Revisiting CFIUS Jurisdiction Over Real Estate Transactions

August 29, 2022

Concerns are growing over the national security impact of real estate purchases by foreign persons, only a small portion of which are reviewed by the Committee on Foreign Investment in the United States (CFIUS). These transactions are the subject of increasing debate and congressional attention. CFIUS review of real estate transactions is limited to land purchases in close proximity to US military installations, ports, or other sensitive facilities, and is not generally subject to any mandatory filing requirement. This leaves a considerable gap in foreign investment screening and potentially impacts other national security interests, such as the US supply chain and food security.

The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded CFIUS jurisdiction by providing the Committee with authority to review foreign acquisitions of or investments in real estate in close proximity to US military installations, ports, and other sensitive facilities. While the addition of select real estate transactions to CFIUS jurisdiction broadened the Committee’s mandate, CFIUS jurisdiction over real estate transactions remains fairly limited, focusing on proximity to sensitive locations.

Recent reports of growing numbers of real estate acquisitions by foreign persons have reinvigorated debate over whether this jurisdiction remains too narrow. There is an increasing recognition that more real estate deals merit scrutiny based on national security concerns beyond those where the land is in close proximity to military or critical infrastructure locations. Across the national security apparatus and Congress, discussions are beginning to focus on foreign acquisitions of US lands that impact, for example, the agribusiness sector, which can raise issues relevant to the US supply chain and food security. Although national security considerations always compete with traditional foreign direct investment equities, there is a greater awareness of potential threats to national security, increasing the likelihood that CFIUS’s scope of review of real estate transactions could be expanded.

While these transactions have raised concerns for years, the recent April 2022 acquisition by the Fufeng Group of Shandong, China, of approximately 370 acres of land in Grand Forks, North Dakota, has reignited concerns, with federal and state politicians calling for CFIUS to review the transaction. Most comments focused on the land’s proximity to the Grand Forks Air Force Base, which is about 12 miles away, and/or the motivations behind the acquisition, as the proposed corn milling facility will be located further from the corn fields than typical milling facilities in North Dakota. Less attention has been paid to the fact that real estate transactions can pose national security risks beyond those associated with proximity to government facilities.

CFIUS’s Current Jurisdiction Over Real Estate Purchases

Prior to February 13, 2020, the regulations pertaining to investments in the United States by foreign persons, at 31 CFR Part 800, focused on transactions that could result in foreign control of a “US business.” Thus, almost no real estate transactions were subject to review unless the land was itself a business or part of a business. Effective February 13, 2020, the regulations changed to implement FIRRMA. Part 802 now addresses CFIUS’s expanded jurisdiction over select real estate transactions. However, the Committee’s real estate authority remains limited. The CFIUS regulations largely track the language in FIRRMA, focusing, like the statute, on two types of land transactions: those near military bases and those near ports. 31 CFR § 802.227.

FIRRMA allows CFIUS to review only the “purchase or lease by, or a concession to, a foreign person of private or public US real estate that—

  • is, is located within, or will function as part of, an air or maritime port; or
  • is in close proximity to a United States military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security.”

FIRRMA excluded from CFIUS jurisdiction transactions that constitute the purchase or investment in

  • a single “housing unit,” as defined by the Census Bureau; or
  • real estate in “urbanized areas,” also as defined by the Census Bureau, although CFIUS also could include, by regulation, real estate “as otherwise prescribed by the Committee in regulations in consultation with the Secretary of Defense.”

Currently, an urbanized area is defined as one where there is a statistical geographic area of a “densely settled core created from census tracts or blocks and contiguous qualifying territory that together have a minimum population of at least 50,000 individuals.”

Not surprisingly, CFIUS review of real estate transactions has been relatively limited as a result of its narrow jurisdiction. As noted in the CFIUS annual reports, real estate deals constitute a very small portion of overall CFIUS activity. Because FIRRMA did not authorize reviews of real estate transactions outside the narrow areas described above, many types of real estate purchases that may still pose a risk to national security remain largely unreviewed, including transactions with a potential impact on supply chains, power sources, telecommunications, and numerous other areas.

Grand Forks Transaction

In November 2021, the City of Grand Forks announced that Fufeng selected the municipality as the location for a new wet corn milling plant. The second largest producer of xantham gum in the People’s Republic of China (PRC), Fufeng, which is publicly traded on the Hong Kong Exchange, is asserted by members of the US Congress to have strong ties to the PRC government and the Chinese Communist Party (CCP). Those alleged ties led to calls for CFIUS to review the land acquisition. Because of CFIUS’s limited jurisdiction, however, the calls for review focused on the land’s proximity to the Grand Forks Air Force Base, which is home to a US military drone facility as well as a new space networking center. The space center reportedly forms the backbone of US military communications globally.

Although the US Air Force has not taken a public stance on the purchase, an Air Force officer stationed at the facility produced a report raising concerns about the PRC government conducting covert surveillance through operations that could occur at the agribusiness site (something strenuously denied by Fufeng). That report notes:

Some of the most sensitive elements of Grand Forks exist with the digital uplinks and downlinks inherent with unmanned air systems and their interaction with space based assets . . . . If proximal access were given to our adversaries, and their collections were directed at us, it would present a costly national security risk causing grave damage to [the] United States’ strategic advantages.

In a May 2022 report, the US-China Economic and Security Review Commission echoed these concerns: “The location of the land close to the base is particularly convenient for monitoring air traffic flows in and out of the base, among other security-related concerns.”

These proximity concerns have prompted politicians to call for CFIUS review of the deal. On July 14, 2022, US Senators John Hoeven and Kevin Cramer of North Dakota and Marco Rubio of Florida submitted a formal request for CFIUS to conduct a full review of the Fufeng land purchase. According to Senator Cramer: “[W]e grossly underappreciate how effective [China is] at collecting information, collecting data, [and] using it in nefarious ways.”

Shortly thereafter, on July 25, North Dakota Governor Doug Burgum sent a letter to US Treasury Secretary Janet Yellen and US Defense Secretary Lloyd Austin, also calling for CFIUS to review the transaction. The parties ultimately decided to submit the transaction to CFIUS for review. Had the land’s proximity to the Grand Forks Air Force Base not been available as a basis for CFIUS jurisdiction, the deal would likely not have been within CFIUS’s reach.

Expanding Review Beyond Proximity to Military and Critical Facilities

The North Dakota land purchase reflects a continuing uptick in US land holdings by foreign persons, which increased more than 60% in the last decade. Chinese buyers reportedly own more US agricultural real estate than those from any other foreign country. According to US Department of Agriculture (USDA) Agricultural Foreign Investment Disclosure (AFIDA) reports, Chinese investors’ holdings of US agricultural land grew from 13,720 acres in 2010 to 352,140 acres in 2020.

Part of that increase occurred when a Chinese company acquired Smithfield Foods, one of the US’s largest farming operations. Smithfield’s assets include 146,000 acres of US land. Although CFIUS reviewed the transaction (since it involved a US business and not just real estate), it imposed no restrictions on the buyer’s ownership. Without any oversight, following the transaction the new owners terminated relationships with a number of Smithfield’s then-existing US partners. For example, a year after the acquisition, Smithfield reportedly ended its contract with CHS, the largest farmer-owned grain cooperative in the United States, and in 2015, Smithfield ended its contract with MaxYield Cooperative, which had supplied a Smithfield feed mill for 20 years. Simultaneously, Smithfield ramped up exports to China, sending a record amount of pork to China in 2020—so much so that the company ran out of blast freezer space (used to store pork) in China.

The acquisition initially raised national security concerns because the buyer is a subsidiary of a Chinese company whose chairman was alleged to have “direct ties” to the CCP. The connection was assumed to have allowed the company to secure the necessary backing from the Chinese government for the required outflow of monies from China, including a $4 billion loan from the state-owned Bank of China. The Smithfield acquisition was recently cited by the US-China Economic Security Review Commission as raising concerns beyond just proximity. Had that deal been solely a land purchase, it is not clear that CFIUS would have had jurisdiction to review it, or that it even would now, because of the proximity requirement in FIRRMA.

Food supply and food security represent, perhaps, the most obvious national security issues raised by real estate transactions outside of the proximity concerns currently within the Committee’s jurisdiction. The last couple of years—spanning a global pandemic, war, and record-high inflation—have showcased the frailty of domestic and global supply chains and the consequential impacts of supply volatility and commodity shortages. There is a rapidly growing recognition that food security represents an important part of national security, and both are impacted when real estate transactions occur in this sector.

Once land assets and their production are acquired by a foreign entity, there are few, if any, national security restrictions relating to the use of that land. As a result, real estate acquired by foreign entities or governments can present unique challenges to US national security.

While CFIUS can address national security concerns in transactions it has the authority to review, to paraphrase Wayne Gretzky, the US misses 100% of the cases it does not review.

The potential national security issues arising from land ownership are also demonstrated by the recent focus on Russia, which revealed to the American public that Russian oligarchs had acquired many premier properties in the United States, some without disclosing their interests. Yet, the vast majority of these acquisitions were not then, and would not be now, subject to CFIUS review. And for the few that might be subject to CFIUS analysis, the decision to file a notice would be up to the parties, as pure real estate transactions are not subject to mandatory CFIUS action. Thus, in addition to the type of real estate transactions subject to CFIUS jurisdiction, the lack of any authority for mandatory submissions remains a continuing concern for many in Congress focused on national security.

Reviewing land purchases only when they are close to a US military installation or a limited set of critical infrastructure leaves significant gaps in the ability of foreign investment reviews to protect US national security. National security risks that continue to attract attention include where there is a potential impact on supply chains and food security in the United States, where critical information and communications technology and services (ICTS) facilities are located, and numerous other important areas. Consequently, Congress is considering numerous proposals to expand CFIUS jurisdiction, as listed below. If that jurisdiction is expanded in the near future, it seems likely real estate transactions will be among those for which broader reviews occur.

Relevant Proposed Legislation

Due to current constraints on CFIUS’s review of real estate transactions, Congress has proposed a number of legislative amendments to expand the Committee’s jurisdiction or otherwise impose greater regulatory oversight on foreign-party purchases of real estate. Some of the more relevant legislative initiatives include the following:

  • On April 21, 2021, Senators Ted Cruz, Marco Rubio, and Steve Daines introduced the Protecting Military Installations and Ranges Act of 2021, which would make CFIUS reviews mandatory for land acquisitions near sensitive US military installations.
  • On October 5, 2021, Senators Tommy Tuberville, Cynthia Lummis, Roger Marshall, and Rick Scott introduced the Foreign Adversary Risk Management (FARM) Act, which would
    • add the secretary of agriculture as a member of CFIUS;
    • expand the definition of “critical infrastructure” to include agricultural production facilities and real estate; and
    • mandate reports to Congress on current and potential foreign investments in the US agricultural industry from the USDA and Government Accountability Office (GAO).
  • On October 21, 2021, Senator John Kennedy introduced the Exposing China’s Belt and Road Investment in America Act of 2021, which would add greenfield investment to CFIUS jurisdiction, specifically requiring that parties submit declarations to CFIUS if China’s government controls or has substantial interest in the investment.
  • On June 23, 2022, the House Appropriations Committee approved an amendment to the Fiscal Year 2023 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Bill, which would completely prohibit companies from Russia, China, North Korea, and Iran from purchasing US agricultural land.
    • The previous year, the Appropriations Committee voted to ban China from acquiring additional US farmland, but the proposal was later revised to a request for a USDA report on the matter.


The continuing increase in acquisitions of US land by non-US persons, particularly agricultural land, underscores the point that there is a need to revisit the legal authorities governing CFIUS reviews of real estate transactions. Foreign ownership of US real estate has demonstrated implications for US national security. Due to FIRRMA’s limitations, legislative action would be required to expand reviews of real estate deals where national security can be placed at risk.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors or any of the following Morgan Lewis lawyers:

Washington, DC
Giovanna M. Cinelli
Kenneth J. Nunnenkamp
David Plotinsky
Ulises R. Pin
W. Barron Avery
Katelyn M. Hilferty
Christian Kozlowski
Eli Rymland-Kelly

Carl A. Valenstein

Christina Renner

Michael Masling

Casey Weaver

Joanna Christoforou

Legal practice assistant Julia Benbenek contributed to this LawFlash.