From Sanctions to Export Controls: The OFAC 50% Rule vs. BIS 50% Rule

Article

September 30, 2025

Kit

Conklin

Senior Vice President, Risk & Compliance

Executive Summary

The U.S. government has adopted the BIS 50% Rule, extending export control restrictions to any entity 50% or more owned by one or more parties on the BIS Entity List — even if not explicitly named. This aligns export control enforcement with the sanctions framework long used by OFAC. The following compares the two frameworks and highlights the urgent compliance steps companies should take now.

In September 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) formally published its new 50% or “Affiliate” Rule. This marks a major expansion of export control obligations, borrowing directly from the logic of the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) 50% Rule but applying it to export restrictions. For global companies, this is a pivotal moment: ownership structures now matter as much as name-based screening when it comes to both sanctions and export controls.

Here is a breakdown between the two rules.

OFAC 50% Rule - The Sanctions Standard

Scope: Any entity owned 50% or more, directly or indirectly, in the aggregate by one or more blocked persons is treated as though it is itself blocked.
Application: Even if not explicitly named on the SDN List, the entity is automatically off-limits.
Aggregation: Shares owned by multiple blocked parties are combined to reach the 50% threshold.
Impact: Transactions, services, or dealings with these entities are prohibited unless licensed.

This rule has been the cornerstone of sanctions compliance for over a decade, ensuring that U.S. sanctions cannot be easily bypassed through shell companies or opaque subsidiaries.

BIS’s Newly Published 50% Affiliate Rule - The Export Control Shift

Scope: As of September 29, 2025, any entity that is 50% or more owned, directly or indirectly, by one or more parties on BIS restricted lists (e.g., Entity List, Military End User List) is now automatically subject to the same export licensing restrictions as its listed parent(s).
Automatic effect: Companies no longer need to wait for BIS to name an affiliate or subsidiary – the restriction applies the moment the ownership threshold is met.
Aggregation: Multiple restricted owners’ stakes are added together to determine if the 50% threshold is crossed.
Impact: Thousands of affiliates and subsidiaries worldwide may now be covered, particularly in advanced technology, defense, semiconductors, and dual-use sectors.

This rule closes a longstanding “loophole” that allowed restricted parties to continue accessing U.S. technology through majority-owned affiliates.

Side-by-Side: OFAC 50% Rule vs. BIS 50% Rule

Feature	OFAC 50% Rule	BIS 50% Affiliate Rule
Domain	Sanctions law	Export control law
Trigger	50%+ ownership by blocked persons	50%+ ownership by BIS-listed entities
Effect	Entity treated as blocked; all transactions prohibited	Entity treated as restricted; export licenses required / often denied
Aggregation	Yes	Yes
Status	Long-established	New as of Sept. 29, 2025

What This Means for You

Expanded risk universe: Entire networks of subsidiaries are now automatically restricted.
Ownership tracing required: Compliance teams must map indirect and aggregate ownership, not just check names against lists.
Systems upgrade: Screening and risk tools must account for ownership logic under both OFAC and BIS.
Immediate action: Companies should begin identifying counterparties that fall under the new BIS rule to avoid unlawful exports.

Key Takeaway

The BIS 50% Rule fundamentally shifts export compliance from a name-based to an ownership-based regime — aligning export controls with sanctions logic but vastly expanding the set of entities that are restricted.