U.S. Updates Export Rules: Affiliate Companies Now Covered by Entity List Restrictions

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The U.S. Department of Commerce Has Changed the Export Administration Regulations

On September 30, 2025, the Bureau of Industry and Security (BIS) announced new rules for the Export Administration Regulations (EAR). The changes apply strict export controls to companies owned by parties on the Entity List and certain other restricted lists. This new rule is called the “Affiliates rule.”

Who Is Affected by the New Rule?

Any company owned 50% or more by one or more parties on the Entity List is now automatically covered by the same restrictions as those parties. This applies whether the ownership is direct or indirect, and whether it is all from one listed company or spread across several.

The same rule now also covers:

  • Companies 50% or more owned by parties on the “Military End-User” (MEU) List.
  • Companies 50% or more owned by parties who are Specially Designated Nationals (SDNs) under certain sanctions.

What Is the Entity List?

The Entity List is a record of organizations and people that the U.S. government thinks could harm national security or foreign policy. Businesses on this list need special licenses to receive certain exports, imports, or technologies from U.S. companies.

What Has Changed?

Before this rule, only companies listed by name on the Entity List were covered. Now, any foreign company owned 50% or more by one or more listed parties is also covered. This aligns the BIS rules with those already used by the Department of Treasury’s Office of Foreign Assets Control (OFAC).

What Are Businesses Required to Do?

Businesses that export, reexport, or transfer items controlled by the EAR must:

  • Check if another party in their transaction is 50% or more owned by one or more parties on the Entity List, the MEU List, or is a certain SDN.
  • Do due diligence to figure out the ownership structure of their partners.
  • Resolve any “Red Flags” — warnings in the regulations that mean a business must do more checking before shipping.

If they cannot tell if a business partner meets the 50% threshold, exporters must apply for a license or find a valid exception before moving forward.

If different owners have different restrictions, the strictest rule applies.

Details About the 50% Rule

  • The rule covers both direct and indirect ownership.
  • The 50% can come from multiple owners. For example: If two separate Entity List companies each own 25% of another company, that company is covered.
  • The rule does not apply to U.S. companies, only to foreign companies.

Temporary General License (TGL) for Some Affiliates

A Temporary General License allows certain exports to or within specific countries that meet control group requirements, even if the recipient is now covered under the new Affiliates rule. This TGL will expire on December 1, 2025.

Red Flags and Due Diligence

A new “Red Flag 29” has been added to compliance guidance. If an exporter knows or suspects that a business they are dealing with has a listed owner, they must:

  • Check ownership percentages.
  • If unsure or missing information, apply for a license or identify a valid license exception.

Process for Removal or Modification

If a foreign company is now covered because it is 50% or more owned by a listed entity, it may request removal or a change to its listing by writing to BIS and providing reasons.

FDP Rule Changes

Foreign-Direct Product (FDP) rules are also updated. When a company is 50% or more owned by listed parties, the rules for foreign-produced products made with U.S. technology may also apply to them.

Penalties

Exporters can be held strictly liable if they export to a now-restricted affiliate without the proper checks and permissions, even if they didn’t know about the ownership.

Summary Table Provided

A detailed table in the official rule helps businesses understand how the new rule applies in different types of cases.

Effective Dates and Comments

  • The rule takes effect on September 29, 2025.
  • The temporary general license runs until December 1, 2025.
  • Comments on the rule are due by October 29, 2025.

Where to Find More Information

For detailed information and the official text, visit regulations.gov or the Federal Register.

Businesses with questions can contact the Chair, End-User Review Committee at the Bureau of Industry and Security, phone: (202) 482-5991, or by email as provided in the rule.

Conclusion

The U.S. now restricts exports to any foreign business that is 50% or more owned by companies on certain restricted lists. Companies must check ownership carefully before shipping. The change aims to improve national security by stopping restricted parties from evading export controls through affiliates.


Legal Disclaimer

This article includes content collected from the Federal Register (federalregister.gov). The content is not an official government publication. This article is for informational purposes only and does not constitute legal advice. For case-specific consultation, please contact us. Read our full Legal Disclaimer, which also includes information on translation accuracy.