BIS Official Confirms Agency Is Working on 50% Rule for Entity List
The Bureau of Industry and Security is drafting a new regulation that could create a 50%-ownership threshold rule for parties on the Entity List, a BIS official said this week.
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The agency is “definitely looking at” that, said Tim Mooney, acting director of the BIS Regulatory Policy Division. Mooney declined to describe the rule in detail, but he acknowledged it could apply stringent U.S. export license requirements to subsidiaries of certain parties on the Entity List.
It also could be issued as an interim final rule, according to two people familiar with the matter, which could mean an abbreviated public comment period before the changes take effect (see 2505190014).
“We definitely have looked at that,” Mooney said during a June 10 Regulations and Procedures Technical Advisory Committee meeting. “We do have a draft rule. It hasn’t been published yet, of course. But we do have a draft rule.”
An Entity List 50% rule -- a rule the Office of Foreign Assets Control uses to impose sanctions on any entity owned 50% or more by a sanctioned entity on OFAC's Specially Designated Nationals List (see 2504100036) -- was floated in April by Landon Heid, President Donald Trump’s nominee to be assistant secretary of commerce for export administration (see 2504100036).
Mooney said BIS previously has received questions about possibly adopting a 50% rule, including after it recently added new export license requirements for people and entities designated under certain Treasury Department sanctions programs (see 2403200036).
He said there are “arguments to be made on both sides” for whether to adopt a 50% rule (see 2505280038). Mooney noted that some Entity Listed companies have been able to evade license restrictions by creating a front company with a different name.
“One of the challenges that we've had historically, definitely, is this whole 'Whac-A-Mole' problem, because you put one on the Entity List, and then they just create a new wholly owned subsidiary,” Mooney said. “It's like, ‘oh, shoot, we've got to do another rule to add them and then another rule to add them.’ So it does create a lot of additional regulatory activity.”
He added that BIS “definitely has been closely evaluating and determining what's the best approach to protect U.S. national security.”