Senate Okays Outbound Investment Rules

By an overwhelming vote of 91 to 6 the Senate approved an amendment to the defense reauthorization bill that for the first time would impose notification requirements on US cutting edge technology outbound investments to China and other “countries of concern.”

The amendment was added to the National Defense Authorization Act currently on the Senate floor.

The notification requirement would apply to artificial intelligence, quantum industries, advanced semiconductors and micro-electronics, hypersonics, satellite-based communications and networked laser scanning systems with dual-use applications.

In addition the China, the provision requires investors to notify the Treasury Department of any investment in the above sectors in Russia, Iran, North Korea, Cuba and Venezuela.

Our friends at Akin Gump note:

• In the meantime, the Biden administration continues to consider an Executive Order (EO) to address its concerns about U.S. investment in certain advanced technology sectors in countries of concern. The Biden administration has been reportedly targeting August for the EO, but that timing remains fluid.
• Key differences between the NDAA provision and the expected EO are (1) the provisions would include passive investment and certain contractual arrangements, in addition to active investment; and (2) the provision would require only notification and does not explicitly prohibit or limit any particular transactions. The NDAA provision and expected EO are likely to cover similar technologies and countries.

Farmland Rules Added

Senators also approved an amendment requiring the inter-agency Committee on Foreign Investment in the United States (CFIUS) to examine foreign purchases of US farmland.

Separately, the House approved by voice vote legislation (HR 752) that strengthens federal efforts to expand domestic manufacturing of semiconductor chips. The Securing Semiconductor Supply Chains Act directs the Commerce Department’s SelectUSA program – in collaboration with federal agencies and state economic development organizations – to develop strategies to attract investment in US semiconductor manufacturers and supply chains.