Washington, D.C. (October 2, 2025) - On September 29, 2025, the Commerce Department's Bureau of Industry and Security (BIS) issued a new interim final rule (Affiliates Rule) subjecting any entity that is at least 50 percent owned by one or more entities on the Entity List or Military End-User List (MEU) to the same restrictions applicable to the listed entity. BIS previously used a "legally distinct" standard in applying restrictions to affiliates on the Entity List, but the new rule aligns the BIS approach with that used by the Treasury Department's Office of Foreign Assets Control.
The Affiliates Rule extends licensing restrictions to entities that:
- Are at least 50 percent owned by a single entity that is on the Entity List or MEU; or
- Have multiple minority owners that are on the Entity List or MEU whose aggregate ownership is at least 50 percent.
Notably, the standard is based on ownership, not control. Where the aggregate ownership of multiple listed entities is at least 50 percent, the most restrictive licensing requirements of any of the entities apply. Exporters, reexporters, and transferors also have a duty to determine the ownership percentage of a listed entity if they are aware that a party to a transaction has an owner on the Entity List or MEU list.
The rule warns that a Red Flag is present and additional due diligence is required for "foreign parties with significant minority ownership by, or other significant ties to (e.g., overlapping board membership or other indicia of control), an Entity List entity, an MEU List entity, or an SDN subject to § 744.8(a)(1)."
The BIS described the Affiliates Rule as "a marked improvement over the current standard which excludes all entities that are not specifically included on the Entity List, regardless of affiliation with the Entity List entities." The new 50 percent ownership standard "is designed to be consistent with longstanding Department of the Treasury practice, so as to limit the additional burden on the business community."
Key Takeaways
The new BIS 50 percent rule expands the scope of entities subject to export licensing restrictions by including Affiliates that are 50 percent or more owned by a listed entity, meaning that an entity not listed on the Entity List or MEU could nevertheless be subject to restrictions. The rule also warns of the need for additional due diligence by exporters, reexporters, and transferors to ensure that a party to a transaction does not fall within the Affiliates Rule criteria.
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