The Bureau of Industry and Security (BIS) Entity List is a trade restriction list of individuals, businesses, government organizations, and addresses that are subject to specific license requirements for the export, reexport, and/or transfer (in-country) of specified items.
Currently, subsidiaries, parent companies, and sister companies are legally distinct from listed entities. Therefore, licensing and other obligations imposed on a listed entity do not apply to these subsidiary, parent, and sister companies.
While BIS does recommend that organizations exercise caution when dealing with companies adjacent to listed entities, it does not explicitly prohibit these relationships the way, for example, the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) 50 Percent Rule does. Lack of an explicit prohibition may be contributing to export control evasion.
>> Get insight into managing and responding to import-export compliance challenges <<
Closing the subsidiary loophole
Landon Heid, President Trump’s nominee to be Assistant Secretary of Export Administration at BIS, has suggested closing this loophole in the Entity List’s prohibitions.
During his April 10 testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Heid was asked how the China-controlled company, DeepSeek, accessed advanced Nvidia chips through third countries like Malaysia and Singapore despite stringent U.S. export controls. The subsidiary loophole, Heid believes, may be part of the problem.
“There is no more sophisticated actor on the planet than the CCP (Chinese Communist Party) as far as it goes to overt and covert collection of U.S. technology,” Heid began in his response.
He goes on to propose increasing the effectiveness of export controls. Referencing the Entity List, Heid mentioned the fact that restrictions applied to an entity do not apply to the entity’s subsidiary, allowing companies to use their subsidiaries to obtain restricted items.
Heid suggests including subsidiaries on the Entity List in a manner similar to that of the OFAC. The OFAC 50 Percent Rule mandates that any entity owned 50% or more by one or more sanctioned individuals or entities is also considered blocked.
Heid stated that adopting an approach similar to the OFAC 50 Percent Rule would be a “simple fix you could do relatively quickly. These are the kinds of things we’re going to be talking about and moving very quickly at to solve the problem.”
On April 16, the House Select Committee released a report alleging that DeepSeek covertly funnels American user data to the CCP and was trained using material unlawfully obtained from U.S. AI models. The release also highlights that DeepSeek was reportedly developed using over 60,000 Nvidia chips, which may have been obtained in circumvention of U.S. export controls.
In early May, the Senate Banking Committee advanced Heid to the Senate floor for further consideration.
>> Learn practical techniques to comply with rapidly evolving export controls <<
A potential future Entity List
Given the speed of the current administration’s actions and the advance of this candidate’s nomination, there’s a likelihood that changes to the BIS Entity List to include subsidiaries will become a reality.
If so, organizations will need to ensure they can efficiently and effectively map the upstream ownership of their customers and determine the risks they pose. By marrying global corporate and trade data together in a graph database — and overlaying that data with key risk indicators — Sayari provides enhanced risk screening at scale.
Sayari automatically screens entities against U.S., EU, UK, and other sanctions lists, flagging all those sanctioned, related to a sanctioned entity, and formerly sanctioned. Shareholder relationships in Sayari automatically display the percent ownership to facilitate more nuanced decision-making. Sayari’s extensive data model and in-application translation tools make it easy for organizations to obtain information on entities in opaque and otherwise inaccessible jurisdictions. All Sayari records also cite authoritative sources to facilitate documentation and reporting.
UPDATE: Sayari announced the launch of its BIS50 Signal Screening Solution, which empowers organizations to prepare for anticipated changes to U.S. export control rules. The provided screening file identifies thousands of entities that are majority-owned by companies on the BIS Entity List and MEU List. Flagged entities will also be visible in both Sayari Graph and Sayari Map. Learn more about this data solution in our latest press release.
