42 is within about 10 miles from another Part 802 installation, Edwards Air Force Base, and will overlap most of its 99-mile proximity radius with that entity.  Importantly, however, the eight military installations are also in areas with predominantly agricultural operations that are frequently involved in real estate transactions. 

This expansion of covered real estate authority follows recent land acquisitions by Chinese companies that prompted opposition from federal and state legislators, in particular FuFeng’s acquisition of 370 acres near Grand Forks Air Base in North Dakota.[1] In response to Fufeng’s notice of the acquisition to CFIUS on October 17, 2022, CFIUS determined it lacked jurisdiction to review.[2] This resulted in criticism from North Dakota Senators Hoeven and Cramer, and Senator Rubio.^[3]  The Air Force likewise commented in a letter to Senators Hoeven and Cramer that the acquisition “presents a significant threat to national security.”^[4] At the time of the review, Grand Forks Air Base was not included in Appendix A to Part 802 and, as such, CFIUS lacked covered real estate authority to review the proposed land acquisition. The Proposed Rule, however, would extend CFIUS’ jurisdiction to cover such acquisitions in extended proximity to Grand Forks Air Base as well as the above-mentioned sites. The Proposed Rule is silent as to whether the newly created geographic reach of CFIUS’s real estate authority afforded by the eight added installations will apply retroactively, to transactions that have closed since February 13, 2020 (effective date of Part 802 authority).  Although case law concerning administrative rulemaking disfavors retroactive applications, whether CFIUS will use its expanded geographic authority to review prior transactions is an open question

FOOTNOTES

^[1] Senator John Hoeven, Press Release, Air Force Provide Official Position on Fufeng Project in Grand Forks (Jan. 31, 2023), available at https://www.hoeven.senate.gov/news/news-releases/hoeven-cramer-air-force-provides-official-position-on-fufeng-project-in-grand-forks. 

^[2] Stacie Van Dyke, Fufeng Moving Forward with Corn Milling Plant in Grand Forks, Valley news Live (Dec. 13, 2022), available at https://www.valleynewslive.com/2022/12/14/fufeng-moving-forward-with-corn-milling-plant-grand-forks/

^[3] E.g., Meghan Arbegast, U.S. Sen. Kevin Cramer calls CFIUS decision on Fufeng land deal ‘underwhelming,‘ Grand Forks Herald (Dec. 15, 2022), available at https://www.grandforksherald.com/news/north-dakota/u-s-sen-kevin-cramer-calls-cfius-decision-on-fufeng-land-deal-underwhelming; Press Release, Rubio Slams CFIUS’s Refusal to Take Action Regarding Fufeng Farmland Purchase (Dec. 14, 2022), available at https://www.rubio.senate.gov/public/index.cfm/press-releases?ID=234F7FC0-C88B-4101-B900-9DBE95495857. 

^[4] Department of Air Force Letter to Senators Hoeven and Cramer (Jan 27, 2023), available at https://www.hoeven.senate.gov/imo/media/doc/USAIRFORCE-FUFENG-LETTER-HOEVEN.pdf.