Trump asked Secretaries of Commerce and State to review U.S. export controls
New U.S. investment and export control measures are shaping how businesses engage with foreign markets, particularly China. From limiting outbound investments to tightening export licenses, these evolving policies from the Trump administration aim to protect national security and maintain technological leadership. Below is a breakdown of key developments and what they mean for companies navigating cross-border transactions.
Outbound U.S. Investment Restrictions
The U.S. Department of the Treasury recently enacted the Outbound Investment Security Program (OISP), restricting U.S. persons from investing in certain Chinese or Chinese-owned companies. The program aims to prevent China from advancing technologies critical to military, intelligence, and surveillance applications while limiting its access to the “intangible benefits” of U.S. capital investments.
Specifically, OISP prohibits or requires notification of certain U.S. investments in "persons of a country of concern" that engage in certain activities related to artificial intelligence, quantum information technology, semiconductors, and microelectronics.
"Persons of a Country of Concern" include:
- Citizens or permanent residents of a country of concern who are not U.S. citizens or permanent residents.
- Entities that are headquartered, have their principal place of business in, or are incorporated in or organized under the laws of a country of concern.
- The government of a country of concern, persons acting on behalf of such government, and persons controlled by or directed by such government.
- Entities, wherever located (including in the U.S.), in which one or more of the persons identified above, individually or in the aggregate hold directly or indirectly at least 50% of voting interest, voting power of the board, or equity interest.
“Country of Concern” currently includes China, Hong Kong and Macau.
The program applies broadly to U.S. citizens and lawful permanent residents, entities organized under the laws of the U.S., any foreign branches and subsidiaries of such entities, and entities and individuals physically present in the U.S. All such parties must also “take all reasonable steps” to prevent prohibited transactions by any affiliated controlled foreign entity.
Although certain exceptions apply, such exceptions have limitations and need to be examined carefully. For example, investment in publicly traded securities is exempt, however, participation in IPOs is not exempt.
The Trump administration and the Treasury Department are reviewing the OISP, and modifications are expected. We anticipate that the program may evolve to more closely resemble the Committee on Foreign Investment in the United States (CFIUS) review process, which screens foreign investments in U.S. companies. We may also see an expansion in prohibited activities and restricted countries.
Affected investors, including U.S. entities and their foreign branches and subsidiaries, should carefully review their investments in China, Hong Kong and Macau and determine whether they relate to the AI, quantum information technology, semiconductors, and microelectronics fields (note that additional fields are likely to be added). If they do, such investors should carefully assess whether they may have to notify or obtain approval from the Department of Treasury.
Changes to U.S. Export Controls
As of Feb. 5, the Department of Commerce has paused processing most export license applications for dual-use items, although urgent applications may be considered. This pause is reportedly due to a policy review and is expected to extend license review times.
Meanwhile, unaffected for now are license applications for defense articles filed with the Directorate of Defense Trade Controls. However, this may change in the coming days.
President Trump has tasked the Secretaries of State and Commerce with reviewing U.S. export controls to strengthen technological superiority and close loopholes in existing policies. While no sweeping changes are expected, additional items may soon require export licenses.
[View source.]
