The OFAC 50% rule is well established. But with the currently paused BIS Affiliates Rule, an extension of the rule will apply to the Entity List. An outlook.
The 50% rule in US sanctions law includes indirect provisions and is the US equivalent of the ban on indirect provisions in EU sanctions regulations. Specifically, the 50% rule refers to companies that are not sanctioned themselves but are still subject to bans on indirect provisions if they are owned or controlled to 50% or more by a sanctioned entity. One characteristic of the application area of these bans on indirect provisions is that the affected entities themselves are not listed on sanctions lists.
The dilemma for companies is that a default screening of their business partner against relevant sanctions lists does not return any matches and they have no business relationships with the owners of their business partner that would in fact result in a match. Identifying bans on indirect provisions therefore always requires research concerning the ownership constellations behind the actual business partners.
Currently, the 50% rule applies to all sanctions programs of the US Specifically Designated Nationals List – in short, the SDN List. The SDN List is the US financial sanctions list and it is managed by the Department of the Treasury – Office of Foreign Assets Controls (OFAC). Only US companies are subject to fully comprehensive compliance with this list.
However, since a few sanctions programs in the SDN List also involve secondary sanctions, companies outside the US also check their business partners and their owners against the SDN List. This is based on the US understanding that secondary sanctions must be observed worldwide, and thus also by non-US companies. The 50% rule in the SDN List has a very limited application area for companies based outside of the US.
As an interim final rule, the “Affiliates Rule” by the US Bureau of Industry and Security (BIS) – often referred to as the BIS 50% rule” – has taken effect on September 29, 2025. But it was suspended shortly after, on November 10, 2025. At this point, BIS plans to add it back into the law on November 10, 2026.
The BIS Affiliates Rule applies to any entity that is owned to 50% or more (direct, indirect, or aggregate) by entities listed on the Entity List (EL), the Military End-User (MEU) List, or certain parties designated as Specially Designated Nationals (SDN).
The significance of the 50% rule for companies outside of the US will increase considerably when the new BIS rule takes effect – in particular the 50% rule application for the US Entity List. The EL is a list of extraterritorial US export control laws under the Export Administration Regulations (EAR), administered by BIS. The EAR apply worldwide to trade involving US products – and there are many of them in companies around the world.
The inclusion of the 50% rule in the US Entity List has been prepared by BIS in light of massive evasions of sanctions against Russia. Particularly in view of the good trade relations between China and Russia, the US wants to prevent US products from reaching Russia unnoticed via unlisted Chinese entities that are owned by sanctioned Chinese companies, research institutes, and universities.
A real-life use case: The Huawei Technologies Group has more than 200 locations around the globe that are listed on the EL. Due to the extraterritorial scope of the EAR, re-exporting US products to these worldwide locations that are explicitly mentioned is effectively prohibited. Given that there are many more Huawei locations than the ones that are explicitly listed and these locations are not subject to re-export bans without the new BIS 50% rule, it becomes clear that the US would like to close this gap.
The course of action planned by the US is perfectly understandable. However, including the 50% rule in the US Entity List will lead to a significant additional burden for companies outside of the US. All companies that have US products in their portfolio will have to check their re-exports against the EAR, which would include the 50% rule for non-listed business partners once the Affiliates Rule comes back into effect later this year.
In practice, this will lead to considerable difficulties simply because many companies do not even know which products fall within the scope of the EL as US products. At present, this is not causing any problems, as most business partners are checked against the Entity List regardless of US product considerations. If the screening returns a match, companies begin to consider the legal consequences of that match, which then also includes identifying the US product.
Once this procedure is applied to the US Entity List with a 50% rule, the ownership structures of all business partners will have to be determined and checked for a listing in the EL. The additional time and money required to do so would be immense.
While the new BIS Affiliates Rule is currently on hold, its suspension automatically reimposes the rule on November 10, 2026 – unless BIS takes any further regulatory action. We are following the developments and will keep you informed.
On the positive side, especially for companies would are looking to implement measures before the new effectiveness date of the Affiliates Rule, there is already help at hand: AEB’s Compliance Screening solution including the Dow Jones content enables companies to run automated, comprehensive due diligence screening to efficiently manage the new BIS 50% rule requirements.
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