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The US globally suspended enforcement of the Affiliates Rule.
1. What?
The confusingly-named "Affiliates Rule" is better understood as a rule on majority ownership of subsidiaries. Issued by the Bureau of Industry and Security (under US Commerce), the rule "deems" a non-listed foreign entity owned 50% or more by most listed parties to be subject to the same restrictions as if it were itself listed. (In the case of a conflict between restrictions, the most restrictive treatment apply.) It to some degree parallels the "50% Rule" that OFAC (i.e., the Office of Foreign Asset Control under the US Treasury) applies. A primer, here.
2. Why?
China would have been significantly burdened by the Affiliates Rule, which draws into scope entities on the US Entity List. (Well over a thousand Chinese and related entities are named parties on that list.) In addition, Chinese org charts (for corporate ownership) are famously complex, and due diligence of ultimate ownership takes time. Both of these elements would have dramatically complicated – and likely materially impeded – international transactions.
During negotiations, China agreed (among other things) to lift certain export controls on rare earth minerals for one year; in an apparent quid pro quo, the US suspended global application of the Affiliates Rule for one year.
3. When?
The Affiliates Rule, which has been in effect since September 29, 2025, will remain in effect through November 9, 2025. The suspension commences on November 10, 2025. In the interim period, Temporary General License No. 7 provides immediate, broad relief for many companies.
4. So What?
The application of the Affiliates Rule has been suspended, not rescinded. There is no guarantee that the suspension will be extended; indeed, it could be lifted at any time, triggering its reimposition. (The Rule could also be modified or eliminated.)
We recommend assuming the eventual reimplementation of the Affiliates Rule. As a consequence, prudent companies will (1) assess the adequacy of screening and due diligence procedures, (2) prepare for eventual restrictions on impacted counterparties, and (3) monitor changes closely.
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