On September 29, 2025, the United States significantly expanded the reach of export controls. The U.S. Department of Commerce's Bureau of Industry and Security ("BIS") released an interim final rule, available here, that applies Entity List and Military End User ("MEU") List restrictions to non-U.S. affiliates that are 50% or more owned by listed entities.
This rule became effective immediately on publication with a narrow temporary general license that allows specific transactions for 60 days. BIS is accepting comments on the rule for 30 days.
Expanded Scope: This "Affiliates rule" is a marked departure from existing regulations that did not automatically apply export restrictions to undesignated affiliates. Under the rule, the export restrictions associated with a listed person will apply to any affiliate that is 50% or more owned by the listed person. Affected foreign affiliates may petition to have BIS modify the relevant entry to state that the restrictions do not apply to the affiliate.
Heightened Diligence Expectations: The rule also creates a new "red flag" that applies where a company knows or has reason to know that a foreign entity has one or more listed entity owners, including through significant minority ownership or other "significant ties, such as overlapping board membership or other indicia of control. In such cases, BIS states that the company has an "affirmative duty" to determine the percentage of ownership of those listed entities and if that is not possible, to obtain a license from BIS if required under the relevant Entity List or MEU List requirements.
BIS stated its expectation that the change will operate similar to the 50% rule applicable in the context of certain U.S. sanctions designations, but acknowledged that traditional export compliance tools—such as the Consolidated Screening List—will no longer be sufficient to perform comprehensive export-related diligence.
Narrow Exclusions: The Affiliates rule is accompanied by a 60-day temporary general license ("TGL"). This TGL permits export transactions involving affiliates that are located in specified jurisdictions (Country Groups A:5 and A:6), or that involve joint ventures with entities headquartered in the United States or A:5/A:6 jurisdictions. Importantly, entities based in China are not included within this TGL. The rule also contains a narrow savings clause for in-transit exports, re-exports, or in-country transfers, provided that the transaction is completed within 30 days of publication.
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