US officials are currently investigating flaws in the national-security review process after an uneasy compromise to allow DuPont to sell its sustainable-materials business to a Chinese company, while ensuring that the technology behind it remained in the US. It is reported that the arrangement did not work as planned, exposing vulnerabilities in the battle over technology between the US and China and prompting an FBI investigation.
The review process, conducted by a cabinet-level committee responsible for screening sensitive deals with foreign buyers, took over a year to reach a decision due to divisions among committee members. Despite an unsuccessful appeal for President Biden’s intervention, a solution was reached, only to be undermined shortly after implementation.
The technology in question is related to a DuPont invention used to create a more sustainable version of nylon. After deciding to sell the business, DuPont found a buyer in China and sought approval from the Committee on Foreign Investment in the US (Cfius), which is led by the Treasury Department. However, the Cfius members had differing opinions on how to proceed.
The disagreement stemmed from a US intelligence assessment that byproducts from one of DuPont’s manufacturing processes could potentially be used as a high-quality base for fuel in cutting-edge weapons. This raised concerns over China’s military expansionism. Defense Secretary Lloyd Austin argued against the deal, while Treasury Secretary Janet Yellen and others disagreed, considering the concerns to be too abstract and a form of market interference.
A complex compromise was eventually reached, leading to the approval of the sale in May 2022. However, it was soon discovered that Cfius’ efforts to protect the industrial secret had failed. The investigation into what went wrong is still ongoing.
The Biden administration has identified the Cfius process as crucial in countering China and reshaping the US economy away from dependence on the second-largest economy. In addition to the DuPont case, the administration has also recently banned US investments in certain Chinese semiconductor and quantum-computing companies.
DuPont, a historic US company known for its inventions such as nylon and Kevlar, started as a gunpowder seller for figures like Thomas Jefferson. The company is now under scrutiny as the investigation continues.