The Fragmentation of U.S. Investment Security Without NSC Coordination

The Facts -

The stability of national security investment frameworks in the United States faces significant challenges as the National Security Council (NSC) struggles to fulfill its coordinating role. The NSC, an entity crucial for interagency collaboration, is experiencing institutional pressure, affecting its ability to effectively manage the country's investment security architecture.

Under the current administration, the NSC has been subjected to continuous institutional stress. Notably, in January, about 160 career officials from various agencies were sidelined, followed by a mass dismissal of officials during the spring. These changes have dispersed the core team that supports the NSC's coordination efforts. As observed by the Financial Times in August 2025, the traditional foreign policy process led by the NSC has "largely broken down."

The Importance of NSC Coordination

The Committee on Foreign Investment in the United States (CFIUS) is developing the Known Investor Program (KIP) to facilitate reviews for low-risk investors. Simultaneously, Treasury is expected to issue COINS Act regulations by March 2027, which will expand the Outbound Investment Security Program. The Department of Justice's Data Security Program (DSP) commenced full enforcement last July, and Commerce's Office of Information and Communications Technology Services (OICTS) is extending its authorities into connected vehicles and other technologies.

Each of these initiatives demands a robust legal basis and sustained agency focus. However, they also require comprehensive interagency policy coordination, a role that only a functional NSC can efficiently fulfill. Without this coordination, the quality and predictability of the rules suffer, potentially leading to national security risks.

Examples of Effective Rulemaking

Department of Justice’s Data Security Program

The Data Security Program (DSP) exemplifies effective rulemaking through interagency collaboration. Initiated by Executive Order 14117 in February 2024, the program aimed to restrict access to bulk U.S. sensitive personal data by certain countries. The Department of Justice (DOJ) published a detailed Advance Notice of Proposed Rulemaking (ANPRM) in March 2024, soliciting public input. This consultative process included extensive stakeholder engagement and collaboration with the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, among others, orchestrated by the NSC.

The final rule, released in December 2024, reflected the inputs from various agencies and stakeholders, showcasing a model of regulatory refinement and coordination.

Department of Commerce’s Connected Vehicle Rule

The Department of Commerce's approach to the connected vehicle rule also highlights the advantages of NSC-coordinated regulation. After releasing an ANPRM in March 2024, Commerce refined its proposals based on feedback from original equipment manufacturers (OEMs), component suppliers, and other parties. The final rule narrowed its focus to vehicle connectivity and automated driving systems, demonstrating the benefits of engaging with stakeholders and interagency partners.

These examples illustrate how effective NSC coordination can lead to well-defined, administrable regulations, benefiting both policymakers and the regulated community.

Challenges Ahead Without NSC Coordination

CFIUS’s Known Investor Program

The future of the Known Investor Program (KIP), which intends to pre-screen foreign investors, hinges on resolving complex interagency issues. The program's success depends on shared standards across agencies, such as defining "verifiable distance" from adversaries. Questions also arise about how KIP clearances interact with other compliance regimes, highlighting the need for NSC-facilitated cross-agency collaboration.

The COINS Act Regulations

The COINS Act mandates significant regulatory expansions and international coordination. Treasury's requirement to establish a public database of covered foreign persons involves intricate interagency collaboration to ensure alignment with existing lists and frameworks. The absence of NSC coordination could hinder these efforts, resulting in fragmentation across agencies.

Implications of a Weakened NSC

The absence of effective NSC coordination can lead to regulatory fragmentation, with each agency independently defining national security risks. This disjointed approach undermines the coherence of the U.S. investment security system, potentially deterring legitimate investment and affecting international cooperation.

Moreover, without NSC-led interagency reconciliation, the regulatory burden shifts to external parties, such as foreign governments and trade associations. These entities may struggle to navigate inconsistencies, posing challenges for the broader investment security architecture.

The United States' capacity to maintain a coherent investment security framework relies on the effective functioning of the NSC as a coordinating body. The current lack of coordination threatens the predictability and integrity of the system, with far-reaching consequences for national security and international relations.

FEATURED IMAGE: An exterior view of the building of US Department of the Treasury is seen on March 27, 2020, in Washington, DC.(Photo by OLIVIER DOULIERY/AFP via Getty Images)

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