BIS Affiliates Rule — Entity List 50%-ownership automatic extension (Interim Final Rule)

Mechanism

The Interim Final Rule amends 15 CFR parts 732, 734, 736, 744, and 748 to introduce an automatic 50%-ownership extension of Entity List, Military End-User (MEU) List, and certain other restricted-party EAR controls. Under the rule:

• Any unlisted foreign entity that is at least 50% owned — directly or

indirectly, individually or in the aggregate — by one or more parties on the Entity List, MEU List, or other covered restricted-party lists becomes itself automatically subject to the same EAR license requirements as its listed parents.

• The 50% threshold is harmonised with OFAC's long-standing "50 Percent

Rule" for sanctioned parties, in order to limit incremental compliance burden on industry already screening against OFAC SDNs.

• A Temporary General License (TGL) was issued to permit certain

export, reexport, and transfer transactions involving such non-listed 50%-owned affiliates through Nov. 28, 2025, to allow industry to perform ownership-tracing diligence on existing supply chains.

• Public comments were invited through Oct. 29, 2025.

The structural target is well-known diversion patterns where Entity List parties (notably Huawei, SMIC, YMTC, CXMT, and Russian/Iranian defense-industrial parents) operate through unlisted Chinese, Hong Kong, UAE, Turkey, Malaysia, and Singapore subsidiaries to acquire controlled US-origin technology. The pre-existing rule required BIS to list each affiliate individually — a bottleneck that diversion networks exploited by spinning up new corporate vehicles faster than the listing process could keep pace.

Downstream implications

• Compliance scope-up: Even with subsequent suspension, the rule

established the regulatory architecture for an EAR 50% rule. US exporters and reexporters built ownership-tracing capability during the Sept 30–Nov 10 window; that capability persists and lowers the switching cost for re-imposition on 2026-11-10.

• Diversion-network targeting: Pairs with the Oct 9, 2025 BIS

Entity List additions targeting Iran-diversion networks across China, Turkey, and the UAE — the Affiliates Rule was the broad-scope perimeter; the Oct 9 listings were the named-party fill-in.

• Negotiation chip: The fact that BIS suspended the rule six weeks

later as part of the Busan understanding established it as a reversible enforcement lever, distinct from underlying named-party listings (which were not rolled back). Future US-China bilateral negotiations now have a concrete precedent for trading enforcement posture for diplomatic deliverables.

• Re-entry cliff at 2026-11-10: Absent extension, the rule

automatically returns. Industry compliance teams have a hard date to plan for; M&A diligence on China-exposed targets must already underwrite the post-suspension regime.

Open questions

• Will BIS use the suspension window to refine the rule (e.g., narrow

it to MEU List only, or add explicit due-diligence safe harbors) or reinstate it as-is on 2026-11-10?

• How does the Affiliates Rule architecture interact with the

trilateral chip-equipment perimeter (Japan METI 2023-03-31, Netherlands ASML DUV 2024-09-07) — would suspension/reinstatement decisions be coordinated with allies, or remain unilateral?

• During the suspension window (2025-11-10 to 2026-11-09), can BIS

still rely on case-by-case named listings to pursue diversion affiliates, and at what listing-velocity?