On September 30, 2025, the Bureau of Industry and Security (BIS) released an interim rule regarding "Affiliates." Under the rule, any entity that is at least 50% owned by one or more entities on the Entity List or the Military End-User (MEU) List will itself automatically be subject to Entity List/MEU restrictions. This is a significant change from the current standard, which excludes entities that are not specifically included on the Entity List or MEU List, regardless of any affiliation with Entity List or MEU List organizations.
This rule is effective September 29, 2025.
Entity, MEU List Background
The Entity List identifies persons (includingbusinesses, research institutions, government and private organizations, individuals, and other types of legal persons)reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. These persons are subject to specific license requirements for the export, reexport,and/or transfer (in-country) of specified items.
BIS first published the Entity List in 1997. Since its initial publication, grounds for inclusion on the Entity List have expanded to activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests.
The current Entity List can be found in Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR) here.
Military End-User List is a list of foreign entities, including military services, intelligence organizations, and other entities supporting military uses, for which a license is required to export, reexport, or transfer U.S. goods and technology.
The current MEU list can be found in Supplement No. 7 toPart 744 of the EAR here.
The New Affiliates Rule
The new rule aims to crack down on listed parties acquiring U.S. goods through unlisted subsidiaries. The rule follows the same parameters as the Office of Foreign Assets Control's (OFAC) 50% rule. Both direct and indirect ownership count toward the 50% threshold. In addition, the threshold applies in the aggregate; if an entity has multiple parent companies on the Entity List or MEU List, the ownership stakes will be added together.
Red Flag 29
In addition to establishing the 50% affiliate threshold, the rule also establishes a new red flag. Going forward, if an exporter knows that a foreign entity is owned in part by listed parties, they must determine the ownership percentage. Where ownership cannot be verified, exporters have an affirmative duty to secure a BIS license before moving forward with a transaction.
Impact
According to a recent analysis by Kharon, the rule will cover thousands of additional subsidiaries. Russia and China account for the majority of these new subsidiaries. However, entities in the EU, UK, Singapore, Australia, and India will also be impacted.
Exporters will face immediate restrictions or licensing as a result of this rule and have significant new due diligence and compliance obligations.
In the notice, BIS emphasized that the new rule creates an "affirmative duty" to determine the ownership of parties in a transaction. Many exporters will need to develop new ownership screening to comply with this requirement.
A key foundation of proactive and effective export compliance requires the development of an export compliance plan. Diaz Trade Law can help exporters develop and refine their compliance plans to minimize the risk of violations. We assist with export compliance training, transaction vetting, requesting licensing, voluntary self-disclosures, and more. Get in touch with us today to learn more about how these new requirements may impact your business –305-456-3830 or info@diaztradelaw.com.
Read more:
- Webinar:Introduction to Export Controls
- The Importance of Regular Export Compliance Training for Your Business
- Bloomberg Law:Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
- Bloomberg Law:Building & Maintaining an Export Compliance Plan
- Bloomberg Law:Export Licensing Under EAR
- Bloomberg Law:Introduction to U.S. Export Controls
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
