Although the Bureau of Industry and Security in FAQs this week suggested its new 50% rule applies only to ownership and not the control that a parent company may have over an affiliate, that doesn’t mean U.S. exporters should ignore an Entity Listed company’s controlling influence over an unlisted company, said Mike Huneke, a trade lawyer with Morgan Lewis.
Senate Banking Committee member Mark Warner, D-Va., urged the Bureau of Industry and Security on Sept. 30 to consider placing export controls on open-source technologies that could benefit China.
House Foreign Affairs Europe Subcommittee Chairman Keith Self, R-Texas, unveiled a bill Sept. 30 to codify a new interim final rule that will place subsidiaries on the Bureau of Industry and Security’s Entity List or Military End-User List if they are owned 50% or more by companies on those lists.
A Bureau of Industry and Security interim final rule that introduced a 50% ownership threshold rule for the Entity List and Military End-User List was released and effective Sept. 29 (see 2509290017).
The 60-day temporary general license in the Bureau of Industry and Security's new 50% rule (see 2509290017) is “very limited” and could push exporters to apply for licenses “on an expedited basis to avoid noncompliance,” Morgan Lewis said in a client alert.
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The Bureau of Industry and Security's new 50% rule only applies to ownership, not the “control” that a parent company may have over an affiliate, the agency said in new FAQs. Other FAQs stress that the government’s Consolidated Screening List is no longer exhaustive, clarify how license exceptions may apply to unlisted affiliates, explain how BIS will determine whether a U.S. exporter has “knowledge” that a listed entity owns part of a non-listed foreign affiliate, and more.
China's Ministry of Commerce this week criticized the Bureau of Industry and Security's new rule that introduced a 50% ownership threshold rule for the Entity List and Military End-User List (see 2509290017), saying the measure is "extremely egregious," "severely" damages the rights of affected companies and undermines global supply chains.
A new interim final rule released by the Bureau of Industry and Security this week introduces a 50% ownership threshold rule for the Entity List and Military End-User List, a change that’s expected to drastically increase the number of companies subject to stringent export licensing restrictions. BIS also is adopting the rule, which it calls the “Affiliates rule,” for export transactions involving certain parties sanctioned by the Office of Foreign Assets Control, which BIS said will “align more closely” OFAC’s 50% rule with the new restrictions under the Export Administration Regulations.
The Bureau of Industry and Security officially released a new regulation to introduce a 50% ownership threshold rule for parties on the Entity List and Military End-User List. The interim final rule, released and effective Sept. 29, will impose the same export license requirements as the parent company for any affiliate owned 50% or more by a party on the Entity List or Military End User List, similar to how sanctions are applied under the Office of Foreign Asset Control's 50% rule. The rule includes a 60-day temporary general license that “permits certain export, reexport, and transfer (in-country) transactions involving non-listed 50-percent or more owned foreign affiliates of parties on the Entity List or Military End-User List.” BIS is accepting public comments on the changes by Oct. 30.