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BIS Weighs the 50% Rule: Implications for Supply Chains and Third-Party Risk

Article - July 15, 2025

Executive Summary

The U.S. Government Bureau of Industry and Security (BIS) is proposing an expansion of its export regulations that will impact all supply chain and third-party risk professionals in the following ways:

  • Increased scope and responsibility for exporters: Currently BIS prohibits exports to over 10,000 international entities through its Entity, Military End User (MEU), Unverified lists, and more. The new regulation applies those same requirements to majority-owned subsidiaries of the named entities. 
  • Vastly expanded due diligence: Organizations must now look beyond direct counterparties and screen all upstream and downstream entities for restricted party ownership. 
  • Ownership of hidden risks at every tier: Sub-tier companies that previously escaped scrutiny will now be in scope, raising the risk of inadvertent violations. 
  • Increased complexity and cost: Manual review and public data are no longer sufficient to meet regulatory expectations. Exporters must do their own research to understand who the restricted subsidiaries are. 

Overview

BIS is drafting a new policy that would target majority-owned subsidiaries of companies on the BIS Entity List. The so-called “50% Rule” would, if implemented, result in thousands of companies around the world being subject to the new restrictions. It would require organizations to treat any entity as “controlled” by a restricted party if that restricted party owns, directly or indirectly, 50% or more of its shares or voting interests. This expands the scope of compliance obligations, especially for thousands of sub-tier suppliers, distributors, and other third parties who have not previously been subject to U.S. government restrictions.

Similar to the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) 50% Rule, BIS is not expected to publish and maintain a list of subsidiaries that meet the ownership threshold, which creates new compliance and supply chain due diligence requirements for industry.

The 50% Rule is a significant shift in U.S. export control policy — and will drastically shape how organizations screen and engage with third parties globally. The Rule addresses a longstanding perceived loophole in export controls: currently, subsidiaries of companies on the Entity List can still access technology, despite the inclusion of their parent company on the Entity List.

For example, the bipartisan U.S. Select Committee on China has repeatedly advocated for this policy as well. For many industries, particularly those that relate to dual-use technologies, the 50% Rule creates sudden and significant shifts in compliance obligations. The rule also creates significant new risk for sub-tier suppliers that may now be subject to U.S. government restrictions. 

Challenges

Navigating the new BIS 50% Rule requires companies to understand complex challenges and how to address them, including: 

  • Opaque ownership: Many high-risk entities, particularly in China, use shell companies and layered ownership structures to obscure beneficial ownership. 

  • Data gaps: Traditional watchlist screening tools often fail to capture non-listed subsidiaries or aggregate indirect ownership percentages at multiple levels. Stale data also prevents organizations from identifying the most up-to-date risks. 

  • Entity resolution: Traditional screening and monitoring tools often lack the sophistication needed to correctly identify high-risk entities and track changes to those entities in real-time. 

  • Supply chain risk: The need to identify newly designated risks hidden at any level of your supply chain.  

How Exiger Helps Identify Hidden Supply Chain Risk

The 1Exiger platform unlocks risks, exposures, and opportunities that remain invisible to traditional data providers or manual review. This technology enables faster, deeper, and more reliable insights with the most accurate data for our customers to: 

  • Map complex ownership networks across jurisdictions, revealing indirect or layered relationships. Algorithms quantify and verify direct and indirect ownership, automatically flagging cases where 50% or more control is established, even through complex corporate structures or nominee arrangements. 

  • Uncover Hidden Entities through proprietary entity and ownership data that map networks not visible through public registries or basic screening tools—enabling the discovery of restricted parties hidden multiple layers deep in the supply chain. 

  • Automatically screen and continuously monitor for changes in risk exposure across subsidiaries, suppliers, subcontractors, and customers—against the latest U.S. government lists and the 50% Rule standard, with automated updates constantly refreshing the data. 

Proactive Intelligence for the Most Critical Suppliers

Exiger Proactive Intelligence combines AI automation and human expertise to identify critical supply chain risks in the core companies that matter most to our customers. Instead of scanning millions of global businesses, Exiger focuses on high-impact risks by working with strategic leaders across industries. Proactive Intelligence detects real-time changes in risk from thousands of international watchlists, regulatory agencies, and millions of news sources — so customers stay ahead of emerging threats.

Supply chain monitoring, in real time

Questions? Contact us today to understand how we can help your organization remain compliant with the proposed 50% Rule.

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