Those navigating the federal restrictions on foreign investment administered by the Committee on Foreign Investment in the United States (CFIUS) must contend with yet another dynamic: possible state restrictions. With respect to agricultural lands, and farmlands in particular, notable recent developments, such as the Fufeng Group controversy in North Dakota last year, have highlighted the growing concerns among state—and federal—lawmakers about foreign acquisition of potentially sensitive U.S. land.
The recent purchase of land in North Dakota by Fufeng Group Limited (Fufeng Group) exemplifies a growing trend in potential legislative action regarding foreign ownership interests in certain U.S. real property. This, along with cybersecurity, sensitive data, and advanced software, is an area to watch in 2023.
Fufeng Group Controversy in North Dakota
In November 2021, the Fufeng Group, a company with majority Chinese ownership, announced plans to establish its first U.S.-based wet corn mill plant in Grand Forks, North Dakota by purchasing approximately 300 acres of land for $2.3 million. The proposed plant was to be located near the Grand Forks Air Force Base military installation. It was the latest in a string of significant investments in the U.S. agricultural sector by Chinese interests. For example, in 2013, WH Group, led by Chinese billionaire Wan Long, successfully acquired Smithfield Foods, the formerly U.S.-owned company known for its production of pork. Additionally, the Xinjiang-based real estate tycoon Sun Guangxin, who reportedly has ties with the Chinese Communist Party, purchased roughly 140,000 acres in Val Verde, Texas near Laughlin Air Force Base in 2021. Given the growing volume of foreign interests purchasing U.S. agricultural lands within the last decade and the increasingly strained relations between the United States and China, the proposed Fufeng Group project provoked lengthy debate about the nexus between national security and U.S. farmlands.
Senators John Hoeven (R-ND) and Kevin Cramer (R-ND) openly discouraged the local government of Grand Forks from moving forward with the project and called for CFIUS and other relevant federal agencies to review the proposed project. After conducting a review, CFIUS concluded in December 2022 that it lacked jurisdiction to review the proposed land acquisition because the acquisition did not constitute a "covered transaction" pursuant to the CFIUS Regulations (31 C.F.R. Part 800). In response, local government officials in Grand Forks lifted the holds on Fufeng Group-related infrastructure projects.
But that was not the end of the matter. While the United States Department of the Air Force (DAF) originally declined to issue an official stance on the controversial corn meal plant project until CFIUS finalized its assessment, in January 2023, DAF released its decision. Notwithstanding CFIUS's finding that it lacked jurisdiction, DAF stated that "the Department's view is unambiguous: the proposed project presents a significant threat to national security with both near- and long-term risks of significant impacts to our operations in the area." Following DAF's official statement, officials in Grand Forks, North Dakota ultimately voted to strike down the proposed corn mill and the city denied Fufeng Group's requests for infrastructure and building permits.
Current Federal Reporting Requirements for Foreign Ownership of U.S. Farmlands
Despite the growing concerns over foreign ownership of U.S. agricultural foreign lands, no federal restrictions on foreign acquisitions, other than those administered by CFIUS, exist—yet. Notably, however, foreign owners are required to disclose information related to their ownership of U.S. agricultural lands to the U.S. Department of Agriculture (USDA), Farm Service Agency, as mandated by the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA). Failure to disclose the information may result in penalties and fines.
In the 117th Congress, federal lawmakers explored various legislative proposals, including expansion of AFIDA reporting requirements, requirements for USDA certification of foreign agricultural landholders, expansion of federal review of foreign investments in the U.S. agricultural sector, and restrictions on foreign ownership by certain countries. These legislative proposals are expected to be taken up by the current Congress, particularly given the Fufeng Group controversy.
Possible State Restrictions on Foreign Ownership of Farmlands
To the extent that federal lawmakers do not act (or perhaps despite additional federal legislation), U.S. states appear to be moving quickly into this space. Certain states and localities already restrict or impose reporting obligations with respect to foreign ownership of U.S. farmlands. These requirements vary from state to state. Other states are considering the same. For example, in 2021, Alabama considered Senate Bill (S.B.) 14, which would limit agricultural land ownership to U.S. citizens and resident aliens. California's proposed S.B. 1084 would prohibit foreign governments from holding controlling interest in U.S. agricultural lands and would require the California Department of Foods and Agriculture to publish an annual report that covered trends in foreign ownership of agricultural lands. State legislative initiatives like these may be revisited and existing restrictions may grow, particularly in light of the recent national discussion on the topic.
With renewed and growing concerns regarding foreign ownership of U.S. agricultural lands, new state and congressional legislative proposals may reemerge to further restrict foreign ownership and investment in the United States. This is an evolving area that Venable's International Trade and Logistics Group is monitoring closely. If you have questions as to how this may impact your business or investment opportunities, please contact us to discuss.
 Flannery, R., "China's WH Group to Sell Smithfield Seasoning Business to Solina for $587 Million," Forbes (Oct. 3, 2022), available at https://www.forbes.com/sites/russellflannery/2022/10/03/chinas-wh-group-to-sell-smithfield-seasoning-business-to-solina-for-587-million/?sh=7807af1948c0.
 Hyatt, J., "Why a Secretive Chinese Billionaire Bought 140,000 Acres of Land in Texas," Forbes (Aug. 9, 2021), available at https://www.forbes.com/sites/johnhyatt/2021/08/09/why-a-secretive-chinese-billionaire-bought-140000-acres-of-land-in-texas/?sh=73ecc2d478c3.
 Nelson, T., "Fufeng USA Looking to Move Ahead with Grand Forks Project After Federal Agency Review Suddenly Ends," KVRR News (Dec. 13, 2022), available at https://www.kvrr.com/2022/12/13/fufeng-usa-looking-to-move-ahead-with-grand-forks-project-after-federal-agency-review-suddenly-ends/; see also 31 C.F.R. § 800.213 (defining "covered transaction").
 Abergast, M., "Spokesperson says Air Force held off on official Fufeng stance CFIUS assessed risk," Grand Forks Herald (Feb. 6, 2023), available at https://news.yahoo.com/spokesperson-says-air-force-held-013700906.html.
 Department of the Air Force Fufeng Group Letter (Jan. 27, 2023), available at https://www.hoeven.senate.gov/imo/media/doc/USAIRFORCE-FUFENG-LETTER-HOEVEN.pdf
 Norman, G., "Chinese company's North Dakota corn mill project struck down by Grand Forks, prompting cheers of 'USA!'" Fox Business (Feb. 7, 2023), available at https://www.foxbusiness.com/economy/china-fufeng-north-dakota-corn-mill-project-halted-grand-forks-city-council.
 Pub. L. 95-460, 7 U.S.C. 3501-3508.
 Spellman., N., and Brown, M., "Statutes Regulating Ownership of Agricultural Land," The National Agricultural Law Center (last accessed on Feb. 15, 2023), available at https://nationalaglawcenter.org/state-compilations/aglandownership/.
 Brown, M., "State Proposals on Restricting Foreign Ownership of Farmland: Part One," The National Agricultural Law Center (last accessed on Feb. 15, 2023), available at https://nationalaglawcenter.org/state-proposals-on-restricting-foreign-ownership-of-farmland-part-one/.