S. 3640 — Divesting from Communist China’s Military Act of 2026

This section states congressional findings on national security threats from U.S. investments financing Chinese military companies, including references to Executive Orders 13959 and 14032; the definition of such companies under section 1260H(g) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (10 U.S.C. 113 note); Department of Defense procurement restrictions under section 805 of the National Defense Authorization Act for Fiscal Year 2024 (10 U.S.C. 4651 note prec.), prohibiting new contracts after June 30, 2026, and indirect purchases after June 30, 2027; and the need for consistent treatment across U.S. sanctions regimes.

This section requires the Secretary of the Treasury, not later than 90 days after the Secretary of Defense identifies an entity as a Chinese military company operating in the United States under section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (10 U.S.C. 113 note), to include the entity on the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List) maintained by the Office of Foreign Assets Control if not already listed. (As background, section 1260H requires the Secretary of Defense to identify entities owned or controlled by the People's Liberation Army or involved in China's military-industrial complex that conduct operations in the United States.) Not later than 60 days after such inclusion, the prohibitions of Executive Order 13959 (addressing securities investments that finance Communist Chinese military companies) apply to the entity, except that U.S. persons have a one-year divestment period beginning on the inclusion date to purchase or sell the entity's publicly traded securities solely for divestment purposes.