The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has followed through on its long-threatened proposal to expand the Entity List to capture foreign subsidiaries and affiliates of listed companies. On September 29, 2025, BIS released an interim final rule (the September 29 IFR) announcing that BIS will adopt a similar approach to that currently used by the Treasury Department’s Office of Foreign Assets Control for its Specially Designated Nationals List restrictions and expand the scope of the Entity List, Military End User (MEU) List, and Section 744.8 restrictions to non-U.S. entities owned, directly or indirectly, and individually or in the aggregate, 50 percent or more by another party enumerated on an applicable list (such parties, a Foreign Affiliate). U.S. entities owned by a listed entity are not subject to the new restrictions.
This new rule will replace the current BIS rule, under which the Entity List or MEU List license requirement does not apply to “legally distinct” entities that are separately incorporated or otherwise legally distinct from a listed Entity List entity unless the entity acts as an agent, a front, or a shell company for the listed entity. The rule change is designed to reduce diversion risks by increasing the number of entities subject to applicable export restrictions, including for relevant products controlled under the Foreign Direct Product Rules. These changes align with the bolstered enforcement posture adopted by the U.S. government across various national security and trade regimes and the administration’s focus on strengthened diligence expectations for exporters as exemplified by a new “Red Flag” in BIS’s “Know Your Customer” guidance. Note that these rules are enforced as strict liability regimes, and knowledge of the recipient’s affiliation is not required for a violation to occur.
The interim final rule takes effect on September 29, 2025. The rule provides a temporary general license for 60 days (November 28, 2025) that permits continued exports, reexports, and transfers to newly restricted Foreign Affiliates as long as the Foreign Affiliates are currently unlisted and: (1) located in certain allied countries (a Country Group A:5 or A:6 country); or (2) located a country other than a sanctioned country or Syria (a Country Group E:1 or E:2 country) AND part of a joint venture with a U.S.-, Country Group A:5-, or Country Group A:6-headquartered entity that is not itself a listed Foreign Affiliate.
Key Takeaway
We recommend that companies ensure that their current screening processes cover the expansion of these lists. Some third-party screening providers include a 50 percent ownership screen as part of their offerings, but if your screening is currently based on the Consolidated Screening List provided by the U.S. government, you will need to incorporate additional screening to address this new rule. We also recommend screening current customers to ensure that no relationship needs to be terminated before the 60-day temporary general license expires.
BIS is welcoming public comments on the September 29 IFR through October 29, 2025.
Please reach out to Josephine Aiello LeBeau, Anne Seymour, Jahna Hartwig, Bryan Poellot, or another member of Wilson Sonsini’s National Security and Trade practice with questions regarding any of the matters discussed above.
