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[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.''.
                                 <all>
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