Treasury’s Proposed Outbound Investment Rule Adds Biotech and AI Prohibitions
The U.S. Department of the Treasury (Treasury) issued a Notice of Proposed Rulemaking (NPRM) on October 22, 2026, which would implement the Comprehensive Outbound Investment National Security (COINS) Act and expand current Outbound Investment Security Program (OISP) restrictions. The NPRM would maintain the general framework of the existing OISP – which requires U.S. persons to notify Treasury of certain transactions involving foreign persons and sensitive technologies and prohibits certain other transactions – while making modest changes to the scope of covered technology and countries of concern. Among the most significant proposed changes are new restrictions on outbound U.S. investments involving biotechnology and expanded restrictions on investments involving artificial intelligence (AI) systems (also known as Super Intelligence (SI) systems). Treasury seeks public comment on the NPRM by December 7, 2026.
The proposed rules are not retroactive, and the existing OISP framework will remain in effect while Treasury completes the rulemaking. The COINS Act requires Treasury to issue final implementing regulations by March 13, 2027.
The COINS Act, enacted as part of the FY2026 National Defense Authorization Act, largely codified the existing OISP, which was established pursuant to Executive Order 14105 of August 9, 2023 (Outbound Order) to prohibit or require notification of certain outbound U.S. investments involving certain technologies and products that could be exploited to develop sensitive technologies in countries of concern. The Outbound Order identified three areas of technology for coverage – semiconductors and microelectronics, quantum information technologies, and AI systems – and identified the People’s Republic of China (PRC), along with the Special Administrative Regions of Hong Kong and Macau, as a country of concern.
In accordance with the COINS Act, the NPRM would stand up a new OISP regime with an expanded list of countries of concern to include Cuba, Iran, North Korea, and Russia in addition to the PRC (including Hong Kong and Macau). As required by the COINS Act, the NPRM would expand the jurisdiction of the OISP to include high-performance computing and supercomputing, and hypersonic systems. Further, consistent with the COINS Act’s authorization that permits the Treasury Secretary to add other technologies to the scope of the program, the NPRM would expand the OISP to include biotechnology.
Additional key details of the NPRM are highlighted below.
1. Biotechnology Is a Prohibited Technology Sector
The NPRM proposes to add biotechnology to the definition of prohibited technology, which would block certain U.S. person investments in the biotechnology sector in the countries of concern. The NPRM states that certain advanced or sensitive biotechnologies pose an acute risk to U.S. national security. The specific risks identified in the NPRM include “the proliferation of biological weapons, the development of brain-computer interfaces, harm to U.S. supply chain security, and the indigenization by countries of concern of advanced technologies with military, government intelligence, and mass surveillance end uses.”
Although the COINS Act did not prescribe notification or prohibition requirements for the biotechnology sector under the OISP, Treasury’s inclusion of biotechnology as a prohibited technology aligns with the Trump Administration’s February 2025 “America First Investment Policy,” which directed Treasury to consider expanding existing restrictions to the sector.
To restrict certain outbound biotech investment by U.S. persons, the NPRM proposes to include in the definition of “prohibited technology” the following specific activities and technical parameters associated with the biotechnology sector:
- Development, engineering, or use of a biological system – or any component of a biological system – to modify, enhance, produce, or control any of the following compounds or materials:
- An agent or toxin restricted in 7 CFR Part 331, 9 CFR Part 121, 42 CFR Part 73, 22 CFR Part 121, or 15 CFR Part 774, or novel agents or toxins that are capable of causing death, disease, or other biological malfunction in a living organism; deterioration of food, water, equipment, supplies, or material; or deleterious alteration of the environment;
- An energetic precursor or energetic material, including propellants, explosives, and pyrotechnics;
- A novel or high-performance functional material, i.e., a bio-derived product that exhibits novel or enhanced properties, such as an adaptive or protective coating, bio-cement or other material for agile infrastructure, material capable of self-repair or self-assembly, and a biosensor;
- A pharmaceutical compound, including small molecules, polymers, vaccines, blood and blood components, allergenics, cell and gene therapies, and monoclonal antibodies or other recombinant therapeutic proteins, as well as their delivery mechanisms; or
- A biofuel, i.e., fuel made or derived from a bio-based feedstock.
- Development or production of brain-computer interfaces, including invasive, partially invasive, noninvasive, and hybrid systems that enable interaction between the brain and its environment, as well as associated software.
- Development, construction, or production of biomanufacturing equipment, including components and associated software or technology and as identified in Export Control Classification Numbers 2B352, 2D352, or 2E001, in Supplement No. 1 to 15 CFR Part 774.
- Development or production of the following technology or equipment, including components and associated software:
- Biological sequencing technology, including short-read or long-read sequencing;
- Flow cytometers and cell sorters that are designed for spectral analysis or that contain 26 or greater detectors or channels;
- Liquid chromatography mass spectrometry instruments designed for top-down proteomic analysis;
- Computational or bioinformatics tools for research, design, optimization, modeling and simulation, discovery, or assessment of biological systems or processes; and
- Hardware, robotics, or software for automated scientific discovery or experimentation, including laboratory automation or cloud lab infrastructure.
The NPRM would define “development” to include activities conducted through affiliates, pre-production activities, and high-level oversight and planning that occur before production.
Treasury seeks comments on several specific issues related to biotechnology, including whether or how to more precisely describe the following terms in the definition of prohibited technology: biological systems, biofuels, novel or high-performance functional material, and pharmaceutical compounds.
The NPRM does not mention licensing arrangements. Licensing deals involving a country of concern (e.g., China) generally would remain permissible provided that the deal structure does not include prohibited activities/investment. The NPRM would define the term “covered national security transaction” to include certain direct or indirect transactions of U.S. persons that involve a covered foreign person, including, e.g., certain acquisitions of equity interests, limited partner investments, greenfield investments, joint ventures, and certain debt financing transactions. Accordingly, a traditional pharmaceutical licensing arrangement involving upfront payments or royalties and commercialization rights would likely remain permissible if it does not also involve an acquisition of equity ownership or control.
2. Development of Any AI System Is Prohibited Technology
The current OISP distinguishes between “AI systems” based on technical capabilities and end uses, and certain transactions related to the development of AI systems are prohibited while others carry a notification requirement or are outside the scope of the OISP restrictions. The NPRM would eliminate this distinction and broadly prohibit investment in a covered foreign person that develops any AI system (or SI system). The proposed definition of the term SI system would extend to items that operate using an SI system – i.e., “any data system, software, hardware, application, tool, or utility that operates in whole or in part using an SI system, including an SI agent harness and an embodied SI or physical SI system (e.g., SI-enabled: industrial robots, bipedal or humanoid robots, quadruped robots, other mobile robots, autonomous vehicles, and unmanned systems)."
Treasury seeks public comment on the potential implications arising from defining the term “prohibited technology” to include the development of any SI system, as well as feedback relating to the definition of an SI system.
3. Effective Date
The NPRM was released for public consideration, and its draft regulatory text is nonbinding. The effective date of the new OISP will be published in the forthcoming final rule, which will not have retroactive effect. Again, the COINS Act requires regulations to be issued no later than 450 days after enactment, i.e., March 13, 2027.
The new OISP regime will be established in a new Part 851 within Title 31 of the Code of Federal Regulations (CFR). The existing OISP regulations at 31 CFR Part 850 will continue to apply to activities of U.S. persons that occurred on or after January 2, 2025, and prior to the effective date of the final rule.
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Wiley’s CFIUS and National Security practices have unparalleled capabilities in helping clients navigate the increasingly complex regulatory landscape associated with foreign investment in the United States, international trade, and national security laws. Our practice groups leverage the insights of former senior U.S. government officials and professional compliance experts to support clients’ growth strategies and compliance procedures. Please reach out to any of the authors listed on this alert should you have any questions about the NPRM.
Leah Porter, a Law Clerk at Wiley Rein LLP, contributed to this alert.
