Overview
On June 10, 2025, Tim Mooney, Acting Director of the Bureau of Industry and Security’s Regulatory Policy Division, Department of Commerce, confirmed that BIS is preparing to introduce a new rule that will extend 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. Previously, Landon Heid, President’s Trump’s nominee to be Assistant Secretary of Commerce for Export Administration, characterized the new rule as “a simple fix you could do relatively quickly” during his April 10, 2025, confirmation hearing before the Senate Banking Committee, indicating “[t]hese are the kind of things we're gonna be talking about and moving very quickly on to solve”.
Heid’s comments, as well as later statements made by Mooney, also 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. Recent precedents demonstrate BIS's frequent use of IFRs for urgent national security measures, including the October 2022 advanced computing controls on semiconductor exports to China and the 2019 Huawei Entity List addition that simultaneously added 68 non-U.S. affiliates.
The new rule would close a significant export enforcement gap by mirroring Treasury's Office of Foreign Assets Control (OFAC) 50% rule which automatically extends sanctions beyond specifically designated entities to their subsidiaries. There is no requirement for OFAC to specifically designate the subsidiary; if the ownership threshold is met, the entity is blocked by operation of law. Conversely, 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 new rule comes amid escalating efforts in both Washington and Beijing to impose further control over their respective high-tech industries as they race to assert global dominance in emerging technologies like AI. In late May, the Trump administration built upon past export controls by revoking licenses from a broad swathe of companies shipping design software and chemicals for semiconductors, butane and ethane, machine tools, and aviation equipment to China. The effort—built upon by this most recent move by BIS—is part of an effort to deny Beijing the resources to accelerate the high-tech sectors in its military-civil fusion policy. There are anxieties in both capitals that advancements in high-tech industries could tip the balance in their ongoing strategic competition.
Given the high likelihood of near-term implementation of the rule in 2025, US companies conducting business operations relating to semi-conductors, AI and other advanced technologies, as well as aerospace and dual-use technologies, should take steps now to prepare for a significantly more complex compliance environment. The new rule will fundamentally alter how export controls apply to corporate structures and require comprehensive compliance program overhauls across affected industries. Comprehensive ownership mapping will be required to identify ultimate beneficial ownership through multiple tiers of corporate structures, not just direct ownership percentages. Current internal procedures, training materials, and decision-making workflows of established export compliance programs must be revised to account for the new subsidiary-level restrictions. Given the significant criminal and civil penalties for violations of BIS export control rules, US companies are strongly encouraged to immediately consult with export control counsel experienced with BIS enforcement and Entity List matters to be prepared for this historic increase in export compliance obligations.
