September 30, 2025 marked a major shift in export compliance:
The Bureau of Industry and Security (BIS) published an Interim Final Rule expanding end-user controls to cover affiliates of listed entities — a move that mirrors the often-overlooked OFAC 50 Percent Rule.
For U.S. exporters, reexporters, and transferors, this Affiliates Rule change means ownership screening just became more complex — and more important.
A Quick Recap: What OFAC’s 50% Rule Does
The Office of Foreign Assets Control (OFAC) 50 Percent Rule treats any entity owned, directly or indirectly, 50 percent or more by one or more blocked persons as also blocked — even if it isn’t listed on the Specially Designated Nationals (SDN) List.
Unfortunately, many organizations fail to screen for this “hidden” ownership risk. Traditional name-matching tools catch entities on the list, but not those owned by listed parties.
Enter the BIS “Affiliates Rule”
BIS has now taken a page from OFAC’s playbook. The new Affiliates Rule extends export control restrictions to certain foreign affiliates based on ownership, mirroring OFAC’s 50% Rule.
It applies the same license requirements and review policies that govern entities on the Entity List, Military End User (MEU) List, or the SDN List (for programs under § 744.8(a)(1)) to:
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Any foreign entity that is owned, directly or indirectly, 50 percent or more by one or more entities on those lists; and
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Any foreign entity that is owned 50 percent or more by another entity that has itself become restricted under this rule.
In short, exporters must treat majority-owned foreign affiliates of listed companies as if they were listed themselves — a major alignment between BIS and OFAC ownership screening expectations.
Practical Example
Imagine Company A (20 %) and Company B (30 %) are on the Entity List. Together, they own 50 percent of Company C, a foreign firm not listed by name. Under the new BIS Affiliates Rule, Company C is treated as though it were on the Entity List.
If Company C owns 50% of Company D, Company D also inherits the same restrictions — even though D itself isn’t listed.
That same cascading logic is what compliance officers should already be applying under OFAC.
Red Flag 29 – The New Affirmative Duty
BIS also added Red Flag 29, making uncertain ownership a compliance trigger. If exporters can’t confirm how much of an entity is owned by listed parties, they must treat it as a red flag and either obtain a BIS license or document a valid license exception before proceeding.
The takeaway: “Not knowing” is no longer acceptable — exporters must determine ownership or stop the transaction.
Why This Matters
For many companies, ownership screening has focused on OFAC sanctions — not export-control lists. But the BIS Affiliates Rule means Entity List and MEU List screening now requires the same depth of ownership analysis as OFAC.
Why the Rule Is Causing Concern: Many exporters are alarmed not only by the speed of the Affiliates Rule’s rollout and the limited public guidance, but also because it exposes an existing gap in their compliance programs. While the new rule mirrors OFAC’s long-standing 50 Percent Rule, many companies were never fully compliant with OFAC’s ownership-screening requirement in the first place. As a result, they are now being asked to meet BIS’s expanded standard without the necessary systems, data, or procedures already in place. Combined with Red Flag 29’s new affirmative duty to verify ownership or seek a license, this has left many exporters scrambling to understand how to catch up.
To stay compliant, exporters should now:
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Expand ownership due diligence beyond the first layer of shareholders.
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Aggregate indirect ownership — multiple listed entities can collectively reach the 50 percent threshold.
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Document findings and decision-making, including cases where ownership could not be confirmed.
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Align BIS and OFAC procedures, since both rules use the same 50 percent aggregation test and cascading application.
Integrating BIS and OFAC Screening
At S Massie Consulting, we recommend treating BIS and OFAC ownership screening as a single, integrated workflow. The same approach for identifying direct and indirect ownership, aggregating percentages, and documenting risk applies to both.
Practical Tip: After mapping ownership, screen all identified owners against both BIS and OFAC lists. Only determine precise ownership percentages if one or more owners appear on either list; that’s when the 50% test becomes critical.
Under both regimes, failing to uncover hidden ownership can expose your company to license violations, civil penalties, or criminal enforcement.
Key Takeaway
The BIS Affiliates Rule closes a long-standing gap between export-control and sanctions enforcement.
It sends a clear message: Know who owns your customers, suppliers, and partners — or be prepared to stop the transaction.
If your company hasn’t reviewed its screening procedures since this rule took effect, now is the time to do it.
Need help assessing ownership structures or updating your screening process?
S Massie Consulting provides tailored export compliance program design, risk assessments, and training to ensure your business stays compliant with both BIS and OFAC requirements.
📞 Contact us to schedule a consultation or compliance review.
