How To Understand US Foreign Investment Laws

Foreign investment is a physical investment by a company in one country to establish an enterprise in another country. In the US, restrictive laws govern foreign investments from other countries as well as US investments in other countries. Domestic companies in the US are usually the targets of foreign investors. In the banking industry, analysts argued that the amount of investments from foreigners should be equivalent to a vote of confidence for the health of the economy of the country. The US economy can stabilize with the funds that may come from overseas investors.

Sovereign funds from foreign countries structure their deals by not including board seats, and sensitive industry sectors. Without these deals, regulatory scrutiny is avoided. US laws consider ownership of less than 10 percent without levers of control, and without a board seat to be a passive investment. Hence, it does not require a review by US security agencies. Because of this deal, European governments remarked they are against the sovereign funds. For them, declaring an investment as passive means without respect to economic logic.

In the real estate industry in the US, foreign investors face several restrictions with respect to owning a piece of land. This includes the type of real property, and reporting requirements that allows the government to monitor its activity.

In the early 1900s, the US government enacted a law preventing immigrants from owning agricultural lands. After the World War II, another law was passed retaining only 25 percent of Japanese descents pre-war farmers, to retain their property. After the September 11 terrorists attack, more regulations tighten the free flow of investments from foreign countries into the US.

Foreign investment in real estate is an open door policy by the US government. The government believes that such investments can create jobs, and promote economic growth. There are however restrictions that are imposed. Under the policy, those investors who do not intend to become naturalized US citizens cannot purchase large tracts of land and are therefore barred from owning real properties in US territories.

Foreign investors may enter the US as permanent residents or short visits only. A temporary work visa may be granted to applicants whose real estate operation is active. The E-2 visa is offered to investors from other countries with a treaty between the US, who may qualify to make a substantial venture in an active enterprise. The E-2 visa is renewable indefinitely provided there is a qualifying investment from the investor.

Various restrictions apply to areas like energy resources or mineral mining. US licenses are required before these activities can be conducted. Under federal law foreign ownership of power plants, uranium mines, defense material production, radio and television stations, and satellite communications are strictly prohibited.

Periodic reporting is a requirement from most federal regulations. The reporting program aims to obtain information about investments in the US. This requirement does not restrain such investments; it has no restrictions.

US laws relating to foreign investment in domestic companies are imposed to all investors merely as a reporting law. They are not intended to deter or restrain such investments but to be filed with the US Department of Commerce in the Bureau of Economic Analysis. The most famous US law regarding investment is the International Investment and Trade in Services Survey Act of 1984, formerly International Investment Survey Act of 1976.


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