Industry Official Expects Outbound Screening Regime in 'Next Few Weeks'

The Biden administration’s upcoming executive order on outbound investment is “likely to be coming in the next few weeks,” said Jeannette Chu, vice president for national security policy at the National Foreign Trade Council. Chu, speaking during a May 11 Materials and Equipment Technical Advisory Committee meeting, said she expects the new screening tool to be unveiled around or soon after the G-7 meetings in Japan next week.

She said there’s been a “good deal of debate” about what types of investments and industries the tool could cover, including whether it would screen just passive U.S. investments in foreign companies. A “reasonable hypothesis” would be that “it will look at both active and passive investments,” said Chu, a former senior policy adviser at the Bureau of Industry and Security. “But to what extent … I'm not sure.” Some experts have suggested the screening regime be deployed in phases and avoid capturing passive capital flows (see 2304130034).

Chu pointed out that other countries are also considering outbound investment reviews, including Germany. The European Union is looking into setting up a regime (see 2303220052), and “it would not surprise me if maybe Japan or some other countries start to take a look at this as well,” Chu said.

The interest in screening outgoing investments comes amid a steady increase in scrutiny by the Committee on Foreign Investment in the U.S. on investments from China. Chu referenced the first-ever set of enforcement and penalty guidelines released by the committee last year, adding that CFIUS has recently “gone out on a listening tour” to discuss mitigation requirements with companies, service providers, law firms and others “to understand better how this is coming together out there in the wild, so to speak.” CFIUS previewed the meetings in January (see 2301050020).

Chu added that she’s “deeply concerned” about China’s space ambitions, saying the country is trying to get ahead of American advancements in the sector, particularly surrounding artificial intelligence. She also said she’s “concerned” about Beijing’s “grip on rare earth minerals” and its ability to “pull any of those things as levers in the global economy.”

“All of these things carry long-term impacts. whatever the government decides,” Chu said. “It's going to be something that we're all going to have to deal with for years to come.”

As part of her work at the National Foreign Trade Council, Chu said she is sharing information with companies about how they can improve their compliance programs. “We see compliance as a way to have credible access to the policy-making discussion,” Chu said, adding that Congress is holding “literally almost a hearing a week” on trade-related national security-related issues.