Outbound investment rules expanded

The United States codified and strengthened outbound investment restrictions (OIR) through the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act) in its latest defense budget authorization package, signed into law in December 2025. The OIR originated from Executive Order 14105, issued by the Biden administration in 2023 to regulate certain outbound investments by U.S. persons into entities connected to China. The updated OIR expands the list of “countries of concern” from China alone to include Russia, Iran, North Korea, Cuba, and Venezuela. The U.S. Department of the Treasury (Treasury) has 450 days from the date of enactment to issue updated implementing regulations, and the existing OIR remains in effect until those regulations are promulgated.

The OIR’s purpose is to address national security threats arising from U.S. capital and expertise flowing into foreign entities that are developing sensitive technologies capable of advancing the military, intelligence, or surveillance capabilities of countries of concern. Depending on the nature of the investment, the OIR either prohibits the transaction entirely or requires notification to the Treasury.

• Countries of concern under the current OIR: Currently, the only designated country of concern is China (including Hong Kong and Macau). 
• U.S. persons: The existing rules apply to “U.S. persons,” which includes U.S. citizens, lawful permanent residents, entities organized under U.S. law, and any person physically present in the United States.
• Technology sectors covered: The existing rules target U.S. investments across three technology categories: (1) semiconductors and microelectronics; (2) quantum information technologies; and (3) artificial intelligence.
• Covered foreign person: The rules govern certain transactions involving “covered foreign persons.” Covered foreign person means:
  • A person of a country of concern that engages in a covered activity; or
  • A person that directly or indirectly holds a board seat on, a voting or equity interest in, or any contractual power to direct or cause the direction of the management or policies of a person of a country of concern that engages in a covered activity and derives or incurs more than 50% of certain financial metrics (i.e., revenue, net income, capital expenditure, or operating expenses) from such person of a country of concern. The “certain financial metrics” referenced above include circumstances in which:
    • More than 50% of its revenue is derived individually, or as aggregated across such persons from each of which it derives at least $50,000 (or equivalent) of its revenue, on an annual basis;
    • More than 50% of its net income is derived individually, or as aggregated across such persons from each of which it derives at least $50,000 (or equivalent) of its net income, on an annual basis;
    • More than 50% of its capital expenditure is incurred individually, or as aggregated across such persons from each of which it incurs at least $50,000 (or equivalent) of its capital expenditure, on an annual basis; or
    • More than 50% of its operating expenses are incurred individually, or as aggregated across such persons from each of which it incurs at least $50,000 (or equivalent) of its operating expenses, on an annual basis.
• Covered transactions: Covered transactions include equity acquisitions, certain debt arrangements, joint ventures, greenfield investments, and certain limited partner (LP) investments.
  • Covered LP investments mean the acquisition of an LP or equivalent interest in certain non-U.S. funds that a U.S. person knows at the time of the acquisition are likely to invest in a person of a country of concern that is in a covered sector, and where such fund undertakes a transaction that would be a covered transaction if undertaken by a U.S. person.

Here, the distinction between U.S. person and non-U.S. person is critical. The rules apply only to U.S. persons, and LP investments are covered only if the fund is not a U.S. person, as defined above.

• Excepted transactions: Excepted transactions under the OIR include publicly traded securities; certain derivatives; pre-existing binding, uncalled capital commitments; full buyouts from a person of a country of concern; intracompany transactions; equity employment compensation; and certain LP fund investments with binding contractual assurances. 

COINS Act and key updates

On December 18, 2025, the FY2026 National Defense Authorization Act, including the COINS Act, was signed into law. The COINS Act codifies and significantly expands the OIR. Updates include:

• Additional countries of concern: The COINS Act broadens the list of countries of concern beyond China to include Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime. The Venezuela provision’s applicability may be affected by future political changes.
• Expanded technology sectors: In addition to semiconductors and microelectronics, quantum information technologies, and AI, the COINS Act adds high-performance computing and supercomputing, and hypersonic systems, as covered technology categories.
• Simplified ‘covered foreign person’ definition: The COINS Act eliminates the complex “financial metrics” test under the OIR. A “covered foreign person” includes any foreign person that is:
  • Incorporated in, has a principal place of business in, or is organized under the laws of a country of concern;
  • A member of the Central Committee of the Chinese Communist Party or the political leadership of a country of concern;
  • Subject to the direction or control of a country of concern or its government; or
  • 50% or more owned by a country of concern or its government.
• Excepted transactions: The COINS Act also modifies and expands the exceptions under the OIR. New excepted transactions include:
  • De minimis transactions (value threshold to be determined by the Secretary of the Treasury);
  • A national interest category (any category of transactions the Secretary of the Treasury determines is in the national interest); 
  • Ancillary transactions undertaken by financial institutions;
  • Intracompany fund transfers;
  • Secondary transactions (including bank lending, payment processing, underwriting services, and more); and
  • Ordinary or administrative business transactions.

Modified excepted transactions include: 

• Certain LP investments: Under the OIR, to qualify for this exception, committed capital must not exceed $2 million.
  • Under the COINS Act, the committed capital must not be more than a de minimis amount, as determined by the Secretary of the Treasury.
• Treasury’s new responsibilities and next steps: The Secretary of the Treasury, in consultation with relevant departments and agencies, has 450 days to issue implementing regulations. Treasury must implement its new responsibilities and enforcement mechanisms. These responsibilities will include:
  • Non-binding feedback process for determining whether transactions would be prohibited;
  • Non-exhaustive public database of covered foreign persons (i.e., U.S. persons must still conduct independent diligence);
  • Voluntary self-disclosure framework;
  • Annual congressional reporting; and
  • Multilateral engagement with allies to promote coordinated outbound investment controls.

 What this means for U.S. investors

Until Treasury issues updated regulations, U.S. persons must continue to comply with the current OIR. Once new regulations are promulgated, investors should expect a broader geographic scope, expanded technology coverage, streamlined covered foreign person analysis, ongoing due diligence requirements, and new compliance tools, including non-binding guidance and self-disclosure pathways.