The U.S. Government significantly raised the export controls ante. Under a new Entity List “50% Rule” published by the Commerce Department’s Bureau of Industry and Security (BIS), any foreign entity owned 50% or more by Entity List parties will now itself be treated as subject to Entity List license requirements. Exporters must therefore determine the ownership of every counterparty, and an inability to do so creates a red flag that triggers a BIS license requirement. We at Taxise Asia can help your business evaluate and comply with this new 50% Rule.
On 30 September 2025, the Commerce Department’s Bureau of Industry and Security (“BIS”) published an interim final rule expanding the scope of U.S. export controls under the Export Administration Regulations (“EAR”) to cover “foreign affiliates” at least 50% owned by specified entities that are currently subject to license restrictions. Affiliates include any entity that is at least 50% owned by one or more:
- Entities on the Entity list;
- Entities on the Military End-User (“MEU”) list; and
- Certain sanctioned entities designated on the Office of Foreign Asset Control’s (“OFAC”) Specially Designated Nationals and Blocked Persons (“SDN”) list.
Under the new rule, Entity List restrictions will apply automatically to these 50% controlled foreign affiliates. This is a significant expansion in the EAR’s scope, as these restrictions previously applied only to entities specifically designated on the list, not their subsidiaries and affiliates. In essence, Entity List restrictions will no longer apply to an exhaustive list of entities. Further, the rule introduces a Red Flag covering instances where a foreign entity’s ownership percentage by a listed entity is unknown; traders will have an affirmative duty to determine the ownership percentage and resolve the Red Flag before proceeding with any exports, reexports, or transfers to the foreign entity.
Traders will need to update their trade compliance systems and adopt additional KYC/screening processes to identify whether customers are affiliates of Entity List, MEU list, or SDN list entities.
Other points to note include:
- The 50% threshold can apply to ownership by multiple listed entities. Where a foreign entity is owned 50% or more by multiple listed entities, the most restrictive Entity List license requirement will apply.
- The 50% Rule does not apply to affiliates of entities designated on other lists (the Unverified List and entities subject to Denial Orders).
- A Temporary General License will authorise certain exports, reexports, or transfers to foreign affiliates captured under the 50% Rule for 60 days.
- A foreign affiliate can apply to BIS for the removal of Entity List license requirements.
- This 50% Rule is designed to be consistent with OFAC’s existing 50% rule for sanctioned entities.
The full rule can be found here: https://public-inspection.federalregister.gov/2025-19001.pdf
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At Taxise Asia, we combine deep regulatory expertise with local language capabilities across Asia to help companies navigate this challenge. Our screening service helps clients identify ownership structures and resolve red flags so that businesses can maintain compliance with evolving U.S. export control rules.
Reach out to learn how we can support your compliance needs under the new 50% Rule.