[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2678 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
1st Session
S. 2678
To provide for an investment screening mechanism relating to covered
sectors.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 27, 2023
Mr. Cornyn (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 Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Outbound Investment Transparency Act
of 2023''.
SEC. 2. PROTECTION OF COVERED SECTORS.
The Defense Production Act of 1950 (50 U.S.C. 4501 et seq.) is
amended by adding at the end the following:
``TITLE VIII--PROTECTION OF COVERED SECTORS
``SEC. 801. DEFINITIONS.
``In this title:
``(1) Appropriate congressional committees.--The term
`appropriate congressional committees' means--
``(A) the Committee on Armed Services, the
Committee on Finance, the Committee on Banking,
Housing, and Urban Affairs, the Select Committee on
Intelligence, and the Committee on Foreign Relations of
the Senate; and
``(B) the Committee on Armed Services, the
Committee on Ways and Means, the Committee on Financial
Services, the Permanent Select Committee on
Intelligence, and the Committee on Foreign Affairs of
the House of Representatives.
``(2) Country of concern.--The term `country of concern'
means, subject to such regulations as may be prescribed in
accordance with section 806, a country specified in section
4872(d)(2) of title 10, United States Code.
``(3) Covered activity.--
``(A) In general.--Subject to such regulations as
may be prescribed in accordance with section 806, and
except as provided in subparagraph (B), the term
`covered activity' means any activity engaged in by a
United States person in a related to a covered sector
that involves--
``(i) an acquisition by such United States
person of an equity interest or contingent
equity interest, or monetary capital
contribution, in a covered foreign entity,
directly or indirectly, by contractual
commitment or otherwise, with the goal of
generating income or gain;
``(ii) an arrangement for an interest held
by such United States person in the short- or
long-term debt obligations of a covered foreign
entity that includes governance rights that are
characteristic of an equity investment,
management, or other important rights, as
defined in regulations prescribed in accordance
with section 806;
``(iii) the establishment of a wholly owned
subsidiary in a country of concern, such as a
greenfield investment, for the purpose of
production, design, testing, manufacturing,
fabrication, or development related to one or
more covered sectors;
``(iv) the establishment by such United
States person of a joint venture in a country
of concern or with a covered foreign entity for
the purpose of production, design, testing,
manufacturing, fabrication, or research
involving one or more covered sectors, or other
contractual or other commitments involving a
covered foreign entity to jointly research and
develop new innovation, including through the
transfer of capital or intellectual property or
other business proprietary information; or
``(v) the acquisition by a United States
person with a covered foreign entity of--
``(I) operational cooperation, such
as through supply or support
arrangements;
``(II) the right to board
representation (as an observer, even if
limited, or as a member) or an
executive role (as may be defined
through regulation) in a covered
foreign entity;
``(III) the ability to direct or
influence such operational decisions as
may be defined through such
regulations;
``(IV) formal governance
representation in any operating
affiliate, like a portfolio company, of
a covered foreign entity; or
``(V) a new relationship to share
or provide business services, such as
but not limited to financial services,
marketing services, maintenance, or
assembly functions, related to a
covered sectors.
``(B) Exceptions.--The term `covered activity' does
not include--
``(i) any transaction the value of which
the Secretary of the Treasury determines is de
minimis, as defined in regulations prescribed
in accordance with section 806;
``(ii) any category of transactions that
the Secretary determines is in the national
interest of the United States, as may be
defined in regulations prescribed in accordance
with section 806; or
``(iii) any ordinary or administrative
business transaction as may be defined in such
regulations.
``(4) Covered foreign entity.--
``(A) In general.--Subject to regulations
prescribed in accordance with section 806, and except
as provided in subparagraph (B), the term `covered
foreign entity' means--
``(i) any entity that is incorporated in,
has a principal place of business in, or is
organized under the laws of a country of
concern;
``(ii) any entity the equity securities of
which are primarily traded in the ordinary
course of business on one or more exchanges in
a country of concern;
``(iii) any entity in which any entity
described in subclause (i) or (ii) holds,
individually or in the aggregate, directly or
indirectly, an ownership interest of greater
than 50 percent; or
``(iv) any other entity that is not a
United States person and that meets such
criteria as may be specified by the Secretary
of the Treasury in such regulations.
``(B) Exception.--The term `covered foreign entity'
does not include any entity described in subparagraph
(A) that can demonstrate that a majority of the equity
interest in the entity is ultimately owned by--
``(i) nationals of the United States; or
``(ii) nationals of such countries (other
than countries of concern) as are identified
for purposes of this subparagraph pursuant to
regulations prescribed in accordance with
section 806.
``(5) Covered sectors.--Subject to regulations prescribed
in accordance with section 806, the term `covered sectors'
includes sectors within the following areas, as specified in
such regulations:
``(A) Advanced semiconductors and microelectronics.
``(B) Artificial intelligence.
``(C) Quantum information science and technology.
``(D) Hypersonics.
``(E) Satellite-based communications.
``(F) Networked laser scanning systems with dual-
use applications.
``(6) Party.--The term `party', with respect to an
activity, has the meaning given that term in regulations
prescribed in accordance with section 806.
``(7) United states.--The term `United States' means the
several States, the District of Columbia, and any territory or
possession of the United States.
``(8) United states person.--The term `United States
person' means--
``(A) an individual who is a citizen or national of
the United States or an alien lawfully admitted for
permanent residence in the United States; and
``(B) any corporation, partnership, or other entity
organized under the laws of the United States or the
laws of any jurisdiction within the United States.
``SEC. 802. ADMINISTRATION OF UNITED STATES INVESTMENT NOTIFICATION.
``(a) In General.--The President shall delegate the authorities and
functions under this title to the Secretary of the Treasury.
``(b) Coordination.--In carrying out the duties of the Secretary
under this title, the Secretary shall--
``(1) coordinate with the Secretary of Commerce; and
``(2) consult with the United States Trade Representative,
the Secretary of Defense, the Secretary of State, and the
Director of National Intelligence.
``SEC. 803. MANDATORY NOTIFICATION OF COVERED ACTIVITIES.
``(a) Mandatory Notification.--
``(1) In general.--Subject to regulations prescribed in
accordance with section 806, beginning on the date that is 90
days after such regulations take effect, a United States person
that plans to engage in a covered activity shall--
``(A) if such covered activity is not a secured
transaction, submit to the Secretary of the Treasury a
complete written notification of the activity not later
than 14 days before the anticipated completion date of
the activity; and
``(B) if such covered activity is a secured
transaction, submit to the Secretary of the Treasury a
complete written notification of the activity not later
than 14 days after the completion date of the activity.
``(2) Circulation of notification.--
``(A) In general.--The Secretary shall, upon
receipt of a notification under paragraph (1), promptly
inspect the notification for completeness.
``(B) Incomplete notifications.--If a notification
submitted under paragraph (1) is incomplete, the
Secretary shall promptly inform the United States
person that submits the notification that the
notification is not complete and provide an explanation
of relevant material respects in which the notification
is not complete.
``(3) Identification of non-notified activity.--The
Secretary shall establish a process to identify covered
activity for which--
``(A) a notification is not submitted to the
Secretary under paragraph (1); and
``(B) information is reasonably available.
``(b) Confidentiality of Information.--
``(1) In general.--Except as provided in paragraph (2), any
information or documentary material filed with the Secretary of
the Treasury pursuant to this section shall be exempt from
disclosure under section 552 of title 5, United States Code,
and no such information or documentary material may be made
public by any government agency or Member of Congress.
``(2) Exceptions.--The exemption from disclosure provided
by paragraph (1) shall not prevent the disclosure of the
following:
``(A) Information relevant to any administrative or
judicial action or proceeding.
``(B) Information provided to Congress or any of
the appropriate congressional committees.
``(C) Information important to the national
security analysis or actions of the President to any
domestic governmental entity, or to any foreign
governmental entity of an ally or partner of the United
States, under the direction and authorization of the
President or the Secretary, only to the extent
necessary for national security purposes, and subject
to appropriate confidentiality and classification
requirements.
``(D) Information that the parties have consented
to be disclosed to third parties.
``SEC. 804. REPORTING REQUIREMENTS.
``(a) In General.--Not later than 360 days after the date on which
the regulations prescribed under section 806 take effect, and not less
frequently than annually thereafter, the Secretary of the Treasury
shall submit to the appropriate congressional committees a report
that--
``(1) lists all notifications submitted under section
803(a) during the year preceding submission of the report and
includes, with respect to each such notification--
``(A) basic information on each party to the
covered activity with respect to which the notification
was submitted; and
``(B) the nature of the covered activity that was
the subject to the notification, including the elements
of the covered activity that necessitated a
notification;
``(2) includes a summary of those notifications,
disaggregated by sector, by covered activity, and by country of
concern;
``(3) provides additional context and information regarding
trends in the sectors, the types of covered activities, and the
countries involved in those notifications;
``(4) includes a description of the national security risks
associated with--
``(A) the covered activities with respect to which
those notifications were submitted; or
``(B) categories of such activities; and
``(5) assesses the overall impact of those notifications,
including recommendations for--
``(A) expanding existing Federal programs to
support the production or supply of covered sectors in
the United States, including the potential of existing
authorities to address any related national security
concerns;
``(B) investments needed to enhance covered sectors
and reduce dependence on countries of concern regarding
those sectors; and
``(C) the continuation, expansion, or modification
of the implementation and administration of this title,
including recommendations with respect to whether the
definition of `country of concern' under section 801(2)
should be amended to add or remove countries.
``(b) Form of Report.--Each report required by this section shall
be submitted in unclassified form, but may include a classified annex.
``(c) Testimony Required.--Not later than one year after the date
of enactment of this title, and annually thereafter, the Secretary of
the Treasury and the Secretary of Commerce shall each provide to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives
testimony with respect to the national security threats relating to
investments by the United States persons in countries of concern and
broader international capital flows.
``SEC. 805. PENALTIES AND ENFORCEMENT.
``(a) Penalties With Respect to Unlawful Acts.--Subject to
regulations prescribed in accordance with section 806, it shall be
unlawful--
``(1) to fail to submit a notification under subsection (a)
of section 803 with respect to a covered activity or to submit
other information as required by the Secretary of the Treasury;
or
``(2) to make a material misstatement or to omit a material
fact in any information submitted to the Secretary under this
title.
``(b) Enforcement.--The President may direct the Attorney General
to seek appropriate relief in the district courts of the United States,
in order to implement and enforce this title.
``SEC. 806. REQUIREMENT FOR REGULATIONS.
``(a) In General.--Not later than 360 days after the date of the
enactment of this title, the Secretary of the Treasury shall finalize
regulations to carry out this title.
``(b) Elements.--Regulations prescribed to carry out this title
shall include specific examples of the types of--
``(1) activities that will be considered to be covered
activities; and
``(2) the specific sectors and subsectors that may be
considered to be covered sectors.
``(c) Requirements for Certain Regulations.--The Secretary of the
Treasury shall prescribe regulations further defining the terms used in
this title, including `covered activity', `covered foreign entity', and
`party', in accordance with subchapter II of chapter 5 and chapter 7 of
title 5 (commonly known as the `Administrative Procedure Act').
``(d) Public Participation in Rulemaking.--The provisions of
section 709 shall apply to any regulations issued under this title.
``(e) Low-Burden Regulations.--In prescribing regulations under
this section, the Secretary of the Treasury shall structure the
regulations--
``(1) to minimize the cost and complexity of compliance for
affected parties;
``(2) to ensure the benefits of the regulations outweigh
their costs;
``(3) to adopt the least burdensome alternative that
achieves regulatory objectives;
``(4) to prioritize transparency and stakeholder
involvement in the process of prescribing the regulations; and
``(5) to regularly review and streamline existing
regulations to reduce redundancy and complexity.
``SEC. 807. MULTILATERAL ENGAGEMENT AND COORDINATION.
``(a) In General.--The President shall delegate the authorities and
functions under this section to the Secretary of State.
``(b) Authorities.--The Secretary of State, in coordination with
the Secretary of the Treasury, the Secretary of Commerce, the United
States Trade Representative, and the Director of National Intelligence,
shall--
``(1) conduct bilateral and multilateral engagement with
the governments of countries that are allies and partners of
the United States to ensure coordination of protocols and
procedures with respect to covered activities with countries of
concern and covered foreign entities; and
``(2) upon adoption of protocols and procedures described
in paragraph (1), work with those governments to establish
mechanisms for sharing information, including trends, with
respect to such activities.
``(c) Strategy for Development of Outbound Investment Screening
Mechanisms.--The Secretary of State, in coordination with the Secretary
of the Treasury and in consultation with the Attorney General, shall--
``(1) develop a strategy to work with countries that are
allies and partners of the United States to develop mechanisms
comparable to this title for the notification of covered
activities; and
``(2) provide technical assistance to those countries with
respect to the development of those mechanisms.
``(d) Report.--Not later than 90 days after the development of the
strategy required by subsection (b), and annually thereafter for a
period of 5 years, the Secretary of State shall submit to the
appropriate congressional committees a report that includes the
strategy, the status of implementing the strategy, and a description of
any impediments to the establishment of mechanisms comparable to this
title by allies and partners.
``SEC. 808. AUTHORIZATION OF APPROPRIATIONS.
``(a) In General.--There are authorized to be appropriated such
sums as may be necessary to carry out this title, including to provide
outreach to industry and persons affected by this title.
``(b) Hiring Authority.--The head of any agency designated as a
lead agency under section 802(b) may appoint, without regard to the
provisions of sections 3309 through 3318 of title 5, United States
Code, not more than 25 candidates directly to positions in the
competitive service (as defined in section 2102 of that title) in that
agency. The primary responsibility of individuals in positions
authorized under the preceding sentence shall be to administer this
title.
``SEC. 809. RULE OF CONSTRUCTION WITH RESPECT TO FREE AND FAIR
COMMERCE.
``Nothing in this title may be construed to restrain or deter
foreign investment in the United States, United States investment
abroad, or trade in goods or services, if such investment and trade do
not pose a risk to the national security of the United States.''.
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