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Understanding the pending BIS 50% ownership rule

Date of Publication: July 24, 2025

Introduction

In today’s increasingly complex global trade landscape, regulatory requirements regarding ownership and control can have significant implications for businesses, investors, and compliance professionals. One of the most closely watched potential regulatory changes is the pending 50% ownership rule proposed by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). In June of this year, Tim Mooney, Acting Director of the BIS Regulatory Policy Division, confirmed that BIS is preparing to introduce a new rule that extends BIS trade restrictions to any subsidiary that is 50% or more owned by Entity List Companies, Military End User listed entities, or Specially Designated Nationals.
This article provides an overview of the pending BIS 50% ownership rule, its background, intended objectives, potential impacts, and key considerations for organizations navigating this evolving regulatory environment.

Background: The current BIS ownership rule

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is responsible for administering and enforcing export controls on dual-use items, commercial goods, and sensitive technologies. Under current BIS regulations, certain persons, entities, or countries are subject to restrictions or prohibitions on export, reexport, or transfer of controlled items.
A central concept in these regulations is the so-called “Entity List” and related lists, which designate individuals and organizations subject to export controls. Subsidiaries, joint ventures, or related entities that have not been specifically named can still engage in activities otherwise restricted for their listed parent companies.
Under the current BIS enforcement framework, subsidiaries of Entity List Companies must be added individually, creating enforcement delays that are ripe for exploitation by foreign adversaries and therefore harmful to national security.

The pending 50% ownership rule: What’s changing?

The pending BIS 50% ownership rule proposal seeks to expand and clarify how ownership and control are assessed for purposes of export controls, particularly with respect to entities owned or controlled by persons on the Entity List or other restricted parties. Generally, it mirrors the current policy used by the Office of Foreign Assets Control (OFAC).
Key details of the pending rule include
:
  • Aggregation of ownership
    : Rather than assessing 50% ownership by a single listed party, the rule would require aggregation of ownership interests held by multiple listed parties. For example, if two restricted parties each own 30% of an entity, their combined 60% stake would now trigger the 50% rule, even if neither party individually meets the ownership threshold.
  • Indirect ownership:
     The rule would clarify and potentially broaden the definition of indirect ownership, requiring scrutiny of complex ownership structures, subsidiaries, and affiliated entities.
  • Control and influence beyond equity:
     The BIS may also consider measures of control or influence that go beyond simple equity ownership, such as contractual rights, board representation, or other means by which restricted parties may direct an entity’s operations or policies.
  • Application to all entity lists:
     The expanded rule is expected to apply not only to the BIS Entity List, but potentially to other lists administered by the Department of Commerce, Treasury, and other agencies, creating a more harmonized approach to “ownership or control” standards across U.S. government export control regimes.
Statements made to date indicate that BIS intends to issue the rule as an interim final rule (IFR), with abbreviated comment procedures. This mechanism allows the rule to become effective immediately, while providing post-implementation public comment opportunities.

Objectives behind the pending rule

The main objectives behind the BIS’s pending 50% ownership rule are to:
  • Close loopholes:
     Prevent restricted parties from circumventing controls by distributing ownership shares among multiple related entities or individuals.
  • Enhance national security:
     Strengthen U.S. export controls to prevent sensitive technologies and goods from ultimately benefiting parties of concern, especially in the context of rapidly evolving threats and geopolitical rivalry.
  • Promote compliance consistency:
     Align the BIS’s ownership and control assessment with international best practices and other U.S. government agencies, simplifying compliance for businesses operating across multiple regulatory regimes.

Potential impacts for businesses

The pending 50% ownership rule would have far-reaching implications for both U.S. and non-U.S. businesses engaged in international trade, especially those operating in sectors subject to export controls, such as semiconductors, aerospace, telecommunications, and advanced manufacturing.
Key impacts include:
  • Due diligence obligations:
     Companies will need to conduct more thorough due diligence on their customers, suppliers, partners, and investments. This includes scrutinizing complex ownership structures and identifying all ultimate beneficial owners (UBOs) with direct or indirect ties to restricted parties. Screening based only on company names will no longer be sufficient.
  • Increased compliance costs:
     Enhanced due diligence and ongoing monitoring may require greater investment in compliance resources, technological tools, and third-party services.
  • Transaction delays or cancellations:
     The need to aggregate ownership stakes and investigate indirect control may slow down deal timelines or require businesses to abandon transactions that carry unacceptable compliance risks.
  • Global supply chain implications:
     The rule could affect entire supply chains, especially in industries where complex joint ventures or cross-border investments are common. Entities with partial restricted party ownership may find themselves subject to U.S. export controls or unable to access U.S.-origin goods, software, or technology.

Key compliance considerations

To prepare for the potential adoption of the pending 50% ownership rule, organizations should consider the following actions:
  • Assess ownership transparency:
     Map out ownership and control structures for all business partners, customers, and suppliers, including upstream and downstream entities.
  • Review contractual arrangements:
     Analyze contracts, shareholder agreements, and other instruments that could confer control or influence on restricted parties, even if formal equity ownership is below 50%.
  • Update screening protocols:
     Ensure that compliance systems and screening tools are capable of aggregating ownership interests across multiple restricted parties and flagging indirect control scenarios.
  • Enhance staff training:
     Provide regular training to compliance, legal, and sales teams on evolving regulatory requirements and the practical implications of the new rule.
  • Engage with legal counsel:
     Consult with specialized export control and trade compliance legal advisors, when appropriate, to interpret ambiguous situations and ensure operational resilience.

Challenges and areas of uncertainty

While the objectives of the pending rule are clear, several challenges and areas of uncertainty may complicate implementation:
  • Complex ownership structures:
     Global businesses frequently use layered ownership, holding companies, trusts, and joint ventures, making it difficult to untangle ultimate beneficial ownership and control.
  • Data availability
    : Information on private beneficial ownership is not always publicly available, particularly outside the United States, complicating due diligence efforts.
  • International regulatory divergence:
     Other jurisdictions may use different thresholds or aggregation methods, creating risk of conflicting compliance requirements for multinational enterprises.
  • Transition period:
     The rule may include a grace period for compliance or phased implementation, but the details remain to be determined.
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.

Preparing for the future

Organizations should stay abreast of BIS regulatory developments, monitor updates to the Federal Register, and participate in industry consultations or comment periods as appropriate. Early preparation will position businesses to confidently meet new compliance expectations, avoid costly enforcement actions, and maintain access to global markets.

Conclusion

The pending BIS 50% ownership rule represents a significant evolution in U.S. export control policy, closing loopholes and enhancing the government’s ability to safeguard sensitive technologies. By aggregating ownership interests and clarifying indirect control, the rule will require companies to adapt their compliance strategies and strengthen due diligence efforts. Staying informed, updating internal processes, and seeking expert guidance will be essential for navigating this new regulatory landscape and ensuring continued business success in a world of increasing scrutiny and interconnected risks.
For more information on how ONESOURCE Global Trade solutions can assist you in managing restricted party screening and export controls, contact your Account Manager or Customer Success Manager.