HR7075-119

What This Bill Does

The Divesting from Communist China's Military Act of 2026 links the Defense Department's Chinese military company list to Treasury securities restrictions. The findings cite Executive Orders 13959 and 14032, the national emergency over Chinese military-industrial companies, and concerns that Chinese military-civil fusion and surveillance technology use U.S. capital markets. The operative section requires the Treasury Secretary, within 90 days after the Defense Secretary identifies an entity as a Chinese military company operating in the United States under section 1260H of the FY2021 NDAA, to add that entity to the OFAC Non-SDN Chinese Military-Industrial Complex Companies List unless it is already listed. Within 60 days after listing, the securities purchase and sale prohibitions in Executive Order 13959 apply. U.S. persons may still purchase or sell covered securities for one year after listing solely to divest.

Who Benefits and How

National-security officials, Defense Department 1260H analysts, Treasury OFAC staff, investors seeking clear compliance rules, and members of Congress focused on China policy benefit because a Defense identification would automatically lead to OFAC list treatment and securities restrictions. U.S. investors benefit from a one-year divestment window that allows orderly exit rather than an immediate forced sale.

Who Bears the Burden and How

Chinese military companies operating in the United States face loss of U.S. securities investment and reputational consequences after Defense identification. U.S. investment funds, broker-dealers, pension plans, index providers, compliance officers, and individual investors must screen holdings, halt prohibited transactions after the 60-day period, document divestment activity, and manage the one-year divestment exception. Treasury and Defense staff must coordinate list updates and congressional reporting.

Key Provisions

• Requires Treasury to add Defense-identified Chinese military companies to the OFAC NS-CMIC list within 90 days.
• Applies Executive Order 13959 securities prohibitions 60 days after an entity is added to the list.
• Allows U.S. persons to buy or sell covered securities for one year solely to divest.
• Uses the Defense Department section 1260H Chinese military company identification as the trigger.
• Defines covered securities, U.S. persons, the NS-CMIC list, and covered congressional committees.