On September 29, 2025, the Bureau of Industry and Security (BIS) published a new “50 percent rule” expanding export controls under the Export Administration Regulations (EAR). This rule subjects any foreign entity that is 50% or more owned—directly or indirectly—by one or more parties on the Entity List or Military End-User (MEU) List to the same licensing restrictions as its listed owners. This new rule essentially mirrors OFAC’s 50 percent ownership rule. BIS stated that it “has determined that applying the 50 percent rule under the EAR (which BIS refers to as the Affiliates rule) will reduce the need to publish additional final rules to add entities to the Entity List and more broadly and effectively impose license requirements for exports, reexports, and transfers (in-country) to or involving entities that pose a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States.”
BIS also introduced “Red Flag 29,” which requires exporters to investigate ownership structures and seek licenses if ownership cannot be clearly determined. Regarding this point, BIS stated the following:
“Exporters, reexporters, and transferors are responsible for compliance with the BIS Affiliates rule and can be held liable for unauthorized exports, reexports, or transfers (in-country) on a strict liability basis, so due diligence must be conducted to determine whether a foreign entity is an entity that is owned by one or more listed entities. The application of the Affiliates rule creates an affirmative duty to determine the ownership of other parties to the transaction in order to comply. As with any export transaction, other parties, e.g., freight forwarders and financial institutions, may also have compliance obligations; BIS maintains guidance applicable to these parties that may be of assistance in ensuring that their compliance programs appropriately take export control restrictions into account.”
The 50 percent rule is effective immediately, but most transactions will be covered by a 60-day Temporary General License that expires on November 28, 2025. BIS is also accepting public comments for 30 days, including “whether the 50 percent ownership threshold should be even lower.”
