The U.S. Commerce Department has made export control sanctions much stricter. Now, companies that are 50% or more owned by already sanctioned companies are also affected. The Affiliates Rule, which was published as an interim final rule, changes compliance requirements in a big way. This is especially true for transactions with China, where many of the restricted parties are based.
Under the new rules, restrictions that used to only apply to companies on the Export Administration Regulations’ Entity List or the Military End-User List (MEU List) will now automatically apply to any entity that is majority-owned, directly or indirectly, by one of those companies. The same rule applies to affiliates of companies that the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has put on a list of bad companies.
The change is similar to OFAC’s long-standing 50 percent rule, but it makes the rules stricter. If a company is owned by more than one sanctioned entity, the most strict export control rules that apply to any of its owners will apply. This also includes rules about foreign direct products when they apply.
The Bureau of Industry and Security (BIS) has announced a 60-day temporary general license to help with the changeover. Under this rule, exports, reexports, and transfers within the country can still happen in certain situations, such as when U.S. or allied companies are involved in joint ventures in approved jurisdictions.
The Commerce Department wants people to give their thoughts on the Affiliates Rule. Comments are due by October 30, 2025. Experts are calling this a “historic change” in export control enforcement, so businesses are being told to immediately review their transaction-screening procedures to make sure they are in line with it.
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