For about six weeks in the fall of 2025, U.S. exporters lived under one of the broadest changes to export controls in years. Then it disappeared, paused as part of a trade truce with China. Many businesses moved on.
The pause was never the end, though. As of November 1, 2026, the Bureau of Industry and Security (“BIS”) Affiliates Rule is scheduled to return in just nine days, on November 10, 2026, unless the U.S. government formally extends the suspension. When it does, a foreign customer you’ve shipped to for years could suddenly become subject to export restrictions and require a license before you can continue shipping.
This article explores where the rule came from, why it was paused, why it's returning, who it reaches and how it works, and what businesses should be thinking about now.
Key Takeaways:
The Affiliates Rule extends certain U.S. export restrictions to foreign entities owned 50% or more, directly or indirectly, by one or more listed parties, individually or in the aggregate.
Unless the U.S. government formally extends the suspension, the rule is scheduled to return on November 10, 2026.
A possible extension through January 10, 2027, has been discussed, but BIS has not formally announced one.
Exporters must address ownership-related red flags, and violations of applicable export restrictions may occur without intent.
For many Entity List entries, even ordinary goods classified EAR99 may require a license.
What Was the BIS Affiliates Rule, and Why Was It Paused?
BIS is the Commerce Department agency that runs U.S. export controls. It keeps several lists of restricted foreign parties, and the best known is the Entity List. For years, those restrictions applied only to the companies actually named. A subsidiary with a different name, even one wholly owned by a listed company, generally fell outside them.
BIS saw that as a gap. On September 29, 2025, it issued an interim final rule extending list restrictions to companies owned 50% or more by listed parties. “For too long, loopholes have enabled exports that undermine American national security and foreign policy interests,” under Secretary Jeffrey Kessler said in the agency's announcement. The rule took effect immediately. A temporary general license gave certain transactions a few weeks to wind down.
BIS also gave a practical reason. Adding each new subsidiary to the list one by one took substantial time and resources, and new companies could be formed to slip around existing listings. Borrowing the 50% approach that the Treasury Department's Office of Foreign Assets Control (OFAC) has long used for sanctions closed that door in one step.
The timing was explosive. Within days, China announced sweeping new export controls on rare earths, minerals essential to electronics and manufacturing. After Presidents Trump and Xi met in Busan, South Korea, the White House announced a deal. The United States would suspended the Affiliates Rule for one year starting November 10, 2025, and China would suspend its new rare earth measures. BIS made the pause official in a November 2025 rule.
Why Is the Affiliates Rule Coming Back?
The pause was built with an end date. The suspension rule doesn't repeal anything. It sets the Affiliates Rule aside until November 9, 2026, "absent a future extension," and then restores the same requirements starting November 10, 2026. No new rule or announcement is needed for that to happen.
BIS never said it had changed its mind about the policy. During the pause, the agency said it "will continue to evaluate U.S. national security and foreign policy interests" tied to these unlisted affiliates. When it first issued the rule, BIS even asked the public whether the 50% threshold should be lower and whether the rule should reach additional lists. Questions like those suggest a future version could be broader, not narrower.
The date itself may still move. On September 23, 2026, Treasury Secretary Scott Bessent said the U.S. and China would extend the Busan agreement from November 10 to January 10, 2027. Many in the trade community expect the Affiliates Rule pause to be extended to match. But as of publication, BIS has not published a Federal Register notice changing the November 10 date. Until it does, that is the date on the books.
That leaves exporters with an uncomfortable choice: plan around an extension that hasn't been made official, or prepare for a rule that may arrive in days. A two-month delay would change the deadline. It wouldn't change the work.
Who Does the Affiliates Rule Apply To, and How Does It Work?
The rule reaches foreign entities owned 50% or more, directly or indirectly, by one or more parties identified on the lists covered by the rule. These include the Entity List and the Military End-User List, as well as certain persons or entities designated on the Treasury Department's Specially Designated Nationals and Blocked Persons List (“SDN List”) under the specific sanctions programs identified in 15 C.F.R. § 744.8(a)(1). Importantly, this does not mean that every person or entity appearing on every Treasury sanctions list is automatically covered.
Ownership can be traced through multiple levels of ownership. In other words, the analysis does not necessarily stop with the immediate shareholder. A foreign entity may be covered when a listed party's ownership interest is held through one or more intermediate entities.
Ownership is also added together, and that's where many businesses get caught. Picture a Florida distributor selling industrial pumps to a trading company in Hong Kong. Neither the trading company nor its parent appears on any list. But one listed company owns 30% of it, and another owns 25%. Together, that's 55%. Under the rule, the trading company is treated as if it were listed.
What makes this so consequential is how far the restrictions reach. The license requirements depend on the particular Entity List entry and the restrictions that apply to the listed party. For many entries, a license is required for all items subject to the Export Administration Regulations (EAR), including products classified as EAR99. EAR99 is the catch-all classification for items that are not specifically identified on the Commerce Control List, and such items ordinarily may be exported without a license. But EAR99 classification does not eliminate licensing requirements that apply because of the identity of the end user or another restriction. Under the Affiliates Rule, a foreign entity may become subject to those restrictions even though its own name does not appear on a list.
The rule isn't limited to U.S. companies shipping from U.S. soil, either. It covers shipments leaving the United States and shipments moving between or within foreign countries, whenever the items are subject to U.S. export rules. A foreign manufacturer using U.S.-origin parts can be just as exposed as a U.S. exporter.
The rule also puts responsibility on exporters to address ownership-related red flags. BIS amended its existing Red Flag 29 guidance to address circumstances in which an exporter knows that a foreign entity has an owner identified on a relevant restricted-party list but cannot determine the extent of that owner's ownership interest. In those circumstances, the exporter is expected to resolve the ownership question through appropriate due diligence or, where applicable, obtain a license before proceeding with the transaction. The inability to determine the ownership percentage should not simply be treated as proof that the 50% threshold has been met; rather, it is a red flag that requires attention. When a foreign entity has multiple listed owners whose restrictions differ, the most restrictive applicable requirements may govern.
Violations of applicable EAR requirements may be enforced on a strict-liability basis. This means that a lack of knowledge about a listed party's ownership of a customer does not necessarily eliminate the underlying violation if a license was required and the transaction proceeded without one. However, the circumstances surrounding the transaction, including what the exporter knew and the compliance measures it had in place, may be relevant to the agency's assessment of the violation and any resulting penalty.
That's where many businesses struggle. Ownership records for private foreign companies are often incomplete or out of date. A screening tool that checks names against the lists won't flag a customer whose name appears on none of them. How much digging is enough, and what to do when the answer stays unclear, are judgment calls with real legal consequences.
What Happens When an Exporter Gets It Wrong?
Export control penalties are steep. Under the Export Control Reform Act, civil penalties can reach the greater of a per-violation cap or twice the value of the transaction. According to BIS, that cap was $374,474 per violation as of January 2025, and criminal cases can bring up to $1 million in fines and 20 years in prison per violation. Each unauthorized transaction may constitute a separate violation, depending on the circumstances.
Money isn't the only risk. BIS can deny a company's export privileges, cutting it off from any transaction subject to U.S. export rules. And merchandise exported contrary to law can be seized and forfeited, turning a compliance problem into a fight to recover property.
For a business that discovers a problem after the fact, the order of its next steps matters. A voluntary self-disclosure to BIS can change how the agency responds. But what goes into it, and when, can determine whether it helps or hurts. That’s a decision to make with counsel, not alone.
What the Rule’s Return Could Mean for Your Business
The return of the Affiliates Rule raises questions that extend beyond whether a customer appears on a restricted-party list. A foreign entity that is not itself listed may nevertheless become subject to export restrictions because of its ownership. Determining whether those restrictions apply can require examining direct and indirect ownership interests, aggregating interests held by multiple listed parties, and assessing the licensing requirements applicable to the transaction.
The implications extend beyond whether a particular shipment can proceed. The rule may affect a business's ability to maintain existing commercial relationships, fulfill orders, and continue transactions involving foreign customers or intermediaries.
The issue here is not simply whether a customer appears on a restricted-party list, but whether the ownership structure behind that customer creates restrictions that could affect the transaction.
If Your Business Relaxed During the Pause, the Gap Is Bigger Than It Looks
Some companies kept checking ownership straight through the pause, treating the rule as a matter of when, not if. Others did what seemed reasonable and went back to business as usual. If you're in the second group, you're far from alone. You're also starting further behind.
Think about what has changed in a year. New customers came on board without ownership checks. Existing customers may have changed hands or taken on new investors. Ownership structures that were never examined under the Affiliates Rule may now become relevant to determining whether a transaction can proceed. And contracts signed during the pause may say nothing about who bears the cost if a shipment suddenly needs a license.
Licenses take time, and they aren't guaranteed. Many companies on the Entity List carry a license review policy of presumption of denial, and under the Affiliates Rule, their affiliates inherit the strictest policy among their listed owners. A business that first asks the question on November 9 may find it has orders it can't legally fill.
There's no cushion this time, either. When the rule first appeared, a temporary general license gave certain transactions a few weeks to wind down. Nothing in the suspension rule provides a new one, so as written, the rule returns in full on day one.
Some obligations never paused at all. OFAC's own 50% rule has applied to sanctioned parties throughout. And BIS can still add any affiliate to the Entity List by name at any time.
None of this means every customer is a problem. Most aren't. The challenge is knowing which ones are, and deciding how to handle the transactions that land in a gray area. Those decisions are far easier, and cheaper, to make before the rule returns than after a shipment has been stopped.
Whether you export directly or sell through distributors abroad, now is the time to understand your exposure. We represent exporters and businesses in trade compliance and enforcement matters, from export control reviews to enforcement actions and seizures. If you or someone you know might be facing this issue, contact us for a confidential consultation.
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The BIS Affiliates Rule extends certain U.S. export restrictions to foreign entities that are owned 50% or more, directly or indirectly, by one or more parties identified on specified restricted-party lists. As a result, a foreign entity may become subject to export restrictions even if it is not individually named on a list.
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The suspension is scheduled to end on November 9, 2026, with the rule returning on November 10, 2026. Although a possible extension through January 10, 2027, has been discussed, BIS has not formally announced an extension.
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The suspension followed a U.S.-China trade agreement reached after discussions between Presidents Trump and Xi in Busan, South Korea. As part of the agreement, the United States suspended the Affiliates Rule for one year, while China agreed to suspend certain new rare earth export controls.
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Foreign entities owned 50% or more, directly or indirectly, by one or more parties identified on the lists covered by the rule may be subject to its restrictions. These include the Entity List, the Military End-User List, and certain persons or entities on the Treasury Department's SDN List under the sanctions programs specified in 15 C.F.R. § 744.8(a)(1).
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Yes. Ownership may be traced through intermediate entities, and ownership interests held by multiple listed parties may be aggregated. Consequently, a foreign entity may be covered even if no single listed party owns 50% or more of it.
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No. Under the Affiliates Rule, a foreign entity may become subject to applicable restrictions because of its ownership by listed parties, even if its own name does not appear on the Entity List or another covered list.
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They may. Licensing requirements depend on the restrictions applicable to the relevant listed party. For many Entity List entries, a license is required for all items subject to the EAR, including items classified as EAR99.
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No. The rule may also affect transactions involving shipments between or within foreign countries when the items are subject to U.S. export controls. Foreign manufacturers and businesses using U.S.-origin items may therefore be affected.
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BIS’s amended Red Flag 29 guidance addresses situations in which an exporter knows that a foreign entity has a listed owner but cannot determine the extent of that ownership. The exporter is expected to address the ownership-related red flag through appropriate due diligence or, where applicable, obtain a required license before proceeding. Uncertainty does not automatically establish that the 50% threshold has been met, but it should not be ignored.
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Depending on the circumstances, violations may result in substantial civil penalties, criminal fines, imprisonment, denial of export privileges, or seizure and forfeiture of merchandise. Civil penalties can reach the greater of the applicable per-violation maximum or twice the value of the transaction. Each unauthorized transaction may constitute a separate violation.
This article is intended for informational purposes only and does not constitute legal advice. The content herein is not a substitute for obtaining legal advice from a qualified attorney licensed in the appropriate jurisdiction. Viewing or relying upon this information does not create an attorney-client relationship. Readers should consult with legal counsel regarding their individual circumstances before taking any action based on this material.
