BIS Expands Export Controls with 50% Affiliates Rule
October 29, 2025 00:40:27
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently issued an interim final rule (IFR), known as the “Affiliates Rule,” which expands export control restrictions under the Export Administration Regulations (EAR). The Affiliates Rule automatically extends these restrictions over the export, reexport, and transfer of U.S.-origin goods, software, and technology under the EAR to any entity that is directly or indirectly 50 percent or more owned by one or more parties listed on the EAR Entity List, the Military End-User (MEU) List, or certain entries on the Specially Designated Nationals (SDN) List. The rule is designed to close enforcement gaps and prevent listed entities from circumventing controls through their affiliates.
Background
BIS administers and enforces the EAR, which control the export, reexport, and transfer of U.S.-origin goods, software, and technology. The EAR Entity List identifies foreign entities that BIS believes are involved, or may be involved, in activities contrary to U.S. national security or foreign policy interests. Entities on the list are subject to additional licensing requirements and limits on license exceptions for exports, reexports, and transfers of U.S.-origin items, with each entity’s license review policy noted on the list and details provided in the Federal Register notice that adds the entity.
The MEU List identifies foreign parties subject to specific licensing requirements based on national security, foreign policy, or proliferation concerns. Before the Affiliates Rule, these restrictions applied only to entities explicitly named on the lists, leaving a coverage gap where listed entities could operate through subsidiaries or affiliates not formally designated. The Affiliates Rule closes this gap by extending the same restrictions to entities that are majority-owned, directly or indirectly, by one or more listed parties.
Key Elements of the IFR
50 Percent Affiliates Rule
Under the Affiliates Rule, any foreign entity that is 50 percent or more owned, directly or indirectly, by one or more parties listed on the Entity List or MEU List is automatically subject to the same export control restrictions. This significantly broadens the scope of export controls to cover many additional foreign entities. In addition, it requires the aggregation of ownership by parties across any of the lists covered by the Affiliates Rule. For example, if Company A, which is an Entity List party, owns 10 percent of Company C (an unlisted party) and 50 percent of Company B (an unlisted party), which owns 80 percent of Company C, under the FIR, Company C will become subject to the restrictions imposed on Company A. When a non-listed entity is majority-owned by more than one Restricted Party, regardless of which lists the owners are on, BIS will apply the strictest licensing requirements among those lists.
Enhanced Due Diligence Obligations
Exporters, reexporters, and transferors of U.S.-origin items under the EAR now have an affirmative duty to trace the ownership structure of their foreign counterparties. Any entity that is majority-owned, directly or indirectly, by a listed party must be addressed by determining whether a license is required or by implementing other compliance measures before proceeding with an unlicensed transaction. Lack of transparency in ownership is also treated as a red flag, reinforcing the exporter’s responsibility to identify and assess all upstream ownership under the expanded Affiliates Rule.
Temporary General License
BIS has issued a 60-day Temporary General License (TGL), effective through November 28, 2025, to provide temporary relief during the initial implementation of the Affiliates Rule. The TGL permits certain transactions with non-listed foreign affiliates of listed entities, allowing businesses time to assess ownership structures, update screening procedures, and implement compliance measures before fully applying the IFR restrictions.
The TGL provides temporary relief to allow companies time to assess ownership structures, update compliance programs, and implement necessary due diligence measures. However, the TGL does not replace or override any other licensing requirements under the EAR.
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