US Defense Bill Would Fortify Outbound Investment Rule, Fentanyl Enforcement, China Lists

The version of the FY2026 National Defense Authorization Act (NDAA) that passed the House this week would advance measures covering a slew of U.S. national security priorities—including bolstering sanctions and export-controls authorities, reorienting security tools, and reinforcing efforts to disrupt illicit fentanyl supply chains from China.

Another, potentially transformative measure it includes: a major expansion in who and what are covered under the U.S. outbound investment rule.

“For too long, the hard-earned money of American retirees and investors has been used to build up China’s military and economy,” Rep. John Moolenaar (R-Mich.), chair of the House Select Committee on the Chinese Communist Party (CCP), said in a statement this week. “This legislation will help bring that to an end.”

Notably, including with outbound investment, the 3,000-page legislation repeatedly moves to extend national security programs’ scope to cover affiliated persons or firms of covered actors, raising extra challenges for compliance. 

The bill now advances to the Senate. Here’s what to know about its proposed outbound investment changes, plus four other NDAA highlights from the arenas of sanctions, risk and compliance.

1. Expanding outbound investment regulations

The Comprehensive Outbound Investment National Security (COINS) Act, which the NDAA folds in, would codify the White House’s plans for expanding the outbound investment rule and heighten the stakes along with it: Penalties for transactions that violate the rules, the COINS Act says, include civil penalties, forced divestment and “appropriate relief” as directed by the president.

The bill would add Cuba, Iran, North Korea, Russia and Venezuela to its list of specified “countries of concern,” joining China, Hong Kong and Macau, and it directs the executive branch to identify “additional technologies” to be covered under the rule.

Additionally, it would expand the covered foreign parties under the outbound investment rule to include:

• those incorporated in, that have a principal place of business in or that are “organized under the laws of” a country of concern.
• members of the CCP or political leadership of a country of concern.
• those “subject to the direction or control of” a country of concern.
• those that “knowingly engaged in significant operations” in the defense or surveillance technology sectors of the economy of a country of concern.
• entities owned in the aggregate, directly or indirectly, 50% or more by a country of concern.

From there, the COINS Act would impose restrictions on a broader range of national-security-related transactions involving such covered persons, including:

• acquisitions of an equity interest or contingent equity interest.
• loans to a covered foreign person.
• joint ventures that engage or plan to engage in prohibited tech.
• acquisitions, leasing or other development of land or property.
• acquisitions of a limited partner or an equivalent interest in a venture capital fund, private equity fund or other pooled investment fund.

In short, it’s a comprehensive bulk-up. 

Take note: The legislation empowers the Treasury secretary, in consultation with the Commerce secretary, to establish a public database of covered foreign persons—but it wouldn’t be “exhaustive.”

2. Targeting fentanyl supply chains

Another provision merged into the NDAA, the Break Up Suspicious Transactions of (BUST) Fentanyl Act, would add new categories to sanction foreign persons involved in the opioid trafficking pipeline, including:

• those who fail to “take credible steps,” including implementing “appropriate know-your-customer procedures,” to detect or prevent opioid trafficking.
• senior Chinese officials who aid and abet opioid trafficking.
• those who provide significant financial, material or technological support to such activity.
• entities owned, controlled or acting on behalf of persons engaged in those activities.

The NDAA also directs the president and Treasury Department to prioritize identification of Chinese individuals involved in fentanyl-related supply chains. That prioritization shall continue, it says, until China “is no longer the primary source” for the shipment of fentanyl, its precursors and manufacturing equipment.

3. Repealing Assad-era Syria sanctions

President Trump moved in June to terminate the United States’ Syria sanctions program, while leaving sanctions on former leader Bashar al-Assad and his associates in place. But the House-passed NDAA would now erase those remaining Syria sanctions, by repealing the Caesar Syria Civilian Protection Act that authorized them during President Trump’s first term.

As a condition of that repeal, the legislation mandates a report from the president to Congress within 90 days, and “every 180 days thereafter for the following 4 years,” that certifies that the new Syrian government is following through on certain obligations. They include:

• taking “concrete and tangible action to eliminate the threat posed by ISIS and other terrorist groups.”
• combating money laundering and terrorist financing.
• taking verifiable steps to combat the proliferation of narcotics.

4. Signaling sanctions in Haiti and the Western Balkans

At the same time, the legislation would set the stage for new sanctions against actors contributing to instability elsewhere.

It mandates the president to impose sanctions on individuals identified in required Haiti-related reports, with penalties including property blocking, visa bans and possible additional prohibitions on financial transactions for economic elites.

Then, with respect to the Western Balkans, the 2026 NDAA would require the president to sanction foreign persons found to be:

• threatening peace, security, stability, or territorial integrity;
• undermining democratic processes or institutions;
• engaged in corruption or human rights abuses;
• or engaging or attempting to engage in acts that obstruct or threaten the implementation of regional security and peace agreements in the Balkans.

5. Expanding and strengthening Chinese military lists

Two last sections of note echo each other, in tightening restrictions on companies the U.S. deems to be part of China’s military industrial complex.

One measure would strengthen the Department of Defense’s 1260H list of civil-military fusion companies to include affiliated firms, even those operating outside China. 

• The objective here is to reinforce supply chain security by preventing Chinese military-linked firms from accessing U.S. procurement, investment or technology channels through third-country intermediaries.

The provision specifically makes note of “affiliates” here to include entities that are:

• directly or indirectly owned by listed Chinese military companies;
• controlled by listed military companies;
• beneficially owned by listed companies;
• or acting in an official or unofficial capacity as an agent of, or on behalf of listed companies.

That expansion could have a knock-on effect, too. In the NDAA’s final pages, it mandates a process for reviewing whether Chinese persons on the 1260H list or other restricted lists should be added to the separate Non-SDN Chinese Military-Industrial Complex (CMIC) List. This list, administered by the Treasury Department, prohibits U.S. persons from dealing in publicly traded securities in listed firms, which operate in China’s defense or technology surveillance sectors.

Key point: The proposed changes to the two lists, like much of the rest of the NDAA, underscore a consistent message from Congress: While trade tensions with China may have dissipated for now, it remains the U.S.’s central geostrategic concern.