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The new Bureau of Industry and Security (BIS) entity ownership rule published in the Federal Register on September 30, 2025 , marks a significant shift in U.S. export controls enforcement. The rule, which applies a "50 Percent Ownership Rule" to the BIS Entity List and Military End-User (MEU) List, will have substantial compliance impacts on global companies, supply chains, and due diligence standards. The rule is modeled on longstanding Office of Foreign Assets Control (OFAC) sanctions guidance and aims to strengthen U.S. national security by preventing listed parties from accessing controlled U.S. technologies and goods through undisclosed subsidiaries.
The BIS Entity "50 Percent Rule" expands export control restrictions beyond specifically named entities on the Entity List and MEU List. Any foreign entity that is owned 50 percent or more – directly, indirectly, or in aggregate – by one or more listed parties will now itself become subject to the same licensing requirements and restrictions as those parties, even if it is not explicitly named on the lists. This approach closes loopholes that previously allowed listed entities to evade controls by creating subsidiaries or affiliates that are usually not individually named and often in jurisdictions with limited ownership transparency. Businesses must be prepared for more rigorous enforcement actions and increased penalties for violations related to indirect ownership links to listed parties.
Companies must now conduct thorough due diligence to uncover both direct and indirect ownership interests for all transaction counterparties. If exporters cannot determine the ownership percentage of an entity potentially controlled by a listed party, this is considered a "red flag" which must be resolved prior to export. If the ownership red flag cannot be resolved, BIS directs that an export license be obtained unless a license exception applies. In situations where a non-listed entity is owned by more than one listed party and their combined ownership reaches or exceeds 50 percent; license requirements will apply. As such, screening practices must be upgraded to capture layered, aggregated ownership relationships and not just direct ownership or name matches.
Effects on Global Trade and Export Controls
- The rule will affect exporters, manufacturers, distributors, logistics providers, and financial institutions that transact with foreign entities potentially owned by listed persons.
- Thousands of subsidiaries and affiliates across nearly 100 countries may be newly subject to export license requirements due to their ownership structure.
- Companies operating in countries where corporate ownership data is not publicly disclosed will face heightened compliance challenges, necessitating enhanced screening tools and risk management systems.
What Should You Do?
- Review and enhance current restricted party screening processes to investigate indirect and aggregated ownership structures.
- Update policies and train compliance personnel on the expanded scope and new obligations under the 50 Percent Rule.
- Engage legal and compliance experts to develop processes for resolving "red flags" identified during due diligence, including how to seek BIS licenses.
- Monitor ongoing regulatory guidance and sector-specific updates from BIS for nuanced implementation details, and do not forget to sign up for the Torres Trade Law newsletter by visiting our website or emailing operations@torrestradelaw.com.
BIS's new 50 Percent Ownership Rule for the Entity List and MEU List is a transformative enhancement in U.S. export controls policy. The rule expands the reach of export restrictions to address risk posed by increasingly global and complex corporate structures. Companies doing business internationally should act swiftly to address expanded obligations and mitigate risks associated with this new regulatory landscape. The Torres Trade Law team is highly versed in conducting the most complicated and comprehensive ownership due diligence reviews.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
