In a notable shift, the United States has broadened its focus on Foreign Direct Investment (FDI) to include not just inbound investments but also outbound ventures by U.S. businesses. This development has significant implications for companies seeking growth outside national borders. The expansion is part of a robust effort to tighten national security and economic controls.
The New Frontier: Outbound Investment Security
Traditionally, U.S. regulations have concentrated on protecting domestic industries from foreign intervention through measures like the Committee on Foreign Investment in the United States (CFIUS). However, the introduction of the Outbound Investment Security Program, under Executive Order 14105 (OISP), marks a shift. This program necessitates notifications and potentially restricts investments by Americans in foreign entities linked to specific nations such as China, Cuba, and Russia, particularly in technology sectors like semiconductors and artificial intelligence.
Legislative Developments: The COINS Act
The 2026 National Defense Authorization Act enshrines these changes in law through the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act). The COINS Act extends the list of "countries of concern" and redefines what constitutes a "covered transaction." It also expands the definition of "covered foreign person" and aims to protect critical technology sectors important to national security.
The act not only maintains existing trade controls but also tasks the U.S. Department of the Treasury with developing regulations that detail and enforce these new stipulations. This includes the authority to identify technologies that could empower foreign military or intelligence capabilities.
Guidelines for U.S. Businesses
U.S. companies must now rigorously analyze prospective international investments to ensure compliance with the COINS Act. This involves checking for involvement with covered foreign persons or countries of concern, and verifying the nature of affected technologies and sectors. Those navigating these new waters need to be acutely aware of the regulatory landscape, including export controls and other associated legal requirements.
The COINS Act also establishes a process for receiving feedback from stakeholders, defining exceptions for certain transactions, and enforcing penalties for violations. Investments deemed "de minimis" or within the national interest, among others, may be exempt from restrictions.
Global Perspective and Compliance
The United States is not an outlier in tightening FDI regulations. Many of its trading partners have enacted similar rules. Consequently, U.S. entities engaged in cross-border transactions should ensure global compliance through diligent evaluation of necessary disclosures and filings. Legal assistance, such as that from Womble, can be invaluable in navigating these intricate international investment regulations.
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