US Treasury Proposes Rules to Implement COINS Act Outbound Investment Screening

The U.S. Department of the Treasury has issued a Notice of Proposed Rulemaking to update the Outbound Investment Security Program, acting on congressional direction contained in the Comprehensive Outbound Investment Security Act, which was passed as part of the Fiscal Year 2026 National Defense Authorization Act. The proposal marks a significant expansion of the government's framework for regulating American capital flows into sensitive technologies abroad, codifying an approach that until now has rested on executive authority.

The COINS Act directs the Treasury Secretary to issue regulations requiring U.S. persons to notify the department of certain transactions involving covered foreign persons engaged in notifiable technologies, and to prohibit U.S. persons from participating in other transactions involving covered foreign persons engaged in prohibited technologies. The law authorizes the Secretary to define technical parameters across five sectors: semiconductor technologies and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. It also permits the Secretary, in consultation with appropriate congressional committees and subject to notice-and-comment rulemaking, to add technologies beyond those enumerated—authority the Secretary has exercised by adding biotechnology to the proposed regulations.

In passing the legislation, Congress determined that restricting certain outbound investments into dual-use strategic technologies that benefit a foreign adversary's military modernization, surveillance capabilities, and human rights abuses is necessary to protect U.S. national security and foreign policy interests. The administration framed the measure as consistent with maintaining an open investment environment. "Under President Trump's leadership, we are committed to putting America's national security first," said Treasury Secretary Scott Bessent. "The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security." He added that the step provides clarity to U.S. and foreign investors and an opportunity to offer feedback.

The NPRM details key concepts including requirements applicable to U.S. persons and their controlled foreign entities, categories of covered national security transactions, definitions, the scope of covered foreign persons, excepted transactions, and technical specifications for the covered technology areas. It also addresses notification content, the process for requesting non-binding feedback and submitting confidential information, the knowledge standard and expectations for reasonable and diligent inquiry before undertaking a transaction, and conduct treated as a violation along with applicable penalties. "The proposed regulations are designed to address risks that can arise when foreign adversaries try to benefit from U.S. investment in key technology sectors," said Assistant Secretary of the Treasury for Investment Security Christopher Pilkerton, adding that the proposal will enhance the program and efforts to protect national security.

Treasury is inviting comments from stakeholders on all aspects of the proposal, including the scope of covered transactions, definitions of key terms, notification requirements, and penalty and enforcement processes. Written comments may be submitted by the deadline specified in the official NPRM, and the department said it will carefully consider the input before issuing final implementing regulations, which will set an effective date for the program. For technology investors and fund managers, the proposal signals a more formalized and potentially broader screening architecture for cross-border capital in strategic sectors, raising compliance expectations for deal diligence and post-closing monitoring.