In a significant development, President Biden has issued an Executive Order (E.O.) introducing new outbound investment restrictions that will have far-reaching effects on various industries and companies operating in the United States. The E.O., issued on August 9, 2023, targets investment activities that may pose a threat to US national security.
Key Industries Affected
The new restrictions are expected to impact companies and investors in the fields of semiconductors, artificial intelligence (AI), and quantum computing. While the initial E.O. lists China (including Hong Kong and Macau) as the only country of concern, it is likely that the limitations may be extended to other industries and nations in the future.
Objective of the E.O.
The primary objective of the E.O. is to prevent US outbound investments that could potentially contribute to national security risks. It prohibits certain investment activities involving countries of concern and grants the Treasury Department the authority to prohibit US persons from engaging in transactions that would be deemed prohibited if conducted by a US person. This includes the concept of “facilitation” prohibition, as seen in US sanctions regulations.
Proposed Regulations and Industry Feedback
To implement the E.O., the Treasury Department has released an Advance Notice of Proposed Rulemaking (ANPRM), seeking comments from the public until September 28. The ANPRM outlines the proposed regulations and gives industry stakeholders the opportunity to provide input on how the program should be implemented.
Specific Activities Covered
Under the proposed regulations, certain activities involving semiconductors, quantum computing, and AI systems will be subject to restrictions. These include the development or production of specific technologies, such as integrated circuits and quantum computers, and the design and fabrication of advanced integrated circuits. The program also covers the development of AI software exclusively used for military, government intelligence, or mass-surveillance purposes.
Understanding the Program
The program defines key terms such as “US Persons,” “Covered Transactions,” and “Covered Foreign Persons.” It further establishes exceptions for certain types of passive and lower-risk investments. Interested parties are encouraged to submit comments on various aspects of the program, including notification requirements, compliance, penalties, and definitions of key terms.
While the proposed program is still subject to refinement, it is likely to come into effect in the near future. These restrictions mark a new era of government oversight in outbound investments and emphasize the importance of strategic planning for investors and industry players. It is advisable to seek specialized advice pertaining to individual circumstances.
Q: What is the objective of the new Executive Order?
A: The objective is to prevent US outbound investments that could pose national security risks.
Q: Which industries will be affected by the new restrictions?
A: The restrictions will impact companies and investors in the fields of semiconductors, artificial intelligence, and quantum computing.
Q: Will the restrictions be extended to other countries and industries?
A: It is likely that the limitations may be expanded to include other industries and nations in the future.
Q: What should interested parties do?
A: Interested parties should submit comments on the proposed program and participate in shaping its implementation.
Q: When will the restrictions come into effect?
A: The restrictions are expected to come into effect in the near future, although a specific timeline has not been provided.