DealLawyers.com Blog

The Department of the Treasury’s Outbound Investment Security Program (OISP) — which became effective in January and requires notifications for or prohibits certain U.S. investments in Chinese companies — is now being actively enforced. Treasury inquiries have begun despite suggestions of reform in the America First Trade Policy memorandum and Bloomberg’s recent report that Treasury Secretary Scott Bessent spoke with Congress about developing clear outbound investment rules for China. Here’s more from this Cooley alert:

Treasury has been actively monitoring transactions for potential OISP violations and has begun reaching out to US investors that may have participated in a prohibited or notifiable transaction in violation of the OISP’s complex regulations. In just the first week of May, we have seen early OISP enforcement outreach, with Treasury sending multiple enforcement inquiries to US investor clients suspected of involvement in transactions implicating the OISP regime. […]

For those acquainted with the CFIUS post-closing (i.e., “non-notified”) inquiry regime, the OISP enforcement outreach regime will seem familiar. Indeed, the three-person team at Treasury administering the OISP enforcement regime are former CFIUS officials with deep experience in cross-border transaction dynamics. Additionally, the OISP team operates under the same management umbrella as CFIUS within Treasury’s Office of Investment Security.

The alert says that transacting parties need to consider OISP — even when an investment target doesn’t have obvious connections to China — and despite expectations that the OISP will change in the future. The memo says changes “are likely to broaden the scope of the OISP to cover additional technologies and industries (i.e., beyond the currently covered semiconductor, quantum computing and AI sectors)” but will hopefully also include more explicit “definitions and guardrails for transaction parties.”

– Meredith Ervine