Final Defense Spending Bill Excludes Outbound Investment Measure, Includes AUKUS Exemptions

A conference report on the 2024 defense spending bill released this week by House and Senate negotiators said the legislation won’t include a polarizing measure that could have led to new guardrails around U.S. outbound investments into China. The leaders of the Senate and House Armed Services committees ultimately decided to leave out the provision in the compromise version of the National Defense Authorization Act despite the fact that it passed as part of Senate’s version of the NDAA in July (see 2307280052).

Among other things, the measure would have required companies to notify the Treasury Department 14 days before making certain investments in several “countries of concern,” including China, expanding on the notification requirement Treasury is currently considering as it drafts outbound investment regulations (see 2308090066). A bipartisan group of lawmakers in November urged negotiators to include the provision in the final version of the NDAA (see 2311210068), while Republican leaders of the House Financial Services Committee urged lawmakers to reject it, saying new investment restrictions would limit American control, influence and intelligence gathering in China (see 2311300023).

The NDAA included other trade provisions, including some to help ease defense technology trade under the Australia-U.K.-U.S. (AUKUS) agreement. One provision could help expedite certain controlled defense exports, and exempt them from certain licensing requirements, as long as the administration certifies that both the U.K. and Australia have export control regimes “comparable” to that of the U.S. (see 2309270007, 2307140019 and 2309060028).

Another provision would require the State Department and Defense Department to designate senior officials to “oversee and coordinate” the implementation of AUKUS. Other provisions would create a new AUKUS Task Force -- which would establish a forum for the defense industry and the government to discuss AUKUS -- and require the government to regularly report to Congress on progress made under the partnership.

The NDAA also includes language that could lead to new Global Magnitsky sanctions against people and companies engaging in "significant corruption" that are in countries that aren't meeting anti-corruption standards, or that have ties to the construction of Russia’s Nord Stream 2 pipeline. The State Department would need to annually evaluate its work to impose these sanctions.

The NDAA notably didn’t include a provision passed by the Senate that could have made Taiwan eligible for License Exception Strategic Trade Authorization, which authorizes certain exports to trusted U.S. allies if the foreign importer certifies that they won’t reexport the item outside a list of STA countries.