What Is the BIS 50% Rule?
The BIS 50% Rule is an interim final rule that was introduced on September 29, 2025. It further expands export control restrictions and requirements under the Export Administration Regulations (EAR) in order to include foreign entities that are at least 50% owned by one or more parties on certain restricted lists such as the Entity List, Military End-User (MEU) List, and the Specially Designated National (SDNs).
Why Is the BIS 50% Rule Important for Export Control?
Many entities have been long trying to avoid restrictions through the use of subsidiaries such as creating new affiliates under different names in opaque jurisdictions. With this new rule, regulators will be able to track and enforce restrictions more easily. The BIS states that this rule can affect thousands of subsidiaries in nearly 100 countries, particularly China, Russia, and Iran.
Changes Introduced by the BIS 50% Rule
The BIS 50% Rule is, in fact, based on a long-established rule in the US system: OFAC 50 Percent Rule. While there are many common points between them, there are multiple differences worth mentioning such as their respective risk areas and activities that they have an impact on. Now, let’s see what the BIS 50% Rule has introduced.
50 Percent Affiliates Rule: The most important change that has been introduced with this rule is the 50 Percent Affiliates Rule. This rule automatically subjects all foreign entities that are owned 50 percent or more by one or more listed parties, subject to restrictions under the Affiliates Rule to the same restrictions. For example, let’s say that Company X (subject to restrictions), owns at least 50% of Company Y (no restrictions), which at least owns 50% of Company Z (again, no restrictions). This means Company Z will face the same restrictions imposed on Company X.
The Red Flag No.29: The BIS has also introduced the Red Flag (No.29) to Supplement No.3 to Part 732 of the EAR. This is applicable when an exporter is not able to determine the ownership percentage of a foreign entity owned by one or more restricted parties. In such cases, exporters have to resolve the “Red Flag” or obtain a BIS license before proceeding with any further activity.
Liability and Coverage: In terms of liability, the Affiliates Rule is very strict. This means that exporters can be held liable even if they are not aware of a listed party’s involvement. Furthermore, this makes the Consolidated Screening List (CSL) insufficient on its own to cover all the affiliates. Thus, we strongly recommend using third-party screening tools capable of conducting ownership analysis with standards such as OFAC and BIS.
Who Is Affected by the BIS 50% Rule?
All individuals or companies that export, re-export or transfer items subject to Export Administration Regulations (EAR), including U.S. manufacturers and exporters, non-U.S. companies that export items from the U.S., and global logistic providers, are directly affected. As we have mentioned in the previous section, foreign companies owned 50% or more by one or more entities on lists such as the Entity List, MEU list, or SDN list are also affected. Therefore, we strongly suggest, especially for multinational groups with joint ventures, evaluating indirect ownership.
While these are the main domains that are directly affected, there are also indirect effects on certain institutions such as financial institutions processing payments to listed affiliates. This requires such organizations to screen and flag ownership-based risks. Furthermore, non-U.S. businesses using U.S. technology and basically every organization involved in trade, procurement, or compliance must now take the necessary prevention steps to mitigate these risks.
What Counts as Ownership Under the BIS Rule?
If the ownership, direct or indirect, of a listed company exceeds the 50% limit, then they are considered as subject to the same restrictions as the listed entity. However, there are some areas that need a little clarification such as the aggregated ownership. For example, a company owned by two listed entities, each holding a 25% stake, would also fall under this category.
Furthermore, it is also worth mentioning that BIS considers ownership as any form of control or economic benefit derived from the entity. These can be equity shares, voting rights that are influential over management decisions, or partnership interests.
How to Comply with the BIS 50% Rule
Evaluate Your Screening Tools
Compliance with the new BIS 50% Rule starts with up-to-date screening solutions. As we have mentioned in the previous sections, traditional screening lists such as the CSL will not cut it anymore. Your screening tools should be able to compare all identified Ultimate Beneficial Owners (UBOs) against the Entity List, MEU List, and other BIS lists. In order to improve your screening processes, you can leverage software solutions such as Sanction Scanner.
Expand Due Diligence Scope
If you notice that a counterparty operates in a high-risk country or industry, you should swiftly apply EDD measures. Even minority stakes or board overlaps may pose red flags. These measures include requesting End-User Statements (EUS) and End-Use Certificates, conducting background checks on executives, asking for confirmation that the company is not acting on behalf of a listed entity, and gathering written acknowledgement of export details in contracts.
Red Flag No. 29
You must require counterparties to disclose all updates in ownership structure during onboarding and periodic reviews. However, this information may remain unclear in some situations. In such cases, you have a duty to verify ownership, obtain a BIS license, or confirm a valid license exception before proceeding.
Take Export Controls Seriously
In the last few years, BIS has been closing loopholes both under the Biden and Trump administrations. We believe there is more to come, and therefore you should not treat export-control diligence as a temporary regulatory trend. For example, this year alone, the U.S. has tightened global exports of AI chips, revoked certain fast-track export privileges, and is reportedly considering broad software export curbs to China.
Use the Temporary General License (TGL) Carefully
BIS has issued a 60-day Temporary General License to authorize transactions for certain non-listed affiliates of listed entities, such as transactions to or within certain US partner countries and transactions to or within any destination outside those subject to the most comprehensive US embargoes, for a short period of time. It would be beneficial to use this transition period to review your ownership processes, retrain staff, and take the necessary measures to comply with BIS’s recent standards.
Update Internal Policies and Training
One of the best things you can do is to train all relevant staff, from logistics to sales, on the indicators of evasion, such as unexplained ownership changes, multiple listed minority owners, and shell entities in high-risk jurisdictions.
FAQ's Blog Post
The BIS 50% Rule focuses on export control under the EAR, while the OFAC 50% Rule applies to sanctions and financial restrictions.
Non-U.S. companies using U.S. technology or exporting U.S.-origin goods must screen ownership to avoid violations.
Red Flag No. 29 warns exporters when ownership data is unclear, requiring them to verify or obtain a BIS license before proceeding.
Companies should upgrade screening tools, expand due diligence, review ownership structures, and train compliance staff.
Sanction Scanner enables ownership-based screening, detects indirect control, and automates BIS and OFAC list checks in real time.
