September 29, 2023

Comments on Provisions Pertaining to U.S. Investments in Certain National Security Technologies and Products in Countries of Concern

Submitted by: Sarah Bauerle Danzman (Associate Professor, Indiana University Bloomington; Senior Fellow, Atlantic Council), Tim Fist (Fellow, Technology and National Security Program, Center for a New American Security), Emily Kilcrease (Senior Fellow and Director of the Energy, Economics, and Security Program, Center for a New American Security), Ngor Luong (Research Analyst, CSET), and Emily Weinstein (Research Fellow, CSET)


Comments are provided on the following areas:

  • The concept of intangible benefits and the potential advantages of creating clear indicators for when intangible benefits are conveyed by an investment transaction;
  • Extraterritorial application, specifically the broad assertion of jurisdiction over U.S. persons that “knowingly direct” certain transactions;
  • Covered transaction definitions, including
    • Need to clarify the policy intent for coverage of Chinese conglomerates;
    • Further precision on the “is engaged in” standard that links a Chinese company to a national security technology or product;
    • Questions around the provision of safe harbor, including as it pertains to multi-stage investments, growth transactions, and potential pivots of the business of a covered foreign person;
  • Recommendation to complement the EO/ANRPM with the additional policy tool of an expanded non-SDN CMIC program to address specific, entity-based national security concerns;
  • Recommendations on strengthening the scoping of the AI definitions and creating a “defense-in-depth” approach on AI through a package of policy tools, including by:
    • Amending the “exclusively used” standard in the end use provisions to align with export control concepts;
    • Adding an additional set of covered transactions involving frontier AI models, defined based on a set of technical parameters; and
    • Including entity-based restrictions for particular bad actors in the AI space.

Introductory Comments

We commend Treasury, Commerce, and the interagency for the release of this advanced notice of proposed rulemaking (ANPRM), as well as the President’s issuance of Executive Order 14105: Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern (the “EO”). The EO and ANPRM mark an important milestone in the development of new authorities to address national security concerns associated with certain investments made in the China market, particularly those that may advance China’s capabilities in key technology ecosystems that support its military modernization, intelligence, and surveillance capabilities. We welcome the opportunity for the public to provide comments on this new and complex set of authorities.

Our comments are informed by guiding principles laid out in prior research by Bauerle Danzman and Kilcrease, Sand in the Silicon: Designing an Outbound Investment Controls Mechanism, jointly published by the Atlantic Council and the Center for a New American Security. In this report, the authors note that new outbound investment control authorities should be:

  • targeted at transactions that present the highest national security risk;
  • clearly defined and understandable to private-sector participants, who will be responsible for the first line of compliance;
  • non-duplicative of existing tools that address national security risks associated with global economic activities, including inward investment screening conducted by the Committee on Foreign Investment in the United States (CFIUS), export controls, list-based sanctions programs, and the CHIPS and Science Act of 2022;
  • scoped proportionately to the institutional capacity available to effectively administer a new mechanism; and
  • designed to enable meaningful conversations with allies about adopting similar regimes.

As a general matter, the proposals in the ANPRM align closely with these principles, though our comments note certain points where the proposed rules would benefit from further clarity, examples, and explanation to strengthen alignment with these core concepts. Additionally, we urge the executive branch to continue its engagement with other economies that are large exporters of capital and developers of advanced technologies. As with export controls, a coordinated approach of like-minded countries will be most effective in addressing the main policy objectives of the EO, and there remains a high risk of backfilling of capital and associated benefits from other economies should the United States act in a unilateral manner.

While Congressional actions are beyond the scope of these comments, we nonetheless note that Congress has an important role to play in working with the executive branch to address national security concerns arising from certain outbound investments. The Congress should codify the authorities laid out in the EO and use the legislative process to fill any gaps that may exist due to constraints of International Emergency Economic Powers Act (IEEPA) as the underlying authority for the EO. The Congress should also ensure that the agencies implementing the outbound authorities receive sufficient budgets and staffing resources to effectively administer this novel program, to ensure robust intelligence community support, and to engage in outreach to partners and allies, as has proven to be effective through similar appropriations in the Foreign Investment Risk Review Modernization Act of 2018.

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  2. Comments are offered in a personal capacity and do not necessarily reflect the perspective of employing organizations.
  3. Sarah Bauerle Danzman and Emily Kilcrease, “Sand in the Silicon: Designing an Outbound Investment Controls Mechanism,” Atlantic Council and the Center for a New American Security (CNAS), September 2022,

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