Background
On August 9, 2023, former-President Biden issued Executive Order 14105, Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern, which in summary directed the U.S. Treasury Department to establish an outbound investment security program for certain investments in “countries of concern” – broadly targeting certain kinds of investments in China in sensitive industries. Further to this order, the Treasury Department on October 28, 2024 issued its final rule (the “Outbound Investment Rule”) and established the Outbound Investment Security Program to implement E.O. 14105.
The Outbound Investment Rule, went into effect on January 2, 2025, and imposes new diligence and reporting requirements on U.S. persons who make certain outbound investments with a “covered foreign person” in a “country of concern.” Presently, China (including Hong Kong and Macau) is the only “country of concern” identified under the Outbound Investment Rule.
The Rule either outright prohibits or requires notification of certain kinds of investments, known as “covered transactions,” in the semiconductors and microelectronics, quantum information technologies, or artificial intelligence sectors, subject to certain exceptions.
The Trump Administration’s Ordered Review
On January 20, 2025, the Trump administration (the “Administration”) issued a memorandum (the “Trade Memorandum”), directing several members of the new Administration’s cabinet and other economic advisors to review various aspects of current U.S. trade policy – including a review of the Outbound Investment Rule
Specifically, Section 4(e) of the Trade Memorandum directs the Secretary of the Treasury, in consultation with the Secretary of Commerce, to:
- Review whether the E.O. 14015 should be modified or rescinded and replaced;
- Assess whether the Outbound Investment Rule includes sufficient controls to address national security threats; and
- Directs the Secretary of the Treasury to make recommendations based on the finding of this review, including potential modifications to the Outbound Investment Security Program.
Expected Next Steps
The Trade Memorandum requests that the Secretary of Treasury provide its report and recommendations on the Outbound Investment Security Program by April 1, 2025. Given the sensitivity and complexity of US-China policy in the noted sectors, it appears the Administration is moving somewhat more cautiously in this space. But the suggestion that Treasury review whether the Outbound Investment Rule “includes sufficient controls to address national security threats” does not indicate that the program will be discarded and instead suggests that the program could be broadened or expanded over time.
Notwithstanding any potential future modifications or amendments, the Outbound Investment Rule has been finalized and remains in effect. As such it is important that U.S. persons ensure that they are conducting appropriate diligence to determine whether any outbound investments are “covered transactions” implicated by the Outbound Investment Rule and not subject to any applicable exception.
