BIS Expends Entity List with Entity 50 Percent Rule

Oct. 6, 2025
By: Marvin E. McPherson

The Bureau of Industry and Security (BIS) issued an interim final rule establishing an “Affiliates Rule” or 50 Percent Rule. The rule extends the restrictions of the Entity List and Military End-User (MEU) List to foreign affiliates that are at least 50 percent owned, directly or indirectly, by a listed party. This marks a major policy shift for BIS, aligning its approach more closely with the Treasury Department’s Office of Foreign Assets Control (OFAC), which has long applied a similar ownership-based standard to blocked parties.

Under this new framework, BIS will treat majority-owned subsidiaries and affiliates of Entity List or MEU-listed companies as though they themselves appear on those lists. Companies engaging in exports, reexports, or transfers of controlled items to such affiliates will require the same license authorizations as for the named listed entities. The rule also emphasizes that uncertainty about ownership or control constitutes a “red flag” under the Export Administration Regulations (EAR), obligating exporters to resolve those doubts before proceeding with a transaction or to seek an advisory opinion from BIS pursuant to § 748.3.

BIS has updated their FAQ’s regarding the applicability of the 50 percent rule on affiliate companies.

BIS has issued a Temporary General License (TGL) valid through November 28, 2025. The TGL authorizes certain limited transactions with non-listed affiliates in cases that do not undermine U.S. national security or foreign policy interests, such as dealings with entities in allied jurisdictions or joint ventures not majority-owned by restricted parties. BIS has invited public comments on the rule through October 29, 2025.

For companies subject to U.S. export controls, the Affiliates Rule significantly heightens due diligence obligations. Screening efforts must now extend beyond name-based searches to include ownership-structure analysis, tracing both direct and indirect equity stakes in counterparties. Firms are advised to review existing business relationships, assess potential exposure through joint ventures or minority investments, and treat any uncertainty about ownership as a compliance risk requiring resolution or licensing. While the TGL provides a short-term compliance buffer, organizations should anticipate stricter enforcement once it expires.

If you have any questions surrounding the applicability of BIS’s entity affiliate rule or screening, please contact any attorney at Barnes Richardson and Colburn.