On December 18, 2025, President Trump signed into law the FY 2026 National Defense Authorization Act (NDAA), which includes the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act). The COINS Act codifies restrictions on US outbound investment in certain sensitive technologies and signals bipartisan support for outbound investment screening as a permanent fixture of the US national security regulatory regime.
The current Outbound Investment Security Program (Outbound Program), which took effect January 2, 2025, pursuant to Executive Order 14105 and its implementing regulations at 31 C.F.R. Part 850, prohibits, and requires notification of, certain direct or indirect investments by US persons in “covered foreign persons,” which are certain individuals or entities with a nexus to a “country of concern” engaged in — or associated with parties engaged in — activities involving semiconductors and microelectronics, quantum information technologies, or artificial intelligence. Until now, the administration has only identified the People’s Republic of China (including Hong Kong and Macau) as a “country of concern.” The existing Outbound Program regulations specify certain activities and technical parameters in the identified sectors for both prohibited and notifiable transactions.
The COINS Act keeps the core of the Outbound Program in place while expanding its scope and coverage, clarifying certain terms and processes, adding certain exceptions, and directing the US Department of the Treasury (Treasury) to implement a confidential process for the public to receive feedback as to whether a transaction would be prohibited. By providing independent statutory authority for the Outbound Program, the legislation codifies the core authorities, definitions, and requirements of the Outbound Program (although the legislation is set to sunset after seven years unless reauthorized). The legislation also authorizes significant appropriations and new hiring for the Outbound Program.
Treasury has 450 days from enactment to promulgate new or amended regulations for the Outbound Program. The new regulations may amend, terminate, supersede, revoke, or streamline the existing Outbound Program regulations. Companies and investors should prepare to provide feedback as part of the rulemaking process and should consider the upcoming regulatory changes as part of the diligence process when evaluating prospective investments in sensitive sectors in a country of concern.
For now, the current Outbound Program regulations remain in effect. For more information on the existing Outbound Program and regulations implemented by Treasury at the beginning of 2025, see this Latham Client Alert.
The COINS Act indicates that the Outbound Program will change in numerous ways once new regulations are implemented. The below table summarizes some of the key changes contained in the legislation. The changes will take effect upon the promulgation of new regulations, which we expect will also resolve certain differences between the existing Outbound Program regulations and the provisions of the COINS Act.
| Change | Existing Outbound Program | COINS Act Outbound Program |
|---|---|---|
| Technology coverage |
|
|
| Geographic coverage | People’s Republic of China (including Hong Kong and Macau) |
|
| Exceptions and exemptions |
|
|
| Non-binding confidential feedback or anonymized public guidance | No | Yes |
| Covered foreign person: 50% rule |
|
Direct or indirect 50% ownership |
The COINS Act expands the sectoral coverage of the Outbound Program to include high-performance computing and supercomputing and hypersonic systems, while retaining coverage of semiconductor technology and microelectronics, artificial intelligence systems, and quantum information systems. The legislation also authorizes Treasury, through the rulemaking process, to add and define additional categories of technology that “enable the military, surveillance, or cyber-enabled capabilities of a country of concern,” which could lead to a broader expansion of the categories of technology covered by the Outbound Program.
The COINS Act expands the definition of “country of concern” from the People’s Republic of China (including Hong Kong and Macau) to include Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime. This change is largely symbolic because US persons are generally prohibited from investing directly or indirectly in these jurisdictions under existing US sanctions.
The COINS Act grants Treasury express rulemaking authority to define the technical parameters of both prohibited and notifiable technologies, which could result in significant changes to or revocation of the existing parameters and thresholds in the current Outbound Program. The notice-and-comment rulemaking process will give companies, investors, industry associations, asset managers, and others the opportunity to submit comments, informed by their experience with the current Outbound Program, to Treasury on the proposed regulations.
The COINS Act adds some new exceptions and provides additional clarity about the scope of existing exceptions. Notably, the exceptions under the COINS Act includes underwriting services that involve the temporary acquisition of an equity interest, and signals that the exception for publicly traded securities may be further clarified. It further applies the intracompany exception to a US person’s support of controlled foreign entities that maintain covered national security transactions that the covered foreign person was engaged in as of the effective date of the new regulations. Transactions completed before the date of enactment of the title (i.e., December 18, 2025) are exempt but will still be subject to the current regulations as long as they remain in force.
The COINS Act makes two key changes that will better inform companies and investors if their investments are potentially subject to the Outbound Program’s restrictions:
The COINS Act changes the definition of “covered foreign person” and “covered transaction.” The definition of “covered foreign person” limits the 50% rule to direct or indirect 50% ownership, rather than tying it to revenue, net income, or capital or operating expenditure as in the current Outbound Program. The COINS Act also adds to the definition persons subject to the direction or control of a covered foreign person. The legislation defines “covered national security transaction” consistently with the definition of “covered transaction” under the existing Outbound Program. For example, the legislation preserves the Outbound Program’s broad definition of brownfield and greenfield transactions.
The COINS Act directs Treasury to establish a formal non-notified program to identify covered national security transactions not notified to Treasury. Although Treasury has been conducting outreach regarding such transactions under existing authority, the legislation provides express congressional authority to create a non-notified program and resources to build it up.
The COINS Act leaves ambiguous whether criminal penalties for violations of the Outbound Program will remain once the new regulations are issued. The existing Outbound Program was authorized under the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. § 1701 et seq.) and expressly incorporated the civil and criminal penalties provided for in that statute. The COINS Act, however, provides independent statutory authority for the Outbound Program and its implementing regulations.
The COINS Act specifically directs that the regulations provide for the imposition of civil penalties equivalent to the amounts provided for in Section 206(b) of IEEPA (50 U.S.C. § 1705(b)) (with an inflation adjustment, currently an amount not to exceed $377,700 or twice the amount of the transaction), and provides for compelled divestment of covered national security transactions in a prohibited technology. The legislation also provides that the President may refer violations — specifically including divestment relief — to the Department of Justice for enforcement.
A separate provision of the COINS Act authorizes (but does not require) the President to use IEEPA authorities to prohibit US persons from investing in or purchasing significant equity or debt in certain “covered foreign persons” by imposing targeted sanctions on certain foreign persons connected to China — including Hong Kong and Macau — that are knowingly engaged in “significant operations in the defense and related material sector or the surveillance technology sector” of the Chinese economy. Covered foreign persons that may be sanctioned under this provision include entities that are owned 50% or more (directly or indirectly) by, or subject to the control of, (i) one or more entities that are incorporated or organized in China, or that have a principal place of business in China, (ii) one or more members of the Central Committee of the Chinese Communist Party or members of the political leadership of China, or (iii) the state or government of China (including any political subdivision, agency, or instrumentality of that state or government). Violations are subject to the civil and criminal penalties provided in IEEPA.
The legislation explicitly does not authorize or require the imposition of sanctions on the importation of goods, but it does not provide any additional details on this point.
The enactment of the COINS Act builds on the Outbound Program enacted by the last administration, reflecting bipartisan support for outbound investment screening as a US national security regulatory tool. While questions have swirled over the fate of the Outbound Program in this administration, Congress’s willingness to settle the question through legislation and expand the scope of the existing regime reflects an intent to buttress and institutionalize the Outbound Program in a way that can transcend administrations.
Latham & Watkins is experienced in advising on a range of national security regulatory issues, including CFIUS, outbound investment, economic sanctions, and export controls. We will continue to track the development of the Outbound Program closely, and we are available to consult on outbound investment and other national security regulatory issues.
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