GAO Finds Significant Gaps in Current Information Collection Process for Non-US Ownership of US Agricultural Land

The Government Accountability Office (GAO) has issued its report on the national security implications of how the US government collects, shares, and considers foreign purchases and ownership of US agricultural land. It generally concluded the process suffers from significant gaps in information collection and timely information sharing with the Committee on Foreign Investment in the United States and other agencies, which may create, or have already created, unaddressed national security risks. Following recommendations from GAO, Congress introduced draft bipartisan legislation intended to address these gaps.

One hundred and nineteen congressional requesters (from both the House of Representatives and US Senate) asked the GAO to “review foreign investments in agricultural land”[1] and report on the manner in which the US government collects and shares foreign purchase information with CFIUS and other US government agencies.

The January 19, 2024 report (GAO-24-106337) focused on the US Department of Agriculture’s (Agriculture’s or the agency’s) process for collecting information on foreign purchase of US agricultural land to identify responsible personnel, document collection, information sharing, and follow-through by the agency. 

Congress passed the Agricultural Foreign Investment Disclosure Act of 1978, as amended (AFIDA),[2] which required foreign persons and legal entities that acquire an interest in US agricultural land to submit reports to the agency that include at least the following information: (1) details of the transactions, (2) identification of the parties (including ownership of the parties), and (3) the land being acquired.

The statute also granted Agriculture the authority to request additional information from the parties and determine the impact of these investments on family farms and rural communities. The agency was also tasked with monitoring compliance and penalizing parties for failing to file required forms.[3]

The accompanying regulations[4] identify the circumstances in which reports are required and include definitions to help inform the public of the requirements. Key definitions include the following:

• Foreign person: May be a (1) foreign individual, legal entity, or government[5] or (2) domestic legal entity in which at least 10% is held directly or indirectly by a foreign individual, legal entity, or government[6]
• Covered land transactions: Includes acquisitions, transfers, or holdings in US agricultural land and leases that extend for at least 10 years[7]
• Agricultural land: Generally includes “land in the United States used for forestry production and land in the United States currently used for, or, if currently idle, land last used within the past five years, for farming, ranching, or timber production”[8]

The AFIDA requires submission of reports (Form FSA-153) to allow the agency to assess the impact of the foreign ownership on impacted communities. Agriculture is also tasked with notifying other agencies, including the US Department of Defense (DOD) and CFIUS, of land purchases that could affect US national security interests.

The report details the process and notes that the original act required Agriculture to publish annual reports on foreign ownership and its impact on US interests. Congress, however, repealed the agency’s reporting obligations in 1998, although the agency continues to publish aggregate statistics. The data published by Agriculture includes:

• Number of acres that are foreign owned
• By:
  • State
  • County
  • Type of agricultural land
  • Country of the foreign investor

The country of foreign investor requirement does not specify whether it is the ultimate beneficial owner (as the investor) or whether the direct entity conducting the purchase needs to be reported. According to the GAO report, this lack of clarity raises questions regarding whether the data provided by Agriculture accurately and completely identifies the foreign ownership.

For example, an investor from Country X could establish an investment vehicle in Country Y that would then purchase the agricultural land. While Form FSA-153 requires submission of the “purchaser,” which would be the investment vehicle from Country Y, the true foreign investor would be from Country X. This gap may affect how other agencies or entities, such as DOD or CFIUS, consider the national security impact of the foreign ownership.

According to the most current Agriculture report, from 2021, Canada, the Netherlands, and Italy represent the top three investors in US agricultural land, and, in the aggregate, these three countries hold 50% of the foreign-owned agricultural land. Overall, nearly half of the holdings for all foreign investors involve forest land accounts, and 54% of foreign holdings involve other-than-direct ownership, such as long-term leases.[9]

Against this backdrop, the GAO identified several significant gaps that demonstrate where national security issues remain unaddressed.

SELECT GAO FINDINGS

The GAO made several findings that directly affect the manner in which other agencies or processes identify national security concerns, in particular the following:

Agriculture Is Not a Member of CFIUS

Agriculture is not a member of CFIUS but does participate in Committee proceedings when the US Department of the Treasury (Treasury) determines that the transaction involves equities related to the agency. The current situation highlights at least two weaknesses in the CFIUS process:

• Agriculture is not a standing member of the Committee and only participates upon invitation
• The invitation to participate is managed and controlled by Treasury,[10] meaning Treasury could decide not to invite Agriculture to participate in a CFIUS review if Treasury determines the agency is not required

AFIDA Information Is Not Regularly Shared with CFIUS on More Frequent or Timely Basis

The GAO found that Agriculture shares information with CFIUS but not “on a timely basis to be useful for CFIUS reviews.”[11]

While Agriculture provides information annually, DOD noted that it needs the information more frequently and in greater detail in order to be useful to the national security review process. The agency publishes the Foreign Holdings of US Agricultural Land report on its website, which includes aggregate information but does not include other details the agency collects such as detailed ownership information, country(ies) of affiliation of foreign investors, and locations of individuals agricultural land transactions.

Neither does the Agriculture report include aggregate holdings of the same foreign investors that would allow other agencies and CFIUS to assess whether specific foreign investors were accumulating agricultural land purchases in specific jurisdictions, near particular facilities, or across various counties. This information would permit for a more detailed assessment of potential US government concerns.

For example, DOD advised GAO of the following:

• More frequently shared data could help the agency identify non-notified transactions that could raise national security concerns.
• This is of concern because DOD does not have a “single database of real estate transactions that may potentially involve DOD interests.”[12]
• Additional information such as when a party filed the required AFIDA report and who filed the report can assist CFIUS, DOD, and its components “to identify cases and investigate the ownership structure of foreign investments.”[13]

Additional Data Integrity, Information Collection, and Intergovernmental Sharing  Issues

• The GAO report notes that Agriculture’s paperwork process appears to delay the sharing of information and leaves the enforcement for failures to submit required reports to farm bureaus or other local agencies. While the collection of information through a paper process may meet statutory standards, the lack of a consistent approach to scanning and providing the data in electronic form results in limited access to relevant data regarding foreign ownership of US agricultural land and challenges to manage the information collected.
• Agriculture’s AFIDA spreadsheet of information contained errors. GAO noted that the errors reflect a lack of quality control that could affect the integrity of the data upon which CFIUS or other agencies such as DOD rely to make national security decisions.
• Data searches identified parties that failed to file required reports. Agriculture “made some efforts to identify non-filers,” but the efforts do not appear to have identified all the non-filers.[14] This gap may result in unidentified foreign ownership that would be relevant to CFIUS and other government agencies.
• AFIDA’s information collection process misses key ownership data regarding all owners, whether direct or indirect. The GAO highlighted that the failure to collect information beyond the primary investor “may skew the reporting of holdings by country.”[15] AFIDA requires filers to include information for up to three ownership tiers; however, it does not appear that Agriculture is collecting information at this level, and the agency noted that the “filings have become increasingly complex” considering more filings come from corporate entities than individuals. Thus, ultimate beneficial owners may not be included in reports to the agency unless the parties voluntarily provide the data.

GAO’S RECOMMENDED CHANGES

Given these gaps, GAO recommended several changes to the process to enhance reporting and the utility of the information collected:

• Agriculture should coordinate with relevant CFIUS members to establish a process for sharing information in more detail and in a timely manner.
• Information shared with CFIUS should include whether a party has filed a disclosure report, who filed it, and when.
• Agriculture should arrange to update the AFIDA handbook, which has not been revised since 2006.
• Agriculture should provide specific instructions to affected agencies regarding employee responsibilities for completing the forms and verifying the accuracy of the form, as well as noting any missing information.
• Agriculture should assess the viability of creating the online AFIDA submission system and public databases. This evaluation was required by the Consolidated Appropriations Act of 2023 and Agriculture should address whether it has the ability to meet its obligations to develop the online system and databases.
• Agriculture should improve the verification process and monitoring of collected AFIDA data as well as the completeness of any submitted disclosure reports.
• Agriculture should continue its data mining activities to compare submitted AFIDA data to identify parties who failed to file required disclosure reports.

The GAO report provides Congress additional data points to consider and both the House and Senate have drafted bills to add Agriculture as a member of CFIUS as well as expand CFIUS’s jurisdiction to review agricultural transactions.

The recommendations do not include express timelines for when Agriculture should complete the various actions noted but, based on Agriculture’s comments regarding the recommendations included in Appendix III to the report, the agency agreed with all but one recommendation and noted that some actions are in process. Agriculture expressed concerns with the recommendation that it confirm the completeness and clarity of any reports, noting that the task would be challenging without additional resources and funding.

RESPONSE FROM CONGRESS

Congress wasted no time in acting upon the GAO report. On January 25, 2024, a group of bipartisan US senators[16] introduced draft legislation titled The AFIDA Improvements Act of 2024 designed to address the key issues noted in the GAO report.

The draft legislation focuses on addressing the gaps related to Agriculture-CFIUS communications, electronic submissions, and reporting in more granular detail on ultimate beneficial owners (all, rather than just the primary owner). As Senator Young’s press release related to the bill noted when he joined the bipartisan sponsors, the important areas the bill seeks to remediate include the following:

• Streamlining CFIUS Data Sharing: Require Agriculture to enter into a memorandum of understanding with CFIUS to govern data sharing between the agency and CFIUS member agencies within one year of enactment.
• Modernizing the AFIDA Handbook: Direct Agriculture to update the agency’s handbook for officials to collect AFIDA data within one year of enactment, which handbook was last updated in 2006.
• Implementing Current Law: Require Agriculture to develop and report to Congress a timeline for meeting specific implementation benchmarks for an online AFIDA submission system and public database. While Congress has required Agriculture to implement an online system by 2025, GAO discovered that the agency “has not developed timelines for creating an online submission process [or] a public database.”
• Improving Data Verification and Monitoring: Direct and empower Agriculture to take any such actions as are necessary to validate foreign ownership data collected under AFIDA.
• Identify Suspected Non-Filers: Direct Agriculture to better leverage Farm Service Agency data to identify individuals who have illegally not filed transactions with foreign persons under AFIDA.
• Collecting Data from Every Foreign Investor: Require reporting for foreign persons with a minority stake in an agricultural land asset, including through ownership tiers or shell companies.

Based on this early and substantive congressional interest, we anticipate further actions by the House and Senate to include additional draft legislation and hearings regarding the scope of the issue as well as the solutions.