What is the BIS "Acting on Behalf Of" rule?

The rule prohibits transactions with any party acting on behalf of a known restricted entity. If an affiliate procures items for a blocked parent, the affiliate is effectively blocked.

Are all affiliates of an Entity List party blocked?

Not automatically by name, unless they meet the 50% ownership threshold. However, transactions with affiliates carry high risk of diversion (General Prohibition 10) and often require enhanced due diligence.

How does BIS define an affiliate?

BIS generally considers an affiliate to be any entity that controls, is controlled by, or is under common control with another entity, often through ownership, board representation, or management.

BIS Affiliates Rule | Export Compliance Guide

The "Hidden" Lists

When an entity is added to the Bureau of Industry and Security (BIS) Entity List, the restriction is clear: you generally cannot ship checks items to them without a license. But what about their subsidiaries? What about their sister companies?

Unlike the Treasury Department's OFAC, which has long enforced a strict "50 Percent Rule" covering all downstream subsidiaries, BIS jurisdiction has historically been more nuanced. However, recent guidance helps clarify that affiliates matter.

Acting on Behalf Of

The core legal principle at play is "acting on behalf of." Under the Export Administration Regulations (EAR), you are prohibited from knowingly exporting items that will be used in violation of the regulations (General Prohibition 10).

The Risk Scenario

Blocked Company A cannot buy from you. So, they instruct their non-listed Affiliate Company B to buy the items. If you ship to Company B knowing (or having reason to know) the items are for Company A, you have violated the EAR just as if you shipped to Company A directly.

Identifying Affiliation Risks

Since BIS does not publish a complete list of every affiliate of every restricted party, the burden of "Know Your Customer" (KYC) falls on you. You need to look for:

Common Ownership: Does a restricted party own stock in your customer? (See our 50% Rule Guide)
Shared Management: Do they share directors, officers, or key managers?
Shared Infrastructure: Do they use the same physical address, email domain, or IP address?
Control: Does the restricted party have veto power or operational control?

The "Red Flag" Standard

BIS guidance explicitly states that transactions with affiliates of listed parties carry a high risk of diversion. This creates a regulatory "Red Flag."

When a Red Flag is present, you have a duty to inquire. You cannot "self-blind" or ignore the relationship. You must conduct enhanced due diligence to verify the end-user and end-use.

Due Diligence Requirement

If an affiliate relationship exists, obtain a written End-User Statement certifying that the items will not be re-transferred to the restricted parent. If you cannot verify this, do not ship.

Automating Affiliate Detection

Manual KYC searches on Google are insufficient for modern compliance. You need automated tools that map corporate hierarchies.

SecurePoint USA's ownership graph technology automatically detects:

Legal Hierarchy

Parent/child relationships and percentage ownership stakes.

Sanctions Links

Direct links between your customer and any restricted entity.

Check Your Exposure

Use our free calculator to see if your customer's ownership structure triggers an automatic block or a red flag.

Run BIS 50% Calculator

Frequently Asked Questions

Does a 25% ownership stake trigger a block?▼

No, a 25% stake does not trigger an automatic legal block (which requires 50%). However, it is a significant "Red Flag" that requires enhanced due diligence to ensure the restricted owner isn't controlling the entity.

What if the affiliate is in a different country?▼

US export controls are extraterritorial. The location of the affiliate does not exempt them from the rule. If they are owned by a Entity List party, the restrictions apply regardless of geography.

Disclaimer: This content is for educational purposes only. The "Acting on Behalf Of" standard is complex. Consult trade counsel for specific decisions.