Historic Change in U.S. Foreign Direct Investment: New Restrictions on U.S. Outbound Investment Abroad

U.S. businesses involved in the U.S. defense industrial base have been historically protected from Foreign Direct Investment (FDI) by the Committee on Foreign Investment in the United States (CFIUS). The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded those protections to include critical technologies, infrastructure, and/or data – including real estate located near controlled airports, maritime ports, military installations, critical infrastructure, and more recently to agricultural real estate. Individual U.S. States also enacted restrictions either preventing or requiring reporting of foreign ownership. 

Notably, all historic U.S. FDI regulation focused on in-bound foreign investment into the U.S.; however, this changed in 2025 to include investments by U.S. businesses made abroad. This change has significant repercussions for all U.S. businesses who are looking to expand outside the US, or U.S. investors looking to invest outside the U.S.

The Outbound Investment Security Program - EO 14105 (OISP) required notification and potentially restricted investments by U.S. persons in “covered foreign persons,” with a nexus to a “country of concern,” involving semiconductors, microelectronics, quantum information technologies, or artificial intelligence. OISP resulted in regulations requiring the notification and/or prohibition of activities, technologies, and sectors for investments involving the People’s Republic of China (including Hong Kong and Macau).

Comprehensive Outbound Investment National Security Act of 2025 – What it includes

The 2026 National Defense Authorization Act (NDAA) included the codification of Outbound Investment Security Program Executive Order 14105. 

Entitled the “Comprehensive Outbound Investment National Security Act of 2025” (COINS Act), the COINS Act expands U.S. FDI to include notifications and restrictions on U.S. outbound investment in certain activities, technologies, and sectors of investments with a nexus to a “country of concern” as part of the U.S. national security framework.

Consistent with existing U.S. trade controls, the COINS Act expands the list of “countries of concern” to include China (Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela. The COINS Act also revises the definition of “covered foreign person,” which will necessarily be further refined in the enacting regulations. The COINS Act also expands the definition of a “covered transaction” to include a transaction where a U.S. person is “knowingly directing” a foreign person’s transaction that would otherwise be notifiable or prohibited or if undertaken by a U.S. person (i.e. investment bankers or brokers).

The COINS Act also expands the categories of covered technologies to include semiconductors, microelectronics, artificial intelligence, quantum computing, supercomputing, and hypersonic technologies. It also provides U.S. Department of the Treasury (Treasury) the authority to add technologies that “enable the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern.”

The COINS Act tasks the Treasury with implementing enabling regulations. Significantly, the COINS Act only provides the Treasury 450 days from its effective date to amend, supersede, revoke, or otherwise adapt the existing OISP regulations. Treasury is also obligated to define a process for receiving feedback as part of their rulemaking process. The current OISP regulations remain in effect until displaced by the COINS Act enabling regulations. 

The COINS Act also tasks the Treasury with establishing an advisory opinion process through which to provide agency advice on whether an investment would be a “covered transaction,” enforcement regulations to pursue violations for “non-notified” “covered transactions,” as well as a possible public database of identified “covered foreign persons” to aid U.S. investors with COINS Act compliance.

The COINS Act provides a few limited “exceptions” to otherwise “covered transactions” including investments:

• Determined to be “de minimis” or “in the national interest” of the U.S.
• Involving certain publicly traded securities.
• By passive limited partners, investment funds, or pooled investment vehicles.
• Acquiring the “totality of the interest” by a U.S. person.
• Certain intra-company transfers.

Early Assessment of Foreign Direct Investment – for both in-bound and out-bound investments

U.S. businesses are now required to determine whether a prospective investment outside the U.S. would be a “covered transaction” requiring notification and/or approval under the COINS Act. As a result, any investment involving an out-bound investment by a U.S. business should be carefully assessed for compliance under the COINS Act.

U.S. businesses and their counsel should therefore exercise early diligence to determine, whether a proposed investment or transaction involves:

• Covered foreign persons
• Countries of concern
• Critical technologies
• Controlled industrial sectors

In addition to the COINS Act, U.S. persons investing abroad need to also assure compliance with the reporting requirements of the U.S. Department of Commerce, Bureau of Economic Analysis, as well as with other applicable U.S. trade regulations, including U.S. export controls, sanctions, anti-corruption, and anti-boycott laws and regulations.

The U.S. is not alone in its changes to foreign direct investment.  Most U.S. trading partners have similar foreign direct investment regulations. U.S. businesses engaged in cross border transactions – including foreign direct investment - should assure compliance around the globe by early diligence to identify required disclosures and filings. Womble can assist U.S., UK, and other international businesses with cross border transactions – including foreign direct investment compliance around the globe and early diligence to identify required disclosures and filings. 

David Vance Lucas – Womble Bond Dickinson, Global Defense and Security Solutions Team (U.S.)  For over three decades, David Vance Lucas has applied his legal, technological, and operational experience to craft strategic advice on intellectual property, international trade, and complex litigation matters – throughout the U.S., U.K. and Europe. He accumulated much of this experience while serving as general counsel for a global technology company and a clinical laboratory software company. David utilizes this experience and legal acumen to advise C-suites and boards of directors (public and private) on legal, compliance, and operational issues.