The Nearshoring Trap in Foreign Investment Screening
A pending House bill would make U.S. FTA partners eligible for screening assistance, turning nearshore ownership diligence into supply continuity risk.
Primary lensTrade policy
Sub-topicPolicy monitoring
Evidence base11 records used
Use casePolicy monitoring
Nearshoring is not outside screening anymore
For this analysis the relevant nearshoring map is the Western Hemisphere free-trade-agreement map associated with reducing China exposure. A pending House bill would make U.S. free-trade-agreement partners eligible for State Department support in building foreign investment screening systems. Several of those partners are Western Hemisphere jurisdictions that figure in nearshoring, so the eligible map and the sourcing map overlap. That overlap is an inference drawn from the bill's partner-country definition and USTR's free-trade-agreement list, not a statutory finding. An importer who files no investment notices and runs no acquisitions would still inherit the risk if a later partner-country screening regime has authority to condition, block, or unwind ownership of assets a supply chain depends on.
Summary
The Securing Partner Supply Chains Act, , would require the Secretary of State to build an Initiative on Foreign Investment Screening that helps partner countries stand up their own review systems, drawing on United States investment-screening expertise. The operative text is country-neutral and does not identify China as a statutory trigger. The partner country definition would reach free-trade-agreement partners, mutual-defense-treaty partners, and any other country the Secretary designates. The free-trade-agreement branch includes Western Hemisphere jurisdictions that figure in nearshoring. The Treasury Department has announced a bilateral foreign investment review cooperation track with Mexico, and H.R. 7675 would move that capacity-building logic into a State Department initiative for partner countries. The generalization from the Mexico track to the bill is an inference, not an operative effect of the introduced text. The introduced text imposes no tariff and no importer filing requirement. The exposure it creates is indirect and would run through supplier and logistics ownership in the nearshore jurisdiction.
The introduced House text would require the Secretary of State to establish the Initiative within 180 days of enactment. It would designate the Under Secretary for Economic Growth, Energy, and the Environment, or that official's designee, to lead it. The Initiative would provide technical assistance, training, advisory services, regulatory guidance, and information sharing to help partner countries screen foreign investment for national security risk. The text defines national security risk to reach critical infrastructure, sensitive technology, supply chain vulnerabilities, and malign foreign influence. The House text terminates the Initiative three years after establishment and requires a report one year after enactment and annually thereafter for three years. Representative Joaquin Castro introduced the bill with Representative Young Kim, and the House Foreign Affairs Committee ordered it reported on March 26, 2026 by a 43 to 3 vote, according to the official committee record and Congress.gov bill status. It is not enacted law, and the introduced text does not create a tariff, a customs penalty, or an importer filing requirement.
The eligible map overlaps with the sourcing map
The introduced text would define a partner country as a country with which the United States has a bilateral or multilateral free trade agreement, a country with which the United States has a mutual defense agreement by treaty, and any other country the Secretary designates. The automatic free-trade-agreement category alone would reach Mexico, Canada, Panama, Colombia, Peru, Chile, and the CAFTA-DR countries. Those jurisdictions sit inside the Western Hemisphere sourcing frame used in this analysis. That reading of the statutory text against the USTR list is a confirmed fact. The nearshoring consequence is an inference. A jurisdiction selected for China-risk reduction can also be a candidate for United States supported investment screening capacity, so the eligible map and the sourcing map overlap.
The United States is already exporting the screening function
H.R. 7675 would not start this work from zero. The bill's own findings state that the United States has expertise in investment screening that can be leveraged to assist allies and partners. That expertise sits in the Committee on Foreign Investment in the United States, the interagency body the Treasury Department chairs, which operates under section 721 of the Defense Production Act as broadened by the Foreign Investment Risk Review Modernization Act of 2018. The bill would put the State Department in the business of helping partner countries build their own screening mechanisms.
The export has already begun on a bilateral track. On December 7, 2023, the Treasury Secretary and Mexico's Secretary of Finance and Public Credit announced their intent to establish a bilateral working group on foreign investment review, to exchange practices on how investment screening can protect national security. The Treasury release ties that cooperation to its role as CFIUS chair. The significance for this analysis is direction. Foreign investment review capacity is already a bilateral topic in the North American nearshore jurisdiction most salient to this analysis, and H.R. 7675 would move that capacity-building logic into a State Department initiative for all partner countries.
One wrinkle is institutional. The existing bilateral effort runs through Treasury as CFIUS chair, while H.R. 7675 would lodge the new Initiative in the State Department. The bill requires the Secretary of State to coordinate with other government agencies as appropriate. Treasury could be central to that coordination because it chairs CFIUS, but the introduced text does not specify whether Treasury would continue to hold the bilateral screening relationship with Mexico or whether State would become the front door for assistance under the new initiative.
The eligible map is also wider than Mexico. Canada and Mexico qualify through the USMCA, and Chile, Colombia, Panama, Peru, and the CAFTA-DR countries also appear on USTR's free trade agreement list. That is enough to show that the Western Hemisphere free-trade-agreement map overlaps with the bill's automatic partner-country category. A China-plus-one supply chain that moved assembly, warehousing, or port throughput into any of these jurisdictions has moved into the eligible map rather than out of it, which is an inference about sourcing and not a statutory effect.
Why USMCA makes the timing different
The timing is not incidental. USMCA entered into force on July 1, 2020, and Article 34.7 requires the Free Trade Commission to meet for a joint review on the sixth anniversary of entry into force, which falls on July 1, 2026. USTR has framed the first United States and Mexico bilateral round around economic security and rules of origin for key industrial goods. Investment screening capacity building in the same partner countries would land beside that review process rather than in isolation.
How the risk reaches the importer
The introduced text creates no importer filing duty and no customs penalty. The risk channel is operational rather than direct. It runs through the ownership, financing, or control of a supplier, terminal, or logistics provider that the importer relies on for continuity of supply. The bill would not authorize a partner country to condition, block, or unwind a transaction. The importer exposure would arise only if a partner country later adopts or applies its own screening law to an asset in the importer's supply chain.
CFIUS shows the range of tools a national-security screening model can use under United States law. It can clear a transaction, clear it subject to a mitigation agreement, impose conditions on ownership or operations, or, at the far end, recommend that the President block or unwind a deal. A partner country would have those tools only if its own law adopted them. H.R. 7675 would support the development of screening mechanisms rather than transfer United States screening authority. The distinction matters for an importer, because the operative power, if it ever reached a nearshore asset, would be partner-country power applied under partner-country procedure and on partner-country timelines that United States law does not control. A nearshore regime of that kind would attach to the assets the jurisdiction hosts, which in the Western Hemisphere sourcing frame means port terminals, logistics and warehousing operators, and component suppliers with Chinese-linked ownership or financing. Whether any specific asset would draw review is an inference, not a forecast. The structural point holds regardless. The categories the bill names, critical infrastructure and supply chain vulnerabilities, are the categories that can describe a nearshore supply chain. This is an inference about second-order effects rather than a prediction of any specific event.
What Section 301 adds
The investment-screening lane does not sit alone. It runs beside the Section 301 action on China's targeting of the maritime, logistics, and shipbuilding sectors. USTR suspended the responsive actions from one minute after midnight Eastern Standard Time on November 10, 2025 through one minute before midnight Eastern Standard Time on November 9, 2026. During the suspension period, no party accrues liability for or is required to pay the maritime transport service fees under Annexes I, II, or III, or the duties under Annex V.A on ship-to-shore cranes and certain cargo handling equipment. USTR has said it will consider whether further action is appropriate in advance of the November 10, 2026 suspension deadline. Whether the measures return depends on that USTR decision in a file tied to negotiations with China. For an importer the relevance is cumulative. Origin facts, transshipment facts, and Chinese-linked ownership or control facts may now have to be reviewed in the same nearshore diligence file. The three lanes do not move together. The maritime measures sit in a suspended Section 301 file that turns on a USTR decision. Origin and transshipment review run continuously through customs. Investment screening, if it arrives, would run through partner-country law. The common file is the nearshore asset record. The ownership and control layer can sit on top of that record for future screening exposure and for any Section 301 maritime measure that turns on operator, vessel, equipment, or control facts.
Why this is new
Most coverage of investment screening reads it as a deal lawyer question about whether a transaction clears. This bill turns it into a sourcing question. The novelty is the direction of travel. The United States is not screening inbound investment into itself here. It is helping export the screening function to jurisdictions this analysis treats as China-risk reduction alternatives, and H.R. 7675 would institutionalize across partner countries a capacity-building logic already visible in the Mexico track. For compliance planning, one diligence file now has to join three review frames. Origin eligibility turns on production and content. Transshipment scrutiny turns on routing and documentation. Future nearshore investment screening would turn on ownership and control. The operational overlap is that the same supplier, terminal, or logistics asset may sit inside all three files.
What importers should do
Importers should map beneficial ownership across nearshore suppliers, port operators, terminal operators, and logistics providers, then treat Chinese-linked capital exposure as a continuity variable rather than a customs footnote. The diligence should identify which nearshore assets carry Chinese-linked ownership, financing, or control, and which of those assets would be hard to replace inside a normal sourcing window. Sourcing contracts written for a China-plus-one world should carry fallback sourcing terms that assume a nearshore asset could change hands or lose financing under a future screening regime. Counsel advising on origin and transshipment should add ownership and control screening of the nearshore chain to the same diligence file, so that the three review frames are tracked together rather than in separate workstreams.
The benchmarks to watch
Three developments would change the calculus. The first benchmark is enactment, because H.R. 7675 remains a House committee-reported bill and is not enacted law. The second benchmark is whether any eligible partner country adopts or applies a screening law with authority to affect port, logistics, or supplier ownership, and the Mexico cooperation track is the first watch item. The third benchmark is the November 10, 2026 Section 301 maritime suspension deadline, the date by which USTR has said it will decide whether to continue the suspension or take further action, which would tell importers whether the maritime lane reopens. The bill's own annual reports would be an earlier watch list. The Secretary of State would have to report to Congress within one year of enactment and annually thereafter for three years. Each report would have to summarize the technical assistance provided, assess partner-country progress in implementing screening mechanisms, evaluate emerging national security risks related to foreign investment, and, for each country the Secretary designates under the catch-all provision, give a detailed description of the reasons for the determination. That last requirement puts the discretionary designations on the record. For an importer, the reports would show which jurisdictions are receiving United States screening assistance, and which were added at the Secretary's discretion and why, before any partner-country law takes effect. Until at least one of these moves, the exposure is latent rather than active.
Caveats
H.R. 7675 is not enacted law. The bill itself creates no importer filing requirement and no tariff. The bill text is country-neutral and does not make any named country a statutory trigger. The Treasury Department's December 2023 Mexico cooperation and the CFIUS reference are drawn from the Treasury releases and public law, and the bill would fund assistance toward partner-country screening rather than transfer United States screening authority. The Congressional Budget Office estimates that the three-year program would cost about 39 million dollars over the 2026 to 2036 period. That estimate measures federal implementation cost. It does not measure any later supply-chain effect from partner-country screening laws. The continuity risk described here is an inference about how a future partner-country screening regime could affect nearshore ownership, financing, or operations, and is not a direct statutory effect. The convergence with USMCA origin enforcement and the Section 301 maritime file is an inference from the cited records, not a direct statutory effect of H.R. 7675.