The BIS 50% Affiliates Rule: Why the One-Year Pause Is a Diplomatic Win but a Compliance Wake-Up Call

On October 30, 2025, Washington and Beijing announced a breakthrough following high-level trade negotiations. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) revealed a one-year suspension of the 50% Affiliates Rule. This regulation expands export control restrictions to any entity majority owned (directly or indirectly) by parties on the Entity List, Military End User (MEU) List, or certain Specially Designated Nationals (SDNs) according to the Export Administration Regulations (EAR).

This decision followed days of discussions and growing concerns about the rule’s potential consequences for global supply chains. In return for the U.S. suspension, China agreed to temporarily halt its own new export licensing requirements on rare earth minerals, which are critical for semiconductor manufacturing and defense technologies. The diplomatic outcome hints at a period of eased trade tensions, but the compliance implications are far from simple.

Understanding the BIS 50% Affiliates Rule

BIS released the Interim Final Rule on September 29, 2025. The purpose was to close loopholes that let restricted entities route U.S.-controlled items through subsidiaries or affiliates, even if the parent company itself was blacklisted. The rule mirrors the longstanding OFAC 50 Percent Rule used by Treasury for sanctions compliance, bringing export controls in line with higher transparency standards. For any company with complex or multinational beneficial ownership, this raised the bar for due diligence and control.

Why Did the Rule Pause?

The decision to pause the rule’s enforcement reflects both regulatory realism and diplomatic strategy. Analysts project that a strict global application would have swelled the count of impacted Chinese entities from roughly 1,300 to over 20,000. The resulting disruption threatened core industries in both countries. The suspension functions as a cooling-off period, providing all parties an opportunity to adjust without locking in any long-term reversals. The official suspension period begins November 10, 2025, and ends November 9, 2026. BIS has confirmed that unless a policy shift is announced, the rule will return as written the following day.

Not Just About China

Early media coverage speculated that the pause was limited to China. BIS clarified through its official guidance that the suspension is global, applying to all amendments made by the 50% Affiliates Rule, regardless of geography or industry. This ensures exporters around the world benefit from the pause and equally share the responsibility to prepare for full enforcement’s return.

Implications for Exporters and Compliance Teams

The delay offers a brief reprieve, not a full escape. Exporters and importers must use the time to modernize compliance systems, update screening and beneficial ownership mapping, and ensure readiness for November 2026. BIS estimates a temporary reduction of export license applications by approximately 245 filings during this window, but expects a sharp increase when the rule is reinstated.

Key points to consider:

• Brief reduction in export license processing delays

• Additional time to update ownership screening and compliance systems

• Opportunity to align beneficial ownership data with new regulatory requirements

• Continued obligation to plan for enforcement and documentation standards

Compliance Risks Remain

Even with a temporary suspension, the focus on risk management and diligence remains strong. Regulatory authorities are pushing for more transparency and accountability across global supply chains. These are the four most relevant risk areas:

1. Due diligence standards keep rising as ownership tracing becomes central to regulatory enforcement beyond direct counterparties.

2. Export licensing complexity continues to increase with new entities added to the lists, demanding strong license management.

3. Expectations for documentation and audit readiness have become stricter.

4. Businesses reliant on manual or siloed compliance processes face greater operational risk from regulatory changes.

Preparation During the Pause

Trade compliance professionals should view the next 12 months as time to enhance preparedness. Immediate steps include:

• Monitoring BIS advisories and interpretive releases

• Assessing gaps in ownership visibility across all entities

• Evaluating screening tools and solutions for indirect and aggregated ownership

• Strengthening audit documentation processes and escalation protocols

• Training staff on beneficial ownership risks and screening responses

• Anticipating increased license applications and enforcement after the rule returns

The Bottom Line

The BIS 50% Affiliates Rule underscores that export controls are now closely tied to both international diplomacy and compliance best practices. The one-year suspension offers a welcome diplomatic reprieve, but it also serves as a warning. Companies that take this as a period of preparation rather than relaxation will be best positioned to comply and succeed in the changing regulatory landscape. Ownership transparency, rigorous screening, and strong compliance practices are not passing trends; they are the new baseline for global trade.

Let this pause serve as your strategic planning period. The rule will return, and compliance will be more important than ever.

Target Audience:

• Corporate compliance officers and export control managers at multinational firms

• Trade lawyers and in-house legal teams advising on U.S. and global regulations

• Supply chain managers overseeing international operations

• Regulatory consultants and auditors specializing in sanctions, EAR, or OFAC compliance

• Government and public policy advisors tracking trade negotiations and regulatory changes