BIS Suspends the “Affiliates Rule” Expanding End User Export Controls for One Year

Effective November 10, 2025, the Bureau of Industry and Security (BIS) issued a one-year suspension of the interim final rule, “Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities” (the Affiliates Rule), after President Trump and President Xi Jinping of China struck a new trade deal.[1]  The suspension follows BIS’s implementation of the Affiliates Rule on September 29, 2025, which extended export control restrictions to certain “affiliates” of entities listed on the BIS Entity List and Military End-User List (the MEU List).

The Affiliates Rule’s suspension applies to all entities that would be covered under the Affiliates Rule, not just Chinese entities.  The suspension provides companies with an opportunity to prepare for its potential re-implementation since the Affiliates Rule is set to take effect again on November 10, 2026, unless it is delayed or amended.

To prepare, companies might consider (i) re-screening customers and counterparties to identify newly restricted persons; (ii) reviewing and updating existing export control provisions in agreements; (iii) analyzing end user representations in agreements; (iv) updating due diligence questionnaires and processes to assess potential export control risks related to ownership; and (v) training relevant personnel about the Affiliates Rule.

The Affiliates Rule Will Generally Align BIS and OFAC Restrictions Based on Ownership

The Affiliates Rule states that foreign entities that are 50% or more owned, directly or indirectly, individually or in the aggregate, by one or more entities targeted under the BIS Entity List, MEU List, and/or the list of Specially Designated Nationals and Blocked Persons (the SDN List) identified in 15 CFR 744.8(a)(1), are generally targeted by the same export control licensing requirements as its ownership.  Parties restricted under the Affiliates Rule will face stringent export license requirements: exports to these entities will require a BIS export license, and license applications to export to these entities will be subject to a presumption of denial.

Previously, BIS adopted a “legally distinct” standard, under which the Entity List and MEU List completely excluded all entities that were not specifically listed—even if a company was wholly owned by a listed entity. The Affiliates Rule, however, more closely aligns US export control end user restrictions with OFAC’s 50% Rule, which generally applying sanctions restrictions to entities by operation of law based on 50% or more ownership by a sanctioned party (the 50% Rule).

The Affiliates Rule differs from OFAC’s 50% Rule in some notable respects:

1. The Affiliates Rule arguably goes further than OFAC’s 50% Rule by aggregating ownership across the Entity List, the MEU List, and SDNs identified in 15 CFR 744.8(a)(1).  Additionally, a company targeted under the Affiliates Rule will be subject to the most restrictive export licensing requirements “applicable to one or more of its owners under the EAR.”  For example, if a foreign company is 20% owned by an Entity Listed party and 30% owned by an MEU Listed party, that company is automatically targeted by the most restrictive rule—whether it is the Entity List or MEU List restriction—that targets its ownership.
2. OFAC’s 50% Rule applies to all SDNs, whereas the Affiliates Rule applies to entities on the Entity List, MEU List, and only to SDNs under specified sanctions programs (the sanctions programs identified in 15 CFR 744.8(a)(1) (i.e., those targeting Russia, Belarus, Ukraine, terrorism, WMDs, narcotics)).
3. OFAC’s 50% rule applies to foreign and domestic entities, but the Affiliates Rule applies to foreign entities only.  This means that a transaction involving a US company owned 50% or more by a listed entity would not be expressly restricted by virtue of the Affiliates Rule.

BIS Adds “Red Flags” that Exporters have an “Affirmative Duty” to Determine Restricted Ownership

The Affiliates Rule also adds a new “Red Flag” to BIS’s “Know Your Customer” Guidance and Red Flags.  The new Red Flag 29 is for any scenario where an exporter has knowledge that a foreign entity has an owner listed on the Entity List or the MEU List, or that are unlisted entities that are subject to license requirements or other restrictions based on ownership.  BIS states that exporters have an “affirmative duty” to determine the percentage of restricted ownership of a foreign entity.

Additionally, BIS states in its press release accompanying the Affiliates Rule that—even where an entity is not 50% or more owned by BIS Entity Listed or MEU Listed entities—significant minority ownership by an Entity List/MEU List company is a red flag that triggers additional due diligence requirements for exporters.  

BIS Had Issued a Limited, Temporary General License

The Affiliates Rule included a narrow 60-day Temporary General License (TGL).  On a going-forward basis, the TGL is now moot due to the one-year suspension of the Affiliates Rule.  While the TLG was in effect from September 29 to November 10, however, it authorized the following transactions where an otherwise restricted “foreign affiliate” was a party: (i) Exports to or within Country Group A:5 or A:6 destinations; and (ii) Exports to or within a destination not in Country Group E:1 or E:2 (embargoed countries), when (a) the foreign affiliate is a JV; (b) a JV partner is headquartered in the United States or a Country Group A:5 or A:6 destination, and (c) that partner is not itself listed or 50% or more owned by a listed entity.  Note that while the TGL authorized exports to entities on the Entity List or MEU List, it did not authorize exports where SDNs were a party to the transaction. 

Compliance Considerations in Preparation for the Affiliates Rule

Even while the Affiliates Rule is suspended, the following compliance considerations may be useful because BIS has long-cautioned companies about dealings with “separately incorporated subsidiaries, partially owned subsidiaries, or sister companies of a listed entity”:

1. Update screening processes (and re-screening as needed) for customers and counterparties to identify newly restricted parties under the Affiliates Rule;
2. Review and update existing export control provisions in agreements to determine if a party presents export control risks based on their ownership, and analyze end user and ownership representations for potential application of the Affiliates Rule;
3. Analyze end user representations in agreements to assess risks relating to a prohibited end user under the Affiliates Rule;
4. Update due diligence questionnaires and processes to assess potential export control risks related to ownership by parties targeted under export control end user restrictions; and
5. Train relevant personnel about the Affiliates Rule, including how to apply the Affiliates Rule and identify red flags.

Additionally, the one-year suspension of the Affiliates Rule may provide companies with a useful buffer during which to seek guidance from BIS concerning compliance with coming expansions of end user export controls. 

Please contact us if you have any questions regarding the Affiliates Rule or its one-year suspension.