1. Origin and context

The term foreign entity of concern emerged within U.S. legislation designed to protect national security, economic interests, and technological supply chains. It appears prominently in:

the CHIPS and Science Act (2022), which supports domestic semiconductor manufacturing;
the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), especially regarding tax credits for electric vehicles and batteries;
implementing regulations issued by the Department of Commerce, Department of the Treasury, and Department of Energy, which give the term operational meaning.

In short, it designates a foreign entity that poses a potential or actual risk to U.S. national or strategic security.

2. Legal definition

The definition is detailed but can be summarized around two main elements: formal designations (specific government lists) and substantive relationships (control, direction, or jurisdiction by a foreign government).

Under 15 U.S.C. § 4651(8), the term “foreign entity of concern” means any foreign entity that is:

(A) designated as a foreign terrorist organization by the Secretary of State under 8 U.S.C. § 1189;
(B) included on the list of Specially Designated Nationals and Blocked Persons (SDN List) maintained by the Office of Foreign Assets Control (OFAC);
(C) owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation;
(D) alleged by the Attorney General to have been involved in activities for which a conviction was obtained under espionage, foreign agents, or arms export control statutes.

The corresponding regulation (15 C.F.R. § 231.104) specifies that an FEOC may include:

any entity designated as a terrorist organization by the Secretary of State;
any entity listed on the Treasury’s SDN list or owned 50 % or more by such listed entities;
any entity owned, controlled, or directed by, or subject to the jurisdiction of, a “covered nation” as defined in 10 U.S.C. § 4872(d).

Less formally: a foreign organization that falls within one of these categories is considered “of concern” to U.S. interests.

3. “Covered nations” and criteria of control or jurisdiction

The laws identify specific covered nations — such as the People’s Republic of China, the Russian Federation, the Islamic Republic of Iran, and the Democratic People’s Republic of Korea — as foreign adversaries.

According to the U.S. Department of Energy (DOE) interpretive guidance, an FEOC can also be:

incorporated, headquartered, or conducting business in a covered nation;
one in which a covered nation’s government owns or controls 25 % or more of voting rights, equity interests, or board seats;
one effectively controlled through contract or licensing arrangements by an existing FEOC.

This means that indirect or partial ownership may suffice — the threshold is not limited to 100 % control. Such elasticity makes the definition politically powerful but legally ambiguous.

4. Fields of application

The FEOC label has concrete consequences across several policy areas:

Under the CHIPS Act: companies receiving federal semiconductor subsidies may not engage in certain research or technology collaborations with FEOCs.
Under the IRA (Section 30D tax credit): if battery components or critical minerals originate from an FEOC, the resulting electric vehicle becomes ineligible for the tax credit.
Across infrastructure and supply-chain programs: the definition works as a filter preventing U.S. public funds from benefiting entities linked to strategic risks or adversarial states.

5. Political rationale and strategic logic

Why does the U.S. use this concept? The logic is threefold:

National security protection: preventing sensitive technologies (e.g., semiconductors, advanced batteries, critical components) from falling under the influence of adversarial governments.
Supply-chain resilience: reducing vulnerabilities by limiting exposure to potentially hostile foreign control.
Alignment of public incentives with national interests: ensuring that beneficiaries of federal subsidies or tax credits are not simultaneously collaborating with FEOCs.
Industrial policy integration: blending economic competitiveness and technological promotion with national security imperatives.

The result is a strategic screening mechanism that ties industrial and trade policy to security considerations.

6. Critical issues and grey areas

The definition’s very strength — its breadth — also creates uncertainty. Several challenges stand out:

The wording “subject to the jurisdiction or direction” is open to interpretation, potentially extending to entities only loosely linked to a covered nation.
The boundary between a “normal” foreign firm and an FEOC is blurred: a partially state-owned private Chinese company may fall within the scope, but the precise threshold is unclear.
The implications for foreign investment, mergers and acquisitions, and global supply chains are complex: U.S. companies must perform due diligence to ensure that their partners or suppliers are not FEOCs, or risk sanctions, loss of credits, or disqualification from subsidies.
There is potential tension between industrial growth (especially in green technologies and battery manufacturing) and security restrictions: an overly broad FEOC interpretation could slow down innovation and infrastructure development.
The definition remains evolving: federal agencies continue to issue new guidance and rulemakings that both clarify and expand its scope.

7. Synthetic conclusion

A foreign entity of concern is therefore a foreign organization deemed strategically risky — either by formal designation (terrorism, sanctions) or by association with governments of covered nations. The label carries tangible effects across public funding, tax incentives, technology transfers, and international cooperation.

Yet it is also a politically charged and interpretive concept, reflecting a broader U.S. shift toward economic security governance: where industrial policy, technology strategy, and national security are no longer distinct spheres but parts of the same geopolitical equation.

U.S. Department of Energy’s (DOE) Final Interpretive Guidance on the Definition of “Foreign Entity of Concern” (FEOC), issued in May 2024

The DOE released the Final Interpretive Guidance on May 3, 2024; it became effective on May 6, 2024.
Stated objective: to “limit the involvement of foreign entities of concern in the U.S. battery supply chain” and promote “domestic and friend-shored battery materials processing and manufacturing.”
The DOE adopts a two-step analysis to determine whether an entity qualifies as an FEOC:
1. Determine whether the entity is a foreign entity;
2. If so, determine whether it is “owned by, controlled by, or subject to the jurisdiction or direction of” a government of a “covered nation.”

Key definitions and operational thresholds

“Foreign entity”

An entity qualifies as a foreign entity if it meets any of the following conditions:

It is a government of a foreign country;
It is an individual who is not a U.S. citizen, lawful permanent resident, or otherwise a “protected individual”;
It is a partnership, corporation, association, or organization incorporated or headquartered in a foreign country;
It is a U.S. entity that is owned by, controlled by, or subject to the direction of any of the above.

“Covered nation”

The DOE explicitly identifies the following as covered nations:
People’s Republic of China, Russian Federation, Islamic Republic of Iran, and Democratic People’s Republic of Korea.

“Foreign entity of concern”

A foreign entity is considered an FEOC if any one of the following criteria applies:

Subject to the jurisdiction of a covered nation’s government
- This includes entities incorporated, domiciled, or with their principal place of business in a covered nation;
- Or entities engaging in relevant activities (e.g., extraction, processing, recycling of critical minerals; battery component manufacturing or assembly) within a covered nation.
Owned by, controlled by, or subject to the direction of a covered nation’s government
- The DOE sets a quantitative threshold: 25 % or more of voting rights, board seats, or equity interest(including capital, profit, or contingent interests) held by a covered nation or its representatives constitutes control.
- Contractual or licensing control test: even absent equity ownership, if an agreement gives another entity (itself a FEOC) effective control over relevant operations — such as mining, processing, recycling, or manufacturing — the entity may be deemed an FEOC.
- The DOE clarifies that the three indicators (votes, equity, board seats) are assessed independently, not cumulatively.
  Example: 20 % of voting rights + 10 % equity + 15 % of board seats = 20 % control, not 45 %.

“Government of a foreign country”

The DOE interprets this term broadly to include:

National and sub-national governments;
Agencies or instrumentalities thereof;
Political parties that constitute or control the government (e.g., the Chinese Communist Party);
“Senior foreign political figures” — meaning senior officials of executive, legislative, administrative, military, or judicial branches of a foreign government or ruling party, as well as their immediate family members (spouses, parents, siblings, children, parents-in-law).

Critical observations

The 25 % threshold is significant: even minority stakes may trigger FEOC classification if they meet one of the control indicators.
The contract/licensing test expands the scope beyond formal ownership, introducing a flexible “effective control” criterion that requires case-by-case assessment.
The inclusion of political parties and senior foreign political figures extends the due-diligence obligations to entities only indirectly tied to foreign governments.
In practice, any company in the battery or clean-vehicle supply chain must demonstrate that it is not owned or controlled — even partly or contractually — by a covered nation’s government or political apparatus.
The rule directly affects DOE grant and loan programs, as well as clean-vehicle tax credits under Section 30D of the Inflation Reduction Act (IRA): collaboration with or sourcing from a FEOC can make a company ineligible.

Analytical remarks

The DOE guidance crystallizes a security-driven industrial policy: it formalizes the U.S. intent to delink critical supply chains from countries viewed as strategic competitors, particularly China.
Yet, the definition’s elasticity — especially the “effective control” clause — invites legal uncertainty. Entities with complex global ownership structures or technical partnerships may find it difficult to prove compliance.

In essence, the 2024 DOE guidance turns the FEOC concept into a compliance and geopolitical screening tool at the core of the U.S. clean-tech and semiconductor strategy:
it codifies a new boundary where economic policy and national security fully converge.

From FEOC to technological sovereignty: How U.S. supply-chain screening hooks into outbound controls

The Department of Energy’s Final Interpretive Guidance on “Foreign Entities of Concern” (FEOC) turns an abstract security label into a justiciable set of supply-chain screens that bind eligibility for public money to geopolitical risk management. In batteries and clean vehicles, FEOC status now serves as a decisive gatekeeper for federal incentives (notably the §30D credit), while its logic reverberates across adjacent industrial programs. The guidance hard-codes a legal theory of effective control (including contractual/licensing control), minority thresholds (25% for voting rights, equity, or board seats, assessed independently), and jurisdictional exposure (incorporation, principal place of business, or relevant operations in a “covered nation”) — all of which render compliance a structural, not episodic, exercise.

This domestic screen maps cleanly onto the Treasury Department’s Outbound Investment Security Program, which implements Executive Order 14105. Treasury’s final rule, effective January 2, 2025, introduces a dual toolset: prohibitions and mandatory notifications for certain U.S. investments into “country-of-concern” entities operating in advanced semiconductors, quantum, and AI — sectors that overlap with the FEOC regime’s techno-strategic perimeter even if the statutory anchors differ. The outbound program is framed as narrowly targeted, but functionally it aligns with FEOC’s animating concern: curbing the intangible benefits of capital — know-how, managerial expertise, market signaling — from compounding adversaries’ capabilities. Together, the two regimes form a pincer: public-money eligibility is conditioned ex ante (FEOC), while private-money outflows are channeled or blocked ex post (outbound).

CHIPS guardrails supply the third side of the triangle. Commerce’s 2023 guardrails rule and NIST’s implementation materials preclude CHIPS funds from benefiting FEOCs and restrict capacity expansion and joint R&D in countries of concern. FEOC is the definitional hinge here as well: the rule elaborates what it means to be “owned by, controlled by, or subject to the jurisdiction” of such entities. The upshot is doctrinal continuity across programs: a single security vocabulary — FEOC — migrates from batteries and EV credits to semiconductors and, conceptually, to outbound investment restrictions. That vocabulary is embedded in positive law (15 C.F.R. §231.104) and operationalized via agency guidance, FAQs, and funding terms.

Institutionally, the DOE guidance pushes “technological sovereignty” by design. First, it treats governments and ruling parties, including senior foreign political figures and their immediate families, as vectors of control, thereby widening the due-diligence aperture beyond equity trees to political embeddedness. Second, the 25% indicator — measured separately across votes, equity, and board seats — lowers the bar for finding state influence; a firm can be FEOC-tainted without majority ownership or overt command. Third, the contract/licensing control test operationalizes a reality of global production: effective control often rides on IP and contractual chokepoints rather than balance-sheet dominance. In practice, these features elevate governance mapping (charters, shareholder agreements, IP licenses, offtake and tolling contracts) to co-equal status with cap-table analysis.

Policy-mechanically, FEOC and outbound controls are complements, not substitutes. FEOC rules shape the compositionof domestic supply chains eligible for subsidies and tax credits (e.g., §30D manufacturer obligations to demonstrate FEOC compliance and transition planning), while outbound rules shape the direction and quality of U.S. capital abroad. When read alongside Treasury/IRS clean-vehicle regulations and manufacturer reporting requirements, the system creates a compliance continuum: to monetize domestic credits, firms must certify upstream de-risking; to deploy capital offshore, they must segregate or abstain from transactions that would re-import strategic risk through intangibles.

Conceptually, this is a migration from classic export controls (policing flows of goods/tech outward) to bidirectional industrial security: public-finance conditionality (FEOC) and capital-flow discipline (outbound) jointly cultivate “trusted” ecosystems at home and abroad. That is why DOE’s guidance, though sector-specific, resonates beyond batteries: it specifies the evidentiary standards (ownership, control, jurisdiction) that other programs can cite or mirror. NIST’s guardrails materials already do this in semiconductors; Treasury frames its outbound rule as narrow, but its problem statement — adversaries “exploiting” U.S. investment to accumulate intangible advantages — is the same risk the FEOC screen tries to preempt onshore.

Two tensions merit emphasis. First, elasticity vs. predictability: the “effective control” and jurisdictional exposure tests are calibrated to catch evasive structures, yet they also create borderline cases in multi-jurisdictional groups and tolling/contract manufacturing models. Agencies have attempted to cabin discretion with concrete thresholds and FAQs, but the factual granularity of global supply agreements ensures residual ambiguity. Second, speed vs. depth: industrial timelines for scaling clean-tech inputs are tight; deep diligence on beneficial ownership, board composition, licensing chains, and sub-tier sourcing may slow deployment — precisely the trade-off a sovereignty-first approach is prepared to accept. The legal architecture does not deny this friction; it institutionalizes it as a feature.

Analytically, the through-line is clear. FEOC guidance conditions access to domestic fiscal tools on supply-chain provenance and control tests; CHIPS guardrails replicate the template in a different sector with similar triggers; outbound rules address the capital side of the same technological rivalry. The common objective — minimize strategic dependence and knowledge transfer to countries of concern while accelerating allied capacity — is not merely rhetorical. It is implemented through mutually reinforcing screens that attach to subsidies, tax benefits, and private investment flows. That is the operative meaning of U.S. “technological sovereignty” in this phase: jurisdiction-anchored incentives and prohibitions that re-shape both the inputs and the geography of innovation.

Foreign entity of concern (FEOC)