BIS Expands Entity List and MEU List Restrictions to Owned Entities with New ‘Affiliates Rule’

On September 29, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule expanding restrictions on Entity List and Military End-User (MEU) List parties to automatically apply to non-U.S. entities 50% or more owned in the aggregate, directly or indirectly, by those restricted parties (the Affiliates Rule). The change aligns with the Office of Foreign Assets Control’s (OFAC) practice for sanctioned parties and is designed to address circumvention and diversion by Entity List and MEU affiliates to their restricted parent entities.

The Affiliates Rule is effective immediately September 29, and it contains a limited temporary general license (TGL) permitting for 60 days some dealings prohibited by the new rule.

Key Aspects of the Affiliates Rule

A license is generally required to export, reexport, or transfer any item “subject to the Export Administration Regulations (EAR)” when any party on the Entity List is a party to the transaction. Items controlled under certain export control classification numbers (ECCNs) are similarly prohibited for export, reexport, or transfer to MEUs without a license from BIS. Historically, these restrictions did not apply to unlisted and legally distinct subsidiaries or other affiliates of an Entity List or MEU party. Instead, affiliation with a restricted end user was a “red flag” that items might be diverted to a restricted party, requiring heightened diligence to ensure compliance before proceeding.

The Affiliates Rule changes the historical practice in the following ways:

• Non-U.S. entities owned directly or indirectly 50% or more by at least one Entity List entity will automatically be subject to the Entity List restrictions and requirements applicable to the listed parent entities, including Foreign Direct Product Rule restrictions applicable to entities designated with a footnote.
• Non-U.S. entities owned 50% or more in the aggregate by at least one listed MEU will automatically be subject to the MEU restrictions and requirements applicable to the parent entity.
• The Affiliates Rule does not extend restrictions to affiliates of unlisted military end users.
• Non-U.S. entities owned 50% or more in the aggregate by a combination of Entity List entities, MEUs, and relevant Specially Designated Nationals (SDNs) will automatically be subject to the most restrictive license requirements, license exception eligibility, and licensing policy that apply to one or more of its owners.
• BIS’ restrictions in § 744.8 of the EAR on exports, reexports, and transfers of items to certain persons on the SDN List will automatically apply to entities owned 50% or more in the aggregate by a covered SDN, aligning with OFAC’s practice.
• The Affiliates Rule applies to entities that are owned 50% or more by parties listed on the Entity List, MEU List, or restricted pursuant to § 744.8 of the EAR, aggregating their interests and causing all their restrictions to apply to the mutually owned entity.
• Parties with significant ownership interests held by or that otherwise have significant ties to (e.g., similar board composition) an Entity List entity or MEU present a red flag of diversion that must be resolved through heightened diligence before proceeding.
• If exporters know an entity is owned by restricted parties, they have an affirmative duty to determine ownership percentage or seek a specific license from BIS for exports, reexports, or transfers to that entity if the ownership percentage cannot be confirmed.
• An unlisted affiliate can rely on a license exception only if all designated parent entities are eligible for the license exception.
• There is a TGL effective for 60 days after the Affiliates Rule is filed for public inspection that authorizes exports, reexports, and transfers of items to certain types of unlisted entities, such as those in Country Groups A:5 or A:6 and certain joint ventures involving companies headquartered in Country Groups A:5 or A:6, who became subject to restrictions under the new rule.
• The changes in the Affiliates Rule do not apply to affiliates of entities on the Unverified List or parties subject to Denial Orders.
• BIS may issue exclusions exempting certain owned entities from a licensing requirement. Such cases will be identified in the relevant Entity List entry for the parent company.

As part of the Affiliates Rule, BIS plans to issue further guidelines in Supplement 8 to Part 744 of the EAR on how to apply the rule. BIS will accept public comments on the Affiliates Rule for 30 days after filing for public inspection.

Practical Considerations for Companies Navigating International Trade

Companies should consider taking the following steps in an effort to comply with the Affiliates Rule:

• Recalibrate settings on screening tools and service subscriptions as needed to apply 50% ownership flags to Entity List and MEU List parties, similar to how these tools might already be deployed to catch affiliates of sanctioned parties.
• Establish sufficient Know Your Customer due diligence procedures to confirm whether transaction parties are owned by entities on the Entity List or MEU List. This may include collecting additional beneficial ownership information, confirming restricted party screening tools account for ownership, and/or revising end user certification language.
• Identify ongoing transactions or relationships implicated by the Affiliates Rule, evaluate whether those activities can proceed under the TGL, consider license exception and licensing options, and suspend business where required.
• Review and revise template agreement language to account for the rule changes.
• Inform personnel of the new rules and train them on issue spotting for red flags and determining the restrictions that apply to unlisted affiliates of restricted parties.

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