INDIANAPOLIS, Ind.—Concerns about companies and investors from the People’s Republic of China (PRC) purchasing farmland in the United States prompted lawmakers in 35 states to consider bills in 2023 calling for restrictions or reviews of regulatory policies regarding foreign land ownership.
Right now, no federal laws address corporations or individuals from other countries buying agricultural land in the United States, while 24 states have varied statutes related to foreign ownership of land.
But that could change soon. In July, the Senate voted 91–7 to include the proposed Promoting Agriculture Safeguards and Security Act, or PASS Act, as an amendment to the National Defense Authorization Act (NDAA), the annual defense budget.
The measure, introduced by Sens. Jon Tester (D-Mont.) and Mike Rounds (R-S.D.), would prohibit businesses or individuals from China, Iran, North Korea, and Russia from purchasing agricultural land in the United States.
Adopting the measure would provide clarity for the 26 states without laws addressing foreign land ownership.
However, the proposed federal bill only applies to entities from the four “adversary” nations, is specific to farmland, and doesn’t address renting or leasing of land, state lawmakers said during an Aug. 14 presentation at the National Conference of State Legislatures (NCSL) 2023 Legislative Summit at the Indiana Convention Center in Indianapolis.
The annual NCSL Summit draws more than 5,000 state lawmakers, legislative staff, lobbyists, nonprofit advocates, and agency representatives from all 50 states and territories. The three-day event concludes on Aug. 16.
As of 2021, corporations and individuals from 109 countries own more than 40 million acres of agricultural land in the United States, according to the U.S. Department of Agriculture (USDA).
PRC companies and investors own about 384,000 acres of that farmland, ranking 18th among nations—behind Cayman Islands—with investors in United States agricultural lands, which includes forests within that description.
Canadians, by far, own the most, 12.845 million acres with the Dutch next at 4.875 million acres.
Texas Law A Blueprint
Montana Senate President Pro Tem Sen. Ken Bogner (R-Miles) said a query from a landowner who could not ascertain the buyer of 370 acres of farmland near his property, which is 12 miles from Grand Forks Air Force Base across the state line in North Dakota, prompted him to look into the acquisition as a constituent courtesy.“I thought maybe he was just a nosey neighbor,” Mr. Bogner said during an Aug. 14 presentation, “Land Grab: The Latest on Foreign Ownership of U.S. Land,” that he moderated with three panelists.
Turns out, the land was bought by the Chinese company Fufeng Group in 2022 with plans to build a $700 million corn-milling plant that it promised would deliver more than 200 local direct jobs.
The proposed wind farm would feature turbines up to 700 feet tall. Some feared those turbines could be used to eavesdrop on and monitor activities at Laughlin Air Base less than 70 miles away.
Mr. Bogner said a proposed 2023 Texas bill that builds on the 2021 law sought to ban anyone or anything affiliated with China, Iran, North Korea, and Russia from acquiring title to property in Texas.
The Texas bill, which ultimately died in the House after being adopted by the Senate, was among his inspirations in filing SB 203 to prohibit foreign “adversaries” from buying, leasing, or renting land near or deemed “critical infrastructure” and agricultural land in Montana.
“I introduced the bill the last week of January. Less than a week later, there was a Chinese spy balloon that got everyone to pay attention to what was going on with foreign adversaries in our country and what they were doing,” Mr. Bogner said.
Murky ‘Follow-The-Money’ Trail
Indeed, agreed panelist Micah Brown, a staff attorney with the National Agricultural Law Center, noting there were bills addressing foreign land ownership in 35 states with “a heat map” of legislation across southern states.Mr. Brown said while USDA data documents that 40 million acres of agricultural land was opened by non-American citizens in 2021, in the past two years at least 14 million additional acres of United States farmland has been purchased by foreign companies and investors.
But there are issues with these laws “because there’s so much that goes into this issue,” he said, with states adopting legislation that define “agricultural land” and “farming” differently, some restricting different types of foreign investors, some capping the acreage foreign purchasers can acquire, some prohibiting purchases of different types of land but not others, and some states creating “a newly enacted research agency” to track land purchases in anticipation of adopting laws in future sessions.
The PASS Act inserted as an amendment in the proposed defense budget would help in clarifying definitions, panelists and state lawmakers agreed.
The measure amends the 1950 Defense Protection Act to add agriculture as an industry the Committee on Foreign Investment in the United States (CFIUS) must consider when determining if a transaction presents a threat to national security.
It would also enroll USDA as a standing CFIUS member.
Panelist Zoe Liu, a Council on Foreign Relations Fellow, said the “aggregate level” of foreign-owned farmland in the United States is about 3 percent of the nation’s agricultural land with investors from China owning less than 1 percent of those 40 million acres.
“Foreign ownership of American farmland is actually very small,” she said. “Despite this small amount of ownership, it has been controversial.”
Ms. Liu cited two reasons. The first is “we are concerned in the United States that Chinese ownership may impact our food supply chains and our energy supply chain,” she said. “And secondly, we’re also concerned that the Chinese government may, through Chinese companies … gain access to not just our assets, our physical assets, but also sensitive information.”
Born in China and a naturalized United States citizen, Ms. Liu said the PRC has been aggressively pursuing “self-sufficiency” from technology to food security for years, especially over the past decade.
She said PRC leader Xi Jinping’s policy is defined by one sentence: “The Chinese people’s rice bowls must be held firmly with the Chinese people” to ensure they can feed themselves independent of any other nation.
Ms. Liu, noting China’s post-pandemic economy is struggling with a 21 percent unemployment rate—more than double its usual jobless rate—said since 2016, the general pattern of United States land acquisition by Chinese companies and investors has changed.
There’s been more “joint investments with a local organization” or national “prestigious groups,” making it difficult to determine “who actually sponsored the investment” and “to follow the money,” she said.
One solution would be to adopt a “Know Your Customer” rule similar to the one used by the Financial Industry Regulatory Authority (FINRA), a non-government corporation regulates member brokerage firms and exchange markets.
The rule states: “Every member shall use reasonable diligence, in regard to the opening and maintenance of every account, to know [and retain] the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer.”
State Lawmakers: PASS Act Not Adequate
State lawmakers said the proposed federal PASS Act still leaves them with many vagaries to deal with. For instance, several noted, there are no federal policies regarding foreign ownership of residential properties.Colorado Rep. Junie Joseph (D-Boulder City) said there are concerns about buyers from China buying homes near military bases and critical infrastructure in her state, which does not have any laws addressing foreign land ownership.
“There is a bill that we are looking at bringing next year and I’m hoping that we will be able to get some bipartisan support—this is a national security issue,” she said, adding that Congress needs to take the lead in fleshing out a “national policy around this as well, as opposed to just leaving it to states. So, why is the federal government not taking this on?”
Panelist Dan Burke, who is the U.S. Air Force Foreign Investment Risk Review director, said from ‘the Air Force perspective,” all land acquisitions around an air base are subject to a review based on proximity as part of CFIUS.
He would not elaborate on what those proximity standards are and what land acquisitions his office are looking at, but noted he’s been to Grand Forks, North Dakota, four times in recent months “and I just got back from a trip to Colorado.”
Arizona Rep. John Kavanaugh (R-Fountain Hills) said the proposed federal law also doesn’t deal with foreign owners who lease or rent land, or with potential issues created by buyers from nations that are not identified as “adversaries.”
“We have a big controversy currently in Arizona about a foreign entity, a business that is renting farmland in southern Arizona for the purpose of growing alfalfa, which they are shipping back to Saudi Arabia because they don’t allow alfalfa farming because it’s so water intensive,” he said.
“And it’s a controversy because they’re pumping water from an aquifer which is a ‘transfer aquifer,’ which is supposed to be used by other parts of the state.”
Mr. Kavanaugh said not including rented or leased land leaves a large loophole that can be exploited by foreign owners with no long-term interest in the land.
“I’m curious as to what is the rationale that the states have in apparently saying ‘You can’t own it, but you can rent it and you can deplete resources.’ water or minerals,” he said. “What is the rationale behind these laws?”
Mr. Bogner said Montana’s new law also prohibits foreign rentals of land and Mr. Burke said the military is “working with [CFIUS] to close some significant gaps in current regulations,” including leasing.
Nebraska Sen. Myron Dorn (R-Adams) said lawmakers in his state have questions about how they can impose expanded restrictions without “grandfathering in” existing foreign land ownership.
Federal Suit Challenges Florida Law
The first legal test could come in Florida.The litigants were joined by the U.S. Department of Justice, which maintains SB 264 imposes “discriminatory prohibitions on the ownership and purchase of real property based on race, ethnicity, alienage and national origin—and imposes especially draconian restrictions on people from China.”
U.S. District Judge Allen Winsor listened to two hours of arguments from plaintiffs seeking an emergency motion for a preliminary injunction suspending implementation of the law while it is debated in court.
As of Aug. 15, Judge Winsor has not issued a ruling on the motion and no date has been set for subsequent proceedings in the case.
