TRUMP ADMINISTRATION TRADE ALERT – EXPORTS
HEADLINE	Department of Commerce Publishes Interim Final Rule Implementing “Affiliate” Rule for BIS Entity, Military End User Lists
DATE	September 30, 2025
AGENCY	Department of Commerce
EFFECTIVE DATE	September 29, 2025
BACKGROUND	The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has long used a “50 percent” ownership rule in connection with the Specially Designed Nationals and Blocked Persons List (SDN List). Previously, however, the Department of Commerce, Bureau of Industry and Security (BIS) had used a “legally distinct” standard for applying some of its list-based restrictions to subsidiaries and other foreign affiliates of listed entities. This meant subsidiaries that were legally distinct from a listed parent entity were not subject to the BIS restrictions placed on the parent entity.
DETAILS	Establishment of the Affiliate Rule. BIS published an interim rule applying an “Affiliates” Rule, applying restrictions to any entity that is at least 50% owned by one or more entities on a BIS restriction list, for the following lists: – The Entity List – The “Military End User” List – Entities subject to the § 744.8 rule (Restrictions on exports, reexports, and transfers (in-country) when certain persons designated on the SDN List are a party to the transaction).   BIS is not adopting the Affiliates Rule for other EAR restricted parties lists such as the Unverified List (UVL) in supplement no. 6 to part 744, or the list of parties subject to Denial Orders issued under part 764 of the EAR.   Affirmative diligence obligations. Foreign parties with significant minority ownership by, or other significant ties to (e.g., overlapping board membership or other indicia of control), an Entity List entity, an MEU List entity, or an SDN subject to § 744.8(a)(1) present a Red Flag (supplement no. 3 to part 732 of the EAR) of potential diversion risk to the listed entity. This red flag must be resolved (an affirmative compliance obligation) prior to proceeding with any export, reexport, or transfer (in-country).   BIS emphasizes that the Affiliates Rule “may require additional analysis by the private sector” because applying the Affiliates Rule may take more time and compliance resources compared to simple list-based screening, especially where corporate ownership structures are opaque. Importantly, the Consolidated Screening List (CSL) will not reflect unlisted affiliates which are owned 50% or more by one or more listed entities. The private sector should either use private screening resources or partner with third parties with access to such resources in order to meet their compliance obligations. Unauthorized exports can be “strict liability” violations, meaning enhanced due diligence is essential to mitigating risk. BIS guidance regarding application of the Affiliates Rule. The 50% threshold for application of the Affiliates Rule is cumulative. Unlisted entities owned by more than one parent entity on a restricted list is subject to the most restrictive of license requirements applicable. Where ownership percentages cannot be precisely determined, the most restrictive Entity List license requirements will apply. BIS provides several examples of the application of the Affiliates Rule in the Notice.   Temporary General License. Supplement No. 1 to Part 736 contains a new Temporary General License, Non-listed foreign affiliates of listed entities under paragraph (g), which can be used to overcome the license requirements applicable to a non-listed foreign affiliate for a limited time (December 29).
BASIS	15 CFR parts 730-774
HTS/  PRODUCTS	Items subject to the Export Administration Regulations (EAR)
COUNTRY	Any
CITE	Fed Reg: Federal Register :: Expansion of End-User Controls To Cover Affiliates of Certain Listed Entities

Recent Trade and Compliance Actions Homepage