In Foreign Investment Watch, Brendan Hanifin Unpacks Proposed Treasury Department Rules on Outbound Foreign Investment

In The News
August 24, 2023

The Treasury Department has solicited feedback on rules related to the regulation and oversight of outbound U.S. investment into “countries of concern.” While the rules will largely apply to certain investments in China, Treasury’s Advance Notice of Proposed Rulemaking (ANPRM) could impact entities in other countries, including the U.S. under certain circumstances.

International risk partner Brendan Hanifin told Foreign Investment Watch that he agrees the ANPRM could have wider impact than simply direct investment in China-based covered transactions. “Yes, the advance notice of proposed rulemaking contemplates that investments in companies located outside of China including, potentially, even U.S. companies, could constitute covered transactions,” said Brendan. “This ultimately hinges on the contemplated definition of ‘person of a country of concern’ as set forth in the ANPRM.” The definition is subject to clarification during the forthcoming rulemaking process, added Brendan. 

Other scenarios, according to Brendan, could potentially be considered covered transactions, as “[t]he ANPRM states that its contemplated definitions were intended to avoid loopholes, including in respect of entities located outside of China that are majority owned by Chinese parties.” Brendan added that the contemplated definition of covered transaction “explicitly states that it would apply to certain joint ventures ‘wherever located’.”

“Because the definitions in the ANPRM may be amended or clarified through the rulemaking process, interested parties will need to continue to monitor for developments, whether through the rulemaking process or parallel legislative efforts.”