The US has a fundamentally open economy with low barriers of entry for non-US investors. As the US is a “developed” nation pursuant to the WTO, it does not restrict investment by sector, and there is no equivalent to China's Foreign Investment Industrial Guidance Catalogue (外商投资产业指导目录), which categorises investment into sectors as either encouraged, permitted, restricted or prohibited to foreign investment. In mid-2012 the US Department of Commerce launched SelectUSA, a federal program designed to attract, retain and expand foreign investment in the US. The program targets 18 key sectors in which the US aims to attract investment: aerospace, education, energy, media and entertainment, pharmaceuticals, travel, tourism and hospitality. The US is very supportive of “Greenfield” investments, where a foreign investor constructs new operational facilities from the ground up, creating new long-term jobs in the US.

b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?

The US upholds a longstanding open investment policy, and continues to be the largest recipient of foreign investment in the world. The government system is broken down into federal, state and local county levels, so Chinese investors can expect potential regulatory processes at each level. Currently, the SelectUSA federal program is the largest driving force responsible for Chinese outbound investment into the US. However, many city and state government officials have taken the lead in attracting Chinese investment as well by creating independent state-funded programs.

Section 2: Investment vehicles

a. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?

How a Chinese investor structures its legal entities and long-term operations in the US effectively defines how it will be taxed, and thus the decision can have a significant impact on profitability. US regulations generally allow businesses to choose a classification as a corporation, partnership or flow-through entities, unincorporated branches, and limited liability companies (LLCs).

Chinese investment into the US is typically structured through the use of a special purpose vehicle (SPV), which is often domiciled offshore in a tax-friendly intermediary jurisdiction. A standard SPV setup may only take two to three weeks; however, before a Chinese company is permitted to conduct outbound investment, it may need to obtain approvals from Chinese government regulatory bodies, such as the State Administration of Foreign Exchange (SAFE) and/or the National Development and Reform Commission (NDRC), as well as at provincial levels, which can take anywhere from two to eight months, depending on the company's industry, size and nature of the outbound investment and other conditions. Not all Chinese companies require approval from these Chinese regulators to conduct outbound investment.

Assuming there are no regulatory hold-ups in the US, the establishment of an LLC, which is typically the entity of choice, can take one to two months, after which a business can become operational with a functional bank account and a federal and state tax identification number.

b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?

Investors must complete basic establishment requirements in the selected SPV's jurisdiction and comply with charter documents such as the company's memorandum of association, articles of association, appointment of directors, and capital investment amount. Most importantly and often times difficult, however, is the opening of a bank account for the SPV. Requirements such as Anti-Money Laundering (AML) compliance and Know Your Customer (KYC) analysis to ensure anti-bribery compliance can slow a company down from opening a bank account, and thus establishing an SPV. Global banking is highly regulated, especially for Chinese-sourced money.

Investors may also be impacted by China's proposed draft PRC Foreign Investment Law, released by the Ministry of Commerce (MOFCOM) on January 19 2015. In particular, if a Chinese investor utilises an SPV and subsequently reinvests funds into China, the investor may be subject to a review by MOFCOM and may need to demonstrate Chinese citizenship or that the SPV is Chinese-controlled. If unable to present such proof, the reinvestment into China may face similar industry and foreign exchange restrictions as those faced by foreign corporations. Investors should take this into account while planning their long-term strategy, if the law goes into effect.

Section 3: Investment approval

a. For foreign investment approval (including any national security review) explain the approval process and timing.

When investing in or acquiring business assets in the US, a Chinese investor should be aware of two major approvals that may be necessary, depending on the nature of the investment – CFIUS and merger control review (see 3c).

Established in 1975, CFIUS is an inter-agency committee of the US government that is made up of representatives from federal agencies and offices. CFIUS establishes the process for reviewing the national security impact of foreign acquisitions, joint ventures, and certain investments into US-located businesses.

The CFIUS notification process is entirely voluntary and has no mandatory waiting period before a transaction can close. Investors should assess whether or not their transaction could elicit national security review, because if an investigation is undertaken post-closing, it could potentially result in the entire transaction being shut down and the necessity to unwind the transaction.

CFIUS timing and review procedures is as follows:

• Initial Review Period – 30 days

• Investigation Period – 45 days

• Presidential Review Period – 15 days

b. Briefly explain the investment restrictions for any specially regulated/restricted sectors (natural resources, financial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors.

While the United States has a general policy of openness to foreign investment, it does restrict foreign investment in certain circumstances. These include, for example, transportation, aircraft, shipping, communication and energy, as well as certain licensed businesses, such as banking and insurance. Restrictions are often in relation to ownership rules, such as restricting the percentage of foreign ownership in a business in a certain sector.

c. Which authority oversees competition clearance, when is notification mandatory, and what is the merger clearance process (including whether pre- or post-closing)?

Under US antitrust law and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have the authority to review proposed transactions that can affect competition in the US and are over a certain size, though certain exemptions apply. Both agencies can block deals that they believe would lessen competition, give the newly merged company the ability to raise prices above competitive levels or decrease quality or output below competitive levels. Prior to completing certain mergers, joint ventures, tender offers, stock or asset acquisitions or exclusive license, both parties must file a “Premerger Notification Report Form” with the FTC and DOJ and observe a statutory waiting period (usually 30 days) before closing, unless the FTC or DOJ challenge the deal. A premerger notification is only required if the transaction meets both the “size of person” and “size of transaction” thresholds, which are updated annually.

d. Are there any unique processes that potentially could block a foreign investment, e.g. consent from labour unions?

Other than the CFIUS review (see 3a) and merger review (see 3c), there are no other major processes that could potentially block foreign investment into the US.

e. Are there approval requirements when a foreign investor increases or exits its investments?

Increasing or exiting investments generally do not require approvals, unless the investment is in restricted sectors (see 3b) or an increase in investment triggers CFIUS review or merger review (see 3c).

Section 4: Tax and grants

a. Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country?

The United States has one of the most complex tax codes in the world. Interestingly, the US tax laws are very similar to China's tax laws. Typically Chinese investors set-up tax-efficient structures by way of an SPV in an offshore tax-friendly jurisdiction, such as the British Virgin Islands or Cayman Islands (see 2a). Additionally, due to the favourable tax treaties between Mainland China and Hong Kong under the Closer Economic Partnership Arrangement of 2003 (CEPA), many Chinese investors will also establish a Hong Kong company as part of their offshore investment structure.

b. What are the applicable rates of corporate tax and withholding tax on dividends?

The corporate income tax rate in the US varies between 15% and 35%. The rate on the highest income bracket of corporations is 35%, and then state and local governments may also impose income taxes ranging from 0% to 12%. US tax law requires withholding tax for non-US persons (non-resident aliens) at a rate of 30% on payments of US source stock dividends, short-term capital gain distributions and substitute payments in lieu.

c. Does the government have any FDI tax incentive schemes in place?

The US government offers significant opportunities and tax incentive schemes for foreign investors. “Greenfield” investments often qualify for subsidised loans and other tax incentives from federal, state, and local governments. Tax incentives, financial and managerial assistance are also available to small businesses and entrepreneurs through the Small Business Administration (SBA). Various states and cities promote tax incentive schemes for certain types of business investments.

d. Other than through the tax system, does the government provide any other financial support to FDI investors? If so, please provide an overview.

The federal government provides government loans and grants to small businesses through the SBA, which are available to foreign investors.

e. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors?

There are no meaningful reciprocal tax arrangements between the US and China from a foreign investment perspective, thus Chinese investors are advised to establish cross-border entity structures that take advantage of alternative tax-friendly jurisdictions (see 2ab).

Section 5: Forex controls and local operations

a. What foreign currency or exchange restrictions should foreign investors be aware of?

The US does not impose any foreign currency or exchange restrictions. The US has rigorous banking rules that impose withholding obligations from time to time and all Chinese investors must at all times comply with anti-money laundering rules.

b. Are there any legal restrictions on bringing in foreign workers and how difficult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice?

Visitors and workers from China must apply for a visa to enter the US. Visas are not difficult to obtain as long as proper procedures are followed. Applicants must show that they qualify under provisions of the Immigration and Nationality Act, must have legitimate reasons to travel and must not have a criminal record.

Section 6: Dispute resolution

a. Does your jurisdiction have a bilateral investment protection treaty with China or other jurisdictions commonly used for investing into the country?

The US does not have a bilateral investment treaty (BIT) with China, though it does have BITs in force with 48 other nations. Investments from China are not typically structured through these other BIT nations; however, depending on the type of investment and complexity of the investor structure, there may be advantages provided by a BIT nation.

b. How efficient are local courts' enforcement and dispute resolution proceedings, and are there any procedural idiosyncrasies foreign investors must be aware of?

Dispute resolution in local courts is not very efficient (in terms of timing) and can become costly, especially in comparison to China, as attorney costs are generally much higher in the US. Chinese investors should be aware that rules with respect to damage and evidence are quite different in the US. Damages can include actual, consequential and possibly punitive damages.

Chinese investors should also know that litigation legal fees are relatively expensive.

c. Do local courts respect foreign judgments and are international arbitration awards enforceable?

The US and China are both members of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention), therefore international judgments and arbitration awards are recognised and enforced as long as they are not against public policy and local law.

d. Are local judgments and arbitration awards from your jurisdiction generally enforceable in other jurisdictions?

As a member of the New York Convention, US judgments and arbitration awards are enforceable in all 152 member states of the Convention, and only about 40 nations have not adopted the Convention.

Author biography

Rocky T. Lee

Rocky T. Lee is the Asia managing partner and the head of Cadwalader's Greater China corporate practice. With a broad practice in China outbound mergers & acquisitions, private equity and venture capital, foreign exchange and antitrust law matters, Rocky is widely recognised as one of the top China-US legal advisors. He has particular expertise in China's “restricted industries” such as internet, technology, banking, funds, e-commerce, education, energy, financial services, healthcare, media and entertainment, publishing and telecommunications. He is highly regarded for his knowledge of the complex regulations governing foreign investment in China, foreign exchange, and cross-border transaction structuring.

Rocky represents Chinese state-owned enterprises, multinationals, financial institutions, hedge funds, private equity funds, and public and private companies in complex-cross border transactions. In addition, he regularly provides legal advice for a number of public and private companies in a variety of areas, including contractual negotiation, financial structuring, corporate governance, and other general legal matters. He has also served as special counsel to independent directors committees in complex mergers and contested going-private transactions and leveraged buyouts.

He is consistently listed as one of the top lawyers in both China and the US. His team was awarded Law Firm of the Year in Private Equity & Venture Capital 2014 and twice awarded Deal of the Year 2014 by China Business Law Journal and Asian﹣MENA Counsel. Rocky was included as the US Best Lawyers Advisory Board's sole “China Expert” in 2013. Chambers Asia has listed Rocky as a “Band 1 Leading Lawyer” (the highest possible ranking) for four years. Top Capital awarded Rocky “Best Legal Counsel of Investment Institutions” and “Counselor of the Year in Venture Capital and Private Equity” numerous times.

Rocky is admitted to practise in California, and is fluent in Mandarin Chinese and English.

美国

李大诚

Cadwalader, Wickersham & Taft LLP

第一节：中国境外投资

1. 您国家吸引中国境外投资或您政府有意吸引中国境外投资的主要有哪些行业？

美国本身是一个经济开放的国家，给外国到美投资设立的门坎很低。世界贸易组织把美国定为“发达”国家，所以美国并不就外商投资的产业进行限制，而且也没有类似中国的“外商投资产业指导目录”把外商投资的产业划分为鼓励、允许、限制或禁止类。在2012年中段，美国商务部动了名为“选择美国”的一个联邦项目，意在吸引、保持和扩大到美投资的外商。该项目瞄准了18个美国想要吸引外资的重点产业：航空航天工业、教育、能源、媒体与娱乐、医药和旅游。另外，美国相对比较支持“绿地”投资，也就是由外国投资者从无到有地彻底建造一个新的运营实体，比如公司、工厂，这样可以为美国创造更多新的长期工作机会。

2. 政府一般支持中国境外投资吗？在您国家，哪些政府或地方机构负责推动中国境外投资？

美国贯彻的是一个长期稳定且开放的投资政策，而且美国一直是全球接纳外商投资最多的国家。但在政治体制方面美国和中国截然不同，美国政府系统不是像中国的单一制国家结构形式，而是分为联邦、州和地级县三级，来到美国的中国投资者需要遵守每一级政府的法规和规章。就主导外商投资的机关，目前，“选择美国”联邦项目是推动中国投资者到美投资的最主要机制，并没有某一个政府部门专门推动外商投资。不过，在市和州政府一级，很多市、州政府也在通过设立各自辖区内独立的推动外商投资的项目来吸引中国投资者。

第二节：投资工具

1. 您国家最常用于中国境外投资的法人实体和工具有哪些？要多久才可营运？

中国投资者如何设计投资模式和长期在美的运营模式与其需要缴纳的税是息息相关的，也就意味