When dealing with U.S. export controls and sanctions, businesses may encounter two key ownership-based rules:
While both use a 50% ownership threshold to determine whether an entity is subject to restrictions, they apply in different regulatory contexts and serve distinct purposes. So, here we’re going to look at some of the characteristics and differences between the two Rules.
The BIS 50% rule has been suspended for a year and is now expected to go into effect in November 2026.
At their core, both Rules aim to prevent restricted individuals or entities from bypassing U.S. regulations by operating through subsidiaries or affiliates. If one or more listed or blocked person owns 50% or more of an entity—directly or indirectly or in aggregate—that entity is treated as if it were also listed or blocked. In relation to OFAC, being “blocked” essentially refers to the status of individuals or entities whose assets are frozen and with whom U.S. persons are generally prohibited from engaging in transactions with. In the BIS 50% Rule, “being listed” means appearing on a BIS-controlled list (such as the Entity List or Military End-User List), which can trigger export licensing requirements.
The approach captured within these Rules can help regulators apply restrictions more broadly without needing to list every affiliated company individually. While calculating ownership thresholds may appear a challenge for compliance teams, clear, standardized thresholds could reduce ambiguity. This consistency means compliance teams can adapt policies, screening data, and compliance workflows to align with regulatory expectations, rather than interpreting criteria.
Sanctions are government-imposed restrictions used to influence the behavior of individuals, entities, or countries by limiting their access to financial systems, trade, or resources—typically in response to activities that threaten national security, foreign policy, or international norms. The OFAC 50% Rule is part of U.S. sanctions enforcement.
Essentially, if an entity is owned 50% or more by blocked persons (i.e., they are sanctioned), then the property and transactions of that entity also become blocked. The entity is treated as if it were also on the OFAC Specially Designated Nationals (SDN) List, even if it is not explicitly listed.
The new BIS Affiliates Rule is part of the U.S. Export Administration Regulations (EAR). It will impose licensing requirements for exports, reexports, and in-country transfers of “controlled items” to entities that are owned 50% or more by parties on the BIS Entity List, designated on the Specially Designated Nationals (SDN) list under certain identifiers, or the Military End-User (MEU) List. A licensing requirement is official authorization from the U.S. government before exporting certain goods, software, and/or technology. As an example, exporting a controlled semiconductor to a company on the BIS Entity List may require a Bureau of Industry and Security (BIS) license.
Here’s a summary of how the two rules compare:
| Feature | OFAC 50% Rule | BIS 50% Rule |
| Regulatory context | U.S. sanctions programs under the Department of the Treasury | Export controls under the Department of Commerce |
| Ownership threshold | 50% or more aggregate ownership by blocked persons | 50% or more aggregate ownership by listed parties |
| Aggregated ownership | Ownership is aggregated only among SDNs For example: If Entity A is owned 30% by an SDN and 30% by an SSI, it is not considered sanctioned by extension. | Ownership is aggregated across some BIS lists. For example: If Entity B is owned 30% by an Entity List entity and 30% by an MEU List entity, it is considered subject to Entity List restrictions. [There are BIS lists not included for aggregation e.g., the Denied Persons List] |
| Scope of restrictions | Blocks property and prohibits transactions | Requires an export license for controlled items |
| Focus area | Financial and property-related sanctions | Export, reexport, and in-country transfers of goods, software, and technology |
| Discretionary enforcement | OFAC may designate entities with less than 50% ownership if control is evident | BIS may impose restrictions below 50% ownership if national security risks are present |
The existence of separate Rules reflects the distinct missions of BIS and OFAC. OFAC focuses on blocking assets and restricting financial dealings with individuals, foreign countries and entities that pose threats to U.S. foreign policy or national security. BIS, on the other hand, is concerned with preventing sensitive technology, software, and goods from reaching parties that could misuse them.
Understanding the BIS Affiliates Rule and OFAC 50% Rule is important for companies engaged in international trade, technology transfer, or financial transactions. While the Rules share a common threshold and goal, i.e., preventing circumvention of laws, they operate in different domains and carry different implications.
For information on Moody’s solutions for automated entity verification processes, understanding beneficial ownership, and sanctions screening, please get in touch with the team any time—we would love to hear from you.
*Disclaimer: This content is for informational purposes only and reflects our understanding of the subject matter as of the date of publication. It does not constitute legal, regulatory, or compliance advice.