2012 US Model BIT stipulates that the subject of treaty obligations includes the "political subdivision", which is mainly stipulated in the Foreign Sovereign Immunities Law of the United States. The relevant legislative report points out that the "political subdivision" includes all the government units under the central government, including the local governments. The practice controversy focuses on how to distinguish between the "political subdivision" and "agency or instrumentality ". There are two criteria: “Legal Characteristics Test" and "Core Functions Test". In addition, defining whether an entity is a political subdivision will further influence the judgment of the organ of the entity or whether most of the shares or owners' interests are all entities.