The Treasury Department is accepting comments through Aug. 4 on a proposed rule that would impose additional restrictions on U.S. outbound investments in national security technologies and countries of concern.
Executive Order 14105, issued in August 2023, directs Treasury to regulate certain U.S. investments into countries of concern in entities engaged in activities involving sensitive technologies that are critical to U.S. national security in three sectors: semiconductors and microelectronics, quantum information technologies, and artificial intelligence. The EO identifies China, along with Hong Kong and Macau, as a country of concern, although this list could be expanded in the future.
To implement that EO, Treasury has issued a “narrow and targeted” proposed rule that would (1) prohibit U.S. persons (which could include any entity organized under U.S. laws) from engaging in certain transactions involving certain technologies and products that pose a particularly acute national security threat to the U.S., and (2) require U.S. persons to notify Treasury of certain other transactions involving certain technologies and products that may contribute to the threat to U.S. national security.
Prohibited transactions would include those related to (1) electronic design automation software; certain fabrication and advanced packaging tools; the design, fabrication, or packaging of certain advanced integrated circuits; and supercomputers, (2) the development of quantum computers and production of critical components; the development or production of certain quantum sensing platforms; and the development or production of quantum networking and quantum communication systems, and (3) the development of any AI system designed to be exclusively used for, or intended to be used for, certain end-uses.
Notifiable transactions would include those related to (1) the design, fabrication, or packaging of integrated circuits not otherwise covered by the prohibited transaction definition, and (2) the development of any AI system not otherwise covered by the prohibited transaction definition if it is designed or intended to be used for certain end-uses or is trained using a specified quantity of computing power.
According to Treasury, the proposed rule provides details on (1) the obligations of a U.S. person regarding a covered transaction, (2) categories of covered and excepted transactions, (3) technical specifications to inform the scope of covered transactions, (4) information required as part of a notification, (5) the knowledge standard and expectations for a U.S. person to conduct a reasonable and diligent inquiry prior to undertaking a transaction, and (6) conduct that would be treated as a violation as well as applicable criminal and civil penalties.
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