The order applies to U.S. persons, which a Treasury fact sheet defines as individual citizens, lawful permanent residents, U.S. businesses or U.S. units of offshore businesses. It also requires such individuals and groups to notify the Treasury Department of certain investments in those sectors.
U.S. businesses would include money managers, but the details remain unclear until the rule comes out.
The executive order directs the Treasury to issue a rule-making implementing the order, so the department issued an advance notice of proposed rule-making on Aug. 9. Comments relating to that rule-making were accepted until Sept. 28
Industry groups and lawyers say they want more clarity on how the rule applies to a U.S. person working for an offshore business and how to differentiate between activities that are prohibited or that the government must be notified of, among other concerns.
"What's interesting about this rule-making is it exists at all," said Adam M. Smith, partner at law firm Gibson, Dunn & Crutcher and co-chair of its international trade practice group.
"What I mean by that is that it's very rare for Treasury authorities promulgated under IEEPA, (or the) International Emergency Economic Powers Act ... to have a rule-making. In almost all cases, a rule-making is exempt because of the national security issue," he said. Smith explained that when a new regulation deals with national security issues, it often bypasses the typical rule-making process, which includes a need for a public comment period.
The International Emergency Economic Powers Act gives the president a variety of powers to control financial transactions when there is a national emergency. In his executive order, the president declared a national emergency to deal with the threat posed by the "advancement by countries of concern in sensitive technologies and products critical for the military, intelligence, surveillance, or cyber-enabled capabilities of such countries."
The only "countries of concern" listed in the order are China and the special administrative regions of Hong Kong and Macau.
One of the general concerns is how the rule will define the investments covered "in a way that is both clear, so you actually know what the red flags look like and what you can't do, and yet does not risk collateral consequences that are significant to not just the U.S., but our allies and partners around the world who rely upon China," Smith added.
The U.S. Chamber of Commerce wrote in a comment letter that "it is imperative that the implementing regulations are narrowly tailored to target specific national security concerns in a transparent, efficient, and predictable manner. The rules should be clear so that businesses can make appropriate plans for compliance."