On September 30, 2025, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an Interim Final Rule that expands the export control restrictions of its Entity List to cover any affiliates that are at least 50% owned by one (or more) entities on the Entity List or the Military End-User (MEU) List. Previously, these two lists excluded all entities that were not specifically named on the lists, even if there were extensive corporate and financial ties with listed entities. Realizing that the lack of export restrictions on affiliates of entities placed on these lists could lead to diversionary schemes to evade Entity List restrictions, BIS has implemented this “Affiliates Rule” effective as of September 29, 2025. BIS clearly states that, “The application of the Affiliates Rule creates an affirmative duty to determine the ownership of other parties to the transaction in order to comply” and that exporters “can be held liable for unauthorized exports, reexports, or transfers (in-country) on a strict liability basis.”
BIS states that this 50% ownership rule mirrors the Treasury Department’s Office of Foreign Assets Control’s (OFAC) rule of the same nature to “limit the additional burden on the business community.” Under the rule, which will be codified at 15 C.F.R. § 744.11(a)(1), any entity that is at least 50% owned by one or more entities on the Entity List or the MEU List will itself automatically be subject to Entity List/MEU List restrictions. As a result, exporters, reexporters, and transferors “may not engage without a license in exports, reexports, or transfers (in-country) to parties that are owned 50% or more, in whole or in part, individually or in the aggregate, by one or more parties listed on the Entity List or subject to restrictions under the Affiliates Rule if that transaction would require a license pursuant to the license requirement applicable to the listed party.” If an exporter, reexporter, or transferor cannot determine the ownership percentage of a foreign entity that is an entity owned, directly or indirectly, by one or more listed entities, they must resolve the red flag or obtain a license from BIS prior to proceeding with the transaction.
A new Supplement No. 8 to Part 744 will be added to the Export Administration Regulations (EAR) that offers guidelines for applying the 50% ownership rule to Entity List entries and, as noted below, BIS has updated its Entity List FAQs to provide further guidance and clarification.
BIS may apply exceptions to the Affiliates Rule on a case-by-case basis if it determines that the foreign affiliates owned by a particular listed entity do not pose a significant risk of being or becoming involved in diversion to the listed entity by approving additions or modifications. Any such specific exclusion will be noted on the relevant Entity List listing. In addition, BIS states that “significant minority ownership by an Entity List/MEU List company is a red flag that triggers additional due diligence requirements for exporters.”
Temporary General License
In Supplement No. 1 to Part 736 of the EAR a new Temporary General License, Non-listed foreign affiliates of listed entities will be added. This TGL authorizes, in limited circumstances: (i) exports, reexports, or transfers (in-country) to or within any destination in Country Group A:5 or A:6; (ii) exports, reexports or transfers to or within any country other than a Country Group E:1 or E:2. The applicability of this TGL must be carefully reviewed prior to use, and this temporary exemption will expire on December 1, 2025.
Savings Clause
For the changes being made in this Affiliates Rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer, on September 29, 2025, pursuant to actual orders, may proceed to that destination without a license provided the export, reexport, or transfer is completed no later than on October 29, 2025.
Affiliates Rule for License Applications and Requests for Removal
The new Affiliates Rule adds new paragraph to Supplement No. 2 to Part 748 in order to address unique application and submission requirements when completing an application and seeking an export license involving affiliates that are at least 50% owned by entities on the Entity List or the MEU List. In addition, the Affiliates Rule revises the Entity List removal and modification process to specify that any foreign entity that is owned, directly or indirectly, individually or in aggregate, 50% or more by one or more entities listed on the Entity List or by non-listed entities subject to restrictions under the Affiliates Rule, may request that its Entity List owner’s entry listing be modified to exclude the affiliated entity seeking the removal request.
Important BIS FAQs and Guidance
BIS’s FAQs on the Entity List has been revised to include updated information and several new questions regarding this new Affiliates Rule. In addressing some expected impacts of the Affiliates Rule, these FAQs offer the following:
- BIS’s Affiliates Rule speaks only to ownership and not to control. An entity that is controlled (but not owned 50% or more) by one or more listed entities is not considered to automatically meet the Affiliates Rule criteria. BIS does note that such a scenario does present a red flag concern requiring additional due diligence, especially given the opaque ownership structures and limited access to accurate ownership data in certain jurisdictions.
- The adoption of the Affiliates Rule means that the U.S. Government’s Consolidated Screening List (CSL) is no longer an exhaustive listing of foreign entities subject to Entity List license requirements.
- A BIS license is required prior to a transaction where a non-listed affiliated entity owned 50% or more by a listed entity is acting as the purchaser or freight forwarder to transport a shipment of items subject to the EAR to the ultimate consignee or end-user.
- A BIS license is required prior to a transaction where a non-listed affiliated entity owned 50% or more by a listed entity is acting as the purchasing agent for items subject to the EAR.
- The Entity List license requirements do not extend to parent companies unless the applicable listing for the entity so states. The Affiliates Rule applies downward to entities owned 50% or more, directly or indirectly, by listed entities or by non-listed entities that meet the Affiliates Rule criteria, not upward to owners of listed entities. Exporters, reexporters, and transferors are reminded, however, that the EAR imposes licensing requirements, such as end-user and end-use based restrictions in Part 744 of the EAR, that could apply to such companies even if they are legally separate from the listed entity.
- BIS does not have jurisdiction over the import of items into the United States, thus the Affiliate Rule is not applicable in such transactions. However, importers should consult other lists maintained by the U.S. Government, as sanctions or other restrictions may apply to import transactions with the particular listed entity or from that particular country of import.
- While BIS’s jurisdiction is limited to export of items subject to the EAR, anyone seeking to purchase items from an entity listed on the Entity List should note that the Entity List is made up of entities “for whom the U.S. Government has found there to be reasonable cause to believe that the entity has been involved, is involved, or poses a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the U.S. government, and those acting on behalf of such entities.”
BIS Accepting Public Comments
BIS is accepting comments on this Interim Final Rule. They must be received no later than October 29, 2025, and submitted electronically to the Federal rulemaking portal at: www.regulations.gov. The regulations.gov ID for this rule is: BIS–2025–0017; and commenters are asked to refer to RIN 0694–AK11 in all comments.