The BIS 50% Rule: A Coming Sea Change in the U.S. Export Enforcement

The U.S. government appears to be gearing up for a game-changing expansion in export control enforcement: applying a 50% ownership rule at the Bureau of Industry and Security (BIS), potentially as early as this month.

This rule would mirror a longstanding policy at the U.S. Treasury’s Office of Foreign Assets Control (OFAC, where sanctions automatically apply to entities owned 50% or more by one or more blocked parties. BIS, which enforces export controls and maintains the Entity List, currently does not apply such rules to subsidiaries — even those clearly majority-owned by blacklisted firms.

According to reporting from Bloomberg and comments from U.S. officials, this is about to change.

Why Now?

The core concern: technology diversion.

Companies like China-based Geovis Technology Co., Ltd., added to the Entity List in 2024 for supporting China’s controversial high-altitude balloon program, have continued operations via subsidiaries. In Geovis's case, its 65%-owned unit, Geovis Environment Technology Co., Ltd., has sold data services to military-linked institutions and suppliers.

Under current BIS rules, that subsidiary is untouched. The 50% rule would change that overnight.

What Would the Rule Do?

The rule would apply BIS trade restrictions to any subsidiary 50% or more owned by:

• Entity List companies
• Military End User (MEU) listed entities
• Specially Designated Nationals (SDNs)

This would effectively cut off subsidiaries that previously operated in gray zones and would significantly increase the number of entities needing export licenses or being blocked from receiving controlled U.S. technologies altogether.

Compliance & Enforcement Impact

Massive Increase in Screening Burden

Companies will need to trace ownership structures much more carefully, going beyond primary entity names and focusing on ultimate beneficial ownership. This goes far beyond traditional sanctions screening approaches and will demand layered investigations into corporate hierarchies.

Higher False Negatives If Systems Aren’t Updated

Without advanced tools, many compliance systems won’t catch these links, leading to inadvertent violations. Existing denied party list filters may not be sufficient unless paired with deeper analytics and ownership mapping.

Risk of Retaliatory Measures

China may counter with its own restrictions, potentially escalating tech tensions.

Increased Pressure on U.S. Companies Supplying Dual-Use Goods

Those exporting advanced tech or components (especially AI chips, aerospace, semiconductors, etc.) will see a jump in compliance workload. Precise name matching will become critical in ensuring that subsidiaries or affiliates do not slip through legacy compliance filters.

Expert Views

Matt Axelrod, former Assistant Secretary for Export Enforcement at BIS, recently shared that this has been “a debate internally for a while.” He described how frustrating it is that an entity-listed firm can easily spin up a new subsidiary that continues to receive sensitive tech unimpeded.

Yet he also noted that a broader application may cause BIS to be more cautious in new designations, especially where DOD or other government agencies rely on non-sanctioned divisions of listed companies.

What to Watch For

• The rule could drop in June (according to Bloomberg)
• Expect it to require significant interagency alignment
• Companies with exposure to China, AI, aerospace, or dual-use tech should prepare now

Summary

This 50% rule, if enacted, would close a major loophole — but open a new chapter in compliance complexity. Companies must now go beyond list-based screening. Deep network analysis, beneficial ownership tracing, and continuous monitoring are essential.

At a time when trade restrictions are being sharpened into strategic tools, the compliance bar is only rising.