BIS Publishes 50% 'Affiliates Rule'

On September 29, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) posted, for public inspection, an interim final rule titled “Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities” (the Affiliates Rule). Effective immediately, the rule has significant implications for compliance due diligence and related procedures.

Key Takeaways

• The Affiliates Rule significantly modifies the Export Administration Regulations (EAR) by extending the license requirements that previously applied only to parties specifically listed on the EAR’s Entity List (Entity List) and Military End User (MEU) List to parties that are owned 50% or more, directly or indirectly, individually or in the aggregate, by parties listed on the Entity List or MEU List, or owned by parties that are otherwise subject to Entity List or MEU List restrictions by virtue of their ownership. The Affiliates Rule makes similar changes with respect to certain transactions involving persons owned 50% or more, directly or indirectly, individually or in the aggregate, by Specially Designated Nationals and Blocked Persons (SDN) blocked under certain U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions programs.
• The Affiliates Rule also introduced a new, but limited, Temporary General License (TGL) that provides authorization that expires on December 1, 2025, for certain specified transactions, mostly involving allied and partner countries (countries in EAR Country Groups A:5 and A:6) or joint ventures with a party headquartered in the U.S. or an allied and partner country.
• The Affiliates Rule became effective September 29, 2025. BIS is accepting comments, which must be submitted to BIS no later than October 29, 2025.

BIS also published a press release regarding its issuance of the Affiliates Rule, and, importantly, published an updated set of Entity List Frequently Asked Questions (FAQs), noting it has added new FAQs under FAQ 41 through FAQ 53 specific to the Affiliates Rule (BIS also appears to have revised the prior Entity List FAQs to address the Affiliates Rule, where appropriate).

BIS states in the preamble to the Affiliates Rule that it “is concerned that the [EAR’s] old approach [to the Entity List and MEU List] can enable diversionary schemes, such as the creation of new foreign companies to evade Entity List restrictions,” through which “listed entities [can] deceive exporters, reexporters and transferors into providing items in violation of the Entity List restrictions that apply to listed entities.” BIS adds in the preamble that “the old approach required BIS to expend substantial efforts to address the tactics that listed entities would adopt to circumvent their placement on the Entity List.”

The Affiliates Rule is dense and contains significant nuance. Importantly, while the Affiliates Rule refers to the 50% ownership standard that the OFAC uses in connection with the SDN List, the way in which the Affiliates Rule aggregates ownership by restricted end users and flows down related license requirements and restrictions is materially different from OFAC’s standard.

Businesses worldwide should closely consider what measures are necessary to sufficiently update any U.S. export control compliance processes and procedures to ensure compliance with the Affiliates Rule, as needed. For example, parties may wish to consider:

• Conducting a risk assessment to determine which, if any, products and business operations may be impacted by the Affiliates Rule.
• Revisiting restricted party screening processes and procedures to ensure they are sufficient for compliance with the Affiliates Rule, including screening parties for ownership.
• Updating due diligence processes and procedures to account for the Affiliates Rule.
• Reviewing agreements and contracts to which they are a party to assess whether any contractual provisions are triggered or require revisiting due to the expanded scope of parties that may now be considered restricted end users under the EAR.

Below, we provide a high-level summary of the changes to the EAR introduced by the Affiliates Rule to assist with the review of the rule and its various provisions. This high-level summary is not intended as a substitute for legal analysis that may be required for actual or potential transactions that may be implicated by the Affiliates Rule. Please reach out to Akin’s Export Controls and Economic Sanctions Practice Group with any questions.

• Extension of EAR’s Entity List, MEU List and SDN List License Requirements
  • The Affiliates Rule revises the EAR such that an unlisted foreign party that is owned 50% or more, directly or indirectly, individually or in the aggregate, by party(ies) specifically listed on the Entity List is now also subject to the same license requirements and restrictions as if the unlisted foreign party was itself specifically listed on the Entity List.
  • The Affiliates Rule applies to indirectly owned affiliates. New BIS FAQ 52 provides an illustrative example. FAQ 52 contemplates a scenario where “Company A (an Entity List party with a license requirement for all items subject to the EAR), owns 50% of Company B (an unlisted party), which owns 50% of Company C (an unlisted party),” and asks whether a party can export items subject to the EAR to Company C. FAQ 52 states that you may not “unless you first obtain a license from BIS,” noting that “Company B meets the criteria for the Affiliates Rule and is subject to the same restrictions as Company A (its only listed owner). Because Company C is 50% owned by Company B, it also meets the criteria for the Affiliates Rule and is subject to the same restrictions.”
  • The Affiliates Rule makes similar revisions to the license requirements and restrictions that apply to parties owned 50% or more, directly or indirectly, individually or in the aggregate, by entities listed on the MEU List (or subject to MEU restrictions via their own ownership) or that are owned by SDNs blocked pursuant to certain OFAC sanctions programs.
  • Importantly, BIS clarified, in the preamble, that the Affiliates Rule does not impose restrictions on U.S. subsidiaries of listed entities. BIS states in the rule’s preamble that, with respect to “U.S. entities owned by listed entities,” the Affiliates Rule “applies only to foreign companies, nor does it limit any compliance obligations that may exist under other provisions of the EAR or under regulations of other agencies.” Accordingly, U.S. entities owned by listed parties remain subject only to other potentially applicable EAR or other U.S. agency requirements, but they are not subject to coverage by the Affiliates Rule itself.
• Rule of Most Restrictiveness. The Affiliates Rule also introduces a “rule of most restrictiveness,” whereby a party owned by multiple restricted parties (e.g., a combination of Entity List, MEU List or SDN List parties) is subject to the most restrictive license requirements, license exception eligibility and license review policy applicable to one or more of its owners.
• Foreign-Direct Product Rule Changes. The Affiliates Rule makes corresponding changes to the end user scope of the Entity List Foreign Direct Product (FDP) Rules and Russia/Belarus MEU FDP Rule, such that both end user scopes also include foreign entities subject to Entity List restrictions based on their ownership.
• Temporary General License. The Affiliates Rule introduces a new TGL that provides limited authorization for certain specified transactions, mostly involving A:5 / A:6 countries. The TGL expires on December 1, 2025, pursuant to the new regulations.
• Savings Clause. The Affiliates Rule authorizes from September 29, 2025, exports, reexports or transfers (in-country) for products en route as of that date, which are completed no later than on October 29, 2025.
• Removal or Modification Requests. The Affiliates Rule includes procedures for a foreign entity subject to Entity List or MEU List restrictions due to its ownership to request that BIS modify the Entity List or MEU List entry for its owner to exclude the requester.
• New Red Flag Guidance and Additional Compliance Guidance. The Affiliates Rule includes new guidance on red flags and other measures to apply with respect to the new rule.
• License Application Guidance. The rule also includes new guidance about the specific requirements and types of information that must be included as part of applications being submitted due to the license requirements of the Affiliates Rule.