Increasing Federal Focus on Foreign Ownership of American Farms

On July 8, Agriculture Secretary Brooke Rollins announced the Administration’s seven-part National Farm Security Action Plan, which finds that “land owned by foreign nationals – particularly those from countries of concern or other foreign adversaries – is a potential threat to national security and future economic prosperity.”

As part of the plan, Secretary Rollins emphasized that the Administration intends to work with federal, state, and local governments to prohibit or rescind purchases of US farmland by Chinese nationals and other foreign adversaries. The Administration’s concerns about threats from foreign control of US farmland have bipartisan support in the US Congress, where members on both sides of the aisle have sponsored multiple bills to ban, limit, or increase monitoring of foreign investments in both agricultural land and US real estate more broadly.

Current Federal Oversight Framework

The Committee on Foreign Investment in the United States (CFIUS) was established in 1975 to review and make recommendations regarding foreign investments in US assets that present potential risks to national security. In 2018, the Foreign Investment Risk Review Modernization Act of 2018 expanded CFIUS’ jurisdiction to include land purchases near sensitive government sites, such as military installations. The CFIUS Committee has the authority to review deals either before or after closing, and can require mitigation measures or request that the president review a transaction for potential suspension or prohibition if a national security threat is identified.

Separately, the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA) requires foreign persons or groups who acquire, transfer, or hold a 10% or greater direct or indirect ownership interest in US agricultural land to report any holdings, acquisitions, or transfers to US Department of Agriculture’s (USDA) Farm Service Agency (FSA). The reporting requirements extend up to three tiers of ownership in farm, ranch, or timber holdings of 10 acres or more, as well as to smaller tracts that generate more than $1,000 per year in gross agricultural receipts. Failure to file a timely and accurate report can result in civil penalties, with fines up to 25% of the ownership interest’s fair market value. Additionally, if a foreign landowner sells its US holdings, the Foreign Investment in Real Property Tax Act of 1980 ensures that foreign sellers pay US income tax on any gains from the sale.

On January 18, 2024, the US Government Accountability Office (GAO) issued a report with six recommendations for improvements on the sharing of AFIDA-related data. Although USDA annually publishes a report disclosing foreign agricultural land investments based on AFIDA data, the GAO’s report identified shortcomings in USDA’s processes for collecting, tracking, and sharing the data. USDA’s annual report is reviewed for risks by the US Department of Defense (DOD), US Department of the Treasury, and other agencies, but the GAO’s report noted that these disclosures should be issued with greater frequency. In addition, although Congress directed USDA to create an online submission process and public database for AFIDA data by the end of this year, GAO reported that USDA has not done so, in part because of insufficient funding. GAO also found that USDA needs to improve its internal processes to ensure the accuracy and completeness of its AFIDA data. USDA generally agreed with the GAO’s recommendations and subsequently began working to implement the online submission process and to conduct data mining of AFIDA data against FSA program data to better oversee compliance. To date, the other recommendations remain unresolved.

The Trump Administration’s Plans for AFIDA Reform

The National Farm Security Action Plan announced by Secretary Rollins specifically references the GAO recommendations and includes several action items related to AFIDA, some of which have already been completed.

Launched

• A new online portal for anonymous whistleblowers to report possible false or failed reporting and compliance with respect to AFIDA, as well as claims of adversarial foreign influence on federal, state, and local policymakers with respect to purchases of US farmland and business dealings in other facets of US agricultural supply chains.

• A new US Foreign Agricultural Investments webpage featuring an interactive map of foreign-owned agricultural land based on data through December 31, 2023.

USDA also signed a joint Memorandum of Understanding with the Department of the Treasury to ensure regular coordination related to CFIUS reviews of covered foreign transactions that involve “agricultural land, agricultural biotechnology, or the agriculture industry (including agricultural transportation, agricultural storage, and agricultural processing).”[1]

In the Works   

• Implementation of an online filing system for enhanced AFIDA compliance reports, as required by the Consolidated Appropriations Act, 2023, and recommended by the GAO. The reports will include geospatial information and the purpose of the land purchase.[2]

• Increasing the civil penalties imposed for late and knowingly false AFIDA filings — though the amount of the increase has not yet been announced. Currently, the penalty for late filings is one-tenth of 1% of the value of the filer’s ownership per week the filing is late, capped at 25% of the value of the filer’s ownership. The penalty for failure to submit, failure to update, or for submitting incomplete, false, or misleading information is up to 25% of the value of the filer’s ownership.

Additionally, USDA says it will work with state and congressional partners to end the direct or indirect purchase or control of American farmland by nationals from foreign adversaries or countries of concern.[3]

Legislative Proposals Relating to Foreign Ownership of US Farmland

This year, members of Congress have introduced at least two dozen bills relating to foreign ownership of US agricultural land. Some would ban certain foreign individuals and entities from owning US farms and land used for food processing, some would modify reporting requirements and enforcement under AFIDA, some would modify CFIUS’ review of farmland transactions, and some would tackle multiple objectives. At the end of this alert, there is a table with information about key bills to watch in each category.

Conclusion

There is a strong emphasis on countering foreign threats to US farm and food security in both the Trump Administration and Congress. At present, the focus of these proposed prohibitions is targeting ownership by adversaries, state sponsors of terrorism, and individuals or entities from specifically named countries, including China, North Korea, Russia, Cuba, Iran, Belarus, Burma, Syria, and the Maduro regime in Venezuela. In addition, there is a push for better and more efficient data collection and data dissemination by USDA on all foreign ownership of US farm land. We will be monitoring Congressional action on this topic. In the meantime, compliance with the current oversight framework remains critical. Better information sharing between USDA and CFIUS, along with the new whistleblower portal, may lead to additional scrutiny of transactions and disclosures. Furthermore, the cost of noncompliance is likely to increase.

If you have any questions about the application of AFIDA or the potential for CFIUS review of a pending or contemplated transaction, please contact the ArentFox Schiff Agriculture & AgTech team.

Tables

Ownership Restrictions

Modifications of AFIDA

Modifications to CFIUS