II
118THCONGRESS
1
STSESSION S. 2678
To provide for an investment screening mechanism relating to covered sectors.
IN THE SENATE OF THE UNITED STATES
JULY27, 2023
Mr. C
ORNYN(for himself and Mr. CASEY) introduced the following bill; which
was read twice and referred to the Committee on Banking, Housing, and
Urban Affairs
A BILL
To provide for an investment screening mechanism relating
to covered sectors.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Outbound Investment 4
Transparency Act of 2023’’. 5
SEC. 2. PROTECTION OF COVERED SECTORS. 6
The Defense Production Act of 1950 (50 U.S.C. 7
4501 et seq.) is amended by adding at the end the fol-8
lowing: 9
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 2
•S 2678 IS
‘‘TITLE VIII—PROTECTION OF 1
COVERED SECTORS 2
‘‘SEC. 801. DEFINITIONS. 3
‘‘In this title: 4
‘‘(1) A
PPROPRIATE CONGRESSIONAL COMMIT -5
TEES.—The term ‘appropriate congressional com-6
mittees’ means— 7
‘‘(A) the Committee on Armed Services, 8
the Committee on Finance, the Committee on 9
Banking, Housing, and Urban Affairs, the Se-10
lect Committee on Intelligence, and the Com-11
mittee on Foreign Relations of the Senate; and 12
‘‘(B) the Committee on Armed Services, 13
the Committee on Ways and Means, the Com-14
mittee on Financial Services, the Permanent 15
Select Committee on Intelligence, and the Com-16
mittee on Foreign Affairs of the House of Rep-17
resentatives. 18
‘‘(2) C
OUNTRY OF CONCERN .—The term ‘coun-19
try of concern’ means, subject to such regulations as 20
may be prescribed in accordance with section 806, a 21
country specified in section 4872(d)(2) of title 10, 22
United States Code. 23
‘‘(3) C
OVERED ACTIVITY.— 24
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 3
•S 2678 IS
‘‘(A) IN GENERAL.—Subject to such regu-1
lations as may be prescribed in accordance with 2
section 806, and except as provided in subpara-3
graph (B), the term ‘covered activity’ means 4
any activity engaged in by a United States per-5
son in a related to a covered sector that in-6
volves— 7
‘‘(i) an acquisition by such United 8
States person of an equity interest or con-9
tingent equity interest, or monetary capital 10
contribution, in a covered foreign entity, 11
directly or indirectly, by contractual com-12
mitment or otherwise, with the goal of gen-13
erating income or gain; 14
‘‘(ii) an arrangement for an interest 15
held by such United States person in the 16
short- or long-term debt obligations of a 17
covered foreign entity that includes govern-18
ance rights that are characteristic of an 19
equity investment, management, or other 20
important rights, as defined in regulations 21
prescribed in accordance with section 806; 22
‘‘(iii) the establishment of a wholly 23
owned subsidiary in a country of concern, 24
such as a greenfield investment, for the 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 4
•S 2678 IS
purpose of production, design, testing, 1
manufacturing, fabrication, or development 2
related to one or more covered sectors; 3
‘‘(iv) the establishment by such 4
United States person of a joint venture in 5
a country of concern or with a covered for-6
eign entity for the purpose of production, 7
design, testing, manufacturing, fabrication, 8
or research involving one or more covered 9
sectors, or other contractual or other com-10
mitments involving a covered foreign entity 11
to jointly research and develop new innova-12
tion, including through the transfer of cap-13
ital or intellectual property or other busi-14
ness proprietary information; or 15
‘‘(v) the acquisition by a United 16
States person with a covered foreign entity 17
of— 18
‘‘(I) operational cooperation, such 19
as through supply or support arrange-20
ments; 21
‘‘(II) the right to board represen-22
tation (as an observer, even if limited, 23
or as a member) or an executive role 24
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 5
•S 2678 IS
(as may be defined through regula-1
tion) in a covered foreign entity; 2
‘‘(III) the ability to direct or in-3
fluence such operational decisions as 4
may be defined through such regula-5
tions; 6
‘‘(IV) formal governance rep-7
resentation in any operating affiliate, 8
like a portfolio company, of a covered 9
foreign entity; or 10
‘‘(V) a new relationship to share 11
or provide business services, such as 12
but not limited to financial services, 13
marketing services, maintenance, or 14
assembly functions, related to a cov-15
ered sectors. 16
‘‘(B) E
XCEPTIONS.—The term ‘covered ac-17
tivity’ does not include— 18
‘‘(i) any transaction the value of 19
which the Secretary of the Treasury deter-20
mines is de minimis, as defined in regula-21
tions prescribed in accordance with section 22
806; 23
‘‘(ii) any category of transactions that 24
the Secretary determines is in the national 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 6
•S 2678 IS
interest of the United States, as may be 1
defined in regulations prescribed in accord-2
ance with section 806; or 3
‘‘(iii) any ordinary or administrative 4
business transaction as may be defined in 5
such regulations. 6
‘‘(4) C
OVERED FOREIGN ENTITY .— 7
‘‘(A) I
N GENERAL.—Subject to regulations 8
prescribed in accordance with section 806, and 9
except as provided in subparagraph (B), the 10
term ‘covered foreign entity’ means— 11
‘‘(i) any entity that is incorporated in, 12
has a principal place of business in, or is 13
organized under the laws of a country of 14
concern; 15
‘‘(ii) any entity the equity securities of 16
which are primarily traded in the ordinary 17
course of business on one or more ex-18
changes in a country of concern; 19
‘‘(iii) any entity in which any entity 20
described in subclause (i) or (ii) holds, in-21
dividually or in the aggregate, directly or 22
indirectly, an ownership interest of greater 23
than 50 percent; or 24
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 7
•S 2678 IS
‘‘(iv) any other entity that is not a 1
United States person and that meets such 2
criteria as may be specified by the Sec-3
retary of the Treasury in such regulations. 4
‘‘(B) E
XCEPTION.—The term ‘covered for-5
eign entity’ does not include any entity de-6
scribed in subparagraph (A) that can dem-7
onstrate that a majority of the equity interest 8
in the entity is ultimately owned by— 9
‘‘(i) nationals of the United States; or 10
‘‘(ii) nationals of such countries (other 11
than countries of concern) as are identified 12
for purposes of this subparagraph pursu-13
ant to regulations prescribed in accordance 14
with section 806. 15
‘‘(5) C
OVERED SECTORS .—Subject to regula-16
tions prescribed in accordance with section 806, the 17
term ‘covered sectors’ includes sectors within the fol-18
lowing areas, as specified in such regulations: 19
‘‘(A) Advanced semiconductors and micro-20
electronics. 21
‘‘(B) Artificial intelligence. 22
‘‘(C) Quantum information science and 23
technology. 24
‘‘(D) Hypersonics. 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 8
•S 2678 IS
‘‘(E) Satellite-based communications. 1
‘‘(F) Networked laser scanning systems 2
with dual-use applications. 3
‘‘(6) P
ARTY.—The term ‘party’, with respect to 4
an activity, has the meaning given that term in reg-5
ulations prescribed in accordance with section 806. 6
‘‘(7) U
NITED STATES.—The term ‘United 7
States’ means the several States, the District of Co-8
lumbia, and any territory or possession of the 9
United States. 10
‘‘(8) U
NITED STATES PERSON .—The term 11
‘United States person’ means— 12
‘‘(A) an individual who is a citizen or na-13
tional of the United States or an alien lawfully 14
admitted for permanent residence in the United 15
States; and 16
‘‘(B) any corporation, partnership, or other 17
entity organized under the laws of the United 18
States or the laws of any jurisdiction within the 19
United States. 20
‘‘SEC. 802. ADMINISTRATION OF UNITED STATES INVEST-21
MENT NOTIFICATION. 22
‘‘(a) I
NGENERAL.—The President shall delegate the 23
authorities and functions under this title to the Secretary 24
of the Treasury. 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 9
•S 2678 IS
‘‘(b) COORDINATION.—In carrying out the duties of 1
the Secretary under this title, the Secretary shall— 2
‘‘(1) coordinate with the Secretary of Com-3
merce; and 4
‘‘(2) consult with the United States Trade Rep-5
resentative, the Secretary of Defense, the Secretary 6
of State, and the Director of National Intelligence. 7
‘‘SEC. 803. MANDATORY NOTIFICATION OF COVERED AC-8
TIVITIES. 9
‘‘(a) M
ANDATORYNOTIFICATION.— 10
‘‘(1) I
N GENERAL.—Subject to regulations pre-11
scribed in accordance with section 806, beginning on 12
the date that is 90 days after such regulations take 13
effect, a United States person that plans to engage 14
in a covered activity shall— 15
‘‘(A) if such covered activity is not a se-16
cured transaction, submit to the Secretary of 17
the Treasury a complete written notification of 18
the activity not later than 14 days before the 19
anticipated completion date of the activity; and 20
‘‘(B) if such covered activity is a secured 21
transaction, submit to the Secretary of the 22
Treasury a complete written notification of the 23
activity not later than 14 days after the comple-24
tion date of the activity. 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 10
•S 2678 IS
‘‘(2) CIRCULATION OF NOTIFICATION .— 1
‘‘(A) I
N GENERAL.—The Secretary shall, 2
upon receipt of a notification under paragraph 3
(1), promptly inspect the notification for com-4
pleteness. 5
‘‘(B) I
NCOMPLETE NOTIFICATIONS .—If a 6
notification submitted under paragraph (1) is 7
incomplete, the Secretary shall promptly inform 8
the United States person that submits the noti-9
fication that the notification is not complete 10
and provide an explanation of relevant material 11
respects in which the notification is not com-12
plete. 13
‘‘(3) I
DENTIFICATION OF NON -NOTIFIED ACTIV-14
ITY.—The Secretary shall establish a process to 15
identify covered activity for which— 16
‘‘(A) a notification is not submitted to the 17
Secretary under paragraph (1); and 18
‘‘(B) information is reasonably available. 19
‘‘(b) C
ONFIDENTIALITY OFINFORMATION.— 20
‘‘(1) I
N GENERAL.—Except as provided in para-21
graph (2), any information or documentary material 22
filed with the Secretary of the Treasury pursuant to 23
this section shall be exempt from disclosure under 24
section 552 of title 5, United States Code, and no 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 11
•S 2678 IS
such information or documentary material may be 1
made public by any government agency or Member 2
of Congress. 3
‘‘(2) E
XCEPTIONS.—The exemption from disclo-4
sure provided by paragraph (1) shall not prevent the 5
disclosure of the following: 6
‘‘(A) Information relevant to any adminis-7
trative or judicial action or proceeding. 8
‘‘(B) Information provided to Congress or 9
any of the appropriate congressional commit-10
tees. 11
‘‘(C) Information important to the national 12
security analysis or actions of the President to 13
any domestic governmental entity, or to any 14
foreign governmental entity of an ally or part-15
ner of the United States, under the direction 16
and authorization of the President or the Sec-17
retary, only to the extent necessary for national 18
security purposes, and subject to appropriate 19
confidentiality and classification requirements. 20
‘‘(D) Information that the parties have 21
consented to be disclosed to third parties. 22
‘‘SEC. 804. REPORTING REQUIREMENTS. 23
‘‘(a) I
NGENERAL.—Not later than 360 days after 24
the date on which the regulations prescribed under section 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 12
•S 2678 IS
806 take effect, and not less frequently than annually 1
thereafter, the Secretary of the Treasury shall submit to 2
the appropriate congressional committees a report that— 3
‘‘(1) lists all notifications submitted under sec-4
tion 803(a) during the year preceding submission of 5
the report and includes, with respect to each such 6
notification— 7
‘‘(A) basic information on each party to 8
the covered activity with respect to which the 9
notification was submitted; and 10
‘‘(B) the nature of the covered activity that 11
was the subject to the notification, including 12
the elements of the covered activity that neces-13
sitated a notification; 14
‘‘(2) includes a summary of those notifications, 15
disaggregated by sector, by covered activity, and by 16
country of concern; 17
‘‘(3) provides additional context and informa-18
tion regarding trends in the sectors, the types of 19
covered activities, and the countries involved in those 20
notifications; 21
‘‘(4) includes a description of the national secu-22
rity risks associated with— 23
‘‘(A) the covered activities with respect to 24
which those notifications were submitted; or 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 13
•S 2678 IS
‘‘(B) categories of such activities; and 1
‘‘(5) assesses the overall impact of those notifi-2
cations, including recommendations for— 3
‘‘(A) expanding existing Federal programs 4
to support the production or supply of covered 5
sectors in the United States, including the po-6
tential of existing authorities to address any re-7
lated national security concerns; 8
‘‘(B) investments needed to enhance cov-9
ered sectors and reduce dependence on coun-10
tries of concern regarding those sectors; and 11
‘‘(C) the continuation, expansion, or modi-12
fication of the implementation and administra-13
tion of this title, including recommendations 14
with respect to whether the definition of ‘coun-15
try of concern’ under section 801(2) should be 16
amended to add or remove countries. 17
‘‘(b) F
ORM OFREPORT.—Each report required by 18
this section shall be submitted in unclassified form, but 19
may include a classified annex. 20
‘‘(c) T
ESTIMONYREQUIRED.—Not later than one 21
year after the date of enactment of this title, and annually 22
thereafter, the Secretary of the Treasury and the Sec-23
retary of Commerce shall each provide to the Committee 24
on Banking, Housing, and Urban Affairs of the Senate 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 14
•S 2678 IS
and the Committee on Financial Services of the House of 1
Representatives testimony with respect to the national se-2
curity threats relating to investments by the United States 3
persons in countries of concern and broader international 4
capital flows. 5
‘‘SEC. 805. PENALTIES AND ENFORCEMENT. 6
‘‘(a) P
ENALTIESWITHRESPECT TO UNLAWFUL 7
A
CTS.—Subject to regulations prescribed in accordance 8
with section 806, it shall be unlawful— 9
‘‘(1) to fail to submit a notification under sub-10
section (a) of section 803 with respect to a covered 11
activity or to submit other information as required 12
by the Secretary of the Treasury; or 13
‘‘(2) to make a material misstatement or to 14
omit a material fact in any information submitted to 15
the Secretary under this title. 16
‘‘(b) E
NFORCEMENT.—The President may direct the 17
Attorney General to seek appropriate relief in the district 18
courts of the United States, in order to implement and 19
enforce this title. 20
‘‘SEC. 806. REQUIREMENT FOR REGULATIONS. 21
‘‘(a) I
NGENERAL.—Not later than 360 days after 22
the date of the enactment of this title, the Secretary of 23
the Treasury shall finalize regulations to carry out this 24
title. 25
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 15
•S 2678 IS
‘‘(b) ELEMENTS.—Regulations prescribed to carry 1
out this title shall include specific examples of the types 2
of— 3
‘‘(1) activities that will be considered to be cov-4
ered activities; and 5
‘‘(2) the specific sectors and subsectors that 6
may be considered to be covered sectors. 7
‘‘(c) R
EQUIREMENTS FOR CERTAINREGULATIONS.— 8
The Secretary of the Treasury shall prescribe regulations 9
further defining the terms used in this title, including ‘cov-10
ered activity’, ‘covered foreign entity’, and ‘party’, in ac-11
cordance with subchapter II of chapter 5 and chapter 7 12
of title 5 (commonly known as the ‘Administrative Proce-13
dure Act’). 14
‘‘(d) P
UBLICPARTICIPATION INRULEMAKING.—The 15
provisions of section 709 shall apply to any regulations 16
issued under this title. 17
‘‘(e) L
OW-BURDENREGULATIONS.—In prescribing 18
regulations under this section, the Secretary of the Treas-19
ury shall structure the regulations— 20
‘‘(1) to minimize the cost and complexity of 21
compliance for affected parties; 22
‘‘(2) to ensure the benefits of the regulations 23
outweigh their costs; 24
VerDate Sep 11 2014 22:45 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 16
•S 2678 IS
‘‘(3) to adopt the least burdensome alternative 1
that achieves regulatory objectives; 2
‘‘(4) to prioritize transparency and stakeholder 3
involvement in the process of prescribing the regula-4
tions; and 5
‘‘(5) to regularly review and streamline existing 6
regulations to reduce redundancy and complexity. 7
‘‘SEC. 807. MULTILATERAL ENGAGEMENT AND COORDINA-8
TION. 9
‘‘(a) I
NGENERAL.—The President shall delegate the 10
authorities and functions under this section to the Sec-11
retary of State. 12
‘‘(b) A
UTHORITIES.—The Secretary of State, in co-13
ordination with the Secretary of the Treasury, the Sec-14
retary of Commerce, the United States Trade Representa-15
tive, and the Director of National Intelligence, shall— 16
‘‘(1) conduct bilateral and multilateral engage-17
ment with the governments of countries that are al-18
lies and partners of the United States to ensure co-19
ordination of protocols and procedures with respect 20
to covered activities with countries of concern and 21
covered foreign entities; and 22
‘‘(2) upon adoption of protocols and procedures 23
described in paragraph (1), work with those govern-24
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 17
•S 2678 IS
ments to establish mechanisms for sharing informa-1
tion, including trends, with respect to such activities. 2
‘‘(c) S
TRATEGY FORDEVELOPMENT OF OUTBOUND 3
I
NVESTMENTSCREENINGMECHANISMS.—The Secretary 4
of State, in coordination with the Secretary of the Treas-5
ury and in consultation with the Attorney General, shall— 6
‘‘(1) develop a strategy to work with countries 7
that are allies and partners of the United States to 8
develop mechanisms comparable to this title for the 9
notification of covered activities; and 10
‘‘(2) provide technical assistance to those coun-11
tries with respect to the development of those mech-12
anisms. 13
‘‘(d) R
EPORT.—Not later than 90 days after the de-14
velopment of the strategy required by subsection (b), and 15
annually thereafter for a period of 5 years, the Secretary 16
of State shall submit to the appropriate congressional 17
committees a report that includes the strategy, the status 18
of implementing the strategy, and a description of any im-19
pediments to the establishment of mechanisms comparable 20
to this title by allies and partners. 21
‘‘SEC. 808. AUTHORIZATION OF APPROPRIATIONS. 22
‘‘(a) I
NGENERAL.—There are authorized to be ap-23
propriated such sums as may be necessary to carry out 24
VerDate Sep 11 2014 22:45 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS 18
•S 2678 IS
this title, including to provide outreach to industry and 1
persons affected by this title. 2
‘‘(b) H
IRINGAUTHORITY.—The head of any agency 3
designated as a lead agency under section 802(b) may ap-4
point, without regard to the provisions of sections 3309 5
through 3318 of title 5, United States Code, not more 6
than 25 candidates directly to positions in the competitive 7
service (as defined in section 2102 of that title) in that 8
agency. The primary responsibility of individuals in posi-9
tions authorized under the preceding sentence shall be to 10
administer this title. 11
‘‘SEC. 809. RULE OF CONSTRUCTION WITH RESPECT TO 12
FREE AND FAIR COMMERCE. 13
‘‘Nothing in this title may be construed to restrain 14
or deter foreign investment in the United States, United 15
States investment abroad, or trade in goods or services, 16
if such investment and trade do not pose a risk to the 17
national security of the United States.’’. 18
Æ
VerDate Sep 11 2014 03:00 Aug 17, 2023 Jkt 039200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6301 E:\BILLS\S2678.IS S2678
kjohnson on DSK79L0C42PROD with BILLS