on covered foreign persons linked to China, Hong Kong and Macau and specified activities involving semiconductors and microelectronics, quantum information technologies and artificial intelligence. Depending on the technology and activity involved, covered transactions by U.S. persons are either prohibited or subject to a post- closing notification requirement. The rules also impose obligations on U.S. persons with respect to certain controlled foreign entities and prohibit U.S. persons from knowingly directing certain transactions by non-U.S. persons that would be prohibited if undertaken by a U.S. person. Under the COINS Act, Treasury must issue implementing regulations no later than 450 days after the NDAA FY2026’s enactment, or approximately March 2027. Until those regulations are issued, the existing OIR remain in effect. The COINS Act codifies the outbound investment regime and directs Treasury to expand it in several respects, including by broadening the list of countries of concern beyond China, Hong Kong and Macau to include Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime; adding technology areas such as hypersonic systems and high-performance computing or supercomputing; creating new feedback and disclosure mechanisms; and establishing a non-notified process analogous to the Committee’s non-notified function. The statute also includes additional authorities and mechanisms that Treasury will need to operationalize through rulemaking. Compliance with the OISP can require extensive due diligence that must consider multiple factors and nuances to determine whether a company is a covered foreign person and whether the transaction is a covered transaction. Where a transaction is notifiable, a notification generally must be submitted to Treasury by each U.S. person party no later than 30 days after completion of the covered transaction, with additional timing rules where a U.S. person acquires relevant knowledge after closing. There are 10 areas of information for inclusion in such notice, including beneficial ownership information for all transaction parties, a description of rights related to U.S. persons in the transactions, and others.
addition, if deemed necessary by CFIUS, it may exercise its subpoena authority in order to obtain information from transaction parties. The final rule sets forth that CFIUS may also request such information from non-transaction parties (or “other parties”), and codifies CFIUS’ ability to request the following additional types of information: (i) information necessary to determine whether the non-notified transaction would trigger a mandatory CFIUS filing obligation, and (ii) information necessary to determine whether the non-notified transaction would raise national security considerations. The final rule also expands CFIUS’ subpoena power, which now encompasses the additional categories of requested information, and covers requests made to non-transaction parties. ^ Expanded penalties . Prior to the implementation of the final rule, the maximum penalty amounts for certain enumerated actions/violations in the CFIUS regulations were either (i) US$250,000 (per violation), or (ii) the value of transaction (whichever is greater). Following the final rule, the maximum penalty amounts have been increased to (i)US$5,000,000 (per violation), (ii) the value of the transaction, or (iii) the value of a non- U.S. investor’s interest in a U.S. business at the time of the violation or the transaction (whichever is greatest). CFIUS’ authority to issue monetary penalties has also been expanded to material misstatements or omissions to CFIUS in contexts outside of a CFIUS filing (e.g., in response to CFIUS’ requests for information related to non- notified transactions or in response to CFIUS’ request for information relating to monitoring or enforcing compliance). Outbound Investments The OIR, which took effect on January 2, 2025, reflects the U.S. government’s concern that countries of concern may use U.S. capital, expertise and investor networks to accelerate development of technologies relevant to military, intelligence, surveillance and cyber- enabled capabilities. The current rules focus
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FDI and National Security Review
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