Executive summary

On 30 September 2025, The US Department of Commerce, Bureau of Industry and Security (BIS) published an Interim Final Rule (IFR) that amends, effective immediately, the Export Administration Regulations (EAR) to address diversion concerns involving restricted parties.

Previously, only entities explicitly named on the Entity List were subject to its restrictions. The new "Affiliates" rule (Affiliates Rule), as BIS refers to it, significantly changes this standard by automatically extending the license requirements of the Entity List and Military End-User List (MEU List) to any entity that is at least 50% owned, directly or indirectly, individually or in the aggregate, by one or more parties on those lists.

What's new

The Affiliates Rule makes BIS Entity List enforcement similar to the long-standing "50% rule" for list-based sanctions programs administered by the US Department of the Treasury's Office of Foreign Assets Control (OFAC).

Importantly, only ownership is considered in the Affiliates Rule, not control. Regarding aggregate ownership, the Affiliates Rule's 50% threshold can be met for a party if its ownership is comprised of two or more listed entities each owning a combined sufficient percentage, e.g., two listed parties with 25% ownership each.

If the Affiliates Rule applies to a given party through aggregate ownership, that party is subject to the license requirements, license exception eligibility and license review policy that are the most restrictive of its listed ownership entities.

Furthermore, the Affiliates Rule applies across BIS lists, meaning the rule applies if the 50% threshold is reached by aggregate ownership among entities spread across the Entity List, MEU List and certain OFAC Specially Designed Nationals and Blocked Persons under EAR Section 744.8. It is not necessary for aggregate ownership to be confined to one list for the Affiliates Rule to apply.

The Affiliates Rule also introduces "Red Flag 29" to the EAR's "Know Your Customer Guidance." Red Flag 29 requires exporters to further investigate an entity's ownership when they have "knowledge" that the entity has one or more listed owners, and to apply for a BIS license if ownership cannot be verified.

The new rule also makes clear that exporters, re-exporters and transferors have an affirmative responsibility to understand the ownership of all foreign parties involved in their transactions.

BIS has provided a 60-day Temporary General License (TGL) that exporters may use to authorize certain transactions involving newly restricted non-US entities in EAR Country Groups A:5 or A:6, along with limited other circumstances.

BIS has also updated its "Entity List FAQs" with new questions 41 through 53. Exporters should carefully review the new rule and FAQs in detail.

Actions for businesses

Companies should consider taking the following immediate steps to update their compliance programs to account for the Affiliates Rule to help prevent potential violations of the EAR. The rule's immediate effectiveness underscores the urgency of these actions.

• Identify whether previously analyzed and cleared business partners are now restricted under the new rule, especially if the analysis identified potential links to a restricted party or if ownership was unknown.
• Prioritize segments of the business with activity in higher-risk countries or market sectors where third-party ownership is less clear. If ownership cannot be initially determined, consider that case a "red flag" requiring further due diligence or a BIS license application.
• Prepare for a major increase in both the rigor of business-partner due diligence (e.g., ownership analysis) and the volume of screening matches against restricted parties, along with possible additional license applications for newly restricted partners.
• Assess whether current screening tools and configurations (e.g., algorithms, features) sufficiently address the new Affiliates Rule requirements. Tools with ownership analysis capabilities can improve automation and efficiency.
• Update onboarding and screening processes for business partners involved in EAR-controlled transactions (e.g., customers, suppliers, contractors, vendors). Updates should include ownership analysis to ensure compliance with the Affiliates Rule.
• In updated processes, include documentation requirements, such as due diligence steps and resolutions. To the extent feasible, begin documenting this due diligence and resolution for transactions now, in advance of procedural implementation.
• Evaluate potential use of the TGL, planning for its expiration in 60 days.