What If the BIS Affiliates Rule Comes Into Force?

Background
On September 29, 2025, BIS issued an interim final rule (90 FR 47201) amending the Export Administration Regulations (EAR) to extend Entity List and Military End User (MEU) List restrictions to majority-owned affiliates of the listed entities. As discussed in our prior alert, the rule applies to any foreign entity that is owned 50 percent or more, directly or indirectly, individually or in the aggregate, by one or more parties on the Entity List, the MEU List or certain OFAC sanctions programs incorporated by reference under EAR § 744.8(a)(1). This effectively imports a 50 percent rule similar to OFAC’s approach into the EAR.

Key features of the rule include:

• Restrictions apply through chains of ownership. Where ownership is split among multiple listed parties, the most restrictive licensing policy applies.
• Where an exporter knows a listed party holds an ownership interest but cannot verify the percentage, the exporter must treat the counterparty as restricted until the question is resolved, apply for a license or rely on a license exception (to the extent available given a listing).
• The rule adds Red Flag No. 29 to Supplement No. 3 to Part 732 for situations where an exporter knows a party is owned by a listed entity but cannot determine the ownership percentage.
• BIS made conforming changes to the Entity List FDP rule and the Russia/Belarus MEU FDP rule under EAR § 734.9, expanding EAR jurisdiction over certain foreign-made items.

Following the October 30, 2025 meeting between President Trump and President Xi in Busan, South Korea, the White House announced on November 1, 2025, that the United States would suspend the Affiliates Rule for one year as part of a broader trade agreement with China (“Busan Agreement”), which we discuss here.

BIS formalized the pause in a final rule published on November 12, 2025, which stays the Affiliates Rule for one year, from November 10, 2025 through November 9, 2026. Absent further action, the Affiliates Rule automatically returns to the EAR on November 10, 2026.

Current Status
On September 23, 2026, Treasury Secretary Scott Bessent announced that the United States and China had agreed to extend the Busan Agreement for two months, through January 10, 2027. The extension is expected to carry a corresponding extension of the Affiliates Rule suspension. As of the date of this alert, however, BIS has not published a Federal Register notice changing the November 10, 2026 reimposition date. If an implementing notice is not published before November 9, the Affiliates Rule would return to the EAR on November 10, 2026, under the terms of the BIS suspension rule.

Even after an extension is formalized, the Affiliates Rule remains on the books, and BIS retains the ability to shorten or end the suspension through further rulemaking. BIS also can allow the Affiliates Rule to go into effect after two months.

The Affiliates Rule has functioned as a bargaining chip in the U.S.-China trade relationship, and its timing has tracked broader negotiations rather than a fixed regulatory calendar. After the November 2026 midterm elections, the Administration may reassess how aggressively to pursue a broader, more lasting trade agreement with China. Reimposing the Affiliates Rule, or declining to extend the suspension beyond January 10, 2027, is a readily available lever that does not require new legislation. A broader deal could also extend the suspension further or lead BIS to revise the rule.

Compliance Updates: Preparing for the Affiliates Rule to Take Effect
Exporters, reexporters, companies dealing with EAR items outside the United States and financial institutions would need to consider compliance steps in advance to be ready for the Affiliates Rule, which may include:

• Implement beneficial ownership screening. Move beyond name-based restricted party screening to ownership-based screening that traces direct and indirect ownership, including aggregated interests and multi-tier chains.
• Map counterparty exposure. Identify customers, distributors, suppliers, end users and other transaction parties that may be owned 50 percent or more by Entity List, MEU List or covered OFAC-listed parties, with priority on China, Russia and other higher-risk jurisdictions.
• Update policies and procedures. Revise export compliance manuals, know-your-customer questionnaires, escalation protocols and recordkeeping to reflect ownership-based diligence and the obligation to treat unresolved ownership as restricted.
• Review the FDP rule impact. Assess whether foreign-produced items made with U.S. technology or software could become subject to the EAR when destined for newly covered affiliates under the expanded Entity List and MEU FDP rules.
• Address contracts. Review supply, distribution and sales agreements for export control compliance clauses, ownership representations and change-in-ownership notice obligations, termination rights, and pricing or delivery terms that may be affected by shipment holds. Consider updates to contract terms where exposure is significant.
• Financial institutions. Banks and other financial institutions that finance, insure or process payments for export transactions or deal with customers whose business involves cross-border exposure to EAR commodities, software or technology, face risk-based updates to already-complex customer and transaction due diligence and AML reporting as they account for ownership-based EAR restrictions.
• Train and plan. In pursuit of readiness, companies face a question of which personnel to train on the Affiliates Rule, and how to put in place an appropriate contingency plan for reimposition on short notice.

Because these steps require careful assessment and take time to implement, industry may wish to begin considering them now, with the goal of readiness in the event of a BIS announcement confirming reimposition of the Affiliates Rule.

Looking Ahead
Companies should monitor the Federal Register for a BIS notice formally extending the suspension before November 9, 2026. Beyond January 2027, the outcome of post-midterm U.S.-China negotiations and any BIS revisions to the rule will determine whether and in what form the Affiliates Rule comes into force. Because the rule can return with little notice, companies and financial institutions face questions of whether to treat the current suspension as a preparation period rather than a reprieve.