The Constitution contains several provisions that guarantee economic freedom. These guarantees generally benefit foreign investors.

The U.S. has no foreign investment statute.

Since the United States has no general foreign investment law, there is no overall definition of foreign investment. There are definitions of foreign investment in specific contexts, such as our bilateral investment treaties and the NAFTA. Below is the definition of "covered investment" from the current prototype bilateral investment treaty of the United States as well as relevant NAFTA definitions. Certain forms of foreign investment are the subject of specific legislation, such as the Exon-Florio provision, and those statutes as well have specific definitions of foreign investment for limited statutory purposes.

Definition from prototype bilateral investment treaty:

"Investment" of a national or company means every kind of investment owned or controlled directly or indirectly be that national or company, and includes investment consisting or taking the form of:

The International Investment and Trade In Services Survey Act requires that all foreign investment in U.S. enterprises in which a foreign person owns a 10% or more voting interest must report to the Bureau of Economic Analysis of the Department of Commerce.

The U.S. has no general regulation of foreign investment. In the few cases where there are restrictions, a natural person is considered a foreign investor.

Not applicable.

U.S. investment policy does not treat joint ventures differently from U.S. companies. There is no separate regulatory framework for foreign-owned or -controlled companies. National treatment applies to all companies established in the U.S. except in certain specified sectors (e.g., maritime cabotage).

There are no time limits on the status or definition of "foreign investor."

Certain restrictions exist as to customs brokers and communication. Only U.S. citizens may obtain a customs brokers' license. A corporation established under the laws of any state may receive a customs brokers' license if at least one officer holds a valid customs brokers' license. There are also nationality restrictions on the ownership of television or cable licenses.

The Constitution contains several provisions that guarantee economic freedom. These guarantees generally benefit foreign investors. These provisions include, for example, Articles I, III, and IV, and the Fifth, Thirteenth and Fourteenth amendments.

Article I, Section 8 provides, in part, that: all duties, imposes and excises shall be uniform throughout the U.S.; foreign and interstate commerce will be regulated by the federal government through Congress; there shall be a uniform bankruptcy law which would free assets that would otherwise be tied up in bankruptcy; and authors and inventors shall have exclusive rights for their works and inventions for a period of time. Article I, Section 9 provides that neither Congress nor the State of the United States can tax exports and prohibits preferences on the regulation of commerce or revenue to ports of one state over other states. Article I, Section 10 provides that the States generally cannot act in a certain manner to impair contractual obligations. Article III provides for federal courts to resolve issues arising under the Constitution and federal law.

The U.S. encourages direct investment in the U.S. and abroad and opposes any type of government intervention that impedes or distorts investment, subject to limited exceptions for national security and related purposes.

See 4.1.

Public and private enterprises compete on equal terms.

See 2.1.

No sectors.

Atomic Energy – Aliens and entities owned, controlled or dominated by aliens or foreign governments may not engage in operations involving the utilization of atomic energy. This restriction applies primarily to nuclear reactors and reprocessing plants extracting plutonium

Authority: Atomic Energy Act. 42 U.S.C. §§ 2011 et seq. (1954).

Customs House Brokers – To obtain a license to operate a customs brokerage, one officer or partner of a firm must be a licensed customs broker and a U.S. citizen.

Authority: Tariff Act. 19 U.S.C. § 16411 (b)

Licenses for Broadcast, Common Carrier, and Aeronautical Radio Stations – For radio, broadcasting, and telephone companies in regard to common carrier radio licenses, US enterprises with foreign ownership exceeding 20%, aliens, and foreign corporations may not be granted the relevant license. When a corporation is directly or indirectly controlled by another corporation, the Federal Communications Commission may refuse to approve a license if more than a 25% interest in the controlling company is foreign and if the Commission finds it in the public interest to do so. Aliens, foreign corporations or any corporation of which any officer or director is an alien may not hold broadcasting, common carrier or aeronautical radio licenses. Moreover, aliens, foreign corporations or foreign governments may not own or vote more than 20% of the stock of U.S. corporations holding radio licenses for such services. There are additional restrictions on the nationality of management that apply in the case of broadcasting companies, and telephone companies having a common carrier radio license.

COMSAT – Foreign-controlled enterprises and all other foreigners may not hold in aggregate more than 20% ownership in the Communication Satellite Corporation.

Authority: Communications Satellite Act (1962). 47 U.S.C. §§734(d).

Subsidies or Grants Including Government Supported Loans Guarantees and Eligibility for Overseas Private Investment Corporation (OPIC) insurance and guarantees for investments in eligible developing countries is limited to entities organized in the U.S. and substantially (more than 50%) beneficially owned by United States citizens or to foreign entities at least 95% owned by U.S. citizens.

Authority: Foreign Assistance Act (1961). 22 U.S.C. §§2198(c).

Advanced Technology Program – To receive financial assistance under the Advanced Technology Program, a company must show that its participation will be in the economic interests of the United States, as evidenced by investments in the United States in research, development and manufacturing, and be a U.S.-owned company or a company incorporated in the United States whose parent is incorporated in a country which 1) affords to U.S.-owned companies opportunities comparable to those afforded to any other company to participate in such joint ventures; 2) affords U.S.-owned companies local investment opportunities comparable to those afforded any other company; 3) affords adequate and effective intellectual property rights to U.S.-owned firms.

Authority: American Technology Pre-eminence Act of 1991. 15 U.S.C. §278h.

Technology Reinvestment Project - To participate in the Technology Reinvestment Project (TRP), a company must conduct a significant level of its research, development, engineering, and manufacturing activities in the United States, or in a U.S.-owned company. A foreign-owned firm may be eligible if its parent company is incorporated in a country whose government encourages U.S.-owned firms' participation in research and development consortia to which that government provides funding, and affords effective intellectual property rights for U.S. companies.

Authority: Defense Conversion, Reinvestment and Transition Assistance Act of 1992. 10 U.S.C. §2491.

Energy - To receive financial assistance under the Energy Policy Act, a company must show that its participation will be in the economic interests of the United States, as evidenced by investments in the United States in research, development and manufacturing, and be a U.S.-owned company or a company incorporated in the United States whose parent is incorporated in a country which 1) affords to U.S.-owned companies opportunities comparable to those afforded any other company to participate in such joint ventures; 2) affords U.S.-owned companies local investment opportunities comparable to those afforded any other company; 3) affords adequate and effective intellectual property rights to U.S.-owned firms.

Authority: Energy Policy Act of 1992. 42 U.S.C. §13525.

Agriculture - Foreign-controlled U.S. enterprises cannot obtain special government emergency loans for agricultural purposes.

Authority: 7 U.S.C. §1922. 7 U.S.C. §1941. 7 U.S.C. §1961.

State and Local Measures Exempt from Article 1102 of the NAFTA Pursuant to Article 1108 thereof. The NAFTA allows certain laws that do not conform with NAFTA's national treatment, MFN, composition of boards of directors, and performance requirements obligations to be grandfathered. These measures at the state level that were in effect on January 1, 1994, were automatically grandfathered for two years and are now grandfathered permanently.

Landing of Submarine Cables - The Federal Communications Commission (FCC), under delegated authority from the President of the United States with concurrence of the State Department, is authorized to issue licenses to land or operate in the United States any submarine cable directly or indirectly connecting the United States with any foreign country. Under the Submarine Cable Landing License Act of 1921, the FCC may withhold or revoke licenses if such action will assist, inter alia, in securing cable landing rights for U.S. citizens in foreign countries.

Authority: Submarine Cable Landing Act. 47 U.S.C. §34-39.

Fisheries - Foreign-controlled enterprises may not engage in certain fishing operations involving coastwide trade. In addition, foreigners may not hold more than a minority of shares comprising ownership in companies owning vessels which operate in U.S. fisheries. Also, corporate organization requirements pertain to the registration of flag vessels for fishing in the U.S. Exclusive Economic Zone.

Authority: Anti-Reflagging Act (1987).

Air and Maritime Transport, and Related Activities - Air Transport - Cabotage and exercise of U.S. international air route rights are reserved to national airlines controlled by U.S. citizens, and owned 75% or more (voting stock) by U.S. citizens.

Authority: Federal Aviation Act (1958). 49 U.S.C. §41703.

Air transport (freight forwarding and charter activities) - A reciprocity test on air freight forwarding and air charter activities applies any time a foreign-owned firm seeks authority to provide indirect air transportation either by cross-border or establishment for U.S.-originating traffic. If a favorable determination is made by the Department of Transportation, indefinite registration is granted to the applicant, and subsequent applications of the same applications of the same nationality are routinely approved.

Authority: 49 U.S.C. 40109 [formerly Section 416 of the Federal Aviation Act (1958)]; 14 CFR 297, 380 Subpart F.

Maritime transport - The Federal Maritime Commission is authorized to take unilateral action when a foreign government, foreign carrier or other persons providing maritime-related services engages in activity that adversely affect U.S. carriers in U.S. ocean borne trade; creates conditions unfavorable to shipping in the foreign trade; or unduly impairs access by U.S.-flag vessels to trade between foreign ports. Sanctions proposed under these statutes most frequently affect the cross-border provision of services, however, sanctions could affect the foreign-owned investment established in the U.S. (e.g. revocation of freight forwarders' licenses, suspension of preferential terminal leases).

Authority: Foreign Shipping Practices Act (1988), Merchant Marine Act (1920) Section 19, Shipping Act (1984) §13(b)4.

Banking, Insurance, Securities and Other Financial Services Banking and Securities - As of August 1989, the Federal Reserve may refuse to designate as a primary dealer a foreign-controlled commercial or investment bank, if the government of the home country of the foreign bank denies national treatment to U.S.-owned banks for government securities operations. Denial of the primary dealer designation means that the Federal Reserve, at its initiative, will no longer deal with that firm in the conduct of monetary policy. The firm, at its initiative can continue unencumbered to purchase U.S. Government securities in government auctions.

Authority: Primary Dealers Act of 1988. 22 U.S.C. §§5341-5342.

Banking and Securities - Indentures must have at least one trustee organized and doing business in the U.S. The SEC can provide an exemption to this rule.

Authority: The Trust Indenture Act of 1939.

Banking, Insurance, Securities and Other Financial Services - There are also reciprocity provisions in the financial services field (including banking, securities and insurance).

Insurance - Regulation of the insurance industry is not done at the federal level. The one major exception to the policy of national treatment in the insurance sector is the licensing restriction as it related to government-owned applicants. A few states prohibit the licensing of companies owned or controlled by foreign governments.

Mineral Land Leasing Act - The Mineral Leasing Act (1920) makes public lands available for leasing only to citizens of the United States, associations of such citizens, or corporations organized under the laws of the United States, with respect to acquiring rights of way for oil pipelines, or leases or interests therein for mining coal, oil or certain other minerals. Non-U.S. citizens may, however, own a 100% interest in a U.S. corporation that acquires a right-of-way for oil or gas pipelines across onshore federal lands, or that acquires a lease to develop mineral resources on on-shore federal lands, unless the foreign investor's home country denies similar or like privileges for the mineral or access in question to U.S. citizens or corporations or to the citizens or corporations of other countries.

Authority: Mineral Land Leasing Act (1920). Chapter 3A, 10 U.S.C. §7435.

Under current U.S. law, treatment of foreign investors in air transport-related activities (i.e., freight forwarding, air charter), submarine cable landing rights, oil and gas pipelines across on-shore federal lands, leases to develop mineral resources on federal lands, primary dealers in financial services, and maritime shipping is conditioned on the way U.S. investors are treated in those activities in the foreign investor's home country. Also, activity concerning the designation of primary dealers and certain technology assistance programs such as the Advanced Technology Program, the Technology Reinvestment Project and the Energy Policy Program contain reciprocity requirements. There are also reciprocity provisions in the financial services field (including banking, securities and insurance).

See answer to question 3.3 for more information.

The United States does not impose performance requirements on foreign (or domestic) investment. There are minor incentive programs at the state level that may be considered performance requirements.

Yes.

The United States' open investment policy is based on the principle of national treatment: foreign investors should not be treated differently from domestic investors. This policy provides the means for economies to grow and prosper. All countries, both sources and recipients, benefit from foreign direct investment. The United States, the world's largest source and recipient of direct investment, has a major interest in fostering open investment climates. We are committed to our open investment policy in the United States, and we are aggressively seeking to open markets abroad.

In general, foreign investors receive the better of national treatment and most favored nation treatment, except as limited by certain laws in the U.S.

The Fifth Amendment of the Constitution includes the taking clause that provides that no "private property shall be taken for public use without just compensation". This constitutional requirement is consistent with international rules on expropriation.

Just compensation.

Intellectual property is adequately and effectively protected by a comprehensive system of federal and state laws. The U.S. is a party to a large number of international intellectual property conventions.

There are no general restrictions on the entry of foreign exchange, capital goods, technology, etc. Goods are subject to any customary tariffs that may be in place.

No. Certain restrictions on transfers may be imposed (on a national treatment basis) for matters such as enforcement of securities legislation, enforcement of judicial or administrative decrees, or enforcement of bankruptcy laws.

There is only one exchange rate.

Foreign-owned or -controlled companies are taxed in a manner equivalent to taxation on U.S.-owned or -controlled companies.

Tax Rates. The United States has a progressive rate structure. Currently, the highest marginal rate is 39.6%

The United States does not engage in discriminatory practices that affect foreign controlled corporations. In most cases, the tax rules that apply to foreign-controlled corporations are the same as those that apply to U.S.-controlled corporations. For example, the determination of transfer prices is given by section 482 of the International Revenue Code. These regulations require both foreign-controlled and U.S.-controlled enterprises to conduct their inter-company transactions in accordance with the arms'-length standard. In cases in which the United States does not distinguish between foreign-controlled and U.S.-controlled corporations, those distinctions are appropriate given the difference in circumstances.

The U.S. has bilateral tax treaties with Canada, Mexico, Jamaica, Barbados, and Trinidad and Tobago.

Foreign investors have access to domestic credit based on creditworthiness. There are no foreign investment incentives per se at the national level (i.e., incentives not available to domestic investors). Many of the states offer reductions on states taxes, credit, and other incentives for foreign or domestic investment that involves job creation. The information related to incentives at the State level is not followed by the federal government in any systematic way. State level incentives are offered on a national treatment basis.

Foreign investors generally have the same access to domestic settlement procedures as national investors. In some cases, were foreign investors are from countries covered by U.S. international treaty obligations, such investors also can avail themselves of binding international arbitration via ICSID and other international arbitration for settlement.

The U.S. is a member of ICSID. The U.S. has also ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Inter-American Convention on International Commercial Arbitration.

The U.S. has signed nine BITs with countries in the Americas (Argentina, Ecuador, Grenada, Haiti, Honduras, Jamaica, Nicaragua, Panama, Trinidad & Tobago). Of those, three are in force (Argentina, Grenada and Panama). Note, the U.S. has an investment commitment with Canada and Mexico similar to the BITs in NAFTA, Chapter 11.

For the United States, Bilateral Investment Treaties (BITs) are concluded as treaties. They enter into force only after approval by the two-thirds of the Senate and ratification by the President. Under Article VI of the U.S. Constitution, treaties are "the supreme Law of the Land," along with federal laws. They are, thus, equal in status to federal laws and preempt any inconsistent state laws.

The United States’ Bilateral Investment Treaties (BITs) contain specific articles providing for the resolution of investor-state and state-state disputes.

The investor-state dispute settlement article provides that investors of one party can pursue investment disputes with the other Party to the BIT in local courts, under previously-agreed procedures or through binding international arbitration.

The state-state dispute settlement article provides that the parties to the BIT can resolve their disputes through binding international arbitration under UNCITRAL rules. Thus, investors may seek to resolve disputes involving a breach of rights granted by the agreements directly in local courts.

There are no special offices in the U.S. government to handle foreign investment. The Bureau of Economic Analysis of the Department of Commerce collects certain information and investment statistics on foreign direct investment in the United States and U.S. direct investment abroad.