On October 17, 2023, Arkansas became the first state to enforce a state law banning certain foreign entities from owning agricultural land (doing so under Act 636, which blocks “prohibited foreign-party-controlled business” from owning public or private land directly or through affiliation). Arkansas Attorney General, Tim Griffin ordered Syngenta Seeds LLC. to sell 160 acres (65 hectares) of farmland because the business is owned by Sinochem Holdings Corporation, a Chinese “state-owned enterprise.” Additionally, the company’s subsidiary was fined $280,00 in civil penalties because Syngenta failed to register as a foreign agricultural landowner under Arkansas Act 1046, Arkansas’ state analog to the federal Agricultural Foreign Investment Disclosure Act (AFIDA).
The enactment of state laws to restrict foreign ownership of agricultural land is on the rise – potentially due to concerns over national security. Currently, there are approximately twenty-five (25) states, like Arkansas, that, in at least some circumstances, forbid or limit nonresident aliens, foreign business entities, and/or foreign governments from acquiring or owning an interest in private agricultural land within their state. This year alone, twelve (12) states have either enacted or amended laws restricting foreign investments in state land.
Enforcement also varies between state laws. While some state laws contain provisions that assign enforcement authority to the state’s attorney general or “a district attorney of the county where the foreign-owned land is located,” other states provide private enforcement or prescribe civil (monetary) penalties for noncompliance with its foreign ownership law. Arkansas will likely not be the last state to enforce such regulations – Based on recent trends, political tensions, and what is happening in Arkansas, it appears most enforcement concerns may come with a connection to Chinese ownership.
From a Federal perspective, while there is currently no specific Federal law restricting foreign land acquisition or ownership, the U.S. Department of Agriculture monitors and reports on certain foreign land ownership through AFIDA, which was enacted in 1978. AFIDA, among other things, currently establishes a nationwide system for collecting (generally through an FSA -153 report) select information and disclosures regarding foreign investments and ownership of agricultural land in the U.S. Under AFIDA, “[a]ny foreign person who acquires or transfers any interest…in agricultural land” is required to disclose their transaction. For the purposes of AFIDA, land sales, as well as leases longer than 10 years must be reported. In recent years, USDA has taken enforcement action against foreign-owned wind and solar energy projects that failed to notify USDA of their long-term leases on agricultural land. AFIDA permits USDA to seek civil penalties of up to 25% of the value of the foreign owner’s interest in an agricultural property. OFW Law has represented and advised several renewable energy projects on AFIDA compliance.
The information collected is then compiled into an annual public report on the amount of agricultural land owned by foreign entities. During the 118th Congress alone, there have been multiple proposals introduced seeking to amend certain provisions of AFIDA, such as the definitions and the penalty provisions.
In 2021, the USDA reported that foreign investors held about 40 million acres of U.S. agricultural land (about 3% total). We suspect we will see additional developments on both the state and Federal levels surrounding foreign ownership of agricultural land.
***
We hope this proved useful. If you have any questions or would like additional information, please contact Kyla Kaplan (kkaplan@ofwlaw.com).