The Bureau of Industry and Security (BIS) is extending the 50% ownership principle into U.S. export controls. Starting September 30, 2025, this rule will apply not just to the Entity List, but also to the Military End User (MEU) List and certain OFAC Specially Designated Nationals (SDNs) already covered under the EAR (§ 744.8).
Read the Interim Final Rule here.
1. How the Impacted EAR End-User Rules Worked Before September 30th
- Entity List: Named entities require a license for nearly all items subject to the EAR. Unlisted affiliates are not automatically covered.
- MEU Rule / MEU List: Exporters must obtain licenses for certain items when a military end user or end use is involved. The MEU List helps identify risk but has never been exhaustive — exporters are expected to apply a “reason to know” standard.
- SDNs Under EAR: A subset of OFAC-designated parties (e.g., Iran, DPRK, Russia) already trigger BIS license requirements, but only if named.
2. What Will Change
With the new rule, any entity owned 50% or more (directly or indirectly, in aggregate) by listed parties is restricted, even if it doesn’t appear by name. Affiliates and subsidiaries (whether listed or unlisted) will inherit the same licensing obligations as their listed parents.
This is similar to OFAC’s SDN 50% rule — but with a critical difference. While SDNs often operate outside mainstream commerce and are caught by banks’ financial screening systems, Entity List and MEU parties often look like ordinary companies. That makes them easier to miss without ownership-focused diligence.
3. CSL Is Not Enough
BIS has made clear that the Consolidated Screening List (“CSL”) will no longer be sufficient to mitigate risk under the EAR. It was already insufficient under OFAC rules. The CSL only contains basic information on listed entities and cannot capture unlisted affiliates now restricted under the 50% rule. Exporters will need to adopt additional screening tools beyond the CSL and integrate them into compliance workflows. BIS argues this aligns with OFAC practices and should minimize burden — but for many exporters, this will mean new investment in software and data.
4. A New Red Flag
The rule also introduces Red Flag 29: if you cannot determine a counterparty’s ownership that is affiliated with a listed entity, that uncertainty itself is a red flag. Exporters must:
- Resolve the ownership question through due diligence, or
- Apply for a license before proceeding.
Ignorance was never a safe harbor, and you’re moving into much deeper waters if you don’t have comprehensive due diligence as part of your normal screening.
5. What Exporters Must Do
- Stop relying solely on CSL: it doesn’t cover affiliates.
- Adopt ownership-tracing tools: commercial databases are now essential.
- Escalate unresolved cases: inability to confirm ownership can be a red flag triggering a license requirement.
- Document diligence: regulators will expect clear records of ownership checks.