Federal government is not powerless to stop Chinese real estate deals near sensitive US military bases

Is the U.S. government unprepared to respond to a Chinese company purchasing land near a vital military base? The Air Force recently wrote Congress to explain that the interagency Committee on Foreign Investment in the United States (CFIUS) lacked jurisdiction over just such a deal. The Chinese company sought to build a corn processing plant 12 miles from North Dakota’s Grand Forks Air Force Base. According to the Air Force, the base “is the center of military activities related to both air and space operations,” and the “proposed project presents a significant threat to national security with both near- and long-term risks of significant impacts to our operations in the area.” Given that the exclusive mission of CFIUS is to address national security risks arising from foreign investments in the United States, what gives?

In 2018, Congress gave CFIUS, chaired by the Secretary of the Treasury, more resources and new authorities — including the express power to review real estate purchases near military bases and other sensitive U.S. government sites. In other words, Congress foresaw the vulnerability of U.S. military bases having Chinese companies as next-door neighbors.

And in 2020, CFIUS issued regulations governing the review of real estate transactions near military bases. The regulations center on two lists of sensitive installations. The first (the “Sensitive Base List”) identifies approximately 131 sensitive military bases, such as Joint Base Andrews, MacDill Air Force Base, Camp Pendleton, and Naval Base San Diego. With limited exceptions, CFIUS has jurisdiction over any real estate transactions within one mile of installations on the Sensitive Base List. The second list (the “Highly Sensitive Base List”) has approximately 32 highly sensitive military facilities, including Edwards Air Force Base, Naval Air Weapons Station China Lake, and Yuma Proving Ground. For these bases, CFIUS can intervene in real estate transactions anywhere within 99 miles.

In Grand Forks, public reports indicate that in 2021, Fufeng USA, the U.S. subsidiary of the Chinese food manufacturer, Fufeng Group, acquired over 300 acres in North Dakota to build a corn processing plant. The property is coincidentally located approximately 12 miles from Grand Forks Air Force Base. Given these facts, CFIUS might have used its new authorities to block Fufeng USA from purchasing the property. But the Air Force neglected not only to include Grand Forks Air Force Base on the Committee’s Highly Sensitive Base List, but also failed to flag it as a “Sensitive Base.” Without one of these designations, CFIUS’s real estate jurisdiction was toothless.

Considering the recent Air Force letter describing the centrality of Grand Forks Air Force Base to air and space operations and the proximity of the Fufeng corn processing plant as a significant national security threat, why wasn’t the base designated accordingly on the CFIUS lists?

After the enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA), CFIUS dedicated two years to identifying the installations that merited protection under the lists. The real estate regulations were written carefully so that only sensitive and highly sensitive facilities were included in the regulations — that way, CFIUS would not have limitless jurisdiction and also could focus precious resources on property acquisitions that might pose the greatest risks to national security. If Grand Forks Air Force Base conducts sensitive military operations, the Pentagon could have included it on the CFIUS lists. Indeed, it can still be added.

Congress does not need to overhaul CFIUS just a few short years after FIRRMA’s implementation.

The U.S. government today has the national security authority to review real estate transactions like the Fufeng land purchase. The key takeaway here is that the executive branch needs to do a better job of understanding and exercising that authority. At the same time, Congress must better supervise the executive branch’s execution of its CFIUS authorities. Here, for example, the Air Force asserts that its North Dakota facility is potentially vulnerable to surveillance, yet it was omitted from a list of “highly sensitive” bases.

Congress should pull that string and find out why — and prevent something like this from happening again.

Tyler McGaughey is the former Deputy Assistant Secretary for Investment Security at the U.S. Department of the Treasury, where he was responsible for managing the day-to-day operations of Treasury’s CFIUS team. He is currently a partner at Winston & Strawn LLP in Washington, D.C.

Thomas Feddo is the former Assistant Secretary for Investment Security at Treasury. He is currently the founder of The Rubicon Advisors, LLC, a consulting firm providing geopolitical and national security regulatory advisory services.

The opinions expressed here are their own.