The U.S. Department of the Treasury issued a final rule on an executive order related to national security threats from countries of concern.
The rule implements executive order 14105, which is called “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.”
The order would direct the Secretary of the Treasury to issue regulations that prohibit U.S. persons from engaging in certain transactions with persons of a country of concern involving a defined set of technologies and products that pose a particularly acute national security threat to the United States. The order would also require U.S. persons to notify Treasury of certain other transactions with persons of a country of concern involving a defined set of technologies and products that may contribute to the threat to the national security of the United States.
“The Biden-Harris Administration is committed to protecting America’s national security and keeping critical advanced technologies out of the hands of those who may use them to threaten our national security. Artificial intelligence, semiconductors, and quantum technologies are fundamental to the development of the next generation of military, surveillance, intelligence and certain cybersecurity applications like cutting-edge code-breaking computer systems or next generation fighter jets. This Final Rule takes targeted and concrete measures to ensure that U.S. investment is not exploited to advance the development of key technologies by those who may use them to threaten our national security,” Paul Rosen, assistant secretary for investment security at the Treasury, said. Rosen
Through the order, the President identified the People’s Republic of China, along with the Special Administrative Region of Hong Kong and the Special Administrative Region of Macau, as a country of concern.
The technologies and products identified in the order include semiconductors and microelectronics; quantum information technologies; and artificial intelligence.
As described in the final rule, this national security program is focused on certain U.S. outbound investments that contribute capital as well as intangible benefits to persons of a country of concern engaged in activities involving certain sensitive technologies and products that could pose risks to U.S. national security. It builds on Treasury’s August 2023 Advance Notice of Proposed Rulemaking (ANPRM) and its July 2024 Notice of Proposed Rulemaking (NPRM). The final rule responds to public comments received on the NPRM from a wide range of interested parties by incorporating technical edits, adding specificity to some provisions, and including explanatory notes.
Specifically, the final rule defines key terms and provides detail on various aspects of the program’s implementation, including:
• Obligations of a U.S. person regarding a covered transaction;
• Categories of covered transactions and excepted transactions;
• Technical specifications for certain technologies and products in the areas of semiconductors and microelectronics, quantum information technologies, and artificial intelligence;
• Information that a U.S. person is required to provide to Treasury as part of a notification;
• The knowledge standard and expectations for a U.S. person to conduct a reasonable and diligent inquiry prior to undertaking a transaction; and
• Conduct that would be treated as a violation of the Final Rule and applicable penalties for such conduct.
U.S. Sen. Bob Casey (D-PA), a lead sponsor of the Outbound Investment Transparency Act, applauded the final rule.
“When we allow American businesses to invest in Chinese sectors like AI and semiconductors, we’re putting our national security and our economic future at risk. This rule is an important step to protect U.S. technology and expertise from falling into the hands of the Chinese Communist Party,” Casey said. “This rule is a good start, and I will keep fighting to pass my bipartisan legislation to make permanent an outbound investment screening program.”
The final rule will become effective on Jan. 2, 2025.