On January 2, 2025, the US Department of the Treasury's regulations implementing Executive Order 14105 “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern” (the “Outbound Investment Regulations” or the “Regulations”) became effective. 

Depending on the nature of the transaction, the Outbound Investment Regulations could (1) require a US person (defined to include US citizens, lawful permanent residents, entities organized under the laws of the United States or any US jurisdiction, and any foreign branch of such entities) to notify an outbound investment transaction to the US Department of the Treasury, or (2) prohibit US persons from engaging in such outbound investment transaction.  

While a review of the Outbound Investment Regulations and their applicability to investment activity outside the US is generally advisable, US persons (individuals and entities) should consider a rigorous review of the Regulations where their investment activities (A) involve outbound investments related to the People's Republic of China (including Hong Kong and Macau), and (B) are related to, among other things: 

• semiconductors and microelectronics (including electronic design automation software, fabrication or advanced packaging tools, design or fabrication of advanced integrated circuits, advanced packaging techniques, and super computers), 
• quantum information technologies (including the development of quantum computers or production of critical components thereof, the development or production of certain quantum sensing platforms, or the development or production of certain quantum networks or quantum communications centers), or 
• certain artificial intelligence systems.

Depending on the particular facts, such investment activities could trigger the requirements of a notifiable transaction or prohibited transaction under the Regulations. 

• Notifiable Transactions (i.e., transactions for which US persons are required to notify the US Department of the Treasury) include: (1) certain transactions by a US person or its controlled foreign entity with or resulting in the establishment of a covered foreign person that engages in certain covered activities that the US government has determined may contribute to the threat to the national security of the United States; or (2) the engagement of a person of a country of concern (currently the People's Republic of China, including Hong Kong and Macau) in certain covered activities that may contribute to the same national security threat identified in (1) above. 
• Prohibited Transactions include: (1) certain transactions with or resulting in the establishment of a covered foreign person that engages in certain covered activities that the US government has determined pose an acute national security threat because of the potential to significantly advance the military, intelligence surveillance, or cyber-enabled capabilities of a country of concern; or (2) engagement of a person of a country of concern in a covered activity posing the same acute national security threat identified in (1) above. US persons are also prohibited from knowingly directing a transaction that the US person knows would be a prohibited transaction if engaged in by a US person. 

The terms highlighted in italics above have specific, and in some cases complex, definitions that require detailed analysis to determine whether an outbound investment transaction might trigger the requirements of notifiable or prohibited transactions under the Regulations.