Congress and GAO Initiate Greater Scrutiny of USDA Reporting of Foreign Agricultural Land Acquisitions

On March 8, 2024, when President Biden signed into law a $459 billion legislation package to fund portions of the government for the next six months, most media attention focused on the last-minute aversion of a partial government shutdown. However, buried in the legislation are provisions that demonstrate increasing concern about the foreign acquisition of U.S. agricultural land and a move to increase coordination between the Committee on Foreign Investment in the United States (CFIUS or the Committee) and the United States Department of Agriculture (USDA).

In particular, the legislation formally mandates that the Committee includes the Secretary of Agriculture as a member of CFIUS with respect to covered transactions subject to CFIUS review that involve agricultural land, agricultural biotechnology or the agriculture industry at large. Additionally, the legislation obligates the Secretary of Agriculture to inform CFIUS of any agricultural land transaction that is a covered transaction that may pose a risk to U.S. national security (with particular scrutiny on buyers from China, North Korea, Iran and Russia) and is required to be reported to the USDA pursuant to the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA). Congress further appropriated $2M to assist the Secretary of Agriculture in these duties.

AFIDA is legislation that requires foreign persons or entities acquiring or transferring interests in U.S. agricultural land to report any such transactions to the USDA. Reporting under AFIDA is voluntary on part of the acquiror, and it also filters through three layers of USDA bureaucracy at the county, state and national level. Unlike CFIUS, USDA does not focus on reviewing AFIDA reporting for national security concerns. While USDA has participated in CFIUS reviews of agricultural transactions when requested by the Department of Treasury (the lead agency behind CFIUS), there has not been a historical legislative mandate for the Secretary of Agriculture to affirmatively join the Committee in such circumstances.

Congressional attention to the Secretary of Agriculture’s position on CFIUS and the interplay between CFIUS, the USDA and the use of AFIDA data was not unexpected after the U.S. Government Accountability Office released a report in January 2024 critical of the quality of data USDA collected under AFIDA and the timeliness in which it shares AFIDA data with CFIUS and other relevant agencies. In particular, the GAO found that, first, AFIDA data was not regularly shared on a timely basis with CFIUS, and therefore, CFIUS rarely considers it, second, USDA’s processes to collect, track and report critical information under AFIDA are flawed, and third, USDA’s processes with respect to verifying AFIDA data are flawed which results in various errors and omissions. The GAO concluded by determining that CFIUS lacked regular and timely access to detailed AFIDA reporting and proceeded to make six recommendations to USDA to improve its processes on the collection, maintenance and reporting of AFIDA data. Notably, USDA agreed with five of the GAO’s six recommendations in full and partially agreed with the sixth.

The key national security concern with respect to the disposition of agricultural land relates to its potential proximity to certain military installations and other sensitive locations. This concern entered the public eye in 2021 when CFIUS declined to exercise jurisdiction over the proposed acquisition of 370 acres of North Dakota farmland located near Grand Forks Air Force Base by a Chinese buyer. While CFIUS did not weigh in, the U.S. Air Force went public with its opposition to the acquisition, and the proposal to build a new corn milling facility on the land was ultimately scuttled.

Taken as a whole, the recent legislative directives make clear that the U.S. government continues to scrutinize foreign investment in agricultural land and industries, which is represented by the efforts of an increasingly muscular CFIUS. The future will tell whether USDA is given the resources necessary to implement GAO recommendations on AFIDA reporting and how that process will be revitalized.

For further questions on CFIUS matters or to learn about Fredrikson’s International practice, contact Robert Oberlies or Aaron Nyquist. For further questions or to learn more about Fredrikson’s Food and Agribusiness practice, contact Michael Jacobs.