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Background
On September 29, 2025, the Bureau of Industry and Security of the US Department of Commerce (“BIS”) issued a new interim final rule, “Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities” (the “BIS 50% Rule” or the “Affiliates Rule”). The BIS 50% Rule expands the export controls laid out in the Export Administration Regulations (“EAR”). The use of an interim final rule means that the BIS 50% Rule became effective immediately, without a prior public comment period. Such an approach is typically used in what are considered emergency or time-sensitive cases, though the final rule could subsequently be amended.
The BIS 50% Rule updates the requirements for screening foreign entities as enumerated in the Entity List, the Military End-User List, and in certain cases the Specially Designated Nationals and Blocked Persons List (all accessed October 19, 2025). According to a BIS statement, the rule will close “a significant loophole in restricted party lists – strengthening the export control regime overall.” One key aim is to stem risks to U.S. national security or foreign policy interests, such as the diversion of sensitive U.S. technologies to countries such as China, Russia and Iran.
Previously, BIS applied those lists only to named entities and their branches not considered “legally distinct.” The BIS 50% Rule will prevent sanctioned entities from using an array of structures to sidestep controls, such as front companies, subsidiaries, and other complex structures. Any entity, irrespective of whether it is listed, which is over 50 percent owned by one or more of the parties on those lists – directly, indirectly, or in aggregate – will be subject to the same restrictions and license requirements as the listed controlling parties. Entities that meet the ownership criteria will be covered regardless of being listed. This change aligns the BIS with the existing rule of the Treasury Department’s Office of Foreign Assets Control (OFAC), which already considers majority-owned subsidiaries of sanctioned entities as also sanctioned.
The importance of ownership due diligence
The BIS has established that companies have an affirmative duty to determine the ownership of all their transaction counterparties. Therefore, in response, companies must now perform much more extensive due diligence screening of their customers, suppliers, and other partners, including upstream ownership tracing. Minority ownership by any listed entities or lack of transparency in ownership constitute red flags, so companies should map their partners’ corporate structures to understand controlling interests, and follow mergers, acquisitions, and investments. Internally, companies should review and update their compliance policies and consider terminating business relationships if needed.
Because affiliates subject to the new rule are not separately listed, the U.S. government’s Consolidated Screening List (CSL) is no longer sufficient on its own for comprehensive export-control screening. Companies should therefore enhance their screening programs with ownership-based due diligence and supplementary third-party data sources to ensure full compliance.
Solutions: Strengthening due diligence under the BIS 50% Rule
In light of the BIS 50% Rule, organizations will need to enhance both the depth and documentation of their third-party screening programs. Ethixbase360 supports clients through a suite of configurable solutions designed to meet the new ownership-based requirements:
- Entity verification and corporate linkage (Premium Corporate Data): Quickly map corporate structures and relationships.
- Ultimate Beneficial Ownership (UBO) intelligence: Identify direct and indirect ownership of entities and their ownership percentages.
- Automated screening: Screen direct and indirect owners against sanctions, regulatory enforcement lists, and watchlists with optional screening for political exposure, state-owned enterprises, and adverse media connections to listed entities.
- Enhanced or Collaborative Due Diligence: Escalate incomplete or opaque cases for multi-lingual research and/or direct third-party verification.
- Integrated workflow and audit trail: Document compliance decisions and maintain regulatory readiness.
While the BIS 50% Rule introduces new compliance obligations, ownership-based due diligence is not new for most multinational organizations or Ethixbase360 clients. Sanctions and export controls imposed in recent years—particularly following the conflict in Ukraine—have already driven many companies to expand their screening programs to capture indirect and beneficial ownership exposure. The BIS update therefore reinforces a practice that many compliance teams have been refining for some time.
Still, tracing ownership remains inherently complex often spanning multiple jurisdictions, and understanding direct and/or indirect ownership, particularly in jurisdictions with opaque corporate registries or limited beneficial ownership data, adds further complexity. Uncovering indirect control through layered holding structures, trusts, or state-linked entities requires persistent due diligence and access to reliable data sources. Where such information is not readily available, companies must implement escalation measures for enhanced research or direct third-party engagement. Similar 50% ownership thresholds under OFAC, and in the EU and UK, further underscore the need for global compliance programs to apply a consistent, ownership-based standard across jurisdictions.
Ultimately, the BIS 50% Rule signals a decisive tightening of U.S. export controls, closing long-standing loopholes around affiliates and complex ownership structures. For compliance teams, the message is clear: screening by name alone is no longer sufficient. By combining instant data intelligence with configurable escalation and documentation workflows, organizations can protect against inadvertent violations while maintaining agility in a rapidly evolving regulatory landscape.
