BIS Affiliates Rule: November 10 Reimposition Remains Scheduled Despite Expected Extension

Background

On September 30, 2025, BIS published an interim final rule, “Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities” (the “Affiliates Rule”). Under the Affiliates Rule, any foreign entity that is owned 50 percent or more, directly or indirectly, individually or in the aggregate (an “affiliate”), by one or more entities on the Entity List or MEU List, by certain SDNs, and/or by unlisted entities that are subject to restrictions based on their ownership (collectively, “listed parties”), is itself automatically subject to the same restrictions as its parent entities. In effect, the Affiliates Rule significantly expanded the number of “end users” to which exports, reexports, and transfers (in-country) of items subject to the EAR are restricted. Among its key features:

• Rule of Most Restrictiveness. Where an affiliate is owned 50% or more by multiple listed parties, the most restrictive license requirements, license exception eligibility, and license review policy among its owners apply, even if that owner holds the smaller stake. Moreover, if any owner falls within the end user scope of a Foreign Direct Product (“FDP”) rule under EAR § 734.9(e) or (g), the affiliate also falls within that end user scope.
• SDN Coverage. The Affiliates Rule applies to SDNs identified under section 744.8 of the EAR, including those designated pursuant to Belarus, Russia, Ukraine, weapons of mass destruction, terrorism, narcotic, and criminal network sanctions programs, aligning EAR restrictions more closely with the corresponding restrictions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).
• Affirmative Duty/Red Flag 29. The rule adds Red Flag 29, requiring that if an exporter, reexporter, or transferor has “knowledge” that a foreign entity is owned in part by a listed party but the ownership percentage is unknown, the exporter, reexporter, or transferor must resolve the red flag through additional due diligence or obtain a BIS license before proceeding, unless a license exception is available based on the restrictions applicable to the listed party. Separately, the underlying end user restrictions are enforceable on a strict liability basis; lack of knowledge of a counterparty’s ownership does not eliminate an applicable license requirement.

BIS explained that the Affiliates Rule was intended to close loopholes that had allowed restricted parties to operate through “legally distinct” foreign affiliates and subsidiaries. In doing so, BIS brought its ownership standard into closer alignment with OFAC’s own long-standing approach: just as OFAC treats an entity as blocked when one or more SDNs own 50% or more of the entity in the aggregate, the Affiliates Rule now applies the same 50%-aggregate-ownership test to trigger EAR restrictions on affiliates of listed parties.

On November 12, 2025, BIS published a final rule imposing a one-year suspension of the Affiliates Rule following a broader trade agreement reached between the U.S. and China. The suspension was made effective November 10, 2025, and was set to end November 9, 2026, absent a future extension.

Reimposition Currently Set for November 10, 2026

As things currently stand, therefore, the Affiliates Rule is set to come back into force on November 10, 2026, reimposing the export restrictions described above on covered affiliates of listed parties. Despite reports of another possible suspension of the Affiliates Rule until January 2027, companies should be preparing for the rule to go back into effect November 10 unless BIS publishes a Federal Register notice confirming an extension.

What Exporters Should Do Now

• Map ownership structures across your non-U.S. customers, partners, and other counterparties to which you may export or transfer items or technology to identify entities that may be 50% or more owned, directly or indirectly, by Entity List, MEU List, or relevant SDN List parties.
• Refresh due diligence procedures, end-user certificates, and contractual provisions that may have lapsed or gone unused during the suspension period.
• Reassess red flag identification and escalation procedures to ensure personnel know how to resolve Red Flag 29 situations where a counterparty’s ownership percentage cannot be confirmed.
• Monitor the Federal Register for any BIS notice further extending, modifying, or confirming the reimposition of the Affiliates Rule, and be prepared to adjust compliance timelines accordingly.
• Review pending exports, reexports, and in-country transfers, including deliveries under existing contracts and foreign-produced items potentially captured by the applicable Foreign Direct Product Rules, to identify transactions that could require BIS authorization upon reinstatement. The original Affiliates Rule’s temporary general license expired on November 28, 2025, so companies should not assume that transitional relief will be available absent further BIS action.

How We Can Help

We regularly advise on export controls and sanctions diligence in acquisitions, other transactions, and day-to-day compliance policies and procedures, and the Affiliates Rule’s reimposition has direct implications for that work. We are closely monitoring BIS’s actions, including whether any further suspension or Federal Register notice is published before November 10, 2026, and can help clients expand diligence scope on live and upcoming deals, build Affiliates Rule exposure into transaction structuring and documentation, and extend ownership screening across existing portfolio companies ahead of the rule’s return.