Overview
Title
To protect the national security of the United States by imposing sanctions with respect to certain persons of the People’s Republic of China and prohibiting and requiring notifications with respect to certain investments by United States persons in the People’s Republic of China, and for other purposes.
ELI5 AI
The bill wants to keep America safe by making rules about not giving money to certain Chinese people and projects, especially if they might use special technology that could be a problem for the U.S. It also talks about who gets to make these rules and how they should work with other friendly countries.
Summary AI
H. R. 10559 aims to safeguard U.S. national security by imposing sanctions on certain individuals from the People's Republic of China and limiting specific investments by Americans in Chinese entities. The bill, titled the "Comprehensive Outbound Investment National Security Act of 2024" or "COINS Act of 2024," outlines the Secretary of the Treasury's powers to define such sanctions and restrictions. It covers the prohibition and notification of investments in covered national security transactions, focusing on technologies that could threaten U.S. safety if developed by China. The bill also includes provisions for creating a public database of foreign individuals involved in prohibited technologies and establishes procedures for coordination and information sharing with allied countries.
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AnalysisAI
The Comprehensive Outbound Investment National Security Act of 2024, also known as the COINS Act of 2024, is a legislative proposal designed to protect the national security interests of the United States. The bill aims to achieve this by imposing sanctions on specific individuals and entities from the People's Republic of China, controlling investments by U.S. individuals in certain sensitive technologies, and enhancing reporting requirements around these activities.
General Summary of the Bill
The bill is structured to address multiple facets of national security through regulation and enforcement. It empowers the President to impose sanctions on foreign individuals who are deemed to present a security risk due to their affiliations or activities. Additionally, it sets stringent notification and prohibition guidelines on investments in technologies that could compromise U.S. security. These efforts are framed within a broader strategy that also involves international cooperation and creating mechanisms to track and report on security threats stemming from foreign investments and technological advancements.
Significant Issues
One of the most significant concerns about the bill arises from its complexity, particularly the definitions of key terms such as "covered foreign person" and "prohibited technology". These are crucial elements for determining who or what falls under the bill's purview, and their intricate specifications might lead to ambiguity and misinterpretation. Moreover, the President is granted extensive powers to impose sanctions, which could pose oversight challenges and lead to inconsistencies in enforcement.
Another important issue is the financial implication, where substantial funding is authorized but without detailed plans for how these funds will be allocated. This raises potential concerns about the effective use of taxpayer money and accountability in spending. Similarly, the authority to appoint individuals outside the traditional competitive hiring process might bypass necessary transparent and merit-based recruitment systems.
The confidentiality provisions around the collection and dissemination of information may also restrict transparency and public oversight, potentially impacting public trust in the bill’s implementation.
Impact on the Public
Broadly, this bill could have significant impacts on how the United States engages with China, especially concerning economic and technological fronts. By restricting certain investments and transactions, there might be downstream effects on global markets and industries. The public could see shifts in prices or availability of certain goods, depending on how these regulations influence supply chains connected to or reliant on targeted foreign partners.
Impact on Specific Stakeholders
Companies and investors that have ties or potential interests in China are likely to be directly affected by the bill. These stakeholders might face increased operational complexity and costs due to compliance with prohibitions and reporting requirements. The penalties for violations are steep, possibly discouraging well-meaning entities from engaging in lawful transactions due to fear of infringing complex rules.
Conversely, stakeholders in national security sectors might view the bill positively as it aims to fortify U.S. defenses against potential threats. Government agencies involved in international commerce and defense will need to gear up for increased administrative duties to manage the enforcement and monitoring required by the bill.
In conclusion, while the COINS Act of 2024 seeks to safeguard U.S. national security, its intricate structures and potential broad powers present various challenges. These include ensuring clarity, maintaining robust oversight mechanisms, and balancing transparency with security needs. As the bill progresses, these considerations will play a pivotal role in evaluating its effectiveness and alignment with public and national interests.
Financial Assessment
The bill, H. R. 10559, includes several financial references that warrant attention. This analysis explores these financial elements and discusses how they relate to potential issues highlighted within the text.
Authorization of Appropriations
The bill authorizes $150,000,000 to be appropriated to the Department of the Treasury. This funding is allocated for each of the first two fiscal years following the enactment of the Act—totalling up to $300,000,000 over two years. This sum is intended to facilitate outreach to industry and individuals affected by the bill's stipulations, with some funds possibly transferred to the Department of Commerce.
Issue Relation: One potential concern, as highlighted in the issues section, is the lack of specificity regarding how this significant amount of money will be spent. Neither the bill nor its summary details a breakdown of expenses or outlines specific oversight mechanisms to monitor the use of these funds. The absence of detailed budgetary guidance could lead to concerns about potential misuse or inefficient spending.
Direct Hiring Authority
The bill grants the President and certain agency secretaries the authority to appoint up to 15 individuals directly into competitive service positions, bypassing traditional hiring protocols as outlined in the United States Code. Although this provision doesn't directly allocate funds, it implies the use of appropriated funds for these positions' salaries and associated costs.
Issue Relation: This bypass of established hiring processes could raise concerns about fairness and accountability, particularly if these positions involve significant taxpayer-funded salaries or benefits. The direct hiring authority could be perceived as a lack of transparency, especially in conjunction with substantial financial allocations without traditional oversight structures.
Penalties and Compliance Costs
The legislation imposes civil penalties for violations, with fines not to exceed the greater of $250,000 or double the transaction amount that constituted the violation. These penalties are intended for individuals or entities that knowingly engage in prohibited transactions or fail to adhere to notification requirements set by the Act.
Issue Relation: The imposition of such substantial penalties, while acting as a deterrent against violations, could create a financial burden on individuals and organizations. The complex regulatory environment might inadvertently lead to missteps, causing entities to incur significant fines. If the compliance requirements are not clearly communicated, this could unintentionally discourage investment and affect legitimate business operations.
Conclusion
The bill's financial implications underscore the need for clear oversight and transparency. The substantial appropriations authorized, alongside penalties for non-compliance, highlight the importance of clarifying how funds will be allocated and ensuring clear communication of the bill’s regulatory requirements. Without these, the risk of inefficient spending and economic deterrence remains a concern.
Issues
The definition of key terms like 'covered foreign person', 'covered national security transaction', 'prohibited technology', and 'notifiable technology' (Sections 102 and 807) is complex and technical, potentially leading to ambiguity and misinterpretation by entities not specialized in those fields, affecting fair and consistent application.
The broad delegation of power to the President in Section 101 to impose sanctions may lead to oversight challenges in how sanctions are implemented or enforced.
The Authorization of Appropriations in Section 4 allows significant sums of money to be appropriated without a clear breakdown or oversight, which might raise concerns about potential wasteful spending or misuse.
In Section 301, the criteria and process for adding PRC persons to the Non-SDN Chinese Military-Industrial Complex Companies List are vague, which could affect transparency and consistency in enforcement.
The President and specific agency Secretaries are permitted to appoint up to 15 individuals directly without traditional hiring processes (Section 4), raising concerns about bypassing competitive and merit-based hiring systems.
The provisions around confidentiality of information in Sections 802 and 805 might limit transparency and public oversight, affecting accountability.
Section 803 requires detailed and potentially burdensome reporting, without clear guidelines or oversight mechanisms to ensure it adequately addresses national security threats.
Sections 801 and 802 outline regulations and penalties that may impose a significant financial burden on violators and create a complex compliance environment, deterring investment unintentionally if not clearly understood.
The lack of specificity about how funds will be used (Section 4) and the provision that allows for the hiring of personnel outside the competitive service could lead to concerns about transparency and accountability.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title; table of contents Read Opens in new tab
Summary AI
The text introduces the "Comprehensive Outbound Investment National Security Act of 2024", also known as the "COINS Act of 2024". It includes details like the act's sections on sanctions, definitions, prohibitions and notifications regarding national security investments, and matters related to securities.
2. Secretary defined Read Opens in new tab
Summary AI
In the defined section of the Act, the term “Secretary” refers to the Secretary of the Treasury, unless specified otherwise.
3. Severability Read Opens in new tab
Summary AI
If any part of this law is found to be invalid, it does not affect the rest of the law or how it applies to other people and situations.
4. Authorization of appropriations Read Opens in new tab
Summary AI
Funding of $150 million per year for the first two years after this Act is enacted is authorized for the Department of the Treasury, with potential transfers to the Department of Commerce for joint outreach efforts. The President and certain agency leaders are allowed to appoint individuals to specific government positions to help implement the Act without following the typical hiring rules.
Money References
- In general.—There is authorized to be appropriated $150,000,000 to the Department of the Treasury, out of which amounts may be transferred to the Department of Commerce to jointly conduct outreach to industry and persons affected by this Act, for each of the first two fiscal years beginning on or after the date of the enactment of this Act, to carry out this Act.
5. Termination Read Opens in new tab
Summary AI
The section states that the law will no longer be effective once the Secretary of Commerce updates a specific regulation to remove China from the list of foreign adversaries.
101. Imposition of sanctions Read Opens in new tab
Summary AI
The section outlines that the President can impose sanctions on specific foreign individuals identified as "covered foreign persons" by the Secretary, with input from the Secretary of State. It details the powers to block transactions involving these individuals' property in the U.S., penalties for violations, exceptions for certain government activities, and annual reporting to Congress, while also allowing the President to consider various sources of information before deciding on sanctions.
102. Definitions Read Opens in new tab
Summary AI
This section provides definitions for key terms used in the title, including what is meant by "appropriate congressional committees," "country of concern," "covered foreign person," "foreign person," "Non-SDN Chinese Military-Industrial Complex Companies List," and "United States person." It specifies which committees in the U.S. Congress are relevant, identifies China and its special administrative regions as countries of concern, outlines what constitutes a covered foreign person, and clarifies who or what is considered a foreign person compared to a United States person.
201. Prohibition and notification on investments relating to covered national security transactions Read Opens in new tab
Summary AI
The text is about new rules added to the Defense Production Act of 1950 through Title VIII, which allows the Secretary of the Treasury to prevent U.S. individuals or companies from investing in "prohibited technologies" that could threaten national security. It also includes procedures for notifying Congress and the public about these rules, providing feedback, penalties for violations, and options for international cooperation to ensure technologies aren't misused by other countries.
Money References
- “(ii) CIVIL PENALTY.—The Secretary may impose a civil penalty on any person who commits an unlawful act described in clause (i) in an amount not to exceed the greater of— “(I) $250,000; or “(II) an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
- “(ii) CIVIL PENALTY.—A civil penalty may be imposed on any person who commits an unlawful act described in clause (i) in an amount not to exceed the greater of— “(I) $250,000; or “(II) an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
- “(B) EXCEPTIONS.—Subject to notice and comment regulations prescribed in consultation with Congress and in accordance with this title, the term ‘covered national security transaction’ does not include— “(i) any transaction the value of which the Secretary determines is de minimis; “(ii) any category of transactions that the Secretary determines is in the national interest of the United States; “(iii) an investment— “(I) in a security (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) that is traded on an exchange or the over-the-counter market in any jurisdiction; “(II) in a security issued by an investment company (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) that is registered with the Securities and Exchange Commission; “(III) made as a limited partner or equivalent in a venture capital fund, private equity fund, fund of funds, or other pooled investment fund (other than as described in subclause (II)) where— “(aa) the limited partner or equivalent’s committed capital is not more than $2,000,000, aggregated across any investment and co-investment vehicles of the fund; or “(bb) the limited partner or equivalent has secured a binding contractual assurance that its capital in the fund will not be used to engage in a transaction that would be a covered national security transaction if engaged in by a United States person; or “(IV) in a derivative of a security described under subclause (I), (II), or (III); “(iv) any ancillary transaction undertaken by a financial institution (as defined in section 5312 of title 31, United States Code); “(v) the acquisition by a United States person of the equity or other interest owned or held by a covered foreign person in an entity or assets located outside of a country of concern in which the United States person is acquiring the totality of the interest in the entity held by the covered foreign person; “(vi) an intracompany transfer of funds, as defined in regulations prescribed in accordance with this title, from a United States parent company to a subsidiary located in a country of concern or a transaction that, but for this clause, would be a covered national security transaction between a United States person and its controlled foreign person that supports operations that are not covered national security transactions or that maintains covered national security transactions that the controlled foreign person was engaged in prior to January 2, 2025; “(vii) a transaction secondary to a covered national security transaction, including— “(I) contractual arrangements or the procurement of material inputs for any covered national security transaction (such as raw materials); “(II) bank lending; “(III) the processing, clearing, or sending of payments by a bank; “(IV) underwriting services; “(V) debt rating services; “(VI) prime brokerage; “(VII) global custody; “(VIII) equity research or analysis; or “(IX) other similar services; “(viii) any ordinary or administrative business transaction as may be defined in such regulations; or “(ix) any transaction completed before the date of the enactment of this title.
801. Prohibition on investments Read Opens in new tab
Summary AI
The section outlines the Secretary's authority to prohibit U.S. persons from certain investments in technologies that may harm national security. It includes provisions for exemption with presidential approval, establishes penalties for violations, and requires regulations to minimize compliance burdens while ensuring public input and transparency.
Money References
- (ii) CIVIL PENALTY.—The Secretary may impose a civil penalty on any person who commits an unlawful act described in clause (i) in an amount not to exceed the greater of— (I) $250,000; or (II) an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
802. Notification on investments Read Opens in new tab
Summary AI
The section requires U.S. persons who engage in certain national security transactions involving prohibited technologies to notify the Secretary within 30 days after the transaction ends. The Secretary must create rules to ensure confidentiality and impose penalties for violations, while allowing some exceptions for sharing information for national security and legal reasons.
Money References
- (ii) CIVIL PENALTY.—A civil penalty may be imposed on any person who commits an unlawful act described in clause (i) in an amount not to exceed the greater of— (I) $250,000; or (II) an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
803. Report Read Opens in new tab
Summary AI
The bill requires the Secretary, in consultation with the Secretary of Commerce, to annually report to Congress about enforcement actions concerning national security transactions, assess potential risks of new technologies, and propose amendments to regulations. It also mandates testimony on threats related to U.S. investments in certain countries and allows for the inclusion of information about these technologies' threats if requested by congressional committees.
804. Multilateral engagement and coordination Read Opens in new tab
Summary AI
The section outlines a plan for the Secretary, in coordination with other agencies, to work with U.S. allies on creating and sharing methods to prevent countries of concern from acquiring prohibited technologies. It also requires developing a strategy and reporting to Congress on progress and challenges in implementing these efforts.
805. Public database of covered foreign persons Read Opens in new tab
Summary AI
The section allows the Secretary, with the Secretary of Commerce, to create a public database listing foreign individuals involved with prohibited technology. It ensures that sensitive information remains confidential, unless it is needed for legal actions, provided to Congress, required for national security, or consented for disclosure by the involved parties. The database won't be a complete list of all foreign individuals associated with prohibited technology.
806. Rule of construction Read Opens in new tab
Summary AI
This section clarifies that nothing in this specific part of the bill should be interpreted as limiting the President's existing powers under other federal laws or the Constitution.
807. Definitions Read Opens in new tab
Summary AI
The document defines key terms related to national security transactions, such as "appropriate congressional committees," "country of concern," and "covered foreign person," which involve entities linked to countries like China. It outlines what constitutes a "covered national security transaction" and provides exceptions, explains what "notifiable technology" and "prohibited technology" are, and distinguishes between "foreign person" and "United States person."
Money References
- (4) COVERED NATIONAL SECURITY TRANSACTION.— (A) IN GENERAL.—Subject to such regulations as may be issued in accordance with this title, the term “covered national security transaction” means any activity engaged in by a United States person that involves— (i) the acquisition of an equity interest or contingent equity interest in a covered foreign person; (ii) the provision of a loan or similar debt financing arrangement to a covered foreign person, where such debt financing— (I) is convertible to an equity interest; or (II) affords or will afford the United States person the right to make management decisions with respect to or on behalf of a covered foreign person or the right to appoint members of the board of directors (or equivalent) of the covered foreign person; (iii) the entrance by such United States person into a joint venture with a covered foreign person; (iv) the conversion of a contingent equity interest (or interest equivalent to a contingent equity interest) or conversion of debt to an equity interest in a covered foreign person; (v) the acquisition, leasing, or other development of operations, land, property, or other assets in a country of concern that will result in, or that the United States person intends to result in— (I) the establishment of a covered foreign person; or (II) the engagement of a person of a country of concern in a prohibited technology where it was not previously engaged in such prohibited technology; (vi) knowingly directing transactions by foreign persons that the United States person has knowledge at the time of the transaction would constitute an activity described in clause (i), (ii), (iii), (iv), or (v), if engaged in by a United States person; or (vii) the acquisition of a limited partner or equivalent interest in a venture capital fund, private equity fund, fund of funds, or other pooled investment fund that the United States person has knowledge at the time of the acquisition, intends to engage in an activity described in clause (i), (ii), (iii), (iv), (v), or (vi). (B) EXCEPTIONS.—Subject to notice and comment regulations prescribed in consultation with Congress and in accordance with this title, the term “covered national security transaction” does not include— (i) any transaction the value of which the Secretary determines is de minimis; (ii) any category of transactions that the Secretary determines is in the national interest of the United States; (iii) an investment— (I) in a security (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) that is traded on an exchange or the over-the-counter market in any jurisdiction; (II) in a security issued by an investment company (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) that is registered with the Securities and Exchange Commission; (III) made as a limited partner or equivalent in a venture capital fund, private equity fund, fund of funds, or other pooled investment fund (other than as described in subclause (II)) where— (aa) the limited partner or equivalent’s committed capital is not more than $2,000,000, aggregated across any investment and co-investment vehicles of the fund; or (bb) the limited partner or equivalent has secured a binding contractual assurance that its capital in the fund will not be used to engage in a transaction that would be a covered national security transaction if engaged in by a United States person; or (IV) in a derivative of a security described under subclause (I), (II), or (III); (iv) any ancillary transaction undertaken by a financial institution (as defined in section 5312 of title 31, United States Code); (v) the acquisition by a United States person of the equity or other interest owned or held by a covered foreign person in an entity or assets located outside of a country of concern in which the United States person is acquiring the totality of the interest in the entity held by the covered foreign person; (vi) an intracompany transfer of funds, as defined in regulations prescribed in accordance with this title, from a United States parent company to a subsidiary located in a country of concern or a transaction that, but for this clause, would be a covered national security transaction between a United States person and its controlled foreign person that supports operations that are not covered national security transactions or that maintains covered national security transactions that the controlled foreign person was engaged in prior to January 2, 2025; (vii) a transaction secondary to a covered national security transaction, including— (I) contractual arrangements or the procurement of material inputs for any covered national security transaction (such as raw materials); (II) bank lending; (III) the processing, clearing, or sending of payments by a bank; (IV) underwriting services; (V) debt rating services; (VI) prime brokerage; (VII) global custody; (VIII) equity research or analysis; or (IX) other similar services; (viii) any ordinary or administrative business transaction as may be defined in such regulations; or (ix) any transaction completed before the date of the enactment of this title.
301. Requirements relating to the Non-SDN Chinese Military-Industrial Complex Companies List Read Opens in new tab
Summary AI
The section outlines the requirements for creating and maintaining the Non-SDN Chinese Military-Industrial Complex Companies List. It mandates reports that identify foreign entities tied to Chinese military interests, prohibits U.S. persons from holding securities in these entities, and provides for waivers in cases where national security is a concern.