White House Announces One-Year Suspension of Affiliates Rule Starting Nov. 10

Over the weekend, the White House announced, as a part of its economic and trade relations deal with China, that the U.S. will suspend implementation of the Affiliates Rule (a/k/a the BIS 50 Percent Ownership Rule) effective November 10, 2025. As we explained previously, the Affiliates Rule is a paradigm shift in counterparty due diligence for parties trading in goods, software, and technology/source code (collectively, Items) “subject” to the Export Administration Regulations (EAR) administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS).

Affiliates Rule Background

Under the Affiliates Rule effective September 29, 2025, entities owned 50% or more, in the aggregate, directly or indirectly, by one or more individuals and/or entities (Persons) listed on the Entity List, Military End-User List (MEU List), and/or on the SDN List for specific reasons cited in 15 C.F.R. § 744.8(a)(1)—(together with the Entity List and the MEU List, the Relevant Lists) (such subsidiaries and affiliates of entities on the Relevant Lists hereafter referred to as Shadow Affiliates)—are subject to the most restrictive treatment under the EAR applicable under any of the designations applicable to their direct or indirect owners on the Relevant Lists. As such, like the long-standing OFAC 50 Percent Rule, Persons exporting Items from the U.S., reexporting or transferring Items abroad, or releasing technology or source code to representatives of non-U.S. entities anywhere must all conduct sufficient due diligence to detect whether a potential transaction involves a Shadow Affiliate. Unlike the OFAC 50 Percent Rule, the Affiliates Rule contains an “affirmative duty” to confirm the total voting shares percentage held by Persons on the Relevant Lists if there is knowledge that Persons on the Relevant Lists hold, directly or indirectly, any shares at all. Proceeding with a transaction without knowing the exact ownership allocations of voting shares risks a “knowing” violation of the EAR.

Can We Really Not Worry About the Affiliates Rule for a Year?

There are strong reasons why this temporary reprieve should not cause significant delay to any company’s efforts to mitigate the effects of the Affiliates Rule on their operations. For example:

• The Temporary Supsension Is Not Effective Immediately. Remember, the suspension doesn’t begin until November 10, so at the time of this writing, the Affiliates Rule is fully effective (though the Temporary General License for certain transactions remains in effect through the end of November 2025).
• Divestments Take Time. If your company is a Shadow Affiliate, or if you have a key counterparty that is a Shadow Affiliate, divestments of shares will usually take significant time to effectuate, unless the shares are publicly traded.
• Anything Less Than a Full Divestment Will Prolong the Headache. Unless modified, the affirmative duty in the Affiliates Rule to understand the ownership structure of an entity owned by one or more Persons on the Relevant Lists subject to the Rule creates a compliance nightmare. Genuine attempts to confirm the ownership structure of counterparties where there is some level of direct or indirect ownership by Persons on the Relevant Lists will be costly and time-consuming unless BIS releases guidance or changes to the Rule in such a way that mitigates the exacting affirmative duty standard described in the Rule.
• National Security and Foreign Policy Developments Predominate. If the President finds that there are reasons to put the Affiliates Rule back on the table over the course of the next year, such as due to Chinese actions related to Taiwan, in the South China Sea, or other strategic interests, there is nothing stopping the President from doing so.
• The Affiliates Rule Could Be Modified to Temporarily Exclude China While Continuing to Apply to Listed Persons of All Other Jurisdictions. While Shadow Affiliates of Chinese Persons on the Relevant Lists certainly outnumber all others, the Relevant Lists apply to Persons in dozens of countries. For parties affected by the Affiliates Rule due to non-Chinese Persons on the Relevant Lists, they are perhaps at a greater risk of the Affiliates Rule being reimposed swiftly, as presumably the U.S. trade deal with China would not be significantly harmed if China’s interests are largely insulated.
• The Affiliates Rule May Go the Way of the AI Diffusion Rule—Suspended but Not Rescinded. Followers of U.S. export controls will note that the Trump Administration suspended all enforcement of the AI Diffusion Rule, one of the Biden Administration’s signature efforts to restrict access to leading-edge AI model weights as well as U.S. semiconductors and certain inputs necessary to produce them. However, while the suspension was announced in May 2025, just days prior to the first major effective date of the AI Diffusion Rule, that Rule’s complicated text has not yet been officially removed from the Code of Federal Regulations. This suspension-without-rescission approach continues to impose practical difficulties in reading and understanding the current state of the EAR’s requirements (thereby raising compliance costs) and prolongs a concern that, at any moment, the Trump Administration could announce it will proceed to enforce the AI Diffusion Rule (perhaps with a few revisions to appease key industry players).

All parties directly or indirectly affected by the Affiliates Rule should utilize the suspension to aggressively ready their operations for full implementation of the Rule. Please reach out to your Winston relationship partner or the authors for assistance with risk assessment, mitigation, and adaptation efforts.