On March 7, the US Department of Commerce and the US Department of the Treasury released two reports to Congress on the status of their work on the Biden Administration's consideration of a mechanism to review outbound investments from the US to other countries. The reports preview the actions the Biden Administration may take in a future outbound investment executive order and indicate that the Administration plans to take a targeted approach to reviewing outbound investment.
The Commerce and Treasury Departments were required to submit these reports by the 2023 Consolidated Appropriations Act.1 The Act also required the departments to identify the resources they need to implement the outbound investment mechanism, which both reports include.
Administration’s Focus, Department Roles
Regarding the status of the outbound investment review mechanism, both reports indicate that the Administration is focusing “on investments that could result in the advancement of military and dual-use technologies by countries of concern.”2 They add that the Administration is considering restrictions or notification requirements on US investment in “certain entities involved in a sub-set of certain key advanced technologies that are critical to US national security. Action may include prohibiting certain investments and/or collecting information about other investments to inform potential future action.”3 This indicates that the Administration intends to focus only on certain high-tech companies for investment restrictions or notifications, rather than broad prohibitions of outbound investment on geographic lines. This approach would be consistent with US Secretary of Commerce Gina Raimondo’s interview with Reuters on March 2, where she indicated that the department did not want to be “overly broad” in its restrictions but also said the United States did not want US venture capital “advancing semiconductor technology or artificial intelligence technology” that could be used by a foreign military.4
The reports confirm that work is ongoing to scope the order to effectively meet these goals.5 They add that the Department of the Treasury will take the lead in implementing and administering the order in coordination with the Department of Commerce and other federal departments and agencies.6
Though the reports do not outline a specific timeline for implementation, they expect final policy determinations to be made “in the near future.”7 In her Reuters interview, Secretary Raimondo indicated that implementation will be a matter of “months, not years,” and added that the department is considering a pilot program prior to implementing final regulations.8
Regarding resources, the Treasury Department’s report estimates that an outbound investment review program would cost $10 million in fiscal year 2023.9 This estimate includes “labor costs for staff to draft regulations, set up program operations, and conduct international engagement; IT system development; data and subscriptions; and travel and training.”10 The report also notes that the fiscal year 2024 budget may recommend additional resources to implement and administer the program.11 The Commerce Department’s report does not provide a specific cost breakdown, instead stating that the Commerce Department will provide technical expertise needed to implement the program and is prepared to hire specific experts to administer the plan.12
These reports provide insight on where the Administration stands on an outbound investment review mechanism. Investors should closely monitor future developments.
1 198 Cong. Rec. S7819, S8479 (Dec. 20, 2022).