This measure significantly expands the scope of Entity List and Military End-User List restrictions, imposing heightened diligence obligations and complicating EAR compliance.
By Les P. Carnegie, Damara L. Chambers, Charles Claypoole, Andrew P. Galdes, Robert Price, Eric S. Volkman, Ruchi G. Gill, Monica Calce, Matthew Crawford, Eric Green, Matthew R. Gregory, Joelle Hageboutros, Elliot W. Hecht, Thomas F. Lane, Christopher (C.J.) Rydberg, Maria Krol Stosz, and Amulya Vadapalli
On September 29, 2025, the US Department of Commerce’s Bureau of Industry and Security (BIS) announced the publication of an interim final rule (the Affiliates Rule) amending the Export Administration Regulations (EAR). This means entities 50% or more owned, directly or indirectly, individually or in the aggregate, by one or more listed entities, including parties listed on either the BIS Entity List or Military End-User (MEU) List, are considered subject to Entity List and/or MEU List restrictions, as applicable.
Previously, a non-US entity 50% or more owned by one or more parties on the Entity List or MEU List was generally not subject to restrictions applicable to its owners, provided the foreign entity was “legally distinct” from its affiliate on the Entity List or MEU List and was not “act[ing] as an agent, a front, or a shell company for the listed entity in order to facilitate transactions that would not otherwise be permissible with the listed entity.” See, for example, this BIS FAQ.
The stated purpose of the Affiliates Rule is to address diversion risk and more closely align EAR restrictions with the so-called “50% Rule” that applies to certain US sanctions administered by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). OFAC’s longstanding 50% Rule provides that entities 50% or more owned by one or more blocked persons (e.g., parties identified on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List) are considered blocked “by operation of law” — and also applies in the context of certain non-blocking OFAC sanctions programs (e.g., Russia-related “sectoral sanctions” measures).
While the scope of companies subject to compliance with the Affiliates Rule may not have changed, the rule significantly expands the prohibitions and restrictions under several BIS lists to existing customer, distributor, and other third-party relationships. Therefore, even companies with established compliance programs may face immediate risks if they have not recently rescreened those entities and reassessed their ownership for compliance. Timely analysis and, where appropriate, voluntary self-disclosures or other remedial steps, could be critical to managing and mitigating exposure.
Although the Affiliates Rule is effective from September 29, 2025, BIS is taking comments through October 29, 2025, and providing a limited temporary grace period for certain exports through December 1, 2025.