EXPORT CONTROLS | 2026-09-18

The BIS Affiliates Rule Is Scheduled to Return on November 10, 2026: What California Exporters Should Have Finished by Then

Commerce suspended its 50 percent ownership rule for one year as part of a trade understanding with China. That suspension runs out in November 2026, and the diligence it requires cannot be built in a week.

In September 2025 the Bureau of Industry and Security extended Entity List and Military End User restrictions to any company 50 percent or more owned by listed parties. Six weeks later it suspended the rule for a year. That suspension is scheduled to expire on November 9, 2026, with the rule returning November 10 unless Commerce extends or amends it. Companies that treated the suspension as a cancellation have roughly seven weeks to build a screening capability that most did not have in 2025.

The Date to Put on the Calendar

On September 29, 2025, the Bureau of Industry and Security's interim final rule commonly called the "Affiliates Rule" — or the 50 percent rule — took effect. It extended Export Administration Regulations licensing requirements from listed parties to the companies those parties own.

Six weeks later BIS suspended it. A Federal Register notice titled "One Year Suspension of Expansion of End-User Controls for Affiliates of Certain Listed Entities," published November 12, 2025, suspended the expansion for one year effective November 10, 2025, in connection with a broader trade understanding reached between the United States and China. The suspension runs through November 9, 2026.

Absent an extension or amendment by Commerce, the Affiliates Rule returns on November 10, 2026. Whether it in fact returns on schedule is a policy question no one can answer with confidence, and that uncertainty is itself an argument for preparing: a company that builds the capability and does not need it has lost some effort, while a company that does not build it and needs it is out of compliance from day one.

What the Affiliates Rule Actually Does

The rule addresses a structural weakness in list-based controls. Restrictions attach to named parties. A named party can form, acquire, or route transactions through subsidiaries that are not themselves named, and the restriction does not follow — unless a rule makes it follow.

The Affiliates Rule makes it follow. A foreign entity that is 50 percent or more owned, directly or indirectly, by one or more designated parties becomes subject to the same license requirements as its owners, without appearing on any list by name. License applications for covered affiliates face a presumption of denial, consistent with the treatment of the listed parents.

The designations that trigger the rule center on the Entity List and the Military End User List, along with certain other designated-party categories. The restriction is inherited automatically by operation of the ownership test rather than by publication of a name.

Aggregation Is the Part That Breaks Screening Programs

The single most demanding feature of the rule is that ownership aggregates. The 50 percent threshold is measured by the combined direct and indirect holdings of all designated parties — even where those owners are unrelated to one another, are not acting in concert, and appear on different lists.

Consider a supplier in which two separate listed entities each hold 30 percent. Neither holding crosses 50 percent. Screening each owner individually returns nothing. In aggregate the holdings total 60 percent, and the supplier is covered.

Conventional restricted-party screening does not detect this. It compares counterparty names against lists; it does not resolve beneficial ownership, trace indirect holdings through intermediate entities, or sum the interests of unrelated designated owners. The capability the rule demands is ownership research, and most compliance programs — including well-run ones — were not built to do it.

What the Suspension Did Not Do

The suspension pauses the expansion of end-user controls to affiliates. It does not relax anything else.

Listed parties remain listed and remain subject to their existing license requirements. General EAR obligations continue: classification, end-use and end-user diligence, the prohibition on proceeding in the face of red flags, and the rules on deemed exports of controlled technology to foreign nationals within the United States. Enforcement of those obligations has not slowed.

A company that read the suspension as a general easing of export controls misread it. The suspension is narrow, time-limited, and tied to a diplomatic arrangement that could change.

Building the Capability Before November

The work divides into a few concrete tasks.

Identify the population that matters. Not every counterparty warrants ownership research. Start with foreign customers, distributors, end users, and suppliers touching controlled items, technology, or software — and with jurisdictions where designated ownership is most likely.

Obtain ownership data, not just names. Determine whether the screening tools in use return beneficial ownership and indirect holdings, or only name matches. If only name matches, the gap needs to be filled before November, whether through a different provider or through documented direct inquiry.

Decide how to handle unknowns. Ownership will sometimes be genuinely undeterminable. Establish in advance what the company does in that situation — proceed with documented diligence, seek a license, or decline — and apply it consistently. An ad hoc answer under commercial pressure tends to become the wrong answer.

Update contracts. Ownership representations, notice obligations on ownership change, audit rights, and termination rights are considerably easier to negotiate now than during a renewal cycle after the rule returns.

Re-screen the existing book. The rule reaches ongoing relationships, not only new ones. A counterparty onboarded in 2024 may be covered in November 2026 without anything about the relationship having changed.

Write down what was done. In an enforcement posture, the difference between a violation and a defensible position is frequently the contemporaneous record of diligence.

Who This Reaches in California

The rule reaches further into California's economy than "exporter" suggests. Semiconductor and equipment suppliers, electronics and instrumentation manufacturers, aerospace and defense suppliers, life-sciences and laboratory-equipment companies, and software and technology firms transferring controlled technology all sit within its scope.

The deemed export dimension deserves particular attention. Releasing controlled technology or source code to a foreign national inside the United States is treated as an export to that person's country. For companies with international research staff, an ownership rule that changes which parties are restricted can change which internal releases require authorization — a compliance question that lives in human resources and engineering management as much as in trade compliance.

How Trembach Law Helps

Trembach Law advises exporters, manufacturers, and technology companies on Export Administration Regulations compliance — classification and jurisdiction analysis, restricted party and ownership screening design, Entity List and Military End User questions, license applications, deemed export issues, internal investigations, and voluntary self-disclosures. Attorney Anatolii Trembach is admitted to practice before the U.S. Court of International Trade and advises on export controls alongside customs and tariff matters, so companies facing both sets of obligations work with a single adviser.

The firm is based in Calabasas, serves companies throughout Southern California and the Bay Area, and represents exporters nationwide.

This article is for general information and is not legal advice. Whether a particular transaction or counterparty is subject to a license requirement depends on specific facts, and no outcome is guaranteed.

Contact Trembach Law Firm at (818) 514-7680 for a confidential consultation.

Trembach Law Firm | 27001 Agoura Road, Suite 350, Calabasas, CA 91301