juillet 27 2023

Outbound Transaction Notification Regime: US Senate Adopts Amendment, Which Could Be Enacted by Congress in 2023


On July 25, 2023, the US Senate adopted by a vote of 91-6 an amendment1 to the Fiscal Year 2024 National Defense Authorization Act (NDAA) that would require the mandatory notification of certain investments, loans and other commercial arrangements by US persons in sensitive sectors involving entities from, or entities whose parent is from, “countries of concern,” i.e., China, Russia, Iran, and North Korea. Notably, while the amendment would create an obligation to file a notification with the Treasury Department (either 14 days before or after the transaction, depending on the facts), it would not give the US Government authority to block or impose changes on the transactions at issue. The bill also provides for the establishment of penalty and enforcement authority for failure to notify and requires a process for identification of covered but non-notified transactions.

This development reflects a continued focus—as discussed in our recent Legal Update2—within both Congress and the Administration on regulating outbound transactions, with particular attention to advanced technology sectors in countries of concern that the United States believes present threats to US national security.

Notification Deadline

If the amendment is enacted into law, following regulatory implementation, US persons (including any corporation, partnership, or other entity organized within the United States) that engage in “covered activity” would be required to notify the Department of the Treasury of that activity:

  • For secured transactions: within 14 days of completion
  • For unsecured transactions: at least 14 days prior to completion

Covered Activities

Covered Sectors

This notification would be required for covered activity involving the following “covered sectors”:

  • Advanced semiconductors and microelectronics
  • Artificial intelligence
  • Quantum information science and technology
  • Hypersonics
  • Satellite-based communications
  • Networked laser scanning systems with dual-use applications

Covered Foreign Entities

Specifically, notification would be required for covered activities by US persons involving “covered foreign entities,” namely:

  • Any entity that is incorporated in, has a principal place of business in, is organized under, or has equity securities that are primarily traded on an exchange of a country of concern;
  • Any entity in which any entity described in the bullet above holds a direct or indirect ownership interest of greater than 50%; or
  • Any non-US person entity that meets criteria specified by the Treasury Department.

Entities with a majority equity interest ultimately owned by US nationals or nationals of countries identified by the US Treasury Department would not be considered “covered foreign entities.”

Further Details on Covered Activities

The following “covered activities” by US persons related to a covered sector would require notification:

  • The acquisition of an equity interest, contingent equity interest, or monetary capital contribution, directly or indirectly, in a covered foreign entity
  • An arrangement for a US person to hold the short- or long-term debt obligations of a covered foreign entity that includes governance rights that are characteristic of an equity investment, management, or other important rights
  • The establishment of a wholly owned subsidiary in a country of concern, including a “greenfield investment,” for the purpose of production, design, testing, manufacturing, fabrication, or development related to a covered sector
  • The establishment of a joint venture in a country of concern or with a covered foreign entity for the purpose of production, design, testing, manufacturing, fabrication, or research involving a covered sector, or other contractual or other commitments involving a covered foreign entity to jointly research and develop new innovation, including through the transfer of capital or intellectual property or other business proprietary information
  • The acquisition by a US person with a covered foreign entity of: operational cooperation; the right to board representation (including as an observer) or an executive role in a covered foreign entity; the ability to direct or influence operational decisions; formal governance representation in any operating affiliate, such as a portfolio company; or a new relationship to share or provide business services, such as but not limited to financial services, marketing services, maintenance, or assembly functions, related to a covered sector

A number of the key elements of the notification mechanism would be refined through regulations promulgated by the Treasury Department, including exempting certain de minimis transactions, transactions in the national interest of the United States, and administrative transactions from the list of “covered activities.”


The amendment mandates that the Treasury Secretary finalize the regulations no later than 360 days after the enactment of the amendment. The mandatory notification requirement will go into effect 90 days after the regulations take effect.

Regulations would also address the penalties associated with a failure to make a mandatory notification.

Next Steps

The Senate is expected to finalize the NDAA before it leaves for its August recess. The House of Representatives has already passed its version of the NDAA, which does not include any outward-bound investment notification or restriction provisions. However, the overwhelming bipartisan vote for the Senate amendment means that the amendment could be included in the final NDAA bill expected to be enacted before the end of the year.



1 Available at CREC-2023-07-18-pt1-PgS3093.pdf (congress.gov)

2 See our previous Legal Update, “Commerce and Treasury Release Update on Outbound Investment Provisions,” discussing the Administration’s focus on outbound investments “that could result in the advancement of military and dual-use technologies” by countries of concern.  

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