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Author: James Swenson, Managing Director, Ethixbase360
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has long used the Entity List to restrict exports to organizations and individuals engaged in activities contrary to U.S. national security and foreign policy interests. Historically, compliance meant screening names against a consolidated list. But recent developments, most notably the introduction of the BIS 50% Rule and the subsequent temporary suspension announced by the White House, have further complicated the compliance landscape.
A shifting rule — and what it means now
The BIS 50% Rule, formally titled “Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities,” was issued as an interim final rule on September 29, 2025. It extended export controls to foreign entities that are 50% or more owned, directly or indirectly, by a party already subject to BIS restrictions.
However, under the U.S.–China economic and trade agreement announced November 1, 2025, the White House confirmed that implementation of the BIS 50% Rule will be suspended for one year starting November 10, 2025. The suspension is temporary, not a repeal, and BIS will review the rule’s application during this period.
For compliance teams, this means the core policy intent remains unchanged — to close ownership-based loopholes that allow restricted entities to operate through affiliates — but the timeline for enforcement has shifted.
Why the risk-based approach still matters
Even with the suspension in effect, organizations should not view this as a step back from ownership transparency. The direction of travel across regulators — BIS, OFAC, the EU, and the UK — continues toward greater scrutiny of beneficial ownership and enhanced third-party oversight.
Under this evolving framework, an entity need not be explicitly named to fall within export restrictions. Ownership alone can trigger controls once implementation resumes. In practice, this dramatically broadens the scope of potentially restricted parties and places a heavier due diligence burden on companies that export, supply, or partner globally.
The 50% Rule highlights a continuing paradox: regulators demand deeper ownership transparency, while companies must navigate opaque markets, fragmented data, and finite compliance resources. A risk-based prioritization model, focusing resources where exposure is highest, remains the most pragmatic and defensible approach.
Understanding where the risk concentrates
Even during the suspension period, reviewing recent BIS listings offers insight into where compliance risk remains most concentrated:
- China continues to dominate BIS listings in semiconductors, quantum computing, and AI, reflecting persistent concerns over military and surveillance applications.
- Russia and Belarus remain heavily represented due to post-Ukraine sanctions and end-user risks.
- Hong Kong features prominently under BIS’s “address-only” model targeting shell companies and fronts.
- Emerging jurisdictions — including Pakistan, the UAE, Iran, South Africa, and Turkey — illustrate that export-control exposure now extends well beyond traditional high-risk geographies.
Applying a risk-based framework
A risk-based approach begins by identifying counterparties most likely to intersect with BIS concerns using indicators such as:
- Jurisdictional exposure – operating in or linked to frequently listed countries (e.g., China, Russia, Belarus, Hong Kong, UAE, Pakistan, Iran).
- Sector and technology sensitivity – involvement in dual-use goods such as electronics, semiconductors, or AI.
- Ownership opacity – limited UBO transparency, offshore structures, or unverifiable shareholder declarations.
- End-use and diversion risk – potential for re-export, resale, or military integration.
- Transactional significance – high-value or high-frequency engagements involving sensitive technology or complex supply chains.
This framework enables compliance teams to apply proportionate due diligence — conducting enhanced due diligence for higher-risk third parties and maintaining standard screening for lower-risk engagements.
Maintaining vigilance during the suspension period
The one-year suspension offers compliance teams time to refine ownership-tracing processes, document internal controls, and prepare for eventual reimplementation. The same risk principles still apply:
- Continue ownership-based screening — even though enforcement is paused, regulators expect proactive monitoring of indirect ownership ties.
- Document decision-making — maintain audit-ready records that show reasoned, risk-based diligence.
- Monitor policy signals — the White House and BIS may amend or reinstate the rule before November 2026 depending on trade developments.
Technology and automation as force multipliers
When managing thousands of third parties, traditional document-based verification can’t keep pace. Companies can bridge the gap with a combination of targeted automation and human intelligence, for example:
- Structured questionnaires requesting ownership details and affiliate disclosures.
- Enhanced due diligence to unwrap complex structures.
- Attestation frameworks requiring partners to certify export-control compliance.
- Automated screening to cross-check disclosed owners against sanctions and BIS lists.
Automation allows compliance teams to maintain vigilance efficiently, even while the rule’s implementation is suspended, providing the ability to scale oversight, capture ownership changes, and prepare for future regulatory shifts.
Looking ahead
The temporary suspension of the BIS 50% Rule offers breathing room, not a rollback. It reflects the intersection of regulatory ambition, geopolitical negotiation, and practical compliance realities.
A risk-based, evidence-backed, and transparently documented approach remains the most practical and defensible strategy — one that ensures organizations can adapt quickly when implementation resumes and continue demonstrating robust due diligence in the meantime.
