On September 29, the Bureau of Industry and Security (BIS) released an interim final rule expanding its controls under the Export Administration Regulations (EAR) to cover foreign entities owned directly or indirectly, individually or in aggregate, 50% or more by one or more persons listed on (1) the Entity List, (2) the Military End-User (MEU) List, or (3) the Specially Designated Nationals and Blocked Persons List (SDN List) designated under a program listed in 15 C.F.R. § 744.8(a)(1) (collectively, “Listed Persons”). BIS is referring to these new controls as the Affiliates Rule.

Exports, reexports, and transfers (in-country) to foreign entities captured by the Affiliates Rule will be subject to the most restrictive license requirements, license exception eligibility, and license review policy applicable to their owners. The Affiliates Rule is effective immediately.

Due diligence requirements

The Affiliates Rule creates an affirmative duty under the EAR for exporters, reexporters, and transferors to determine the ownership of the parties to a transaction. When an exporter, reexporter, or transferor cannot determine the percentage of a foreign entity owned by an entity on the Entity List or MEU List, a license is required to proceed with the transaction.

Additionally, exporters, reexporters, and transferors should proceed with caution when considering a transaction with a foreign entity (a) in which one or more Listed Person have a direct or indirect ownership interest that is less than 50% or (b) is a parent entity of a Listed Person. Companies should conduct additional due diligence to ensure items exported, reexported, or transferred (in-country) to the foreign entity are not destined for a Listed Person.

Temporary general license

BIS’s interim final rule creates a temporary general license (TGL) for transactions involving a foreign entity that would otherwise be subject to the Affiliates Rule. The TGL only authorizes exports, reexports, and transfers (in-country):

  • To or within any destination in Country Group A:5 or A:6 when a party to the transaction is owned 50% or more, directly or indirectly, individually or in aggregate, by one or more entities listed on the Entity List or MEU List or by unlisted entities that are subject to the Entity List or MEU list license requirements or restrictions because of their ownership.
  • To or within any destination other than Country Group E:1 or E:2 when:
    • A party to the transaction is owned 50% or more, directly or indirectly, individually or in aggregate, by one or more entities listed on the Entity List or MEU List or by unlisted entities that are subject to the Entity List or MEU list license requirements or restrictions because of their ownership; and
    • That party is a joint venture with a non-listed entity headquartered in the United States or a country in Country Group A:5 or A:6 that is not owned 50% or more, directly or indirectly, individually or in aggregate, by one or more entities listed on the Entity List or MEU List or by unlisted entities that are subject to the Entity List or MEU list license requirements or restrictions because of their ownership.

The TGL expires on November 29, 2025.