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Bill

S 3640

Divesting from Communist China’s Military Act of 2026

119th Congress Introduced by Jim Banks and 3 co-sponsors

Requires Treasury to add identified Chinese military companies to the NS-CMIC List and allow a one-year window for divestment to enforce investment restrictions.

Introduced in Senate
0
WeVote Research Nonpartisan
Bill Summary · S 3640

Summary of Bill S.3640 (119th Congress, 2nd Session)

Title: Divesting from Communist China’s Military Act of 2026

Purpose
- The bill aims to require the Secretary of the Treasury to add any entity identified as a Chinese military company to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List), and to enforce divestment and other restrictions related to such entities.

Key Provisions

1) Short Title
- Cites as the Divesting from Communist China's Military Act of 2026.

2) Findings
- Recites concerns about China’s military-civil fusion strategy and the PRC’s use of capital to develop military and security apparatuses.
- Notes:
- Executive Order (EO) 13959 and EO 14032 address investments financing Chinese military companies and surveillance tech concerns.
- The Thornberry National Defense Authorization Act (NDAA) 2021 defines “Chinese military company.”
- NDAA 2024 restrictions on DoD purchases from Chinese military companies (and related entities) begin June 30, 2026 (new contracts) and June 30, 2027 (end products/services via third parties).
- Emphasizes harmonizing enforcement across sanctions regimes.

3) Inclusion on NS-CMIC List (Section 3)
- General rule: Within 90 days after the Secretary of Defense identifies an entity as a Chinese military company operating in the United States under the NDAA 2021, the Secretary of the Treasury must add that entity to the NS-CMIC List if it is not already listed.
- Effect of inclusion:
- By default, the EO 13959 prohibitions apply to the entity within 60 days of inclusion.
- Divestment period: The entity’s publicly traded securities may be bought or sold for up to one year beginning on the date of inclusion, solely to divest (reduce holdings).
- Definitions (selected):
- Appropriate Congressional Committees: Senate Banking, Housing, and Urban Affairs; House Financial Services.
- Executive Order 13959 and 14032: Sanctions and investment restrictions related to Chinese military companies and related sectors.
- NS-CMIC List: The Treasury’s list of Non-SDN Chinese Military-Industrial Complex Companies.
- Publicly Traded Security: Securities traded on exchanges or OTC, including derivatives designed to provide exposure to such securities.
- United States Person: U.S. citizens, permanent residents, entities organized under U.S. law, or persons in the United States.

4) Additional Context (from Findings)
- Aligns with ongoing U.S. policy to restrict investment in Chinese military actors and to tighten capital flows that could support China’s defense-industrial base.
- Seeks to bridge sanctions and investment restriction approaches across agencies and regimes.

Who Is Affected

  • Entities identified by the Secretary of Defense as Chinese military companies (under 1260H(g) of the 2021 NDAA) operating in or affecting the United States.
  • Such entities would be added to the NS-CMIC List maintained by the Treasury.
  • United States persons (citizens, residents, and U.S.-based entities and their in-country operations) holding securities of these entities.

Timeline and Procedural Aspects

  • Identification: Secretary of Defense must identify qualifying entities under the 2021 NDAA framework.
  • Inclusion: Treasury Secretary to add the entity to the NS-CMIC List within 90 days of identification.
  • Immediate Effect: Once on the NS-CMIC List, EO 13959 restrictions apply within 60 days (i.e., prohibitions on certain transactions).
  • Divestment Window: 1-year period to divest publicly traded securities of the included entity (to facilitate orderly exit).
  • Relation to DoD NDAA 2024/Upgrade: Complementary to ongoing DoD restrictions on contracts and procurement from Chinese military companies, with an emphasis on harmonized enforcement.

Overall Impact

  • Strengthens U.S. policy to divest from and restrict investments in Chinese military companies by adding them to the NS-CMIC List.
  • Creates a defined, time-bound window for divestment and aligns various executive and legislative sanctions regimes.
  • Expands the scope of Treasury-enforced prohibitions beyond Direct purchases to include a divestment pathway for investors.

Compiled from official sources — confirm details with the bill’s official record.

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