U.S. BIS expands export controls to foreign affiliates of listed entities under new ownership rule
“Affiliates rule” is designed to address diversion risks
The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce today issued an interim final rule amending the Export Administration Regulations (EAR) to automatically apply Entity List and other end-user restrictions to any foreign entity that is at least 50% owned, directly or indirectly, by one or more listed entities, “military end users,” or certain sanctioned parties. This “Affiliates rule” is designed to address diversion risks and aligns with the Department of the Treasury’s Office of Foreign Assets Control (OFAC) 50% ownership standard.
Under the new rule, foreign affiliates meeting the 50% ownership threshold are subject to the same export licensing requirements and restrictions as their listed owners. If an entity is owned by multiple listed parties, the most restrictive license requirements apply. Exporters, reexporters, and transferors must conduct due diligence to determine ownership; if ownership cannot be determined, they must resolve the new Red Flag 29, obtain a BIS license, or identify an applicable license exception before proceeding.
The rule is effective upon publication in the Federal Register (scheduled for September 30, 2025). A Temporary General License (TGL) authorizing certain transactions with covered affiliates is available for 60 days after publication. Comments on the rule are due within 30 days of publication.