After passing the House the preceding week, the National Defense Authorization Act for Fiscal Year 2026 (FY 2026 NDAA) passed the Senate on December 17 by a vote of 77-20 and was signed into law by President Trump the following day. As is frequently the case, this annual “must pass” defense policy bill includes a number of provisions touching on broader foreign policy issues, including U.S. economic sanctions.
As summarized below, these sanctions-related provisions include China-focused measures related to the biotechnology supply chain, defense, and surveillance sectors; a repeal of longstanding statutory Syria sanctions; expansion of fentanyl sanctions and a new focus on Haiti; codifying existing sanctions targeting malign activity in the Western Balkans; and enacting new tools to target state sponsors of unlawful or wrongful detention.
I. BIOSECURE Act
After failing to be included in the previous NDAA or passed on a standalone basis, the substance of the BIOSECURE Act was incorporated into the final FY 2026 NDAA as Section 851. As described in greater detail by our colleagues last week, this provision has the potential to impose significant restrictions on the use of certain Chinese companies in the supply chain for products procured by the U.S. Government. It does this by prohibiting executive agencies from procuring biotechnology equipment or services from biotechnology companies of concern (so-called “BCOCs”)—a category that includes entities appearing on the Department of War’s 1260H List, as well as entities identified by the Office of Management and Budget pursuant to criteria in the bill—and barring U.S. government contractors and subcontractors from using biotechnology equipment or services from BCOCs in performance of a U.S. government contracts. As a result of the implications of these restrictions, the bill has been keenly followed by the biotech industry over the last few years.
II. Chinese Investment Restrictions in the COINS Act
Although most notable for codifying the Treasury Department’s novel outbound investment regime finalized by the Biden Administration pursuant to presidential authorities in November 2024 (about which our colleagues have produced a detailed report), the Comprehensive Outbound Investment National Security Act (“COINS Act”) included in the FY 2026 NDAA also includes two separate sections authorizing discretionary sanctions on Chinese parties.
A. Chinese Defense and Surveillance Sectors
First, sections 8511–13 authorize the President to exercise International Emergency Economic Powers Act (“IEEPA”) authorities to “prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of a foreign person that is determined to be a covered foreign person” under the statute.
“Covered foreign persons” include persons incorporated in, having a principal place of business in, or organized under the laws of, China, Hong Kong, or Macau; members of the Central Committee of the Chinese Communist Party or the political leadership of China, Hong Kong, or Macau; the state, government, or any political subdivision, agency, or instrumentality of China, Hong Kong or Macau; and persons subject to the direction or control of any of the foregoing; or that are owned in the aggregate, directly or indirectly, 50% or more by any of the foregoing, and that “knowingly engaged in significant operations in the defense and related materiel sector or the surveillance technology sector of the economy of” China, Hong Kong, or Macau.
The second half of these designation criteria are similar to those set out in Executive Order 14032, issued by President Biden in June 2021. Persons targeted under Executive Order 14032 are included on the Non-SDN Chinese Military Industrial Companies List (“NS-CMIC List”). But whereas designation on the NS-CMIC List results in a prohibition on U.S. persons engaging in “the purchase or sale of any publicly traded securities, or any publicly traded securities that are derivative of such securities or are designed to provide investment exposure to such securities,” the new NDAA prohibitions are somewhat broader, targeting non-publicly traded equity and debt for the first time, albeit with a “significance” qualifier. The statute requires the President to report annually for seven years whether persons already designated on the NS-CMIC List should be targeted for these statutory sanctions. It remains to be seen whether the President will implement this measure by simply amending Executive Order 14032 to essentially combine the two authorities.
B. Sanctions List Harmonization
Second, section 8531 requires the President to report periodically to Congress on whether additional “PRC Persons” already designated on various U.S. restricted-party lists qualify for inclusion on the NS-CMIC List. These existing lists include the Military End User List maintained by the Department of Commerce; the Section 1260H List maintained by the Department of War; the Entity List maintained by the Department of Commerce; the Covered List maintained by the Federal Communications Commission; and the Uyghur Forced Labor Prevention Act Entity List maintained by the Department of Homeland Security.
By requiring periodic reports to Congress, this provision appears designed to encourage the designation of entities on these other lists to the NS-CMIC List, thereby subjecting them to the U.S. person investment restrictions applicable to entities on that list. Notably, unlike earlier iterations of the proposal—and the now-replaced predecessor to the current CMIC program established by Executive Order 13959, as amended by Executive Order 13974—which required U.S. investors to divest their interest in the securities of designated entities within one year, section 8531 leaves intact current policy, which does not require such divestment.
III. Repeal of Statutory Syria Sanctions
Following the Assad regime’s fall in late 2024, the Trump Administration took steps in the spring and summer of 2025 to ease longstanding, comprehensive sanctions against Syria. These included the issuance of Executive Order 14312 on June 30, which terminated and revoked several prior Syria-related executive orders imposing comprehensive sanctions, replacing them with a narrower list-based regime; and the issuance of a Commerce Department rule on September 8 meaningfully easing (but not altogether lifting) the highly restrictive export controls long applicable to Syria.
These executive measures necessarily left in place, however, the Syria Accountability Act and the Caesar Syria Civilian Protection Act of 2019 (“Caesar Act”), which required certain restrictions subject only to temporary 180-day waivers or suspensions. At Section 8369, the FY 2026 NDAA formally repeals the Caesar Act while clarifying the President’s discretion to impose more targeted sanctions under other authorities. The FY 2026 NDAA does not have any impact on Syria’s continuing designation as a State Sponsor of Terrorism, which has been under review by the Trump Administration since the issuance of Executive Order 14312 in June.
IV. Expanded Fentanyl and Haiti-Focused Sanctions
The NDAA includes, beginning at section 8311, the BUST Fentanyl Act, a bill previously introduced on a standalone basis by Senate Foreign Relations Chairman Risch (R-ID) and Ranking Member Shaheen (D-NH). Among other policy measures, this provision amends the Fentanyl Sanctions Act (the “FSA,” passed as part of the FY 2020 NDAA) to focus existing mandates to report to Congress on “foreign opioid traffickers” more clearly on Chinese persons involved in fentanyl-related transactions.
Persons identified in reports to Congress as “foreign opioid traffickers” are subject to mandatory menu-based sanctions. The BUST Fentanyl Act expand the predicate bases for such sanctions and authorize the President to impose certain FSA sanctions on “any political subdivision, agency, or instrumentality of a foreign government,” as well as senior officials of such entities, “that the President determines [have] knowingly” engaged in or provided support for opioid trafficking activity.
The BUST Fentanyl Act also requires annual reporting to Congress on Haitian criminal gangs and their ties to Haitian political and economic elites, and imposes a combination of mandatory property-blocking and visa sanctions and discretionary financial prohibitions on persons identified in the reports. The available sanctions overlap with a subset of those provided for in Executive Order 14059, pursuant to which former Haitian President Michel Joseph Martelly was designated for less-than-blocking sanctions in 2024.
V. Codification of Western Balkans Sanctions
Fulfilling a longtime ambition of Ranking Member Shaheen, the FY 2026 NDAA includes the Western Balkans Democracy and Prosperity Act. Section 8335 seeks to codify, and make mandatory, existing sanctions criteria in Executive Order 14033, as amended by Executive Order 14140 (the latter issued in the Biden Administration’s final days). In addition to providing that the President “shall” impose property-blocking and visa-related sanctions on persons determined to meet the relevant criteria, which include undertaking activities that threaten the peace,
security, stability, or territorial integrity of the Western Balkans, the provision restricts the President’s authority to terminate such sanctions, requiring a congressional certification similar to that contained in Section 222(b) of the Countering America’s Adversaries through Sanctions Act.
The enacted version of this proposal was narrower than the bill that passed the Foreign Relations Committee last year, which would have required that existing Western Balkans sanctions authorities remain in effect, and that persons designated under those authorities remain designated, subject to the restrictive removal process. More generally, codifying the earlier authorities stands in some tension with the October 29 removal from the SDN List of former Republika Srpska president Milorad Dodik, his son Igor, and many of their associates and related companies, the designation of whom reflected a regional priority for the prior Administration.
VI. Countering Wrongful Detention
Finally, the NDAA includes the Countering Wrongful Detention Act, a provision that amends the Robert Levinson Hostage Recovery and Hostage-Taking Accountability Act to allow, in section 8352, for the designation of countries as “State Sponsors of Unlawful or Wrongful Detention,” and requires a review of authorities, including IEEPA-based sanctions, visa restrictions, and export controls, to respond to and deter unlawful or wrongful detention of U.S. nationals.
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