The Bureau of Industry and Security (BIS) is preparing a major regulatory update that could significantly reshape export compliance for U.S. companies. Tim Mooney, Acting Director of Regulatory Policy at BIS, has confirmed that a new “50% Rule” is in development, shifting enforcement from name-based to ownership-based restrictions, similar to the model used by the Office of Foreign Assets Control (OFAC).
What’s Changing?
Currently, Entity List restrictions apply only to explicitly named entities. This allows subsidiaries and affiliates to operate outside the scope of restrictions, even when controlled by listed entities.
The proposed “50% Rule” would close this loophole by extending restrictions to any entity owned 50% or more, directly or indirectly, by a listed party. This includes complex, multi-layered ownership structures, significantly increasing compliance complexity.
Why It Matters
BIS plans to issue the rule as an “interim final rule,” potentially bypassing the public comment period. This fast-tracked approach reflects the urgency of the change and could leave companies with limited time to adapt.
The rule is a response to concerns that current enforcement is too easily circumvented through opaque ownership structures and corporate restructuring.
Compliance Implications
Exporters must prepare for a shift from simple name-based screening to deep ownership analysis. Key actions include:
- Upgrade Compliance Programs: Integrate ownership-based screening into export workflows.
- Enhance Ownership Tracking: Identify ultimate beneficial owners and map indirect ownership chains.
- Improve Escalation Protocols: Ensure decision-makers have access to timely, accurate ownership data.
Recommended Next Steps
Export professionals should act now to prepare:
- Reassess Internal Compliance Frameworks – Update programs to reflect ownership-based restrictions and coordinate with freight forwarders.
- Strengthen Ownership Tracking Systems – Implement tools to identify and monitor beneficial ownership and layered control structures.
- Enhance Escalation Procedures – Ensure the right personnel have access to updated information and decision-making authority.