New Law Refines Scope of Outbound Investment Security Program

Congress has modified a Biden Administration national security program designed to restrict outbound U.S. investment in sensitive technologies and industries. As part of the FY 2026 National Defense Authorization Act, Congress enacted and President Trump signed into law the Comprehensive Outbound Investment National Security (COINS) Act of 2025, which provides statutory authorization for the existing Outbound Investment Security Program (OISP) and mandates certain changes to the scope of the OISP regulations. The legislation had broad bipartisan consensus reflecting Congress’s view of the importance of outbound investment measures to safeguard the United States’ national security.

Importantly for parties currently negotiating deals potentially affected by these restrictions, the regulatory changes to the OISP from the COINS Act will not take effect until they are implemented by the Treasury Department following a rulemaking process, which must be completed by March 13, 2027. Until then, the current OISP regulations will remain in effect. 

Background

The OISP was implemented in January 2025 by the Biden Administration pursuant to an Executive Order under the authority of the International Emergency Economic Powers Act, which declared a national emergency stemming from the threat to the United States posed by China (including Hong Kong and Macau) seeking to develop and exploit sensitive technologies and product for military, intelligence, surveillance, or cyber-enabled capabilities. See our alert (Biden Administration Implements New Outbound Investment Security Program). 

To address this threat, the OISP prohibits and imposes notification requirements on certain types of transactions by U.S. persons with “covered foreign persons,” which are intended to cover Chinese and Chinese-owned companies engaged in certain activities in three sectors: semiconductors and microelectronics; quantum information technologies; and artificial intelligence (“AI”). 

Changes to the OISP

The COINS Act provides express authority for the regulation of outbound investments from the United States and maintains the OISP’s general regulatory framework of prohibiting certain transactions and requiring notification of others to the Treasury Department. However, the COINS Act did not adopt the OISP as-is.

The COINS Act makes a number of material changes to concepts within the OISP that will both broaden and narrow the scope of the outbound investment transactions covered by the regulations. Key changes include:

• Countries of Concern: The COINS Act expands the countries of concern related to U.S. outbound investment from China (including Hong Kong and Macau) to Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime. Economic sanctions currently prohibit or restrict U.S. investment in these countries, but in the event there is sanctions relief, the revised OISP could still impose restrictions.
• Technologies of Concern: In addition to semiconductor technology and microelectronics, AI systems, and quantum information technologies, the COINS Act identifies two additional sectors of concern: high-performance computing and supercomputing, and hypersonic systems. The specific types of activities that will be covered by the revised OISP in these sectors will be determined by the Treasury Department during rulemaking.
• Covered Foreign Persons: The COINS Act revises the definition of “covered foreign persons” to whom the outbound investment restrictions apply. Under the current OISP, “covered foreign persons” include individuals and companies in China, companies owned or controlled by the Chinese government, or any companies owned 50% or more by such persons, as well as any entity that has a voting interest, equity interest, board seat, or contractual power to direct or cause the direction of the management or policies in a covered foreign person where more than 50% of one of several key financial metrics of the entity is attributable to such covered foreign person. The latter part of the definition, which can capture certain U.S. companies, will be removed from the definition of “covered foreign person.”
• Scope of Notifiable Transactions: Under the current OISP, if a U.S. person working at a non-U.S. company knowingly directs a transaction within the scope of the rules, it is only subject to the OISP prohibitions but not the notification requirement. The COINS Act broadens the scope of the notification requirements to include such “knowingly directed” transactions.
• Excepted Transactions: The COINS Act expands the list of transactions that are excluded from the scope of the outbound investment rules. Most notably, de minimis transactions (to be defined by regulation) and underwriting services in connection with an IPO, which are currently subject to the OISP rules, will become excepted transactions.
• Public Guidance: The COINS Act authorizes the Treasury Department to establish a non-exhaustive publicly available database of covered foreign persons and a process for investors to receive non-binding confidential feedback on proposed transactions.

Implications

The enactment of the COINS Act will result in changes to the regulations governing outbound investments but will not take effect until a formal rulemaking process is completed. The deadline for issuing new rules implementing the COINS Act is March 13, 2027. In the interim, U.S. companies and U.S. individuals should continue to comply with the current OISP regulations.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia; David J. Ribner, an O’Melveny partner licensed to practice law in the District of Columbia and New York; and Hannah V.L. George, an O'Melveny associate licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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