Treasury Proposes New Rules for U.S. Investments in Foreign Tech
Published Date: 10/26/2026
Proposed Rule
Summary
This new rule asks U.S. businesses to tell the Treasury Department about certain deals with foreign companies working on special tech and stops some risky deals altogether. It affects anyone in the U.S. involved in these tech investments and sets clear deadlines for reporting. The goal? Keep America’s tech safe while making sure everyone knows the rules by December 7, 2026.
Analyzed Economic Effects
11 provisions identified: 2 benefits, 8 costs, 1 mixed.
Prohibition on Investments in Prohibited Technologies
The Proposed Rule would prohibit U.S. persons from engaging in certain covered national security transactions involving a covered foreign person that 'engages in' a prohibited technology. The rule implements Title VIII's statutory prohibition on transactions in specified prohibited technologies.
List of Transaction Types Treated as Covered
The Proposed Rule implements Title VIII's definition of 'covered national security transaction' to include direct or indirect: acquisition of equity or contingent equity in a covered foreign person; loans that afford equity-like rights; entrance into joint ventures (which need not create a new entity); conversion of contingent equity or debt into equity (with a knowledge element and applied only to conversions of contingent equity acquired on or after the effective date); acquisition/leasing/development of operations or assets in a country of concern that establish a covered foreign person; direction of a transaction by a foreign person; and acquisition of non-U.S. pooled fund limited partner interests where the fund likely will invest in covered foreign persons.
Mandatory Notifications for Certain Investments
If you are a U.S. person involved in an investment or transaction with a covered foreign person that 'engages in' a notifiable technology (including semiconductor/microelectronics, AI systems, quantum information, high-performance computing/supercomputing, or hypersonic systems as described by Title VIII), you must provide specified information to the U.S. Department of the Treasury as a notification. The Proposed Rule implements this statutory notification requirement and defines the types of transactions that trigger it.
New and Redescribed Technology Sectors Covered
Title VIII and the Proposed Rule expand the program to include two new sectors—high-performance computing and supercomputing, and hypersonic systems—and reclassify some advanced AI capabilities (super intelligence systems) as prohibited. The Proposed Rule defines hypersonic system as a vehicle or weapon delivery system capable of sustained atmospheric flight or very low Earth orbit flight at speeds of Mach 5 or greater and gives examples.
Broader List of Countries of Concern
Title VIII expands the list of 'countries of concern' beyond the PRC (including Hong Kong and Macau) to include Cuba, Iran, North Korea, Russia, and the Bolivarian Republic of Venezuela under the regime of Nicolás Maduro Moros; the Proposed Rule would define 'country of concern' consistent with Title VIII. (The preamble notes the U.S. recognized Delcy Rodríguez as head of state of Venezuela on March 5, 2026.)
Who Counts as a Covered Foreign Person
The Proposed Rule defines 'covered foreign person' consistent with Title VIII to include entities incorporated in, organized under, or having principal place of business in a country of concern; persons subject to direction or control by such countries or entities; and entities owned 50% or more by such actors. The Rule also treats a person as covered if more than 50% of that person's revenue, net income, capital expenditure, or operating expenses are attributable to covered foreign persons, and instructs that amounts below $50,000 should not be included when calculating revenue attributable to a covered foreign person.
Heightened Diligence/Knowledge Obligations
The Proposed Rule requires U.S. persons to conduct a 'reasonable and diligent inquiry' to determine whether a transaction is covered and clarifies Treasury may consider whether the U.S. person appropriately considered information provided by the Treasury Department (including Treasury assessments that a foreign person may engage in a notifiable or prohibited technology) when assessing the knowledge standard. The knowledge standard also applies to controlled foreign entities.
Processes for Guidance, Evidence, and Potential Listings
Title VIII (and the Proposed Rule) requires Treasury to establish: (1) a process to request confidential non-binding feedback or anonymized public guidance about potentially prohibited transactions, (2) a mechanism for the public to submit evidence confidentially on whether a foreign person is a covered foreign person engaged in prohibited or notifiable technology, and (3) discretionary authority to create a publicly accessible, non-exhaustive database identifying covered foreign persons engaged in such technologies.
De Minimis Exceptions for Small Investments
Title VIII includes exceptions for de minimis transactions and for certain limited partner investments where committed capital is not more than a de minimis amount; the statute leaves the de minimis thresholds to the Secretary. The Proposed Rule acknowledges these statutory exceptions but does not set the numeric de minimis amounts in the text provided.
Financial-Service Activities Excepted from Coverage
Title VIII explicitly excepts certain services—underwriting (including where it involves acquisition of equity), bank lending, processing/clearing of payments, prime brokerage, and global custody services—from coverage as covered national security transactions. The Proposed Rule follows Title VIII's exceptions.
No Retroactive Effect; Part 850 Continues for Earlier Period
The Proposed Rule states it will not have retroactive effect, and that the Part 850 Regulations (the existing OISP rules) will continue to apply to activities occurring between January 2, 2025 and the effective date of the final regulations implementing Title VIII. Treasury also retains authority to take action under Part 850 for conduct during that period.
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Key Dates
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