Guilty by Association: Export Controls Just Got More Inclusive

On September 29, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a rule, effective immediately, that amended the Export Administration Regulations to address diversion concerns regarding entities appearing on the Entity List and other restricted-party lists. The new Affiliates Rule applies restrictions on exports (and reexports and transfers) to any foreign entity that is at least 50% owned, individually or in the aggregate, by one or more entities named on the Entity List, the Military End-User List, or those designated with certain identifiers on the Specially Designated Nationals List of the Office of Foreign Assets Control (OFAC).

Previously, only entities actually appearing on the Entity List were subject to its associated export restrictions. But now, legally distinct entities that are affiliates of entities on any of the three restricted-party lists are subject to their various restrictions when they meet the 50% or more ownership test: If an entity is owned 50% or more in the aggregate by more than one listed entity, then the most restrictive condition from any single owner’s presence on any relevant list would apply — even if that owner-entity owns less than 50% of the foreign entity.

US exporters should already be familiar with the construct of the Affiliates Rule as it substantially mirrors OFAC’s 50 Percent Rule, which has been in place since 2014.  

BIS also published FAQs on the Affiliates Rule, providing “red flag” due diligence guidance and answering various questions to clarify the rule.

In its guidance, BIS encourages exporters to adopt a risk-based compliance program to help comply with these requirements. US companies should therefore consider their current screening practices in light of the Affiliates Rule, including reliance on third-party screening software or services, to evaluate whether such procedures can account for the new rule.

If you would like additional information about the issues addressed in this client alert, please contact Rich Matheny, Jake Osborn, Justin Pierce, or the Goodwin lawyer with whom you typically consult.

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