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United States: Investing

FDI in Figures

According to UNCTAD's 2022 World Investment Report, FDI flows to the U.S. rebounded strongly by 143.6%, from USD 151 billion in 2020 to USD 367 billion in 2021, mainly due to a surge in cross-border M&As. Reinvested earnings amounted to USD 200 billion in 2021, the highest level ever recorded. They were spread across many services industries, including information and communication, trade, transport and storage, finance and insurance and professional services. The U.S. FDI stock in 2021 reached USD 13,619 billion. Equity investments were up by 54%, and new greenfield project announcements also increased (+28%) to USD 86 billion. The country remained the world’s largest recipient of FDI (followed by China), thanks to its large consumer base, a predictable and transparent justice system, a productive workforce, a highly developed infrastructure and a business environment that fosters innovation. According to data from the U.S. International Trade Administration, FDI accounts for nearly 16% of U.S. business research and development (R&D) and directly supports almost 8 million jobs in the country. The main investing countries in the U.S. are Japan, Germany, Canada, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. In 2021, California received the most investment, followed by Massachusetts and New York (BEA). The latest data available from OECD shows that in the first semester of 2022, FDI inflows to the U.S. decreased by USD 100 billion, amounting to around USD 74 billion in Q2 2022 (compared with nearly USD 124 billion in Q4 2021).

According to the latest The Economist’s Business Environment ranking, the United States is a top performer, occupying the 6th position out of 82 countries. The country remains the world's leading economic power, the largest international financial centre, and the third-largest country in the world in terms of population. The United States is one of the countries with the best regulatory performance in paying taxes. On the down side, there are the increasing inequalities and the polarised political landscape, as well as a high level of household debt. Furthermore, the Foreign Investment Risk Assessment Modernization Act (FIRRMA) significantly expanded the review authority of the Foreign Investment Commission (CFIUS) on the grounds of national security, a matter that has been seen as one of the major causes of the drop in Chinese investments towards the U.S. in recent years (as many Chinese investing companies are state-owned).

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	95,882	387,780	285,057
FDI Stock (million USD)	10,292,403	13,056,382	10,461,684
Number of Greenfield Investments*	1,655	1,691	2,075
Value of Greenfield Investments (million USD)	69,275	95,635	163,858

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI STOCKS BY COUNTRY AND BY INDUSTRY

Main Investing Countries	2019, in %
Japan	15.0
Canada	12.9
Germany	11.6
United Kingdom	9.9
Ireland	7.6
France	6.9
The Netherlands	6.4
Switzerland	5.0
Austria	1.9
Spain	1.9

Main Invested Sectors	2019, in %
Manufacturing	40.8
Financial and insurance	12.1
Wholesale trade	10.3
Holding companies (non-bank)	5.6
Banking	4.9
Professional, scientific, and technical services	4.4
Information	4.1
Retail trade	3.4

Source: OFII: Foreign Direct Investment in the U.S. 2020, Latest data available.

Form of Company Preferred By Foreign Investors: The most common form of organization for foreign investors is a limited liability company.
Form of Establishment Preferred By Foreign Investors: Company
Main Foreign Companies: Foreign companies present in the United States include for example Rolls Royce, Volkswagen, BMW, Siemens, Airbus, BASF, Bridgestone, Michelin, Unilever, Shell, etc.
Sources of Statistics: U.S Bureau of Economic Analysis

What to consider if you invest in the United States

Strong Points

The United States' strong points include:

The United States offers the largest consumer market on earth with a GDP of $23 trillion and 333.9 million people.
The US has the first world economy, solid and performance in various sectors
A dominant position in R&D
A flexible and reactive employment market
A very good quality of national statistics
70% of public debt held by Americans
The American workforce has a comparatively high level of qualifications and is considered to be one of the most productive and innovative in the world
The dollar is central to the world economic system
Notably thanks to the shale gas, the country is on his way to energetic autonomy
The development of regional ‘clusters’ (collections of companies in the same activity sector in a geographic area) is very attractive to foreign investors

Weak Points

Weak points for FDI in the US:

The US market is very competitive. Consumers are accustomed to have many choices and are not necessarily brand loyalists
A high number of Americans are unemployed and outside the employment market
A decreasing productivity
High public debt
Polarised political landscape
Strong socio-economic disparities
Infrastructure network is partially in decay
A risk of explosion of the student loan bubble
Strong dollar increases the trade deficit

Government Measures to Motivate or Restrict FDI

The US is the world's largest recipient of foreign direct investment (FDI). The US government policies on taxation and regulation offer foreign investors wide freedom. Nevertheless investments controlled by foreign governments may be subject to restrictions.

Foreign investment is reviewed by the Committee on Foreign Investment in the United States (CFIUS) to consider national security risks that may be present in a foreign investment in a US business. In 2018, Congress passed, and the President signed into law, the Foreign Investment Risk Review Modernisation Act (FIRRMA) which aims to modernise and reinforce the Committee of Foreign investments (CFIUS) in order to watch investments that may cause problems for the national security of the United States. FIRRMA was finally adopted in February 2020. Until the adoption of FIRRMA, there was no concept of a mandatory filing for any acquisition or investment (controlling or non-controlling). FIRRMA established the requirement of a mandatory filing for investments in 27 specific industries (pilot programme industries) involving so-called ‘critical technologies’, “critical infrastructure” and “sensitive personal data”.
In October 2017, Congress also adopted the United States Foreign Investment Review Act which will allow the Department of Commerce to examine the economic effects of certain foreign investments. Certain sectors are particularly targeted because they are regarded as strategic for the US. And FDI coming from certain countries is being more carefully screened. More information on these decrees is available here.

SelectUSA is a program led by the U.S. Department of Commerce that facilitates and promotes job-creating business investment into the United States. For more information about FDI incentives, click here.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By the United States: The U.S. is a signatory to 47 conventions. The UNCTAD website allows you to visualise and download the list of conventions signed by the United States.
International Controversies Registered By UNCTAD: The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. The United States are involved in 183 cases as Home State of claimant and in 17 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: USA has been a member since its creation.
The MIGA website gives a detailed description of all the guarantees it proposes.

Country Comparison For the Protection of Investors	United States	OECD	Germany
Index of Transaction Transparency*	7.0	6.5	5.0
Index of Manager’s Responsibility**	9.0	5.3	5.0
Index of Shareholders’ Power***	9.0	7.3	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: Guaranteed
Acquisition of Holdings: A majority holding interest in stock of a local company is legal in the U.S. There are no restrictions per se on the transfer of shares to a foreign investor, however, there are a number of situations in which the US Government may deny or restrict such investments by foreign persons for reasons of national security.
The Committee on Foreign Investment in the United States (CFIUS) is responsible for examining the national security implications of acquisitions or investments in a US company by foreign persons and may block or cancel such transactions when they threaten US national security. CFIUS audits only cover acquisitions or investments involving the transfer of control of a US company to a foreign entity.
Obligation to Declare: The reference text for foreign investments is the International Investment Survey Act of 1976, although each state has its own regulations on foreign direct investments.
Competent Organisation For the Declaration: International Trade Administration
Requests For Specific Authorisations: Investments are governed by sector specific policies and procedures. There are limits on foreign investment in certain industries believed to affect national security, including: shipping, aircraft, banking, energy, communications and media and government contracting.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Regulation of land ownership is primarily an area of state concern. It is possible to rent office space by the day or by the hour. See for example Regus or Instant Offices.
The Possibility of Buying Land and Industrial and Commercial Buildings: In general there are no restrictions on foreign ownership or occupation of property. However, there are certain tax withholding requirements for US real estate dispositions by a foreign person.
Risk of Expropriation: In the United States, the right for the government to take private real or personal property predates the constitution and goes back to English Common Law. This right was implicitly recognized in the Fifth Amendment to the U.S. Constitution in 1791. In general, expropriation by the government must comply with the standards of international law, which means that expropriation must be carried out for a public purpose. The act must be non-discriminatory, legally enforceable and subject to the payment of prompt, adequate and effective compensation.

Investment Aid

Forms of Aid

At a federal and state level, foreign investors may be granted funding allowances such as long-term subsidised loans. In order to encourage new businesses in their territories, the states have started a competitive battle aimed at offering investors the best services and advantages possible. The main types of programs in the United States are tax credit, grant, loan and tax exception.
Foreign companies can benefit from aid, granted by three federal agencies:

The EDA (Economic Development Administration) offers long term loans, with preferential rates for projects of creation and of activity extension leading to new immobilisations and jobs creation.
The Small Business Administration (SBA) offers guarantees for loans contracted by SME and can finance plants construction or material purchase by mid and long term loans.
The Rural Development (depending on the Ministry of Agriculture - USDA) can guarantee up to 90% of the loans granted to commercial companies that create jobs in rural zones.

Privileged Domains

Grants, reductions, exemptions, loan facilities.

Privileged Geographical Zones

Clean and renewable energy, environment, fishing, rural development, research and new technology.

Free-trade zones

Foreign Trade Zones (FTZs) are designated locations in the United States where businesses can enjoy reduced duty and customs-related costs. There are approximately 250 FTZs and over 500 foreign trade subzones across the United States, and the value of merchandise handled by FTZs exceeds $640 billion.

Public aid and funding organisations

Various organisations, including the Economic Development Administration (EDA), the Small Business Administration (SBA), and the Rural Development Office (under the Ministry of Agriculture - USDA).

Investment Opportunities

The Key Sectors of the National Economy: Biotechnology, high technology, telecommunications and information and communication technologies, aerospace industry, automobile, chemical industry, real estate, food-processing industry, hydrocarbons (especially shale gas exploitation), agriculture, financial sector, pharmaceutical industry, consumer goods, logistics, tool machine, cultural industry, medical technology, finance and insurance.
High Potential Sectors: Renewable energy, environmental technologies, semi-conductor device industry.
Privatization Programmes: With Biden's victory in the presidential elections in November 2020, there should be no forthcoming privatisation of industrial sectors.
Tenders, Projects and Public Procurement: SAM.gov, U.S. Federal Government Procurement
Tenders Info, Tenders in United States
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Energy, defence, alcoholic beverages sale.

Finding Assistance For Further Information

Investment Aid Agency: Select USA (U.S. government-wide program led by the U.S. Department of Commerce)
Invest in America (International Trade Administration - U.S. Government Body)
Other Useful Resources: Economic Development Administration (EDA)
Doing Business Guides: Doing business in the United States (Hogan Lovells Guide)
Doing Business in the United States (PwC Guide)
Global tax guide to doing business in the United States (Dentons)

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