6 minute read | December.31.2025
The FY26 National Defense Authorization Act (NDAA), enacted on December 18, 2025, codifies the Treasury Department’s outbound investment rule (OIR), which restricts certain investments by U.S. persons into China (including Hong Kong and Macau) and China-related companies. Once implemented, the relevant provisions, called the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act), will expand the OIR program to cover Cuba, Iran, North Korea, Russia, and Venezuela (as long as it remains under the Maduro regime), in addition to China. Further, the COINS Act will expand the program to cover additional sensitive technology sectors of these countries’ economies.
The COINS Act has no immediate impact, and the Treasury Department has issued guidance reminding U.S. persons to continue to comply with the OIR. The Treasury must issue new regulations or update the OIR by March 13, 2027. The OIR will remain in effect until new or updated regulations become effective.
As discussed in our prior client alert, the OIR, effective January 2, 2025, prohibits certain outbound investments by U.S. persons in Chinese and China-related companies focused on semiconductors, microelectronics, quantum computing, information technologies and artificial intelligence. The OIR also requires U.S. persons to notify the Treasury of other types of investment in Chinese companies operating in these sectors.
1. Additional Countries Targeted by Expanded OIR Requirements
In addition to China, the COINS Act includes as “countries of concern” Cuba, Iran, North Korea, Russia, and Venezuela under the regime of Nicolas Maduro. As these countries are already targets of extensive U.S. sanctions, their inclusion is likely to have no practical impact.
2. Additional Sectors Targeted by Expanded OIR Requirements
Once implemented, the COINS Act will expand prohibitions and notification requirements to cover certain investments in the hypersonic systems and high-performance computing and supercomputing sectors of countries of concern, which, together with semiconductors, microelectronics, quantum computing, information technologies and artificial intelligence, are called “notifiable technologies” and “prohibited technologies.” The Treasury’s regulations are expected to specify the parameters of these technologies.
3. Expanded Definition of “Covered Foreign Person”
The COINS Act defines “covered foreign person” to include any foreign person that:
a) is incorporated, organized or has a principal place of business in a country of concern;
b) is a member of the political leadership of a country of concern, including of the Central Committee of the Chinese Communist Party;
c) is owned in the aggregate 50% or more, directly or indirectly, by a country of concern, any entity described in clause (a) or (b), or the government of a country of concern; or
d) is subject to the “direction or control” of a country of concern, any entity described in clause (a) or (b), or the government of a country of concern.
New regulations are expected to define the terms “direction or control” and “foreign person.” The requirement to determine whether a person is subject to the direction or control of a country of concern could potentially create a more onerous due diligence burden for U.S. persons.
4. Expanded Scope of Covered Transactions
As the OIR currently does, the new program will cover investments and similar transactions that result in a U.S. person knowingly investing in a covered foreign person that is engaged in certain activities related to prohibited or notifiable technologies. In particular, “covered national security transactions” by U.S. persons include:
New exceptions will formalize the exclusion of various ancillary and secondary services and are expected to cover underwriting services, including the temporary acquisition of an equity interest for the sole purpose of facilitating underwriting services.
5. Creation of a Covered Foreign Persons Database
The Treasury may establish a public, non-exhaustive database that identifies covered foreign persons that are engaged in a prohibited technology or a notifiable technology.
6. Treasury Outreach for Non-Notified Transactions
The Treasury must establish a process to identify non-notified transactions that were required to be notified to Treasury under the COINS Act.
7. Establishment of New Advisory Process
The Treasury is expected to establish a process for U.S. persons to request non-binding, confidential feedback, or anonymized guidance to the public, as to whether a transaction would constitute a covered national security transaction in a prohibited technology. The OIR does not include any such process.
8. Authorization of New Investment Sanctions
Separately, the COINS Act authorizes the Treasury to impose new sanctions on certain Chinese or China-related persons determined to knowingly engage in significant operations in the Chinese defense and related material sector or the surveillance technology sector. Such sanctions would prohibit U.S. persons from investing in or purchasing “significant amounts of equity or debt instruments” of the sanctioned entities.
Orrick’s International Trade & Investment team will continue to monitor and provide updates as Treasury works to implement the COINS Act. Please contact the authors listed here with questions regarding OIR compliance.