The Department of Commerce's Bureau of Industry and Security (BIS) is tightening the screws on export controls with a new rule that’s ready to rattle some cages in international trade. Announced last Thursday, the rule targets corporate networks by expanding restrictions to affiliates of entities already on the hot-seat – namely the Entity List or the Military End-User (MEU) List. Now, if a company is at least 50 percent owned by one or more entities on these lists, it's automatically subject to the same stringent export license requirements. And for those keeping score at home, any significant minority ownership by an Entity or MEU List company is enough to raise a red flag, demanding additional due diligence according to the Bureau's release.
Jeffrey I. Kessler, the Under Secretary of Commerce for Industry and Security, didn't mince words when advocating for the new policy: “For too long, loopholes have enabled exports that undermine American national security and foreign policy interests. Under this Administration, BIS is closing the loopholes and ensuring that export controls work as intended.” These new controls come as a clear signal of the administration's intent to not only maintain but to significantly enhance the pressure on entities that could be playing fast and loose with U.S. national security or foreign policy interests, according to the same press release.
Previously, companies could skirt regulations if they were not specifically named on the Entity or MEU List, even when closely tied to restricted firms. That loophole is closing. Under the updated rules, affiliated companies are now subject to the same strict licensing standards, with applications generally reviewed under a presumption of denial—though businesses may still apply for a license.
Transparency and public feedback seem to be key for BIS right now. They're inviting comments on the new rule for the next 30 days after its publication in the Federal Register. However, the restrictions in the rule will be effective immediately, although with some mercy breathed into the transition. Exceptions will be available up to 60 days post-publication. For those with a keen eye for detail, the interim final rule titled "Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities" is available for review.
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