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Rule2025-19001

Expansion of End-User Controls To Cover Affiliates of Certain Listed Entities

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Published

September 30, 2025

Effective

September 29, 2025

Issuing agencies

Commerce DepartmentIndustry and Security Bureau

Abstract

In this interim final rule (IFR), the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to address diversion concerns involving entities on the Entity List and certain other restricted end users. Under this IFR, any entity that is at least 50 percent owned by one or more entities on the Entity List will itself automatically be subject to Entity List restrictions. This is a marked improvement over the current standard, which excludes all entities that are not specifically included on the Entity List, regardless of affiliation with Entity List entities. This IFR similarly applies restrictions to entities at least 50 percent owned by listed `military end users' and certain sanctioned parties. The 50 percent ownership standard in this IFR is designed to be consistent with longstanding Department of the Treasury practice, so as to limit the additional burden on the business community.

Full Text

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<title>Federal Register, Volume 90 Issue 187 (Tuesday, September 30, 2025)</title>
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[Federal Register Volume 90, Number 187 (Tuesday, September 30, 2025)]
[Rules and Regulations]
[Pages 47201-47214]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19001]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 732, 734, 736, 744, and 748

[Docket No. 250509-0083]
RIN 0694-AK11

Expansion of End-User Controls To Cover Affiliates of Certain
Listed Entities

AGENCY: Bureau of Industry and Security, Department of Commerce.

ACTION: Interim final rule.

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SUMMARY: In this interim final rule (IFR), the Bureau of Industry and
Security (BIS) amends the Export Administration Regulations (EAR) to
address diversion concerns involving entities on the Entity List and
certain other restricted end users. Under this IFR, any entity that is
at least 50 percent owned by one or more entities on the Entity List
will itself automatically be subject to Entity List restrictions. This
is a marked improvement over the current standard, which excludes all
entities that are not specifically included on the Entity List,
regardless of affiliation with Entity List entities. This IFR similarly
applies restrictions to entities at least 50 percent owned by listed
`military end users' and certain sanctioned parties. The 50 percent
ownership standard in this IFR is designed to be consistent with
longstanding Department of the Treasury practice, so as to limit the
additional burden on the business community.

DATES:
<bullet> Effective date: This rule is effective September 29, 2025.
<bullet> Modification request date: Non-listed foreign affiliates
of listed entities, regardless of the foreign country where they are
located, that are subject to restrictions under the Affiliates rule
based on ownership by an Entity List party or Military End User may
request modification of the relevant entry following the process in
Sec. 744.16(e) or Sec. 744.21(b)(2) at any time on or after September
29, 2025.
<bullet> Temporary General License (TGL) validity date. General
Order No. 7, TGL--Non-listed foreign affiliates of listed entities,
which 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, as
specified in supplement no. 1 to part 736 under paragraph (g). This TGL
expires on November 28, 2025.
<bullet> Comment date: Comments must be received by BIS no later
than October 29, 2025.

ADDRESSES: Comments on this rule may be submitted to the Federal
rulemaking portal at: <a href="http://www.regulations.gov">www.regulations.gov</a>. The <a href="http://regulations.gov">regulations.gov</a> ID for
this rule is: BIS-2025-0017. Please refer to RIN 0694-AK11 in all
comments.
All filers using the portal should use the name of the person or
entity submitting the comments as the name of their files, in
accordance with the instructions below. Anyone submitting business
confidential information should clearly identify the business
confidential portion at the time of submission, file a statement
justifying nondisclosure and referring to the specific legal authority
claimed, and provide a non-confidential version of the submission.
For comments submitted electronically containing business
confidential information, the file name of the business confidential
version should begin with the characters ``BC.'' Any page containing
business confidential information must be clearly marked ``BUSINESS
CONFIDENTIAL'' on the top of that page. The corresponding non-
confidential version of those comments must be clearly marked
``PUBLIC.'' The file name of the non-confidential version should begin
with the character ``P.'' Any submissions with file names that do not
begin with either a ``BC'' or a ``P'' will be assumed to be public and
will be made publicly available at: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Commenters submitting business confidential information are encouraged
to scan a hard copy of the non-confidential version to create an image
of the file, rather than submitting a digital copy with redactions
applied, to avoid inadvertent redaction errors which could enable the
public to read business confidential information.

FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee,
Office of the Assistant Secretary for Export Administration, Bureau of
Industry and Security, Department of Commerce, Phone: (202) 482-5991,
Email: <a href="/cdn-cgi/l/email-protection#a7e2f5e4e7c5ced489c3c8c489c0c8d1"><span class="__cf_email__" data-cfemail="4e0b1c0d0e2c273d602a212d60292138">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Entity List

The Entity List (supplement no. 4 to part 744 of the EAR (15 CFR
parts 730-774)) identifies entities for which there is reasonable cause
to believe, based on specific and articulable facts, that the entities
have been involved, are involved, or pose a significant risk of being
or becoming involved in activities contrary to the national security or
foreign policy interests of the United States, pursuant to Sec.
744.11. The EAR impose additional license requirements on, and limit
the availability of most license exceptions for, exports, reexports,
and transfers (in-country) when a listed entity is a party to the
transaction. The license review policy for each listed entity is
identified in the ``License Review Policy'' column on the Entity List,
and the impact on the availability of license exceptions is described
in the relevant Federal Register rule that added the entity to the
Entity List. BIS places entities on the Entity List pursuant to parts
744 (Control Policy: End-User and End-Use Based) and 746 (Embargoes and
Other Special Controls) of the EAR.
The End-User Review Committee (ERC), composed of representatives of
the Departments of Commerce (Chair), Defense, Energy, State and, where
appropriate, the Treasury, generally makes decisions regarding
additions to, removals from, or other modifications to the Entity List.
The ERC makes decisions to add an entry to the Entity List by majority
vote and makes

[[Page 47202]]

decisions to remove or modify an entry by unanimous vote.

B. Scope of Entries Listed on the Entity List

1. Entity List Legally Distinct Standard
Prior to this IFR, BIS used a `legally distinct' standard for
applying restrictions to subsidiaries and other foreign affiliates of
entities identified on the Entity List. Under this standard, Entity
List restrictions for listed entities have extended to the foreign
entity listed on the Entity List, as well as any related foreign entity
located in that same country that is not legally distinct from the
listed foreign entity. For example, a branch of a listed entity, even
if operating under a different name, was considered to be subject to
Entity List restrictions, because the branch is not legally distinct
from the listed entity. Conversely, the Entity List requirements for a
listed entity did not extend to a foreign affiliate owned by a listed
entity that was legally distinct from the listed entity, unless BIS
separately listed that legally distinct foreign affiliate on the Entity
List.
BIS is concerned that the old approach can enable diversionary
schemes, such as the creation of new foreign companies to evade Entity
List restrictions. Creation of such companies may allow listed entities
to deceive exporters, reexporters, and transferors into providing items
in violation of the Entity List restrictions that apply to the listed
entities. Furthermore, the old approach required BIS to expend
substantial efforts to address the tactics that listed entities would
adopt to circumvent their placement on the Entity List. BIS frequently
published additional final rules to identify legally distinct foreign
affiliates of listed entities that also warranted being listed on the
Entity List. Even with these additions, there remained a risk that
entities would create additional non-listed foreign companies to try to
circumvent the intent of the controls. The creation of such new foreign
companies would in turn require BIS to devote significant additional
time and resources to issuing rules adding them to the Entity List.
With this IFR, BIS is reducing future piecemeal regulatory activity to
expand Entity List restrictions.
Because of such diversion concerns, BIS has determined that to
protect U.S. national security and foreign policy interests, the Entity
List restrictions should also extend to certain foreign companies that
are subsidiaries or other foreign affiliates owned by listed entities.
2. The 50 Percent Ownership Rule
The Department of the Treasury's Office of Foreign Assets Control
(OFAC) uses a 50 percent ownership rule in connection with the
Specially Designed Nationals and Blocked Persons List (SDN List) and
may also apply the 50 percent rule when issuing other sanctions
prohibitions, including less than full blocking restrictions. Sanctions
maintained by OFAC prohibit all transactions by U.S. persons, wherever
they are located, or within (or transiting) the United States that
involve any property or interests in property of designated or
otherwise blocked persons, unless authorized by a general or specific
license issued by OFAC or exempt under OFAC's regulations. All property
and interests in property of blocked persons that are in the United
States or in the possession or control of U.S. persons may not be
transferred or otherwise dealt in and must be reported to OFAC. Under
the 50 percent rule, entities which are owned 50 percent or more,
directly or indirectly, individually or in aggregate, by one or more
blocked persons are generally considered blocked, regardless of whether
such entities are specifically added to the SDN List.
OFAC's 50 percent rule addresses, among other objectives, threats
of circumvention through unlisted subsidiaries while reducing the
administrative burden associated with adding subsidiaries to the SDN
List. Similar to OFAC, BIS in this IFR is applying the 50 percent rule
under the EAR to address diversionary/circumvention tactics/risks (as
described in section I.B.1) and address interest in reducing
administrative burdens. BIS has determined that applying the 50 percent
rule under the EAR (which BIS refers to as the Affiliates rule) will
reduce the need to publish additional final rules to add entities to
the Entity List and more broadly and effectively impose license
requirements for exports, reexports, and transfers (in-country) to or
involving entities that pose a significant risk of being or becoming
involved in activities that are contrary to the national security or
foreign policy interests of the United States.
BIS recognizes that its own application of the Affiliates rule may
require additional analysis by the private sector (e.g., exporters,
reexporters, or transferors) in order to comply. The private sector
should already be undertaking this analysis as part of a risk-based
approach under OFAC prohibitions to reduce their risk of liability for
dealings with blocked persons who are subject to OFAC's 50 percent
rule. BIS anticipates that this experience in complying with OFAC's 50
percent rule should ease the transition for parties in complying with
the requirements that this IFR adds to the EAR by adopting an
Affiliates rule. Applying the Affiliates rule may take more time and
compliance resources compared to simply screening a list for identified
names, especially in situations where limited information on corporate
ownership structures is publicly available, such as where a listed
entity is privately held. Adopting the Affiliates rule will also mean
that the Consolidated Screening List (CSL) will no longer comprise an
exhaustive listing of foreign entities subject to Entity List license
requirements, because the CSL will only include the entities listed on
the Entity List and will not reflect these additional foreign
affiliates of listed entities that are owned 50 percent or more by one
or more listed entities.
There are various private sector screening resources for companies
that may help to mitigate this challenge, including vendors that
conduct 50 percent ownership analysis already as part of their OFAC
compliance screening programs. OFAC also provides guidance regarding
certain entities that may be blocked pursuant to the 50 percent rule to
facilitate compliance, though this does not replace the need for
independent compliance screening or due diligence. BIS may follow
OFAC's practice of providing guidance regarding certain entities that
may be subject to the Affiliates rule to facilitate compliance. To
further support compliance, BIS may in certain circumstances add those
additional entities to the Entity List.
3. Protecting U.S. National Security and Foreign Policy Interests
Necessitates Adoption of the Affiliates Rule, or a Stricter Rule, for
the Entity List
The Entity List has increasingly become a vital tool to protect
U.S. national security and foreign policy interests. The Entity List
was originally added to the EAR on February 3, 1997, to address nuclear
proliferation concerns (62 FR 4910). The scope of the Entity List has
been broadened over the years, e.g., with the addition of Sec. 744.11
(establishing listing criteria and related procedures) and certain
Entity List Foreign Direct Product (FDP) rules (Sec. 734.9(e) and
(g)), to better take into account all entities that may be involved in
activities that are contrary to U.S. national security or foreign
policy interests. BIS, in consultation with the Departments of Defense,
Energy, State,

[[Page 47203]]

and the Treasury, has determined that the legally distinct standard,
which also relied on exporters, reexporters, and transferors practicing
sufficient due diligence when dealing with legally distinct entities
that were foreign affiliates of listed entities, is not sufficient to
adequately protect U.S. national security or foreign policy interests.
In order for Entity List restrictions to effectively protect U.S.
national security and foreign policy interests, the restrictions must
also extend to foreign affiliates that are owned, directly or
indirectly, by one or more listed entities to prevent diversion to
listed entities of concern.
BIS, in consultation with the Departments of Defense, Energy,
State, and the Treasury, is adopting for the Entity List the 50 percent
rule that OFAC has used for many years for the SDN List, which for EAR
purposes will be referred to as the Affiliates rule. Adopting the same
standard that exporters, reexporters, and transferors have already been
using in their OFAC compliance programs will likely ease the burden in
adopting the new standard for Entity List compliance, as compared with
a distinct standard that applies a lower ownership threshold.
Additionally, this IFR does not constrain the ERC's ability to add an
affiliated entity that is under the 50 percent threshold when the ERC
has reasonable cause to believe, based on specific and articulable
facts, that the foreign entity has been involved, is involved, or poses
a significant risk of being or becoming involved in activities contrary
to the national security or foreign policy interests of the United
States, pursuant to Sec. 744.11(b). Even so, BIS welcomes comments on
whether the 50 percent ownership threshold should be lower.
For the same reasons as noted above, BIS, in consultation with the
Departments of Defense, Energy, State, and the Treasury, is also
adopting the Affiliates rule at this time for the `Military End-User'
(MEU) List in supplement no. 7 to part 744. Extending the Affiliates
rule to the MEU List is consistent with prior BIS proposals to align
the MEU List and the Entity List, including by potentially merging the
two lists and expanding license requirements for MEUs, that are under
review (see the July 29, 2024 proposed rule, End-Use and End-User Based
Export Controls, Including U.S. Persons Activities Controls: Military
and Intelligence End Uses and End Users, 89 FR 60985). BIS is also
adopting the Affiliates rule for Sec. 744.8 (Restrictions on exports,
reexports, and transfers (in-country) when certain persons designated
on the SDN List are a party to the transaction) to better prevent
diversion and to align more closely EAR restrictions with corresponding
OFAC restrictions that apply to persons designated as SDNs under the
authorities specified in Sec. 744.8.
BIS is also informing the public that foreign parties with
significant minority ownership by, or other significant ties to (e.g.,
overlapping board membership or other indicia of control), an Entity
List entity, an MEU List entity, or an SDN subject to Sec. 744.8(a)(1)
present a Red Flag of potential diversion risk to the listed entity. In
this type of situation, additional due diligence is necessary,
especially given the opaque ownership structures and limited access to
accurate ownership data in certain jurisdictions. In addition, BIS has
added a Red Flag to supplement no. 3 to part 732 to indicate that if an
exporter, reexporter, or transferor cannot determine the ownership
percentage of a foreign entity that is an entity owned by one or more
listed entities on the Entity List or the MEU List, it must resolve the
Red Flag prior to proceeding with any exports, reexports, or transfers
(in-country) to the foreign entity, submit a license application to
BIS, or identify an available license exception based on the
restrictions applicable to the listed party. There are not many EAR
license exceptions available, but for certain listed entities, there
are narrowly specified EAR license exceptions that may be available.
For example, JSC Integral, a company that is involved with the
International Space Station (ISS), is listed on the Entity List, so the
Affiliates rule would apply to a foreign entity that is owned 50
percent or more by this listed entity. The license requirement for JSC
Integral may be overcome by License Exception GOV under Sec.
740.11(b)(2) and (e). For example, provided the export meets all of the
requirements of License Exception GOV under Sec. 740.11(b)(2) and is
not otherwise restricted under any of the general restrictions on the
use of license exceptions under Sec. 740.2, exporters could rely on
this license exception authorization for an export to a foreign entity
that is owned 50 percent or more by the listed entity JSC Integral.
When an unlisted entity is owned 50 percent or more by multiple Entity
List parties, and only one such owner is eligible for a license
exception, that license exception will not apply to transactions
involving the unlisted entity, because BIS will apply the most
restrictive license requirements to the unlisted entity.
Exporters, reexporters, and transferors are responsible for
compliance with the BIS Affiliates rule and can be held liable for
unauthorized exports, reexports, or transfers (in-country) on a strict
liability basis, so due diligence must be conducted to determine
whether a foreign entity is an entity that is owned by one or more
listed entities. The application of the Affiliates rule creates an
affirmative duty to determine the ownership of other parties to the
transaction in order to comply. As with any export transaction, other
parties, e.g., freight forwarders and financial institutions, may also
have compliance obligations; BIS maintains guidance applicable to these
parties that may be of assistance in ensuring that their compliance
programs appropriately take export control restrictions into account.
BIS is not adopting the Affiliates rule at this time for certain
other EAR restricted parties list or provisions, specifically, the
Unverified List (UVL) in supplement no. 6 to part 744, or the list of
parties subject to Denial Orders issued under part 764. Extending the
Affiliates rule to UVL entities is not warranted because subsidiaries
or other foreign affiliates of these listed entities may not meet the
standard set forth in Sec. 744.15, that is receipt of items subject to
the EAR with respect to which BIS could not conduct a successful end-
use check for reasons that are outside of the U.S. government's
control. BIS is also not extending the Affiliates rule to persons
subject to Denial Orders as there is a separate related persons process
under Sec. 766.23 pursuant to which BIS provides persons with notice
of contemplated action and an opportunity to respond. BIS welcomes
public comments in response to this IFR on whether BIS should extend
the Affiliates rule to these other EAR end-user lists, as well as on
any other aspect of this IFR.

C. Extending the Entity List Requirements

As discussed above, BIS, in consultation with the Departments of
Defense, Energy, State, and the Treasury, has determined the existing
Entity List restrictions for all existing entries on the Entity List,
including any new entities that will be added to the Entity List in
future rulemakings, extend to any foreign entity that is owned by 50
percent or more by one or more listed entities. The ERC may apply
exceptions to the Affiliates rule on a case-by-case basis if it
determines that the foreign affiliates owned by a particular listed
entity, or one specific foreign entity owned by a listed entity, do not
pose a significant risk of being or becoming involved in diversion to
the listed entity by approving additions or modifications

[[Page 47204]]

to the Entity List. These exclusions will be identified by specifying
in the relevant entry on the Entity List or MEU List that the
Affiliates rule does not apply to any foreign affiliate owned by a
particular listed entity or that a specific foreign affiliate is
excluded. The ERC will make determinations regarding the applicability
of these exceptions in accordance with the procedures set forth in
supplement no. 5 to part 744 of the EAR. Any foreign entity that is
subject to restrictions based upon direct or indirect ownership by one
or more listed entities may request such an exclusion through a request
to modify the relevant Entity List entry or entries pursuant to the
procedures identified in Sec. 744.16 (Entity List) under paragraph
(e).

D. Overview of This IFR

To effectuate the changes described above, in particular, adopting
the Affiliates rule, BIS is amending part 744, as well as making
conforming changes to parts 732, 734, 736, and 748 of the EAR (15 CFR
parts 730-744). The four sets of changes this IFR makes are described
in section II as follows:
1. Adoption of the Affiliates rule for the Entity List;
2. Adoption of the Affiliates rule for the MEU List;
3. Adoption of the Affiliates rule for Sec. 744.8; and
4. Other conforming changes.

II. Amendments to the EAR

A. Adoption of the Affiliates Rule for the Entity List Changes

1. Revision to Introductory Text of Entity List
This IFR amends the Entity List in supplement no. 4 to part 744, by
revising the introductory text to the supplement. This IFR adds a new
fourth sentence to specify that the Entity List license requirements
and other Entity List restrictions also apply to any foreign entity
that is owned 50 percent or more by one or more listed entities or
entities that are subject to restrictions based upon their ownership.
This IFR adds a new fifth sentence to specify the rule of most
restrictiveness, which as used in Sec. Sec. 744.8, 744.11, 744.21, and
supplements nos. 4, 7, and 8 to part 744 of the EAR, means an entity
owned 50 percent or more, directly or indirectly, by multiple entities
subject to EAR license requirements pursuant to some combination of the
Entity List, MEU List, or SDN List designated under programs listed in
Sec. 744.8(a)(1), is subject to the most restrictive license
requirements, license exception eligibility, and license review policy
applicable to one or more of its owners under the EAR. This IFR also
adds a new sixth sentence to specify that if an exporter, reexporter,
or transferor cannot determine the ownership percentage of a foreign
entity that is an entity owned, directly or indirectly, by one or more
listed entities, they must resolve new Red Flag 29, obtain a license
from BIS, or identify an applicable license exception prior to
proceeding with the export, reexport, or transfer (in-country) and
includes a cross reference to new Red Flag 29 in supplement no. 3 to
part 732 that this IFR adds. Lastly, this IFR adds the phrase ``and
other Entity List restrictions'' after the reference to ``license
requirements'' in the first sentence of the introductory text to
clarify that listed entities are subject to restrictions on license
exception availability and the license review policy stated in the
listing, as well as the indicated license requirements.
2. Revision to Sec. 744.11 To Adopt Affiliates Rule for the Entity
List
In Sec. 744.11 (License requirements that apply to entities acting
or at significant risk of acting contrary to the national security or
foreign policy interests of the United States), this IFR adds paragraph
(a)(1) (Entity List entries extend to other foreign affiliates of
listed entities owned 50 percent or more by one or more listed entities
or unlisted entities that are subject to ownership-related
restrictions) to specify that the Entity List license requirements and
other Entity List restrictions also apply to any foreign entity that is
owned, directly or indirectly, individually or in the aggregate, 50
percent or more by one or more listed entities or unlisted entities
that are subject to Entity List license requirements or other Entity
List restrictions based upon their ownership. This revision is made
because of the diversion concern to listed entities. Paragraph (a)
specifies the rule of most restrictiveness, as described under section
II.A.1 of this IFR also applies to the Entity List. Paragraph (a)(1)
also specifies that if an exporter, reexporter, or transferor cannot
determine the ownership percentage of a foreign entity that is an
entity owned, directly or indirectly, by one or more listed entities on
the Entity List, they must resolve the Red Flag or obtain a license
from BIS prior to proceeding with the export, reexport, or transfer
(in-country), unless a license exception is available. Paragraph (a)(1)
also includes a cross reference to new Red Flag 29 that this IFR adds
to supplement no. 3 to part 732. Lastly, paragraph (a)(1) also
specifies that the Entity List license requirements and other Entity
List restrictions do not apply to foreign affiliates of listed entities
that are owned, directly or indirectly, individually or in aggregate,
50 percent or more by one or more entities that are operating at an
address listed on the Entity List if the entities operating at that
address are not specifically identified on the Entity List. BIS notes
that these addresses pose diversion concerns such as through the
operation of corporate secretarial services companies or logistics
companies associated with high volumes of diversion, but that entities
located at a different address with a parent company registered at a
corporate services address on the Entity List may not present the same
diversion risks.
For any foreign entity that is owned, directly or indirectly,
individually or in aggregate, 50 percent or more by one or more
entities with different Entity List license requirements, the most
restrictive of those Entity List license requirements apply to that
foreign entity. For any foreign entity that is an entity owned,
directly or indirectly, by a listed entity where ownership percentage
cannot be determined, the most restrictive Entity List license
requirements applicable to the listed entity apply to that foreign
entity. If BIS is able to make a determination during the license
review process that the foreign entity is in fact not owned, directly
or indirectly, individually or in aggregate, 50 percent or more by one
or more listed entities or entities that are subject to Entity List
license requirements or other Entity List restrictions based upon their
ownership, the license application will be returned without action to
the applicant noting that a license is not required. In such cases, BIS
may consider issuing guidance, as appropriate, in the form of a
frequently asked question on the BIS website to advise other exporters
of such determination.
Application example 1:
<bullet> Company A is listed on the Entity List and requires a
license for all items subject to the EAR and has a presumption of
denial license review policy. Company A owns 35 percent of Company C.
Company C is not listed on the Entity List.
<bullet> Company B is listed on the Entity List and requires a
license for any item on the CCL and has a case-by-case license review
policy. Company B owns 15 percent of Company C.
<bullet> Company C is owned directly or indirectly, individually or
in aggregate, 50 percent or more by one or more listed entities (i.e.,
Company A and B in this example). The Entity List license

[[Page 47205]]

requirements that are applicable to Company C are the same as if the
item was being exported, reexported, or transferred (in-country) to the
owners listed on the Entity List. Because the Entity License
requirements and license review policy is more restrictive for Company
A, the Entity List license requirements and license review policy for
Company A would be followed for any transaction where Company C is a
party to the transaction. Also note that the breakdown of the
percentages adding up to 50 percent or more does not matter (e.g., in
this hypothetical, it would not matter if Company B held 35 percent and
Company A held 15 percent--Company A's requirements would still apply).
<bullet> Company D is owned 50 percent by Company C. Because
Company D is owned, directly or indirectly, individually or in the
aggregate, 50 percent or more by an unlisted entity (Company C) that is
subject to Entity List license requirements or other Entity List
restrictions based upon its ownership, the Entity List license
requirements that are applicable to Company D are the same as if the
item was being exported, reexported, or transferred (in-country) to its
owner(s) listed on the Entity List. Assuming Company D has no direct or
indirect ownership by other listed parties that are subject to more
restrictive license requirements and other restrictions, the Entity
List license requirements and license review policy for Company C would
be followed for any transaction where Company D is a party to the
transaction.
BIS estimates that these changes described in section II.A.1 and .2
will result in an additional 170 license applications submitted to BIS
annually.
3. Conforming Changes in Sec. 734.9 for FDP Rules for Entities on the
Entity List
In Sec. 734.9 (Foreign-Direct Product (FDP) Rules), this IFR as a
conforming change adds three sentences to the end of paragraph (e)
(Entity List FDP rules), to specify that consistent with the revised
introductory text to the Entity List (see supp. no. 4 to part 744), the
end-user scope of the Entity List FDP rules includes any foreign entity
that is owned 50 percent or more, directly or indirectly, individually
or in aggregate, by one or more listed entities or unlisted entities
that are subject to Entity List license requirements or other Entity
List restrictions based upon their ownership, including at least one
entity within the end-user scope of the provision. This IFR adds a
second sentence to specify that these requirements apply to all
entities on the Entity List with a footnote referenced under this
paragraph (e). This IFR adds a final sentence stating that if the
foreign entity is owned 50 percent or more by one or more listed
entities or unlisted entities that are subject to Entity List license
requirements or other Entity List restrictions based upon their
ownership, including at least one entity within the end-user scope,
these Entity List FDP requirements are applicable, even when only one
of the owners meets the end-user criteria under paragraph (e).
For the same reason, this IFR adds two sentences to the end of
paragraph (g) to specify that consistent with the revised introductory
text to the Entity List in supplement no. 4 to part 744, the end-user
scope of the Russia/Belarus-Military End User and Procurement FDP rule
also includes any foreign entity that is owned, directly or indirectly,
individually or in aggregate, 50 percent or more by one or more listed
entities or unlisted entities that are subject to Entity List license
requirements or other Entity List restrictions based upon their
ownership, including at least one entity that meets the end-user scope
of paragraph (g). As in paragraph (e), this IFR adds an additional
sentence to the end of paragraph (g) to provide application guidance
for these criteria.
Application example 2 for FDP application:
<bullet> Company E is listed on the Entity List with a footnote 3
designation, which means foreign-produced items that meet the criteria
in Sec. 734.9(g) (Russia/Belarus-Military End User and Procurement FDP
rule) are subject to the EAR and require a license to this entity.
Company E owns 35 percent of Company G.
<bullet> Company F is listed on the Entity List with a footnote 1
designation, which means foreign-produced items that meet the criteria
in Sec. 734.9(e)(1) (Entity List FDP rule: Footnote 1) are subject to
the EAR and require a license to this entity. Company F owns 15 percent
of Company G.
<bullet> Company G is owned directly or indirectly, individually or
in aggregate, 50 percent or more by one or more listed entities (i.e.,
Company E and F in this example), the Entity List license requirements
and other requirements are applicable the same as if the item was being
exported, exported from abroad, reexported, or transferred (in-country)
to the owners of Company G listed on the Entity List. Similar to
Application example 1, under this Application example 2, the breakdown
of the percentages adding up to 50 percent or more does not matter
(e.g., in this hypothetical, it would not matter if Company F held 35
percent and Company E held 15 percent--Company F's requirements would
still apply), although in determining the scope of foreign-produced
items subject to the EAR, the criteria for both Company E and F would
be used.
<bullet> In determining the scope of foreign-produced items subject
to the EAR that require a license to Company G, both the criteria under
Sec. Sec. 734.9(e)(1) and (g) (i.e., the requirements for both Company
E and Company F) would be used for determining which items required a
license based on the Entity List license requirements.
BIS estimates that these changes to Sec. 734.9 will result in an
additional five license applications submitted to BIS annually.
4. Requests for Removal of Entity List License Requirements for Any
Foreign Affiliate of a Listed Entity That is Subject to Entity List
License Requirements Based on Direct or Indirect Ownership by One or
More Entities Listed on the Entity List
In Sec. 744.16 (Entity List) this IFR revises paragraph (e)
(Removal or modification requests) to add a new second sentence to
specify that any foreign entity that is owned, directly or indirectly,
individually or in aggregate, 50 percent or more by one or more
entities listed on the Entity List or by entities subject to Entity
List license requirements or other Entity List restrictions based upon
their ownership, may request that its Entity List owner's entry listing
be modified to exclude the requester.
BIS estimates that these changes to Sec. 744.16(e) will result in
an additional 30 appeals submitted to BIS annually.
5. Addition of Guidance for Applying for License Applications That
Include a Party to the Transaction That is At Least 50 Percent Owned by
an Entity List Entity, `Military End Users,' or Certain SDNs
In Sec. 748.8 (Unique application and submission requirements),
this IFR adds a new paragraph (a)(a) to reference a new paragraph
(c)(c) (Affiliates rule entities) added to supplement no. 2 to part
748--Unique Application and Submission Requirements. New paragraph
(c)(c) specifies that in order to request a license for an export,
reexport, or transfer (in-country) for any foreign entity that is
owned, directly or indirectly, individually or in aggregate, 50 percent
or more by one or more entities listed on the Entity List in supplement
no. 4 to part 744, MEU List in supplement no. 7 to part 744, or by one
or more SDNs designated under programs listed in Sec. 744.8(a)(1), or
for an

[[Page 47206]]

export, reexport, or transfer (in-country) when the exporter,
reexporter, or transferor cannot determine the ownership percentage of
a foreign entity that is an entity owned by one or more listed entities
on the Entity List or the MEU List, the license applicant must specify
``Affiliates rule'' in Block 9 (Special Purpose) of the BIS-748P
``Multipurpose Application'' form. This IFR also specifies that for
license applications when the exporter, reexporter, or transferor
cannot determine the ownership percentage of a foreign entity that is
an entity owned by one or more listed entities on the Entity List or
the MEU List, the license application must specify the names of the
listed party or parties that own that entity, which also must include
explaining the due diligence conducted to determine the percentage of
ownership, including providing an explanation for why percentage of
ownership was not able to be determined. In addition, this new
paragraph (c)(c) in supplement no. 2 to part 748 specifies that the
applicant must specify the names of the listed party or parties that
own, individually or in the aggregate, 50 percent or more, directly or
indirectly, of that entity(ies) listed on the license application,
including identifying the percentage of ownership by listed parties and
identifying the method that the applicant used to make that
determination. The inclusion of this information as part of a license
application, will assist BIS in identifying why the license application
was submitted and in evaluating potential diversion concerns.
BIS estimates that this addition of paragraph (c)(c) to supplement
no. 2 to part 748 and the addition of Sec. 748.8(a)(a) will not result
in any additional license applications submitted to BIS annually
because these two new paragraphs are limited to providing guidance on
how to submit such license applications. The overall annual increase in
license applications associated with this IFR has already been
estimated and accounted for elsewhere in this IFR.

B. Adoption of the Affiliates Rule for the MEU List Changes

1. Revision to the Introductory Text of the MEU List
This IFR amends the MEU List in supplement no. 7 to part 744, by
revising the introductory text to add a new fourth sentence to specify
that the MEU List license requirements and other MEU restrictions also
apply to any foreign entity that is owned 50 percent or more by one or
more listed entities or entities that are subject to restrictions based
upon their ownership. This IFR adds a new fifth sentence to specify
that the rule of most restrictiveness, as described under section
II.A.1 of this IFR, also applies to the MEU List. This IFR also adds a
new sixth sentence to specify that if an exporter, reexporter, or
transferor cannot determine the ownership percentage of a foreign
entity that is an entity owned, directly or indirectly, by one or more
listed entities, they must resolve the Red Flag or obtain a license
from BIS prior to proceeding with the export, reexport, or transfer
(in-country), unless a license exception is available.
2. Revision to Sec. 744.21 To Adopt the Affiliates Rule for the MEU
List
In Sec. 744.21 (Restrictions on certain `military end uses' or
`military end users'), this IFR adds paragraph (a)(3) to specify that
the MEU List and Entity List license requirements in Sec. 744.21(a)(1)
and (2) also apply to any foreign entity that is owned, directly or
indirectly, individually or in aggregate, 50 percent or more by one or
more listed entities or entities subject to Entity List or MEU List
restrictions based upon their ownership. Paragraph (a)(3) specifies the
rule of most restrictiveness, as described under section II.A.1 of this
IFR, also applies to the MEU List. Paragraph (a)(3) also specifies that
if an exporter, reexporter, or transferor cannot determine the
ownership percentage of a foreign affiliate that is an entity owned,
directly or indirectly, by one or more listed entities, they must
resolve the Red Flag or obtain a license from BIS prior to proceeding
with the export, reexport, or transfer (in-country), unless a license
exception is available. Paragraph (a)(3) also includes a cross
reference to new Red Flag 29 that this IFR adds to supplement no. 3 to
part 732. For any foreign affiliate that is owned, directly or
indirectly, individually or in aggregate, 50 percent or more by one or
more listed entities with different MEU List or Entity List license
requirements, the most restrictive MEU List or Entity List license
requirements apply to that foreign entity. For any foreign entity where
the exporter, reexporter, or transferor cannot determine the ownership
percentage of a foreign entity that is an entity owned, directly or
indirectly, by one or more listed entities, they must submit a license
application to BIS.
Paragraph (a)(3) further specifies that the license requirements in
paragraphs (a)(1) and (2) do not apply to unlisted foreign affiliates
that are owned, directly or indirectly, individually or in the
aggregate, solely by one or more unlisted `military end users,' unless
the unlisted foreign affiliate itself meets the definition of a
`military end user.' BIS has included this text to clarify that the
affiliates rule does not extend the license requirements of Sec.
744.21 to unlisted foreign affiliates when there is no direct or
indirect ownership by a listed MEU or Entity Listed party with a
footnote 3 designation.
BIS estimates that these changes described in section II.B.1 and .2
will result in an additional 30 license applications submitted to BIS
annually.
3. Requests for Removal of MEU License Requirements for Any Foreign
Affiliate of a Listed Entity That is Subject to MEU License
Requirements Based on Direct or Indirect Ownership by One or More
Entities Listed on the MEU List and Entity List
In Sec. 744.21, this IFR also revises paragraph (b)(2) (Requests
for removal from or modification of `Military End User' (MEU) List and
Entity List) introductory text, to specify that any foreign entity that
is owned, directly or indirectly, individually or in aggregate, 50
percent or more by one or more entities listed on the MEU List or the
Entity List or subject to MEU List or Entity List restrictions based
upon their ownership, may request that its MEU List or Entity List
owner's entry listing be modified to exclude the requester.
BIS estimates that these changes to Sec. 744.21(b)(2) will result
in an additional 5 appeals submitted to BIS annually.

C. Revisions to Sec. 744.8

1. Background on SDN List and EAR Requirements Under Sec. 744.8
The U.S. Government has a number of list-based tools to restrict
economic activities of individuals and entities to protect U.S.
national security or foreign policy interests. BIS employs end-user
controls under the EAR, including the Entity List, to impose license
requirements for the export, reexport, and transfer (in-country) of
items subject to the EAR. End-user requirements and Entity List
additions allow for the monitoring of items subject to the EAR,
including less-sensitive items.
OFAC maintains the SDN List to identify persons whose property or
interests in property that are within the United States or in the
possession or control of U.S. persons, wherever located, are blocked
(see appendix A to 31 CFR chapter V and <a href="https://www.treas.gov/sdn">https://www.treas.gov/sdn</a>).
These targeted economic sanctions tools enable the

[[Page 47207]]

U.S. Government to escalate economic pressure and promote deterrence
while mitigating unintended economic effects on the United States and
our partners and allies.
Under Sec. 744.8, BIS implements additional EAR license
requirements for all items subject to the EAR for all persons blocked
under specified OFAC-administered sanctions programs identified under
this section. The EAR restrictions under Sec. 744.8 involving these
OFAC-administered sanctions programs serve as a force multiplier and
complement OFAC's blocking sanctions, which prohibit all transactions
by U.S. persons, wherever they are located, or persons within (or
transiting) the United States that involve any property or interests in
property of designated or blocked persons, unless authorized by a
general or specific license issued by OFAC or exempt under OFAC's
regulations. The imposition of these EAR license requirements for
exports, reexports, and transfers (in-country) allows for the EAR
controls to act as a backstop for activities over which OFAC does not
exercise jurisdiction, including certain situations involving deemed
exports and deemed reexports, and for reexports and transfers (in-
country) that would otherwise not involve U.S. persons (e.g., U.S.
financial institutions). Notably, the license requirements under Sec.
744.8 allow for controls on items outside the United States,
complementing the existing authority in many OFAC programs to impose
blocking sanctions on persons, even outside the United States, who
materially assist, sponsor, or provide financial, material, or
technological support for, or goods or services to or in support of,
SDNs.
2. Adoption of the Affiliates Rule for the Purposes of Sec. 744.8
In Sec. 744.8 (Restrictions on exports, reexports, and transfers
(in-country) when certain persons designated on the SDN List are a
party to the transaction), this IFR revises paragraph (a)(2) to add a
new second sentence that specifies that these EAR controls described
under this section also apply to any entity that is owned, directly or
indirectly, individually or in aggregate, 50 percent or more by one or
more persons blocked under one of the specific programs identified
under Sec. 744.8(a)(1), which is needed to address diversion concerns
to entities blocked as a result of these SDN designations. Paragraph
(b), which states the licensing requirement applicable when an SDN
designated under the programs identified in paragraph (a)(1) is a party
to the transaction, is revised to clarify that the same restrictions
apply regardless of how a party is blocked (i.e., included on the SDN
List or by operation of OFAC's 50 percent rule) by adding `, or blocked
pursuant to,' between `designated on OFAC's SDN list with' and `any of
the identifiers set forth in paragraph (a)(1).'
These restrictions are consistent with OFAC regulations, but in the
event of a discrepancy exporters, reexporters, and transferors must
follow the rule stated here. Because of the close relation between
OFAC's SDN List and this section, the public asked BIS in 2024 after
Sec. 744.8 was added to the EAR in the final rule, ``End-User
Controls: Imposition of Restrictions on Certain Persons Identified on
the List of Specially Designated Nationals and Blocked Persons (SDN
List)'' published March 21, 2024 (89 FR 20107), whether BIS was using
the legally distinct standard or the OFAC 50 percent ownership rule,
and BIS provided regulatory guidance to exporters, reexporters, and
transferors that BIS was using the legally distinct standard. However,
because BIS is now adopting the Affiliates rule for the Entity List and
MEU List, BIS has also determined it is warranted to also use the 50
percent ownership standard for the Sec. 744.8 requirements to protect
U.S. national security and foreign policy interests and to reflect the
close relationship with OFAC for purposes of this section. This IFR
also adds a new third sentence that specifies the rule of most
restrictiveness, as described under section II.A.1 of this IFR also
applies to SDNs listed under one of the specific programs identified
under Sec. 744.8(a)(1). As discussed above, this IFR neither
constrains the ERC's ability to add a foreign entity that falls below
the 50 percent threshold nor to exclude an entity that is owned 50
percent or more by one or more listed entities.
BIS estimates that these changes to Sec. 744.8 will result in an
additional 55 license applications submitted to BIS annually.

D. Other Conforming Changes

1. Temporary General License (TGL)--Non-Listed Foreign Affiliates of
Listed Entities
In Supplement No. 1 to Part 736--General Orders, this IFR adds a
new Temporary General License, Non-listed foreign affiliates of listed
entities under paragraph (g). This IFR adds paragraph (g)(1)
(Authorization), which specifies that this TGL authorizes: (i) exports,
reexports, or transfers (in-country) to or within any destination in
Country Group A:5 or A:6 (supplement no. 1 to part 740) when a non-
listed foreign entity that is owned 50 percent or more, individually or
in aggregate, by one or more listed entities on the Entity List
(supplement no. 4 to part 744) or Military End-User (MEU) List
(supplement no. 7 to part 744), or by unlisted entities that are
subject to Entity List or MEU license requirements or other Entity List
or MEU restrictions based upon their ownership, is a party to the
transaction; and (ii) exports, reexports, or transfers (in-country) to
or within any country other than Country Group E:1 or E:2 when a party
to the transaction is a non-listed foreign affiliate of a listed entity
that is owned 50 percent or more, directly or indirectly, individually
or in the aggregate, by one or more listed entities on the Entity List
or Military End-User (MEU) List, or by unlisted entities that are
subject to Entity List or MEU license requirements or other Entity List
or MEU restrictions based upon their ownership; and such party to the
transaction is a joint venture with a non-listed entity headquartered
in the United States or Country Group A:5 or A:6 that is not owned 50
percent or more, directly or indirectly, individually or in aggregate,
by one or more listed entities on the Entity List or MEU List or by
unlisted entities that are subject to Entity List or MEU license
requirements or other Entity List or MEU restrictions based upon their
ownership. This TGL may only be utilized to overcome the license
requirements described in Sec. Sec. 744.11 and 744.21 of the EAR
applicable to the non-listed foreign affiliate to which this TGL
applies. Paragraph (g)(2) specifies that persons must comply with all
provisions of the EAR, including any applicable additional license
requirements.
This IFR adds paragraph (g)(3) (Validity date) to specify that this
TGL--Non-listed foreign affiliates of listed entities under paragraph
(g) expires on December 1, 2025.
Lastly, this IFR adds paragraph (g)(4) (Recordkeeping requirement)
to specify that all exports, reexports, transfers (in-country), and
exports from abroad exported, reexported, or transferred (in-country)
under the authorization of this TGL are subject to the recordkeeping
requirements of part 762 of the EAR.
BIS estimates that these changes described in section II.D.1 will
result in a reduction of 10 license applications submitted to BIS in
the first year this rule is in effect.
2. Addition of Guidelines for Applying the Affiliates Rule
This IFR adds Supplement No. 8 to Part 744--Guidelines for Applying

[[Page 47208]]

Affiliates Rule to Entity List Entries and Other End-User Controls.
This new supplement provides similar guidance as is contained in the
guidance document from OFAC titled, Revised Guidance On Foreign
Entities Owned By Persons Whose Property And Interests In Property Are
Blocked, from August 13, 2014. However, BIS has made updates to this
guidance to make it EAR-specific and to remove references that are only
applicable in the OFAC sanctions context. The EAR requirements are not
focused on property, but rather on identifying foreign affiliates of
listed entities that are of concern to divert items that are subject to
the EAR to listed entities because such foreign affiliates are owned 50
percent or more by one or more listed entities or by entities that are
subject to restrictions based upon their ownership. The new supplement
this IFR adds to the EAR consists of three paragraphs.
Paragraph (a) (Scope) identifies the general scope of these
guidelines relating to the status of entities owned by individuals or
entities identified on the Entity List, `Military End-User' (MEU) List,
or the SDN List under a program identified in Sec. 744.8(a)(1).
Paragraph (a) also specifies that this supplement sets forth guidelines
with respect to foreign affiliates of listed entities owned 50 percent
or more, directly or indirectly, individually or in aggregate, by one
or more listed entities on the Entity List in supplement no. 4 to this
partor the MEU List in supplement no. 7 to part 744, by SDNs designated
under programs identified in Sec. 744.8(a)(1), or by unlisted entities
that are subject to Entity List or MEU license requirements or other
Entity List or MEU restrictions based upon their ownership, as well as
addressing scenarios when an exporter, reexporter, or transferor cannot
determine the ownership percentage of a foreign entity that is an
entity, directly or indirectly, owned by one or more listed entities on
the Entity List or the MEU List. These foreign affiliates of listed
entities are a diversion concern and therefore the Entity List license
requirements and MEU List license requirements and other restrictions
also extend to transactions involving these other foreign affiliates of
listed entities.
Paragraph (b) (Application of 50 percent ownership rule) provides
guidance on how to apply the Affiliates rule, including providing a
rationale for why these criteria are used. Paragraph (b) specifies that
any foreign entity that is owned 50 percent or more by one or more
entities listed on the Entity List or MEU List, or by SDNs designated
under one of the programs identified in Sec. 744.8(a)(1), or by one or
more entities subject to restrictions based upon their ownership, is
considered to be a diversion concern to such listed entities or SDNs
that own the foreign entity. Because of this diversion concern, a
license is required for any transaction where that foreign entity that
is owned 50 percent or more, directly or indirectly, by one or more
entities is a party to the transaction to the same degree as if the
item was being exported, reexported, or transferred (in-country) to a
party on the Entity List, MEU List, or SDN List under a program
identified in Sec. 744.8(a)(1). This means that any foreign entity
owned 50 percent or more by one or more entities on the Entity List or
MEU List, or by SDNs designated under programs identified in Sec.
744.8(a)(1), is itself considered to be subject to the license
requirements of the Entity List or subject to the requirements under
Sec. 744.8, respectively. Paragraph (b) also specifies the rule of
most restrictiveness, as described under section II.A.1 of this IFR
also applies to entities on the Entity List, or MEU List, or SDN List.
Paragraph (b) also specifies that if an exporter, reexporter, or
transferor cannot determine the ownership percentage of a foreign
entity that is an entity owned, directly or indirectly, by one or more
listed entities on the Entity List or the MEU List, they must resolve
the Red Flag or obtain a license from BIS prior to proceeding with the
export, reexport, or transfer (in-country), unless a license exception
is available.
Paragraph (c) (Due diligence for foreign entities with less than 50
percent ownership by listed entities or SDNs or for parent entities of
listed entities) alerts exporters, reexporters, and transferors to act
with caution when considering a transaction with a non-Entity List,
non-MEU List, or non-Sec. 744.8 foreign entity in which one or more
entities identified on the Entity List, MEU List, or SDN List under a
program identified in Sec. 744.8 has a significant ownership interest
that is less than 50 percent or for parent entities of listed entities.
These foreign affiliates of listed entities may not necessarily raise
the same diversion concern that warrants the listed entities license
requirements and other Entity List and MEU List restrictions extending
to these foreign affiliates of listed entities, but additional due
diligence is warranted by exporters, reexporters, and transferors
because of the minority ownership by listed entities in these foreign
affiliates of listed entities and the opaque ownership structures and
limited access to accurate ownership data in certain jurisdictions.
BIS estimates that this addition of supplement no. 8 to part 744
will not result in any additional license applications submitted to BIS
annually because this supplement is limited to providing guidance, and
the annual increase has already been estimated and accounted for in the
other changes included in this IFR.
3. Addition of One New Red Flag To Assist With Compliance of the
Affiliates Rule
In supplement no. 3 to part 732--BIS's ``Know Your Customer''
Guidance and Red Flags, this IFR adds one new Red Flag that is intended
to provide additional compliance guidance to assist exporters,
reexporters, and transferors as part of their compliance programs for
applying the Affiliates rule. New Red Flag 29 identifies a scenario
where an exporter, reexporter, or transferor has ``knowledge'' that a
foreign entity has one or more owners that are listed on the Entity
List or the MEU List, or that are unlisted entities that are subject to
license requirements or other restrictions based upon their ownership.
New Red Flag 29 specifies that such exporters, reexporters, or
transferors have an affirmative duty to determine the percentage of
ownership of those listed entities and if that is not possible, to
obtain a license from BIS if required under the Entity List or MEU List
based on the requirements for the listed owner or owners of that
foreign entity, unless a license exception is available.
BIS also provides this Table 1 in the preamble of this IFR to
assist understanding of the changes being made in this IFR.

[[Page 47209]]

Table 1--Compliance Aid for Understanding the Application of the
Affiliates Rule for the Entity List, MEU List, and SDN Designations
Under Sec. 744.8(a)(1)
------------------------------------------------------------------------
Types of entities Application notes
------------------------------------------------------------------------
Listed entities. A foreign entity <bullet> These entities are
listed on the Entity List, MEU List, currently subject to Entity
or in SDN designations in Sec. List, MEU List, and Sec.
744.8(a)(1), including any branch or 744.8 restrictions under the
sales office that is not legally `legally distinct' standard
distinct from the listed entity. and will continue to be
subject to such restrictions
under the Affiliates rule.
<bullet> These requirements
applied to all addresses of
these entities located in the
destination under which the
entities were listed.
<bullet> Prior to this IFR,
there were three entities on
the Entity List that were
subject to a worldwide license
requirement.
<bullet> Because of the changes
made in this IFR, the
requirements for all listed
entities on the Entity List,
MEU List, and the requirements
in Sec. 744.8 will now apply
to all foreign countries.
<bullet> For example, an entity
listed on the Entity List
under China has a sales office
in Malaysia. Prior to this
IFR, the sales office in
Malaysia of the listed Chinese
entity was not included within
the scope of the Entity List
license requirements, unless
BIS listed that Chinese sales
office in Malaysia also on the
Entity List or there was
information that the item was
intended for the listed
Chinese entity.
Foreign affiliates of listed entities <bullet> These entities meet
that meet the Affiliates rule. Foreign what is described in this IFR
affiliates of listed entities owned 50 as the Affiliates rule and are
percent or more, directly or subject to the license
indirectly, by one or more listed requirements and other
entities on the Entity List, MEU List, restrictions under the Entity
or an SDN identified in Sec. List, MEU List, or Sec.
744.8(a)(1) or by one or more entities 744.8.
subject to restrictions based upon <bullet> This is an expansion
ownership. of the Entity List, MEU List,
and Sec. 744.8 license
requirements that is needed to
protect U.S. national security
and foreign policy interests
because of the diversion
concerns with these entities.
<bullet> These requirements
apply to all foreign countries
regardless of under which
destination the listed entity
or entity's owners are listed.
<bullet> This IFR adds a TGL
that temporarily authorizes
(i) exports, reexports, or
transfers (in-country) to or
within any destination in
Country Group A:5 or A:6 when
a party to the transaction is
a non-listed foreign affiliate
of a listed entity that is
owned 50 percent or more,
directly or indirectly,
individually or in aggregate,
by one or more listed entities
on the Entity List or MEU
List, or entities subject to
Entity List or MEU List
restrictions based upon their
ownership, and (2) exports,
reexports, or transfers (in-
country) to or within any
destination other than Country
Group E:1 or E:2 when a party
to the transaction is a non-
listed foreign affiliate of a
listed entity that is owned 50
percent or more, directly or
indirectly, individually or in
aggregate, by one or more
listed entities on the Entity
List or on the MEU List, or
entities subject to Entity
List or MEU List restrictions
based upon their ownership;
and such party to the
transaction is a joint venture
with a non-listed entity
headquartered in the United
States or Country Group A:5 or
A:6 that is not owned 50
percent or more, directly or
indirectly, individually or in
aggregate, by one or more
listed entities on the Entity
List or on the MEU List or
entities subject to Entity
List or MEU List restrictions
based upon its ownership. The
TGL expires on December 1,
2025.
Foreign affiliates of listed entities <bullet> The Entity List, MEU
owned by listed entities where List, and Sec. 744.8
percentage of ownership cannot be requirements are enforceable
determined (unresolvable Red Flag on a strict liability basis,
entities). so ``knowledge'' is not
Foreign affiliates of listed entities required to trigger these end-
that have some direct or indirect user requirements under the
ownership by listed entities on the EAR, although ``knowledge'' is
Entity List, MEU List, or by SDNs in a factor that is considered
Sec. 744.8(a)(1), but the exporter, when determining penalty
reexporter, or transferor cannot calculations for a violation
determine whether the listed entity of the EAR.
ownership meets the Affiliates rule. <bullet> By adding a
requirement to resolve the red
flag to Sec. Sec. 744.11
and 744.21, BIS is informing
the public that when an
exporter, reexporter, or
transferor has ``knowledge''
that a foreign entity has one
or more direct or indirect
owners that are listed on the
Entity List or MEU List, it
has an affirmative duty to
determine the percentage of
ownership of those listed
entities and if that is not
possible, to obtain a license
from BIS if required under the
Entity List or MEU List based
on the requirements for the
listed owner or owners of that
foreign entity, unless a
license exception is
available.
<bullet> Because of diversion
concerns to listed entities,
including concerns about
listed entities obfuscating
their ownership stakes in
foreign affiliates of listed
entities as a method to evade
Entity List or MEU List
license requirements, this IFR
specifies that the exporter,
reexporter or transferor must
resolve the Red Flag or obtain
a license from BIS prior to
proceeding with the export,
reexport, or transfer (in-
country), unless a license
exception is available.

[[Page 47210]]

Foreign companies where there is no <bullet> BIS advises exporters,
``knowledge'' that the foreign entity reexporters, and transferors
is owned by a listed entity. to exercise due diligence as
part of their internal
compliance programs with such
foreign companies because as
noted in the previous row, the
Entity List, MEU List, and
Sec. 744.8 requirements are
enforceable on a strict
liability basis.
<bullet> This means that
exporters, reexporters, and
transferors are responsible if
they engage with a foreign
entity that is in fact owned
50 percent or more by a listed
entity on the Entity List, MEU
List, or an SDN designation
under Sec. 744.8, or by
entities subject to
restrictions based upon their
ownership.
<bullet> Accordingly,
exporters, reexporters, and
transferors have an
affirmative responsibility to
know the ownership of the
foreign companies that are
parties to a transaction.
<bullet> Exporters,
reexporters, and transferors
must adopt a risk-based
compliance program to assist
them in complying with these
requirements.
<bullet> Supplement No. 3 to
Part 732--BIS's ``Know Your
Customer'' Guidance and Red
Flags is an EAR regulatory
resource that assists
exporters, reexporters, and
transferors in developing
their compliance programs.
U.S. entities owned by listed entities. <bullet> This IFR does not
impose restrictions, as the
Affiliates rule established in
this IFR applies only to
foreign companies, nor does it
limit any compliance
obligations that may exist
under other provisions of the
EAR or under the regulations
of other agencies.
------------------------------------------------------------------------

Savings Clause

For the changes being made in this IFR, shipments of items removed
from eligibility for a License Exception or export, reexport, or
transfer (in-country) without a license (NLR) as a result of this
regulatory action that were en route aboard a carrier to a port of
export, reexport, or transfer (in-country), on September 29, 2025,
pursuant to actual orders for export, reexport, or transfer (in-
country) to or within a foreign destination, may proceed to that
destination under the previous eligibility for a License Exception or
export, reexport, or transfer (in-country) without a license (NLR),
provided the export, reexport, or transfer (in-country) is completed no
later than on October 29, 2025.

Export Control Reform Act of 2018

On August 13, 2018, the President signed into law the John S.
McCain National Defense Authorization Act for Fiscal Year 2019, which
included ECRA (codified, as amended, at 50 U.S.C. 4801-4852). ECRA
provides the legal basis for BIS's principal authorities and serves as
the authority under which BIS issues this rule. In particular, and as
noted elsewhere, Section 1753 of ECRA (50 U.S.C. 4812) authorizes the
regulation of exports, reexports, and transfers (in-country) of items
subject to U.S. jurisdiction. Further, Section 1754(a)(1)-(16) of ECRA
(50 U.S.C. 4813(a)(1)-(16)) authorizes, inter alia, the establishment
of a list of controlled items; the prohibition of unauthorized exports,
reexports, and transfers (in-country); the requirement of licenses or
other authorizations for exports, reexports, and transfers (in-country)
of controlled items; apprising the public of changes in policy,
regulations, and procedures; and any other action necessary to carry
out ECRA that is not otherwise prohibited by law. Pursuant to Section
1762(a) of ECRA (50 U.S.C.4821(a)), these changes can be imposed in an
IFR without prior notice and comment.

Rulemaking Requirements

1. BIS has examined the impact of this rule as required by
Executive Orders (E.O.) 12866 and 13563, which direct agencies to
assess all costs and benefits of available regulatory alternatives and,
if regulation is necessary, to select regulatory approaches that
maximize net benefits (e.g., potential economic, environmental, public,
health, and safety effects, distributive impacts, and equity). Pursuant
to E.O. 12866, as amended, this interim final rule has not been
determined to be a ``significant regulatory action.'' This interim
final rule is not a regulatory action pursuant to E.O. 14192 because it
is not significant under E.O. 12866.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.) (PRA), unless that collection of information displays a currently
valid Office of Management and Budget (OMB) Control Number. This rule
involves the following OMB-approved collections of information subject
to the PRA:
<bullet> 0694-0088, ``Simple Network Application Process and
Multipurpose Application Form,'' which carries a burden hour estimate
of 29.4 minutes for a manual or electronic submission;
<bullet> 0694-0096 ``Five Year Records Retention Period,'' which
carries a burden hour estimate of less than 1 minute;
<bullet> 0607-0152 ``Automated Export System (AES) Program,'' which
carries a burden hour estimate of 3 minutes per electronic submission;
and
<bullet> 0694-0134 ``Procedure for parties on the Entity List or
the Unverified List to Request Removal or Modification of their
Listing,'' which carries a burden hour estimate of 15 hours per
electronic submission.
BIS estimates that these changes to the Entity List and related
provisions and to Sec. 744.8 under the EAR will result in an
additional 245 license applications submitted annually to BIS under OMB
Control Number 0694-0088 and the changes to Sec. 744.16(e) will result
in an additional 35 appeals submitted annually to BIS under OMB Control
Number 0694-0134. However, the additional burden falls within the
existing estimates currently associated with these control numbers.
Additional information regarding these collections

[[Page 47211]]

of information--including all background materials--can be found at:
<a href="https://www.reginfo.gov/public/do/PRAMain">https://www.reginfo.gov/public/do/PRAMain</a> by using the search function
to enter either the title of the collection or the OMB Control Number.
3. This rule does not contain policies with Federalism implications
as that term is defined under E.O. 13132.
4. Pursuant to section 1762 of ECRA (50 U.S.C. 4821), this action
is exempt from the Administrative Procedure Act (APA) (5 U.S.C. 553)
requirements for notice of proposed rulemaking, opportunity for public
participation, and delay in effective date.
5. Because neither the APA nor any other law requires that notice
of proposed rulemaking and an opportunity for public comment be given
for this rule, the analytical requirements of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Accordingly,
no Final Regulatory Flexibility Analysis is required, and none has been
prepared.

List of Subjects

15 CFR Part 732 and 748

Administrative practice and procedure, Exports, Reporting and
recordkeeping requirements.

15 CFR Part 734

Administrative practice and procedure, Exports, Inventions and
patents, Research, Science and technology.

15 CFR Part 736

Exports.

15 CFR Part 744

Exports, Reporting and recordkeeping requirements, Terrorism.

Accordingly, parts 732, 734, 736, 744, and 748 of the Export
Administration Regulations (15 CFR parts 730 through 774) are amended
as follows:

PART 732--STEPS FOR USING THE EAR

0
1. The authority citation for part 732 is revised to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p.
228.

0
2. Supplement no. 3 to part 732 is amended by adding paragraph (b)29 to
read as follows:

Supplement No. 3 to Part 732--BIS's ``Know Your Customer'' Guidance and
Red Flags

* * * * *
(b) * * *
29. When an exporter, reexporter, or transferor has ``knowledge''
that a foreign entity that is a party to the transaction has one or
more owners that are listed on the Entity List or the MEU List, or that
are unlisted entities that are subject to license requirements or other
restrictions based upon their ownership, it has an affirmative duty to
determine the percentage of ownership by those entities and if that is
not possible, to obtain a license from BIS if required under the Entity
List or MEU List based on the requirements for the owner or owners of
that foreign entity, unless a license exception is available.

PART 734--SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS

0
3. The authority citation for part 734 is revised to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p.
950; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026,
61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. E.O. 13637, 78 FR
16129, 3 CFR, 2014 Comp., p. 223; Notice of November 7, 2024, 89 FR
88867 (November 8, 2024).

0
4. Section 734.9 is amended by:
0
a. adding three sentences to the end of paragraph (e) introductory
text; and
0
b. adding two sentences to the end of the paragraph (g) introductory
text.
The additions read as follows:

Sec. 734.9 Foreign-Direct Product (FDP) Rules.

* * * * *
(e) * * * Consistent with the introductory text to the Entity List
in supplement no. 4 to part 744, the end-user scope of the Entity List
FDP rules also includes any foreign entity that is owned, directly or
indirectly, individually or in aggregate, 50 percent or more by one or
more listed entities or unlisted entities that are subject to license
requirements or other restrictions based upon their ownership,
including at least one entity that meets the end-user scope under this
provision. This end-user scope applies to all entities on the Entity
List with a footnote referenced under this paragraph (e). If the
foreign entity is owned 50 percent or more by one or more listed
entities or unlisted entities that are subject to Entity List license
requirements or other Entity List restrictions based upon their
ownership, including at least one entity with a footnote referenced
under this paragraph (e), these Entity List FDP requirements are
applicable, even when only one of the owners meets the end-user
criteria under this paragraph (e).
* * * * *
(g) * * * Consistent with the introductory text to the Entity List
in supplement no. 4 to part 744, the end-user scope of the Russia/
Belarus-Military End User and Procurement FDP rule also includes any
foreign entity that is owned 50 percent or more, directly or
indirectly, individually or in aggregate, by one or more listed
entities or unlisted entities that are subject to Entity List license
requirements or other Entity List restrictions based upon their
ownership, including at least one entity that meets the end-user scope
of this provision. If the foreign entity is owned 50 percent or more by
one or more listed entities or unlisted entities that are subject to
Entity List license requirements or other Entity List restrictions
based upon their ownership, including at least one entity within the
end-user scope defined by paragraph (g)(2) of this section, these
Russia/Belarus-Military End User and Procurement FDP requirements are
applicable, even when only one of the owners meets the end-user
criteria under paragraph (g)(2) of this section.
* * * * *

PART 736--GENERAL PROHIBITIONS

0
5. The authority citation for part 736 continues to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p.
950; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026,
61 FR 58767, 3 CFR, 1996 Comp., p. 228; Notice of November 7, 2024,
89 FR 88867 (November 8, 2024); Notice of May 7, 2025, 90 FR 19619
(May 9, 2025).

0
6. Supplement No. 1 to part 736 is amended by adding paragraph (g).
The addition reads as follows:

Supplement No. 1 to Part 736--General Orders

* * * * *
(g) General Order No. 7. General Order No. 7. TGL--Non-listed
foreign affiliates of listed entities.
(1) Authorization, TGL--Non-listed foreign affiliates of listed
entities authorizes exports, reexports, or transfers (in-country) as
follows:
(i) to or within any destination in Country Group A: 5 or A:6
(supplement no. 1 to part 740) when a party to the transaction is a
non-listed foreign affiliate of a listed entity that is owned 50
percent or more, directly or indirectly, individually or in aggregate,
by one or more listed entities on the Entity List (supplement no. 4 to
part 744) or Military End-User (MEU) List (supplement no. 7 to part
744), or by unlisted entities that are subject to Entity List or MEU
license requirements

[[Page 47212]]

or other Entity List or MEU restrictions based upon their ownership;
and
(ii) to or within any destination other than Country Group E:1 or
E:2 when the following criteria are met:
(A) A party to the transaction is a non-listed foreign affiliate of
a listed entity that is owned 50 percent or more, directly or
indirectly, individually or in aggregate, by one or more listed
entities on the Entity List or on the MEU List or by unlisted entities
that are subject to Entity List or MEU license requirements or other
Entity List or MEU restrictions based upon their ownership; and
(B) Such party to the transaction is a joint venture with a non-
listed entity headquartered in the United States or Country Group A:5
or A:6 that is not owned 50 percent or more, directly or indirectly,
individually or in aggregate, by one or more listed entities on the
Entity List or the MEU List or by unlisted entities that are subject to
Entity List or MEU license requirements or other Entity List or MEU
restrictions based upon their ownership.
(2) Limitation of authorization. This TGL only overcomes the
license requirements described in Sec. Sec. 744.11 and 744.21 of the
EAR applicable to the non-listed foreign affiliate to which this TGL
applies. Persons must comply with all provisions of the EAR, including
any additional applicable license requirements.
(3) Validity date: Paragraph (g) expires on December 1, 2025.
(4) Recordkeeping requirement. All exports, reexports, transfers
(in-country), and exports from abroad exported, reexported, or
transferred (in-country) that are made under the authorization of this
TGL are subject to the recordkeeping requirements of part 762 of the
EAR.

PART 744--CONTROL POLICY: END-USER AND END-USE BASED

0
7. The authority citation for part 744 continues to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 22
U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 12058, 43 FR 20947, 3 CFR,
1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p.
608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13026,
61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3
CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp.,
p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice
of September 18, 2024, 89 FR 77011 (September 20, 2024); Notice of
November 7, 2024, 89 FR 88867 (November 8, 2024); Notice of August
4, 2025, 90 FR 37999 (August 6, 2025).

0
8. Section 744.8 is amended by:
0
a. In paragraph (a)(2), adding a new second and third sentence, and
0
b. Revising the first sentence of paragraph (b) to read as follows:

Sec. 744.8 Restrictions on exports, reexports, and transfers (in-
country) when certain persons designated on the list of Specially
Designated Nationals and Blocked Persons (SDN List) are a party to the
transaction.

(a) * * *
(2) * * * These EAR controls also apply to any foreign affiliate of
a listed entity that is owned, directly or indirectly, individually or
in aggregate, 50 percent or more by one or more persons blocked
pursuant to the programs listed in paragraph (a)(1) of this section. An
entity owned 50 percent or more, directly or indirectly, by multiple
entities subject to EAR license requirements pursuant to some
combination of the Entity List, MEU List, or SDN List designated under
programs listed in paragraph (a)(1) of this section, is subject to the
most restrictive license requirements, license exception eligibility,
and license review policy applicable to one or more of its owners under
the EAR.
* * * * *
(b) Unless the export, reexport, or transfer (in-country) is
authorized under an OFAC specific or general license or exempted under
OFAC's regulations, a license is required under the EAR for the export,
reexport, or transfer (in-country) of any item ``subject to the EAR''
when a person who is designated on OFAC's SDN List with, or blocked
pursuant to, any of the identifiers set forth in paragraph (a)(1) of
this section is a party to the transaction as described in Sec.
748.5(c) through (f). * * *
* * * * *

0
9. Section 744.11 is amended by adding paragraph (a)(1) to read as
follows:

Sec. 744.11 License requirements that apply to entities acting or at
significant risk of acting contrary to the national security or foreign
policy interests of the United States.

* * * * *
(a) * * *
(1) Entity List entries extend to other foreign affiliates of
listed entities owned 50 percent or more by one or more listed entities
or unlisted entities that are subject to ownership-related
restrictions. The Entity List license requirements and other Entity
List restrictions also apply to any foreign entity that is owned,
directly or indirectly, individually or in aggregate, 50 percent or
more by one or more listed entities or unlisted entities that are
subject to Entity List license requirements or other Entity List
restrictions based upon their ownership. The Entity List license
requirements and other Entity List restrictions do not apply to foreign
affiliates that are owned, directly or indirectly, individually or in
aggregate, 50 percent or more by one or more entities that are
operating at an address listed on the Entity List if the entities
operating at that address are not specifically identified on the Entity
List. An entity owned 50 percent or more, directly or indirectly, by
multiple entities subject to EAR license requirements pursuant to some
combination of the Entity List, MEU List, or SDN List designated under
programs listed in Sec. 744.8(a)(1), is subject to the most
restrictive license requirements, license exception eligibility, and
license review policy applicable to one or more of its owners under the
EAR. If an exporter, reexporter, or transferor cannot determine the
ownership percentage of a foreign entity that is an entity owned,
directly or indirectly, by one or more listed entities, they must
resolve the Red Flag or obtain a license from BIS prior to proceeding
with the export, reexport, or transfer (in-country), unless a license
exception is available (see Red Flag 29 in supplement no. 3 to part
732).
* * * * *

0
10. Section 744.16 is amended by revising paragraph (e) introductory
text to read as follows:

Sec. 744.16 Entity List.

* * * * *
(e) Removal or modification requests. Any entity listed on the
Entity List or the owner or operator of any address that presents a
high diversion risk listed on the Entity List may request that its
listing be removed or modified. Any foreign entity that is owned,
directly or indirectly, individually or in aggregate, 50 percent or
more by one or more entities listed on the Entity List, or by entities
subject to Entity List license requirements or other Entity List
restrictions based upon their ownership, may request that its Entity
List owner's entry listing be modified to exclude the requester. All
such requests, including reasons therefor, must be in writing and sent
to: Chair, End-User Review Committee, Bureau of Industry and Security,
U.S. Department of Commerce, 14th Street and Pennsylvania Avenue NW,
Room 3886, Washington, DC 20230.
* * * * *

0
11. Section 744.21 is amended by:
0
a. Adding paragraph (a)(3);
0
b. Revising paragraph (b)(2) introductory text; and
0
c. Adding one sentence to the end of paragraph (d).

[[Page 47213]]

The additions and revision read as follows:

Sec. 744.21 Restrictions on certain `military end uses' or `military
end users'.

(a) * * *
(3) MEU List and Entity List restrictions extend to foreign
affiliates of listed entities owned 50 percent or more by one or more
listed entities or entities subject to Entity List or MEU List
restrictions based upon their ownership. The MEU List and Entity List
license requirements in paragraphs (a)(1) and (2) of this section also
apply to any foreign entity that is owned, directly or indirectly,
individually or in aggregate, 50 percent or more by one or more listed
entities or entities subject to Entity List or MEU List restrictions
based upon their ownership. The license requirements in paragraphs
(a)(1) and (2) of this section do not apply to unlisted foreign
affiliates that are owned, directly or indirectly, individually or in
the aggregate, solely by one or more unlisted `military end users,'
unless the unlisted foreign affiliate itself meets the definition of a
`military end user.' An entity owned 50 percent or more, directly or
indirectly, by multiple entities subject to EAR license requirements
pursuant to some combination of the Entity List, MEU List, or SDN List
designated under programs listed in Sec. 744.8(a)(1), is subject to
the most restrictive license requirements, license exception
eligibility, and license review policy applicable to one or more of its
owners under the EAR. If an exporter, reexporter, or transferor cannot
determine the ownership percentage of a foreign entity that is owned,
directly or indirectly, by one or more listed entities, they must
resolve the Red Flag or obtain a license from BIS prior to proceeding
with the export, reexport, or transfer (in-country) (see Red Flag 29 in
supplement no. 3 to part 732).
* * * * *
(b) * * *
(2) Requests for removal from or modification of `Military End
User' (MEU) List and Entity List. Any entity listed on the MEU List or
Entity List pursuant to this section may request that its listing be
removed or modified. Any foreign entity that is owned, directly or
indirectly, individually or in aggregate, 50 percent or more by one or
more entities listed on the MEU List or Entity List or subject to MEU
List or Entity List restrictions based upon their ownership, may
request that its MEU List or Entity List owner's entry listing be
modified to exclude the requester. All such requests, including reasons
therefor, must be in writing and sent to: Chair, End-User Review
Committee, Bureau of Industry and Security, U.S. Department of
Commerce, 14th Street and Pennsylvania Avenue NW, Room 3886,
Washington, DC 20230; or by email at <a href="/cdn-cgi/l/email-protection#1451465754767d673a707b773a737b62"><span class="__cf_email__" data-cfemail="d297809192b0bba1fcb6bdb1fcb5bda4">[email&#160;protected]</span></a>. In order for an
entity listed on the MEU List or the Entity List pursuant to this
section to petition BIS for their removal or modification, as
applicable, the entity must address why the entity is not a `military
end user' for purposes of this section.
* * * * *
(d) * * * See supplement no. 2 to part 748, paragraph (c)(c) of the
EAR for unique application and submission requirements for Affiliate
rule entities that meet the criteria under paragraph (a)(3) of this
section.
* * * * *

0
12. Supplement no. 4 to part 744 is amended by revising the
introductory text to the supplement to read as follows:

Supplement No. 4 to Part 744--Entity List

This supplement lists certain entities or addresses subject to
license requirements and other Entity List restrictions for specified
items under this part 744 and part 746 of the EAR. License requirements
for these entities include exports, reexports, and transfers (in-
country) unless otherwise stated. A license is required, to the extent
specified on the Entity List, to export, reexport, or transfer (in-
country) any item subject to the EAR when an entity or a party to the
transaction is operating at an address that is listed on the Entity
List under an address entry is a party to the transaction as described
in Sec. 748.5(c) through (f) of the EAR. The Entity List license
requirements and other Entity List restrictions also apply to any
foreign entity that is owned, directly or indirectly, individually or
in aggregate, 50 percent or more by one or more listed entities or
entities that are subject to restrictions based upon their ownership.
An entity owned 50 percent or more, directly or indirectly, by multiple
entities subject to EAR license requirements pursuant to some
combination of the Entity List, MEU List, or SDN List designated under
programs listed in Sec. 744.8(a)(1), is subject to the most
restrictive license requirements, license exception eligibility, and
license review policy applicable to one or more of its owners under the
EAR. If an exporter, reexporter, or transferor cannot determine the
ownership percentage of a foreign entity that is an entity owned,
directly or indirectly, by one or more listed entities, they must
resolve the Red Flag or obtain a license from BIS prior to proceeding
with the export, reexport, or transfer (in-country), unless a license
exception is available (see Red Flag 29 in supplement no. 3 to part
732). This list is revised and updated on a periodic basis in this
supplement by adding new or amended notifications and deleting
notifications no longer in effect.
* * * * *

0
13. Supplement no. 7 to part 744 is amended by revising the
introductory text to the supplement to read as follows:

Supplement No. 7 to Part 744--`Military End-User' (MEU) List

The license requirement for entities listed in supplement no. 7 to
part 744 applies to the export, reexport, or transfer (in-country) of
any item subject to the EAR listed in supplement no. 2 to part 744. A
license is required to export, reexport, or transfer (in-country) any
item subject to the EAR listed in supplement no. 2 to part 744 when an
entity that is listed on the MEU List is a party to the transaction as
described in Sec. 748.5(c) through (f). No license exceptions are
available for exports, reexports, or transfers (in-country) to listed
entities on the MEU List for items specified in supplement no. 2 to
part 744, except license exceptions for items authorized under the
provisions of License Exception GOV set forth in Sec. 740.11(b)(2)(i)
and (ii) of the EAR as specified in Sec. 744.21(c). The MEU List
license requirements and other MEU List restrictions also apply to any
foreign entity that is owned, directly or indirectly, individually or
in aggregate, 50 percent or more by one or more listed entities or
entities that are subject to restrictions based upon their ownership.
An entity owned 50 percent or more, directly or indirectly, by multiple
entities subject to EAR license requirements pursuant to some
combination of the Entity List, MEU List, or SDN List designated under
programs listed in Sec. 744.8(a)(1), is subject to the most
restrictive license requirements, license exception eligibility, and
license review policy applicable to one or more of its owners under the
EAR. If an exporter, reexporter, or transferor cannot determine the
ownership percentage of a foreign entity that is an entity owned,
directly or indirectly, by one or more listed entities, they must
resolve the Red Flag or obtain a license from BIS prior to proceeding
with the export, reexport, or transfer (in-country) (see Red Flag 29 in
supplement no. 3 to part 732). The license application procedure and

[[Page 47214]]

license review policy for entities specified in this supplement 7 to
part 744 is specified in Sec. 744.21(d) and (e).
* * * * *

0
14. Supplement no. 8 to part 744 is added to read as follows:

Supplement No. 8 to Part 744--Guidelines for Applying 50 Percent
Ownership Rule to Entity List Entries and Other End-User Controls

(a) Scope. These guidelines relating to the status of foreign
affiliates of listed entities owned by individuals or entities
identified on the Entity List, `Military End-User' (MEU) List, or
Specially Designated Nationals (SDN) List under programs listed in
Sec. 744.8(a)(1) of this part. This supplement sets forth guidelines
with respect to foreign affiliates of listed entities owned, directly
or indirectly, individually or in aggregate, 50 percent or more by one
or more listed entities on the Entity List in supplement no. 4 to this
part, the MEU List in supplement no. 7 to this part, by one or more
SDNs designated under programs listed in Sec. 744.8(a)(1) of this
part, or by one or more entities subject to restrictions based upon
ownership by listed entities, as well as for when an exporter,
reexporter, or transferor cannot determine the ownership percentage of
a foreign entity that is an entity owned, directly or indirectly, by
one or more listed entities on the Entity List or the MEU List, because
the involvement of such entities as party to the export, reexport, or
transfer (in-country) presents a diversion concern.
(b) Application of Affiliates rule. Any foreign entity that is
owned, directly or indirectly, individually or in aggregate, 50 percent
or more by one or more entities listed on the Entity List, `military
end-users' on the MEU List, or SDNs designated under programs listed in
Sec. 744.8(a)(1), or by one or more entities subject to restrictions
based upon ownership by listed entities, is considered to be a
diversion concern to such listed entities or SDNs. A license is
required for any transaction where that foreign entity is a party to
the transaction to the same degree as if the export, reexport, or
transfer (in-country) was being exported, reexported, or transferred
(in-country) to its owners. Consequently, any foreign entity owned 50
percent or more by one or more entities on the Entity List, MEU List,
or SDNs designated under programs listed in Sec. 744.8 is itself
considered to be listed on the Entity List, MEU List, or subject to the
requirements under Sec. 744.8, respectively. An entity owned 50
percent or more, directly or indirectly, by multiple entities subject
to EAR license requirements pursuant to some combination of the Entity
List, MEU List, or SDN List designated under programs listed in Sec.
744.8(a)(1), is subject to the most restrictive license requirements,
license exception eligibility, and license review policy applicable to
one or more of its owners under the EAR. If an exporter, reexporter, or
transferor cannot determine the ownership percentage of a foreign
entity that is an entity owned, directly or indirectly, by one or more
listed entities on the Entity List or MEU List, they must resolve the
Red Flag or obtain a license from BIS prior to proceeding with the
export, reexport, or transfer (in-country) (see Red Flag 29 in
supplement no. 3 to part 732).
(c) Due diligence for foreign entities of listed entities with less
than 50 percent ownership by listed entities or SDNs or for parent
entities of listed entities. Exporters, reexporters, and transferors
are advised to act with caution when considering a transaction with a
non-Entity List, non-MEU List, or non-Sec. 744.8 foreign entity in
which one or more entities identified on the Entity List, MEU List, or
SDNs designated under programs identified in Sec. 744.8 has a
significant direct or indirect ownership interest that is less than 50
percent or is a parent entity of listed entities. Such entities may be
the subject of future designation on the Entity List, MEU List, or the
SDN List under one of the designations identified in Sec. 744.8, or of
enforcement actions. Exporters, reexporters, and transferors should
undertake due diligence to ensure that items exported to the entity are
not destined for the Entity List party, MEU List party, or SDN and are
reminded that the EAR imposes licensing requirements, such as end-user
and end-use based restrictions in part 744 of the EAR, that could apply
to such companies even if they are legally separate from the listed
entity.
* * * * *

PART 748--APPLICATIONS (CLASSIFICATION, ADVISORY, AND LICENSE) AND
DOCUMENTATION

0
15. The authority citation for part 748 continues to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p.
228.

0
16. Section 748.8 is amended by adding paragraph (aa) to read as
follows:

Sec. 748.8 Unique application and submission requirements.

* * * * *
(aa) Affiliates rule entities.

0
17. Supplement no. 2 to part 748 is amended by adding paragraph (cc) to
read as follows:

Supplement No. 2 to Part 748--Unique Application and Submission
Requirements

* * * * *
(cc) Affiliates rule entities. To request a license for an export,
reexport, or transfer (in-country) for any foreign entity that is
owned, directly or indirectly, individually or in aggregate, 50 percent
or more by one or more entities listed on the Entity List in supplement
no. 4 to part 744, `Military End-User' (MEU) List in supplement no. 7
to part 744, by one or more Specially Designated Nationals (SDNs)
designated under programs listed in Sec. 744.8(a)(1), or by one or
more unlisted entities that are subject to restrictions based upon
ownership by listed entities, or for an export, reexport, or transfer
(in-country) when the exporter, reexporter, or transferor cannot
determine the ownership percentage of a foreign entity that is an
entity owned by one or more listed entities on the Entity List or the
`military end users' on the MEU List, you must specify ``Affiliates
rule'' in Block 9 (Special Purpose) of the BIS-748P ``Multipurpose
Application'' form. The application also must specify the names of the
listed party or parties that own an aggregate 50 percent or more,
directly or indirectly, individually or in aggregate, of that
entity(ies) listed on the license application, including identifying
the percentage of ownership by listed parties and identifying the
method that the applicant used to make that determination. For license
applications when the exporter, reexporter, or transferor cannot
determine the ownership percentage of a foreign entity that is an
entity owned by one or more listed entities on the Entity List or
`military end users' on the MEU List, the license application must
specify the names of the listed party or parties that own that entity
and explain the due diligence conducted to determine the percentage of
ownership, including providing an explanation for why percentage of
ownership was not able to be determined.

Julia A. Khersonsky,
Deputy Assistant Secretary for Strategic Trade.
[FR Doc. 2025-19001 Filed 9-29-25; 8:45 am]
BILLING CODE 3510-33-P

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