Congressional Considerations on Restricting Foreign Investments in U.S. Agriculture
Over the past decade, foreign investments in agricultural land have grown. At the start of 2021, foreign persons held an interest in nearly 37.6 million acres of U.S. agricultural land according to the Farm Service Agency (“FSA”). In response to these types of purchases, there have been multiple bills introduced in the 117th Congress (2021-2022) that seek to control or restrict certain foreign investments in U.S. farmland.
Specifically, Congress has introduced legislation that would restrict persons from certain countries from acquiring or owning an interest in agricultural land within the U.S. Other federal proposals currently before Congress seek to place the Secretary of the U.S. Department of Agriculture (“USDA”) in the Committee on Foreign Investment in the United States (“CFIUS”). Additionally, Congress is also considering measures that would prevent certain foreign persons and entities from participating in certain USDA-administered programs.
Proposals Restricting Foreign Investments
Currently, no federal law exists that restricts foreign persons from acquiring or holding U.S. agricultural land. While there are approximately fourteen states that specifically forbid or limit foreign ownership of farmland within 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 investments in U.S. 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.
Some of these measures proposed by Congress seek to only prohibit investments by China’s government. For example, the Countering Communist China Act (H.R. 4792) and the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2022 (H.R. 4356) would require USDA to “take such actions as may be necessary to prohibit the purchase of agricultural land located in the U.S. by companies owned” by China. Another bill, known as the Prohibition of Agricultural Land for the People’s Republic of China (H.R. 7892), restricts nonresident aliens, foreign business entities, agents, and trustees associated with the Chinese government from purchasing agricultural land. Instead of USDA, H.R. 7892 seeks to direct the President of the United States to initiate restrictive measures to prohibit these types of acquisitions in U.S. farmland.
Congress is also considering legislation that would restrict companies owned by other countries. Some of the agricultural spending bills introduced in the 117th Congress (H.R. 4502, H.R. 8239, and H.R. 8294) contain a provision that seeks to restrict companies owned by China, Russia, North Korea, or Iran from purchasing U.S. agricultural land. Each of these bills would, if enacted, compel USDA to take steps to prevent companies from these four countries from acquiring an interest in farmland.
Currently, Congress is considering measures that seek to restrict foreign investments not only in agricultural land, but all public and private real estate located in the U.S. One measure is the Securing America’s Land from Foreign Interference Act (S. 4703/H.R. 3847). Congressional representative Chip Roy (R-TX) introduced the bill in the U.S. House while Senator Tom Cotton (R-AR) introduced the bill in the Senate. However, the version of this bill introduced in the Senate is different from the version introduced in the House. The Senate-proposed measure includes additional provisions aimed at restricting foreign investments.
Overall, both versions of the proposed legislation seek to authorize the President to “take such actions as may be necessary to prohibit the purchase of public or private real estate located in the United States by any member of the Chinese Communist Party.” Further, the Senate-proposed version of this bill also seeks to authorize the President to take actions to restriction “any foreign person acting for or on behalf of” China. Additionally, this version also seeks to revise the penalty provision under AFIDA. Under current law, persons determined by USDA to have violated AFIDA are subject to a fine up to 25% of the foreign person’s interest in the agricultural land. 7 USC § 3502(b). S. 4703 seeks to amend this provision by directing USDA to impose a fine not less than 10%, or exceed 25%, of the fair market value of a violator’s interest in the agricultural land.
Another bill currently before Congress, known as the Protecting our Land Act (“POLA”) (H.R. 8652), seeks to restrict foreign adversaries and state sponsors of terrorism—and any of its agents, affiliates, and persons it owns or controls—from purchasing public or private U.S property. POLA defines “foreign adversary” as a foreign government or nongovernment person “engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security…or security and safety of” U.S. persons. A “state sponsor of terrorism” means “a country the government of which the Secretary of State determines has repeatedly provided support for international terrorism….” The current version of the bill requires the President to direct federal agencies to implement rules and regulations to prevent the restricted foreign parties from acquiring an interest in U.S. real estate.
Similar to these proposed measures, H.R. 6383 and H.R. 8603 seek to authorize the President to prohibit purchases of public and private U.S. real estate by any foreign person and any foreign government, respectively.
Restricting Participation in Farm Programs
In addition to restricting foreign investments in U.S. land, legislation introduced in the 117th Congress seeks to prohibit certain foreign persons from participating in certain USDA-administered programs. Several measures that seek to restrict foreign investments in agricultural land also seek to restrict certain foreign persons and entities from participating in certain farm programs. For example, the Countering Communist China Act (H.R. 4792) and an agricultural spending proposal (H.R. 4356), seek to restrict farmland owned by China or companies owned by China from participating in USDA programs.
Another spending bill (H.R. 4502) includes a provision that would make foreign-owned agricultural land owned by China, Russia, Iran, or North Korea ineligible to participate in USDA programs. Additionally, the Prohibiting Agricultural Land for the People’s Republic of China (H.R. 7892) aims to restrict the Chinese government, or persons and entities owed or associated with China, from participating in all USDA program except for “food inspection or other food and safety regulatory requirements.”
Most recently, Senator Chuck Grassley (R-IA) introduced the Farm Credit for Americans Act of 2022 (S. 4954). Under this proposal, any person that qualifies as a “foreign person” under AFIDA (7 U.S.C. § 3508(3)) is ineligible for “any credit or financial services provided by a Farm Credit System institution.” Accordingly, if this bill were enacted, a foreign individual, business entity or corporation, or government could not obtain financing from USDA for a farming operation or enterprise.
Proposals Adding Agriculture to CFIUS
In addition to the federal measures seeking to restrict foreign investments and participation in farmland and farm programs, Congress is considering proposals that would increase oversight of foreign investments in agriculture. A number of bills currently before Congress seek to amend the Defense Production Act (“DPA”) of 1950 to place the Secretary of USDA in CFIUS.
CFIUS is a multi-government agency entity that is authorized by the DPA (50 U.S.C. § 4565) to review certain transactions involving foreign investments and acquisitions of American companies and real estate to determine whether there is a threat to national security. Essentially, CFIUS has the power to suspend, renegotiate, and impose conditions to transactions (whether pending or already completed) that may pose a risk to the national security of the U.S. In other words, the Committee uses these measures to mitigate any threat to national security that arises from a transaction. 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. Another type of transaction CFIUS closely reviews include investments in critical technologies. In general, these technologies are created or used by certain U.S. businesses and industries that are essential to the nation’s economic and national security.
The proposals that seek to add USDA as a member of CFIUS include the Foreign Adversary Risk Management Act (“FARM” Act) (H.R. 5490), Agricultural Security Risk Act (H.R. 3413/S.1755), Food Security is National Security Act (S. 3089), and the Promoting Agriculture Safeguards and Security Act (“PASS” Act) (H.R. 8274/S. 4786). Overall, each of these legislative proposals seek to include USDA as a member of CFIUS. According to some sponsors of these bills, placing USDA as a CFIUS member will provide leverage to protect the interests of the agricultural industry in foreign investments and acquisitions of U.S. agricultural businesses.
Specifically, these bills seek to require CFIUS to consider agriculture-specific criteria when determining whether a foreign investment poses a risk to the United States national security. For example, some proposals incorporate provisions that direct CFIUS to review or investigate transactions that could result in foreign control of a U.S. business that engages in agriculture. Other proposals seek to include “security of food and agriculture systems” and “biotechnology related to the agriculture sector” as “critical infrastructure under the DPA. As a result, this would place the agricultural industry and food supply chains as areas CFIUS can consider as it relates to national security, meaning agriculture and food security will be considered as matters of national security.
These proposals are not the first pieces of legislation that would give USDA representation on CFIUS and require CFIUS to consider the agricultural industry as a matter of national security. In 2017, a bipartisan bill known as the Food Security is National Security Act (S.616) was introduced in Congress. This bill sought to add agriculture and food systems as threats considered by CFIUS and sought to add the Secretary of Agriculture as a member of the Committee. Ultimately, this bill was referred to the Senate Banking Committee, but did not move forward in the legislative process. Nevertheless, there are other pieces of legislation besides the FARM Act that seek to prevent foreign investments in U.S. agriculture currently being considered by Congress.
Foreign investments in agricultural land and the agricultural sector have increased considerably over the past several years. As a result, Congress has proposed several different pieces of legislation that seek to restrict foreign ownership of U.S. real estate, specifically agricultural land, prohibit participation in USDA-administered programs, and increase oversight of foreign investments in the agricultural sector.
Aside from these legislative proposals, Congress has also requested an investigation in foreign farmland ownership. On October 1, 2022, U.S. House Republicans send a letter to the Governmental Accountability Office (“GAO”) requesting a study of foreign transactions and acquisitions in U.S. agricultural land and its “impact on national security, trade, and food security.” The group of policymakers also requested this study to evaluate USDA’s procedures for collecting AFIDA data and whether these procedures ensure accurate disclosure of foreign ownership in U.S. farmland.
Overall, as foreign investments in agricultural land and the agricultural sector continue to increase, federal policymakers may continue to seek legislative proposals and measures to restrict foreign acquisitions and influence in U.S. agriculture.
To view a previous NALC webinar on foreign ownership of agricultural land, click here.
To view state laws regulating ownership of agricultural land, click here.