Publications

On August 9, 2023, the Biden Administration finally issued a long-anticipated Executive Order targeting outbound investments in sensitive sectors in China, Macau and Hong Kong.  The same day, the Treasury Department (“Treasury”) issued a corresponding Advance Notice of Proposed Rulemaking (“the ANPRM” or “Proposed Rule”) describing the contours of proposed implementing regulations.^[1]

The EO, entitled “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern” (“the Outbound Investment EO” or “EO”),^[2] directs Treasury to issue regulations requiring “United States persons” to refrain from some, and provide notification of other, investments involving parties associated with China, Hong Kong, or Macau, and engaged in certain activities related to advanced semiconductors, supercomputers, quantum computers/sensors/networks/communications and artificial intelligence (AI).  If finalized in their current form, the EO and implementing regulations will primarily affect U.S. person investors, joint venturers, and debt financiers, but will also reach foreign entities owned 50 percent or more by U.S. persons, and foreign entities engaged in investments “knowingly directed” by U.S. persons.  Consequences of non-compliance could be severe, including voiding of improper investments, civil financial penalties exceeding $350,000 or twice the value of the investment, or criminal penalties and jail time for willful violations.

The ANPRM invites industry input on over 80 questions regarding the scope of the proposed regulations. Relevant comments outside the scope of the questions are also invited.  The Proposed Rule has potentially very significant consequences for U.S. outbound investment, and industry should take advantage of the opportunity to inform Treasury’s thinking on the issue and formulation of the final rule.  Feedback on the Proposed Rule must be submitted within 45 days of the official publication of the ANPRM in the Federal Register – i.e., by September 28, 2023.  Electronic submission via https://www.regulations.gov is encouraged, although submission by mail is also possible.  Important instructions for preserving the confidentiality of any business confidential information including in comments are set out in the ANPRM and should be carefully reviewed. 

In the following pages, we first provide a bottom line on the types of investments that would be subject to regulation if the Proposed Rule were to become final as written. We then provide a more detailed summary of the EO and Proposed Rule.  The ANPRM is a little hard to navigate, so to save our readers’ scrolling fingers (and patience!), we also provide, as appendices, a quick reference chart listing key definitions in the EO and the ANPRM, and a consolidated list of the 83 questions on which Treasury specifically invited comment.

If you would like assistance in drafting and submitting commentary or have questions about how to prepare to comply with the forthcoming regulations, please contact a member of Wiggin and Dana’s  International Trade Compliance team.  Although this rulemaking applies to certain specific products and technologies, it may serve as a template for future application of the outbound investment rule to other critical and emerging technologies (see Critical and Emerging Technologies List Update issued by the White House in February 2022).

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[1] The Proposed Rule was initially released in unpublished form and then formally published in the Federal Register on August 14, at 88 FR 54961. Treasury has also collected materials relevant to the EO and proposed rulemaking on its new Outbound Investment Program webpage.

[2] The EO was immediately released on the White House website and then formally published in the Federal Register, as Executive Order 14105, on August 14, 2023, at 88 FR 54867.