Could the BIS Entity List Re-emerge as a Major Sourcing Risk?

Article Highlights:

• The Bureau of Industry and Security’s Entity List is a collection of foreign companies, persons, and entities that the bureau has reason to believe are operating in a capacity that poses a threat to the national security of the United States.
• Since the Affiliates Rule was suspended in November 2025, the BIS’s Entity List has not been a major factor in trade compliance or sourcing considerations for most U.S. companies. But just because it hasn’t dominated headlines recently doesn’t mean the BIS Entity List is a variable that should be overlooked. 
• The BIS Entity List’s Affiliates Rule was only suspended for one year, and the prospect of its re-implementation will start to loom by the third quarter of 2026, forcing the subsidiaries of companies on the BIS Entity List to seriously consider how their supply chains could change if the rule were to go into effect. 

On Friday, February 13, the U.S. Department of Defense added a slew of major Chinese companies to its Chinese Military Companies list, formerly known as the DoD’s Section 1260H list. The companies sanctioned by the U.S. government included high-profile corporations like Alibaba, BYD, and Baidu. Then, the updated list—which would have had major ramifications for the covered Chinese firms, as well as all U.S. companies doing business with them—was abruptly pulled from the Federal Register. “We would like to remove this notice from public inspection and withdraw the notice from publication in the Federal Register,” a request from the Pentagon to the government’s official publication read.

It was a disorienting turn of events—and a sequence that undoubtedly triggered whiplash for many companies in both China and the U.S. that would have suffered serious consequences from those sanctions. While the short-lived restrictions might not have had any lasting impact on the Chinese Military Companies list or Chinese businesses writ large, the development did demonstrate just how quickly trade sanctions can resurface in a volatile geopolitical environment. And given the degree of interdependence between original equipment manufacturers (OEMs) and other businesses in the U.S. and China, the prospect of sanctions ramping up again continues to be a serious concern. This may be especially true of the BIS Entity List. 

What Is the BIS Entity List?

The Bureau of Industry and Security’s Entity List is a collection of foreign companies, persons, and entities that the bureau has reason to believe are operating in a capacity that poses a threat to the national security of the United States. According to the BIS, entities on the list can be “reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.”

The sanctions list was first created in 1997, in an effort to keep the public informed about the possibility of goods being diverted, exported, or transferred to nations where they would be used for programs related to the development of weapons of mass destruction (WMD). Since it was initially published in 1997, the BIS Entity List has expanded its scope considerably, and now focuses on all entities involved in activities “contrary to U.S. national security and/or foreign policy interests.”

BIS Entity List Licensing Requirements

There is one primary requirement and/or restriction that inclusion on the BIS Entity List imposes. Any U.S. business looking to export or transfer specific items to any person or entity on the Entity List must apply for a special license from the agency. The list of sanctioned items covered by the list can be found in special Commerce Control Lists, where items are designed with Export Control Classification Numbers. 

Commerce Control Lists covered by the BIS Entity List include:

• ECCN 3B001
• ECCN 3B002
• ECCN 3B611
• ECCN 3B903
• ECCN 3B991 (with certain exceptions)
• ECCN 3B992
• ECCN 3B993
• ECCN 3B994

The Looming BIS 50 Percent Rule 

In late September 2025, the Trump administration announced a new rule impacting the BIS Entity List (as well as the Military End User, or MEU, List). Widely referred to as the “Affiliates Rule,” the new law stipulated that any company or entity that was at least 50% owned by one or more entities on the BIS Entity List or the MEU List would automatically become subject to the restrictions imposed by those sanctions.  

Given the complex ownership structure of many of today’s multinational corporations, this announcement was received as a major development in the corporate and manufacturing worlds. It was set to be particularly consequential for Chinese businesses, which often operate through intricate subsidiary structures or have significant ownership stakes in companies based in other countries. 

The potential consequences of the BIS Affiliates Rule were most notably exemplified by the saga between Wingtech and Nexperia. Nexperia, a Dutch electronic component manufacturer, was acquired by Chinese firm Wingtech Corporation in 2019. Because Wingtech was placed on the BIS Entity List in December 2024, based on the BIS’s new Affiliates Rule, Nexperia was set to fall into the scope of the BIS Entity List. This would have posed a major challenge for both Nexperia’s parent company, Wingetch, and Nexperia itself, epitomizing the emerging challenges imposed by the BIS’s stricter stance on export restrictions. 

But the Affiliates Rule was never implemented. Following trade negotiations between U.S. President Trump and Chinese President Xi Jinping in late October 2025, the U.S. agreed to postpone implementation of the rule for one year. This was a major reprieve for any number of different global supply chain players, including not only sanctioned Chinese companies but also the Chinese subsidiaries set to fall into the Entity List’s scope and the businesses that source from those subsidiaries. (Companies in the latter group that sourced from Nexperia faced major shockwaves for months following the announcement of the Affiliates Rule.)

Widely referred to as the “Affiliates Rule,” the new law stipulated that any company or entity that was at least 50% owned by one or more entities on the BIS Entity List or the MEU List would automatically become subject to the restrictions imposed by those sanctions.  

The trade negotiations between Trump and Xi meant, however, that this potential chain reaction was forestalled. For now.

Why the BIS Entity List Matters More Than You Think

Since the Affiliates Rule was suspended in November 2025, the BIS’s Entity List has not been a major factor in trade compliance or sourcing considerations for most U.S. companies. Instead, organizations have been largely focused on tariffs, as well as the way the conflict in Iran is reverberating through the global economy via energy, helium, and other critical materials. But just because it hasn’t dominated headlines recently doesn’t mean the BIS Entity List is a variable that should be overlooked. 

There are two key reasons the Entity List remains a consequential factor in trade compliance for U.S. businesses. First, the global geopolitical landscape continues to be unsettled and dynamic, with tensions simmering between rival nations like the U.S. and China. These tensions could boil over in a matter of months, translating into trade conflict, export restrictions, and/or the Trump administration’s use of the BIS Entity List to punish Chinese businesses. Given the U.S.’s technological advantages over much of the world, companies cut off from American goods, intellectual property, and technology transfers could be stymied by inclusion on the Entity List—an outcome that would have significant downstream impacts on all the businesses that source from those firms. 

Second—and arguably more importantly—the Affiliates Rule was only suspended for one year. The prospect of its re-implementation will start to loom by the third quarter of 2026, forcing the subsidiaries of companies on the BIS Entity List to seriously consider how their supply chains and technological access could change if the rule were to go into effect. It’s entirely possible, too, that the Trump administration will seek to exploit this leverage in geopolitical and trade discussions, going until the last few days prior to implementation—or even allowing the law to enter into force—in order to extract some desired concessions from China or another geopolitical rival. This type of brinkmanship could be disastrous for companies like Nexperia, which relies heavily on American technology and manufacturing equipment to produce semiconductors. 

Finally, businesses should not overlook the fact that many members of Congress vehemently want the U.S. government to crack down more aggressively on Chinese subsidiaries. For these politicians, the Affiliates Rule is not a threat or a source of leverage. Rather, it’s a real trade instrument intended to punish Chinese corporations for using labyrinthine ownership structures and other unfair trade practices—as well as flouting international ESG standards—to skirt global controls and gain a competitive advantage. 

It’s entirely possible, too, that the Trump administration will seek to exploit this leverage in geopolitical and trade discussions, going until the last few days prior to implementation—or even allowing the law to enter into force—in order to extract some desired concessions from China or another geopolitical rival.

Navigate Sanctions Risk With Z2 

Although it may no longer be at the center of the media spotlight, sanctions continue to be a crucial variable for professionals in sourcing, procurement, and supply chain resilience. In his one term in office, President Biden imposed sanctions on 844 Chinese entities, many of whom were placed on the BIS Entity List. Given the strength of that precedent, there’s a very good chance that the current presidential administration will eventually return to the use of sanctions as a mechanism to penalize other countries and exert geopolitical leverage. 

When that time does come, organizations able to draw on the data and insights of a supply chain risk management (SCRM) tool will enjoy a meaningful strategic advantage. SCRM platform Z2 offers businesses comprehensive intelligence on a wide range of trade sanctions, including not only the BIS Entity List but the UFLPA, the MEU List, and the Specially Designated Nationals (SDN) List, among others. Using Z2, companies can access both present and future guidance on where sanctions are likely to strike with the greatest force.

See Current Sanctions Exposures

When provided with supply chain information, Z2 can show businesses what direct and sub-tier entities are targeted by current sanctions. The tool covers over 180 major global regulations, including not only trade sanctions but ESG and environmental directives all over the world. This type of intelligence reduces compliance risk and saves companies time, giving them an accurate, proven tool for rapidly detecting noncompliance and rooting it out of supply chains.

Know Where Your Future Vulnerabilities Lie

Z2 goes one step further than traditional trade compliance software by providing organizations with a powerful sanctions forecasting tool. Drawing on trusted sources that include congressional documents, NGO investigations, and journalistic reports, Z2 tracks 28 key sanctions lists across 16 different countries—including the U.S., Canada, the U.K., Japan, and China—to create a Sanctions Watchlist that pinpoints businesses at the greatest risk of being sanctioned in the future. 

Users can integrate these forecasts with their own BOM data, providing them with a powerful window into how potential sanctions could affect their suppliers, supply chain, and manufacturing processes. Over time, the insights yielded by Z2’s Sanctions Watchlist can help businesses select safer suppliers, giving them another resource for building a more resilient supply chain. 

To learn more about Z2 and how it can help companies navigate the BIS Entity List and other trade sanctions, schedule a free trial with one of our product experts.