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On October 30, U.S. Treasury Secretary Scott Bessent announced that the U.S. Department of Commerce, Bureau of Industry and Security (BIS) will delay the implementation of the recently announced BIS Affiliates Rule for one year. The announcement follows negotiations between President Trump and China's President Xi Jinping and comes in exchange for China's suspension of its rare earth minerals export licensing regime.
The Affiliates Rule was designed to close a longstanding loophole by extending restrictions to foreign affiliates of parties already subject to export restrictions. Under this rule, a foreign entity that is at least 50% owned, directly or indirectly, individually or in the aggregate, by one or more entities on the Entity List or Military End-User List, or by parties subject to controls specified at 15 CFR § 744.8 (related to Specially Designated Nationals (SDNs)), will itself be subject to the same restrictions as the listed entity. Notably, parties majority-owned by one or more SDNs were already, and continue to be, subject to the associated sanctions by virtue of the U.S. Department of the Treasury, Office of Foreign Assets Control's (OFAC) 50% Rule.
Importantly, BIS has not yet published a formal notice in the Federal Register suspending the rule, and the administration has not indicated when this will be issued. As a result, the Affiliates Rule remains in effect, though enforcement may be paused. In the meantime, parties should continue to evaluate whether enhancements to their compliance programs are needed in preparation for the rule's reinstatement. We previously wrote about the Affiliates Rule and related compliance recommendations here.
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