Global Connection – November 2025

Dear Friend of Snell & Wilmer:

Over the past few months, substantial developments across political, legal, and policy domains extended to the realm of U.S. international trade law. In this edition of Global Connection, we discuss some of the most relevant changes in international law, with a particular focus on tariffs:

We hope that this Global Connection proves useful as businesses and individuals work through these recent changes and their impacts. Further developments are inevitable, and we will continue to highlight them here. If you have any suggestions for future editions of Global Connection or would like to be included in future international events hosted by the firm, please feel free to contact us.

Best,

Brett W. Johnson and T. Troy Galan
Co-Editors

By Brett W. Johnson

During the 1990s, the world moved to the breakdown of international trade barriers with the North American passage of NAFTA and the establishment of the World Trade Organization. In theory, this allowed countries to concentrate on their comparative advantages, whether it be resources, technology development, or labor rates. As a part of this trend, the United States lowered its tariff rates. The post-Cold War result was a resurgence in a complex global supply chain.

However, this world order began to change during the first President Trump administration, and those changes were only compounded by President Biden’s administration. Now, eight months into President Trump’s second term, the dizzying changes have upended international trade norms. There is no industry or individual company that is not somehow impacted by the changes to the international trade regulatory environment. Companies that are prepared for the short- and long-term impacts are in the best position to shift and benefit from the changes to global supply chains.

 This article briefly addresses some of the major changes to the international trade framework.

I. Tariff Mitigation Strategy

In February 2025, President Trump announced tariff increases on steel “at a minimum of 25 percent,” which went into effect on March 12, 2025. Doubling down on the steel tariffs, President Trump raised the steel tariff to 50% in a June Executive Order, with the increased tariffs affecting steel loaded on vessels starting August 7, 2025. On April 2, 2025, President Trump announced a new set of tariffs, described as “reciprocal” and implemented as part of a broader economic emergency response. These included a universal 10% tariff on most imports and a 30% tariff on imports from China. These measures were collectively referred to as the Liberation Day tariffs. And even before Liberation Day, President Trump imposed a 25% tariff on selected goods from Mexico and Canada. The administration’s stated emergency justifications for these tariffs included trade deficits, a lack of reciprocity in international trade, and fentanyl trafficking.

Unlike prior tariff regimes based on other authorities, such as Section 301 of the Trade Act (Section 301) and Section 232 of the Trade Expansion Act (Section 232), these tariffs were primarily imposed under the International Emergency Economic Powers Act (IEEPA) — a statute that had never been previously used to issue tariffs — without a formal investigative process. A 90-day pause was announced shortly thereafter, but key portions remained in effect, including the universal 10% tariff. 

The Court of International Trade and now the Federal Circuit Court of Appeals have held that some of President Trump’s tariff increases were unlawful. The Courts held that IEEPA neither mentions nor authorizes tariffs. While the statute allows the President to regulate financial transactions and freeze assets in response to foreign threats, it does not confer authority to impose duties on imports.

The Courts also rejected the emergency justification offered by the U.S. Government. The opinion emphasized that a long-standing trade deficit — even if politically significant — does not constitute an “unusual and extraordinary threat” within the meaning of IEEPA. Similarly, the Courts determined that the U.S. Government failed to establish the requisite causal connection between the tariffs and a specific external threat justifying such sweeping trade measures. However, the appellate court has allowed the tariffs to remain until October 2025. It is expected that the matter will be appealed to the United States Supreme Court, which is likely to further allow the tariffs to remain in place until final ruling that likely will not take place until July 2026.

In light of this uncertainty, companies have developed tariff mitigation strategies. These strategies have included confirming that the Harmonized Tariff Schedule code is accurate, which if changed may lead to a lower tariff rate. Companies have also looked for new sources of goods in countries that have lower rates or, as hoped by the Trump administration, moving manufacturing back to the United States. This has especially impacted China, which has been the target of the United States’ decoupling strategy under both the Biden and Trump administrations.

However, in addition to lawful mitigation strategies, there have also been schemes to get around the tariffs illegally. One such scheme includes parallel or duplicate commercial invoices, one for payment and one for supporting the tariff at a lower cost. Another scheme relates to transshipments via third-party countries and marking shipments with a new country of origin. A third scheme involves a foreign manufacturer opening a domestic entity to import shipments at cost and then selling them at the regular market rate with a lower tariff cost point without substantial transformation domestically. 

On May 12, 2025, the Department of Justice (DOJ) directed prosecutors to meticulously track and prosecute parties attempting to evade tariffs. The DOJ has bolstered its whistleblower program to encourage increased prosecution. In addition to criminal penalties, civil penalties multiply unpaid tariffs. Penalties may apply to foreign suppliers, brokers, importers, freight forwarders, and downstream U.S. buyers, sometimes referred to as the U.S. Principal Party in Interest. 

II. Anti-Corruption Efforts

On February 10, 2025, President Trump signed an Executive Order directing changed priorities in the enforcement of the Foreign Corrupt Practices Act (FCPA). This included pauses to new FCPA investigations and enforcement actions. One of the main justifications was that the FCPA was placing United States companies at a competitive disadvantage to foreign companies that were able to either straight out bribe or provide “facilitation payments” to expedite transactions. Although technically a major international trade compliance tool appeared to be taken off the table, the reality is that the FCPA is statutory-based and only Congress can make changes. Therefore, continued FCPA compliance remains critical, especially because the statute of limitations of any alleged violation would likely extend into the next presidential administration. Furthermore, most states and other countries have prohibitions on bribery. As such, there is no real change to anti-corruption compliance within the international regulatory framework.

III. Committee on Foreign Investment in the United States (CFIUS)

In 2018, the United States passed the Foreign Investment Risk Review Modernization Act (FIRRMA). This law expanded the scope of foreign investment transactions subject to CFIUS review. Basically, CFIUS has jurisdiction to review a foreign investment in the United States (such as an acquisition of or investment in a U.S. company), a transfer of technologies pursuant joint ventures or other licensing agreements, and the purchase of real property by foreigners around sensitive government sites. 

The main legal issue is the scope of “mandatory” declarations for certain transactions related to critical technologies. Whether disclosure is mandatory depends on whether certain U.S. government authorizations, as discussed below, would be required to export, re-export, transfer (in country), or retransfer the critical technology or technologies produced, designed, tested, manufactured, fabricated, or developed by the U.S. business to certain transaction parties and foreign persons in the ownership chain. However, even if not “mandatory,” it may be in the best interest of the transacting parties to voluntarily declare the transaction and obtain a “safe harbor” from the risk discussed below.

In addition, the scope of control based around “substantial interest” for a foreign entity is a required element in determining indirect ownership interests that trigger a CFIUS disclosure. The reality is that even if “negative control” exists and there is access to critical technologies, CFIUS will have an interest in ensuring adequate safeguards and protections from technical exports to foreign entities.

Although there is a focus on critical technologies, CFIUS is also concerned about the makeup of the parties to a transaction. So even though the technology may be “old,” the fact that certain companies from specific countries are involved may raise significant concerns that put any deal at risk. In addition to the parties involved, CFIUS is also concerned with domestic real property transactions, especially those near government facilities, military installations, and utility companies. Also, even if there is no technology that is a part of the transaction, CFIUS is wary of the transfer of personal identifying information, such as patient records or financial data. For example, a bioscience firm that does not directly treat patients, but only collects patient data as a part of clinical trials, may be subject to CFIUS.

CFIUS compliance should be one of the first discussion points between would be dealmakers. There are strategies that could mitigate risk, such as an independent board of directors, technology control plans, firewalls, or the selling of concerned technology or business units to a company solely owned by U.S. persons.

CFIUS regularly monitors press releases, trade periodicals, and SEC filings to identify transactions of concern. The problem with press releases is that they are meant for marketing purposes and may embellish the scope of the transaction. For example, a press release may highlight a transaction that has an emphasis on future semiconductor technology opportunities, when the underlying technology is actually basic. Or another company’s press release could state that the deal was “concluded,” when in reality only the letter of intent was signed. These are the triggers leading to CFIUS scrutiny.

Although conducting an appropriate CFIUS due diligence review can create a substantial burden on foreign investors and target entities, the penalties for violating the regulations dramatically offset any potential savings resulting from a surface-level CFIUS due diligence review or neglecting it altogether. The regulations provide the U.S. government with the authority to review, prohibit, suspend, and even unwind foreign investment transactions. CFIUS also has the authority to implement harsh mitigation plans, such as ordering the cancellation or assignment of lucrative contracts or assets involving critical technologies, critical infrastructure, or sensitive personal data of U.S. citizens. Violations of these regulations can also lead to severe penalties, up to USD $250,000 or the value of the transaction, whichever is greater. 

 In many circumstances, international trade controls are the last issue a company is considering when doing a transaction largely due to the assumption that the transaction is purely domestic. But, with global supply chains, the reality is that every transaction is now international, and companies should consider enhanced compliance programs ahead of time, rather than trying to create one only when necessitated by a transaction. This program would include a policy and procedure as to compliance with international trade laws, an export classification matrix of parts and services from an export control perspective, a training program, audit features, and ensuring necessary terms and conditions are included in contracts.

IV. Office of Foreign Asset Control (OFAC) Enforcement

Since 9/11, OFAC has been a favored tool of the United States government to effectuate foreign policy and restrict transactions with certain countries, entities, and individuals. OFAC maintains a myriad collection of specific regulations as mandated by various executive orders from several administrations, issued pursuant to the IEEPA and the Trading With the Enemy Act (TWEA), that are still applicable. Most significantly, signed into law on April 24, 2024, the 21st Century Peace through Strength Act significantly increases the statute of limitations for certain sanctions violations from five to ten years.

OFAC is the most significant agency in restricting transactions (of any type) with Russia, China, Cuba, Venezuela, Iran, and several other countries. OFAC works closely with allied nations to assist in enforcement of their laws. For example, although the United States has significant restrictions related to transactions involving Russia, the European Union has surpassed the United States restrictions. As such, recent enforcements have included foreign export control agencies, notably from Germany. This multilateral cross-border enforcement scheme has led to several investigations that placed United States companies at a disadvantage in trying to respond to inquiries from a foreign agency, while working to also mitigate any risk associated with U.S. export controls.

In addition to restrictions on specific countries, OFAC maintains a collection of “sanctions lists” that limit or outright prohibit transactions with certain entities and individuals without an OFAC export license. In many cases, there is a policy of denial of any export license. However, there are usually exceptions associated with humanitarian transfers or protection of intellectual property rights. To ensure compliance, companies are encouraged to “screen” vendors, customers, and intermediaries related to a foreign transaction. Companies involved in international trade should review policies and procedures, especially those dealing with document retention and e-discovery, to ensure compliance with the OFAC requirements.

V. Technology Export Controls

The two primary United States agencies that control exports of technology are the Bureau of Industry Security (BIS), within the U.S. Department of Commerce, and the Directorate of Defense Trade Controls (DDTC), within the U.S. Department of State. Of note, both departments are also members of CFIUS. In 2022 and 2024, under President Biden, significant changes to technology export controls occurred, especially around the semiconductor industry. These changes were built on top of the 2018 Export Control Reform Act (ECRA). The clear target for the enhanced export controls is an effort to “decouple” from China. However, similar to OFAC’s jurisdiction, there are significant efforts to restrict technology exports to other countries, including Russia, North Korea, Venezuela, and Iran, among others.

The stated purpose of these export controls is to protect national security by limiting the efforts of foreign adversaries in advancing military capabilities. If dealing with military or space technology, the International Traffic in Arms Regulations may be implicated and a separate technology control plan may be necessary. Even completely domestic transactions have the potential impact of reaching into China (or other sanctioned countries). U.S. persons, wherever located, should establish a foreign transaction policy that addresses a company’s international trade conduct. 

These export controls have a significant impact on mergers and acquisitions of companies, even if a foreign party is not involved in such a transaction. Buying companies seek assurances that the selling companies are not in violation of the various export controls due to the significant penalties that can result. Even in an asset sale, a buying company can suffer successor liability. As such, as a part of due diligence, it is important that the selling company has a clear understanding of its technology’s export classification. In addition, companies will also need to have clear procedures to ensure that export documentation is properly completed and that export licenses are obtained.

VI. The United Kingdom’s Economic Crime and Corporate Transparency Act of 2023 (the ECCTA)

The ECCTA established a corporate offense related to failing to prevent fraud. As such, a company could be criminally liable where an agent commits fraud intending to directly or indirectly benefit the company and the company did not have reasonable fraud prevention procedures in place. The “base fraud offenses” are broad and includes any conspiracy related to false representations, false accounting, or cheating the public revenue. A company that has operations in the United Kingdom, even if nominal, is required to conduct a risk assessment and make a report to the U.K. government. To comply with the law, the company will need to update its ethics policies to make reference to the law and the program in place to ensure compliance. In reality, the ECCTA is just another tool in line with U.K. Bribery Act, which, unlike the FCPA, prohibits bribery of anyone – not just government officials.

VII. Voluntary Disclosures

In addition to a dedicated compliance program, the similarity as to these international trade regulations is the emphasis on encouraging voluntary disclosures. In May 2025, the DOJ issued the Corporate and White-Collar Enforcement Policy, which built on previous administrations’ policy statements on the benefits of voluntary disclosures. Several of the above referenced agencies — including OFAC, BIS, DDTC, and the DOJ — have specific voluntary disclosure programs. Although the regulations may differ as to the information requested for a voluntary disclosure, the main requirement is full and complete disclosure of information. In addition, the benefits include reduced penalties that may include a simple warning. As such, a voluntary disclosure plan should be a part of any foreign transaction policy.

VIII. Conclusion

Companies attempting to weather the changes in international trade need to have a short- and long-term plan. Any plan should be centered around the compliance program, training, audits, and appropriate standards of conduct clauses in the pertinent agreements. In proactively creating and supporting an international trade compliance program, a company will need to appreciate which government agencies have jurisdiction over its products and services (and what export technology classifications are applicable).

For the companies that are primarily domestic, understanding the impact of the international trade regulations on the global supply chain is important from an operational (and cost) perspective. In evaluating expansion of facilities or moving into new markets to handle research and manufacturing, international trade controls will be significant issues to address and ensure that agreements have the necessary terms to mitigate risk.

Finally, in the event a potential mishap occurs, determining what the plan would be to review the issue and possibly voluntarily report to the applicable agencies proactively is a standard planning discussion for any crisis management strategy.

**Opinions expressed are those of the author and not necessarily the firm’s or their colleagues’. 

By Brett W. Johnson and T. Troy Galan

Although tariffs continue to be in flux, President Trump issued a new Executive Order modifying the reciprocal 10% global tariff introduced earlier this year. The revised rates impose differentiated tariffs by country, ranging from 10% to over 40%. Many companies are still dealing with the impact of past fluctuations. 

However, in light of the standardization of tariffs for some countries and the uncertainty related to global supply chains, companies may consider again revisiting tariff mitigation strategies, addressing transshipment loopholes, ensuring compliance with the law and avoiding quick fix schemes, revisiting global supply chain options (and related agreements) and working towards a plan that provides flexibility around the changing international trade and domestic “reshoring,” “nearshoring,” or “friendshoring” efforts.

Of importance, the reciprocal tariff action does not affect imports from China (which remain subject to Section 301 tariffs and separate Executive Orders), nor does it alter the rates under the United States Mexico and Canada Agreement (USMCA) — the USMCA remains one of the few pathways for duty-free treatment.

While these rate changes are relevant for business planning and import cost forecasting, the more significant legal development lies deeper in the Executive Order: a new enforcement regime targeting transshipment. Importers relying on traditional compliance practices — particularly those using country of origin documentation based on informal supplier assurances — should treat this announcement as a call to action. Customs and Border Protection (CBP) will now have broad authority to impose a 40% penalty tariff on goods found to be transshipped to evade tariffs, with no option for mitigation or remission. It is expected that foreign countries will be assisting CBP with enforcing this penalty to avoid further increased tariffs on all goods.

Companies should reassess how they document country-of-origin, how they structure supplier warranties, delivery and indemnification contract terms, and whether their internal compliance programs are prepared for the anticipated wave of CBP audits and enforcement.

I. New Tariff Rates by Country

The Executive Order replaces the prior 10% global reciprocal tariff with a country-specific structure outlined in Annex I. Notable rates include:

All other countries not listed in Annex I remain subject to the 10% global rate under Executive Order 14257, as amended.

Importers should review current sourcing arrangements and harmonized tariff schedule codes (HTS), to update landed cost assumptions. This is also the time to consider long-term tariff-mitigation strategies to minimize exposure in an increasingly aggressive tariff environment.

II. Transit Carveout

Goods loaded for final transport to the United States before 12:01 a.m. EDT on August 7, 2025, and entered by October 5, 2025, are carved out from the new rates and remain subject to the previous 10% tariff.

Importers seeking to use this exception should consider preparing detailed, contemporaneous documentation demonstrating eligibility, and consider working with trade counsel to prepare internal memoranda memorializing the rationale for the exemption claim. CBP is expected to scrutinize use of this carveout, and mere commercial invoices or bills of lading may not be sufficient, especially if the exemption is being claimed at scale.

III. Potential Future Relief Through Trade Deals

The Executive Order notes that certain countries may receive preferential treatment if pending trade and security agreements are finalized. But, until such agreements are signed and implemented by formal order, however, the country-specific rates listed in Annex I apply in full.

Importers should avoid over-reliance on media reports or public statements from foreign governments or negotiators. Business planning should be based on official guidance from CBP, the agency responsible for implementing and enforcing tariffs. 

IV. The Hidden Provision: 40% Transshipment Penalty Tariff with No Mitigation

The most significant feature of this Executive Order lies in a new enforcement provision authorizing CBP to impose a 40% tariff penalty on any good it determines has been transshipped to avoid tariffs.

While CBP has not released official guidance, key aspects noted in the Executive Order include:

CBP is also expected to publish a biannual list of countries and facilities associated with circumvention schemes, which importers should assess to make risk assessment decisions involving supply chains and procurement decisions.

What this means for global supply chains: even importers following historical practices — such as relying on supplier statements without thorough documentation — may now face severe penalties. This is particularly true for importers sourcing from countries with known transshipment risk, including Vietnam, Malaysia, Cambodia, Thailand, and Indonesia.

As such, importers should consider revisiting country-of-origin certifications. If suppliers cannot produce signed, dated documentation substantiating origin, importers may be exposed (regardless of whether the U.S. company is actually the importer of record). As a reminder, customs brokers cannot provide legal advice, and reliance on their classification is not a defense. 

Further, schemes related to parallel, but different shipping documentation and commercial invoices are illegal. Transactions that have the transporters or brokers act as the importer of recorder and who are willing to pay the tariff and yet charge a lower amount to the domestic company are suspect transactions. Assurances from domestic retailers to used preferred shipping routes or schemes to avoid the tariff will not mitigate risks.

V. Enforcement and the Role of CBP

Executive Orders set the policy — but enforcement falls to CBP. Due to the rapidly changing regulatory environment, CBP implementation of updates tariff rates may lag behind an Executive Order’s effective date. However, it is expected that there will be a significant increase in competitor complaints or voluntary disclosures by some party in the supply chain to avoid liability.

Importers should continue to track Federal Register publications and monitor official CBP guidance to avoid inadvertent violations. International business planning decisions should be made in consultation with trade counsel, not based on informal advice from customs brokers or suppliers.

VI. Strategic Mitigation: Legal Options That Should Be Explored Now

In light of the ongoing rapidly shifting tariff environment, importers should continue to focus on long-term tariff mitigation strategies, rather than treating the current rate schedule as fixed. Companies that invest now in structuring supply chains for tariff efficiency will be better positioned to withstand future changes.

VII. Final Thoughts

While the updated tariff rates are a notable development, the transshipment penalty regime is the key change by the Executive Order. The 40% penalty tariff and lack of penalty relief present a heightened risk for importers and companies who wait for enforcement notices finding themselves already exposed.

General counsels and compliance personnel should review supplier agreements, revisit origin certifications, and ensure that any tariff planning is conducted to mitigate risks. Customs brokers are not attorneys; their mistakes are legally attributable to the importer and not protected by attorney-client privilege in the event of a CBP enforcement action.

As we have noted in prior publications, the time to plan is before CBP acts. If your import practices have not changed since last year, now is the time to revisit them.

By: Brett W. Johnson and T. Troy Galan

The Bureau of Industry and Security (BIS) at the U.S. Department of Commerce launched a Section 232 investigation into the national security implications of aviation imports. This development did not make headlines due to the rapidly shifting tariff rates, but this trade action builds on the government’s expanding use of Section 232 authority to target strategically significant sectors.

As with other active Section 232 reviews, the aircraft and jet engine investigation may result in tariffs, quotas, or other restrictions aimed at limiting U.S. dependence on foreign suppliers. Although the public comment period closes soon, the regulatory process remains in its early stages. In the meantime, companies importing aircraft, sourcing foreign parts, or contemplating aviation-related mergers or joint ventures should begin preparing for a range of outcomes.

I. Key Elements of the Investigation

BIS is investigating whether certain imports threaten national security. Although the scope is broadly defined, the inquiry covers:

BIS has specifically requested public comment on:

This signals a continuation of the Trump administration’s shift toward more assertive use of trade tools to promote domestic industrial capacity and reduce strategic vulnerabilities.

II. Practical Risks for Cross-Border Transactions

Unlike other trade investigations focused primarily on active import flows, the aircraft Section 232 review has implications for a broader set of activities — including corporate transactions involving aircraft and related equipment. For example:

In many of these scenarios, aircrafts may qualify as imports under U.S. customs law even if they have already been temporarily in the United States. The specifics of the transaction and the physical location of an aircraft at the time of closing may trigger customs filings, tariff exposure, and other compliance obligations. Experienced trade counsel should review proposed agreements and supporting documents to assess:

Parties should also consider developments on potential exemptions or mitigation arrangements. Unlike past rounds of Section 232 tariffs, the Trump administration has indicated it may take a more selective approach in aviation tariffs, including temporary relief for companies with U.S. operations or certain trading partners. Such volatility should be carefully considered during the preparation of proposed agreement.

III. Conclusion

The aviation industry will need to ensure consideration of applicable international trade laws, including ever-changing tariffs and other taxes, to flag tariff-risk exposure on price and risk early. Even in deals where the aircraft itself is not the core asset, related parts or supply commitments could trigger exposure. This may lead to a tariff mitigation strategy related to delayed or sped up delivery terms (possibly even before closing) to minimize price differentials. In the event of immediate, unexpected changes in the tariff, designation of which party (or maybe both) is responsible for the increased tariff exposure.

As the Section 232 investigation develops, the interplay between national security concerns and global aviation markets is likely to remain a focal point of trade and regulatory policy. Navigating this landscape will require careful structuring, timely legal review, and engagement with counsel who understand both the transactional and regulatory dimensions of cross-border aircraft operations. In addition, interested stakeholders and trade organizations should ensure that they provide comments and information as a part of the investigation. Such data is then a part of the record that is eventually reviewed by a court in determining whether the investigation outcome and resulting increased tariffs are rational, supported by the record, and compliant with the law.

By Brett W. Johnson, Sarah E. Delaney, T. Troy Galan, and Thomas Williams

Texas has taken another step in positioning itself as a premier destination for corporate legal headquarters, while creating additional hurdles for foreign investment. With the enactment of Senate Bills 29 and 1058, Texas has implemented robust corporate governance reforms aimed at competing with Delaware’s historically dominant framework.

In parallel, Texas has now also enacted sweeping restrictions on foreign ownership of real property. Similarly, a bill creating a CFIUS-style review process for certain foreign business acquisitions was passed with broad, bipartisan support in the Texas Senate. Although the bill ultimately did not make it out of the Texas House, it is highly likely the bill will be reintroduced before a future Legislature.

These developments should be carefully evaluated as companies make corporate formation and foreign investment decisions involving the Texas market.

I. Codification of Director Protections and Litigation Controls

Senate Bill 29, signed into law on May 14, 2025, by Governor Greg Abbott and currently in effect, introduces several key provisions designed to bolster corporate governance certainty and reduce litigation exposure:

II. Incentivizing Financial Services and Exchange Operations

Senate Bill 1058, effective January 1, 2026, amends the Texas Tax Code to exempt certain stock exchange activities from franchise taxes. This measure is intended to reinforce Texas’s emergence as a financial hub, following recent developments such as the launch of the Texas Stock Exchange.

Additionally, House Joint Resolution 4 was approved by voters in the November 2025 general election, thereby amending the Texas Constitution to prohibit the Legislature from imposing transaction taxes on stock exchange activity or other securities transactions. This constitutional amendment further strengthens Texas’s position as a no-transaction-tax jurisdiction for securities markets.

III. Implications for Corporate Formation and Governance

These enacted measures signal Texas’s intent to compete directly with Delaware by offering a pro-management legal environment that reduces litigation risk and allows for greater board discretion. Corporations evaluating where to incorporate — or reincorporate — may find Texas increasingly attractive as a domicile that prioritizes business judgment deference and procedural control.

The addition of financial services tax relief further positions the state as an alternative jurisdiction for capital markets infrastructure, with clear incentives for trading platforms, exchanges, and fintech firms.

IV. New Foreign Investment Regimes

Senate Bill 17, which became effective September 1, 2025, prohibits certain foreign individuals and companies from a “designated country” from owning real property or leasing real property for a year or longer in Texas. Any citizen of a designated country, and any entity with ownership from a designated country, cannot directly or indirectly own real property in the state, and cannot lease real property for one year or longer.

The current list of designated countries includes China, Iran, North Korea, and Russia, although the list can be revised at a future date.

While the ban is not retroactive, it does mean that any such foreign company currently leasing real property in Texas may be unable to renew that lease. Critically, the law contains no limits on the ownership threshold, meaning even a de minimis ownership interest could trigger the prohibition and result in civil penalties of up to 50% of the market value of the real property. Moreover, the statute’s definition of real property is broad — encompassing mineral and water rights in addition to agricultural, commercial, residential, and industrial property — implicating broad swathes of Texas industry.    

The Texas Legislature also pursued Senate Bill 2117, which would have established the Texas Committee on Foreign Investment (TCFI) — a first-of-its-kind state-level counterpart to the federal Committee on Foreign Investment in the United States (CFIUS). The new regulatory regimes would have required notification and review of certain foreign investments in sensitive Texas businesses, including those involving critical infrastructure, energy, and personal data systems.

Senate Bill 2117 passed the Texas Senate by a wide margin, although the Texas House failed to take up the bill before the recent Legislative Session ended. The strong support for Senate Bill 2117, however, indicates that it may be re-introduced in the next Legislative Session beginning in January 2027.

Both the ban on foreign real property ownership and the potential enactment of the TCFI mark a major shift in how Texas regulates foreign investment. These changes should be carefully evaluated by international inbound transactions involving Texas companies.

V. Looking Ahead

Texas’s legislative activity reflects a dual-track strategy: attracting new corporate formations through governance-friendly reforms while asserting state authority over inbound investment — including real property transactions. Combined with other economic development incentives, such as grant awards and foreign trade zone status opportunities, Texas will continue its comparative advantage as to other states in regard to attracting lucrative projects.

Companies considering incorporation, expansion, or international inbound transactions in Texas should consider involving experienced foreign investment counsel early in the process to prevent unexpected issues and delays due to the interplay between these reforms and emerging compliance obligations. As a part of this consideration, enhanced due diligence to carefully engage in foreign transactions (e.g., export controls, import compliance, anti-corruption, etc.) should be in place prior to initiating a transaction.