U.S. Broadens Export Blacklist, Targeting Subsidiaries and Potentially Disrupting Global Supply Chains

technology exports to China and other nations, targeting subsidiaries of companies already on the 'Entity List.' This move aims to close loopholes and tighten control over sensitive technologies.">

September 29, 2025

Washington D.C.- The United States Government announced monday a significant expansion of its export controls, designed to prevent China and other nations from circumventing restrictions on access to advanced technologies. The new regulation, issued by the Department of Commerce, directly addresses the practice of using subsidiaries to obtain restricted items, particularly in the semiconductor manufacturing industry.

New Regulations and Their Impact

According to the Federal Gazette, the updated rules automatically include any subsidiary with a 50% or greater ownership stake held by a company already listed on the “Entity list” – a roster of organizations deemed to pose a threat to U.S. national security or foreign policy interests. This expanded scope dramatically increases the number of entities requiring licenses for transactions involving U.S. goods and services.

The change seeks to eliminate a common tactic were companies establish subsidiaries to acquire technologies indirectly, bypassing direct restrictions. Officials anticipate the measure could introduce disruptions into global supply chains and create complexities for businesses assessing the legality of exports.

The U.S.Department of Commerce has indicated that a 60-day grace period will be granted to allow businesses to adjust to the new regulations and evaluate their compliance requirements.

Mirroring Treasury Department Practices

This broadened approach to export controls mirrors similar “50% rule” principles already employed by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) in sanctions enforcement. Under this established protocol, any entity owned by a sanctioned party with a 50% or more stake is also considered sanctioned, requiring exporters to secure licenses – often with a high probability of denial.

The move follows increasing scrutiny of China’s efforts to bolster its domestic chip industry, which the U.S. views as potentially undermining its technological leadership. According to a recent report by the Congressional Research Service, China invested over $150 billion in its semiconductor industry between 2014 and 2022.

Regulation	Previous Rule	new Rule
entity List Impact	Restrictions applied to listed companies only.	Restrictions apply to companies & subsidiaries with 50%+ ownership by listed entities.
License Requirement	Focused on direct transactions.	Expanded to cover indirect transactions via subsidiaries.
Compliance Timeline	Standard export licensing procedures.	60-day grace period for adaptation.

Did You Know? The U.S. bureau of Industry and Security (BIS) is the agency responsible for administering and enforcing export control regulations.

Pro Tip: Businesses involved in international trade, especially those dealing with China or other restricted regions, should proactively review their supply chains and conduct thorough due diligence to ensure compliance with the new regulations.

what implications will these expanded controls have on global trade dynamics? And how will businesses adapt their strategies to navigate the new compliance landscape?

Understanding Export Controls: A Long-Term Perspective

Export controls are not new. The U.S. has employed them for decades to safeguard national security, advance foreign policy objectives, and protect specific industries. The evolution of these controls reflects shifting geopolitical landscapes and technological advancements. Initially focused on military applications, export controls have expanded to encompass dual-use technologies – items with both civilian and military applications. The increasing complexity of global supply chains has also presented ongoing challenges for effective enforcement.The Semiconductor Industry Association https://www.semiconductors.org/ consistently monitors and contributes to discussions on these evolving regulations.

Frequently Asked Questions About U.S. Export Controls

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How might the expanded Entity List impact companies with complex, multi-tiered supply chains reliant on components from subsidiaries of listed entities?

Expanding Restrictions: A New Phase in Export control

The U.S. Department of Commerce has significantly expanded its export blacklist, officially known as the Entity List, with a recent focus on subsidiaries of previously listed companies. This move represents a hardening of stance on technology transfer and national security concerns, and is poised to create ripple effects throughout global supply chains. The implications extend beyond the directly affected entities,impacting businesses reliant on components or technologies sourced from these organizations. This escalation in export controls is driven by concerns over advancements in areas like artificial intelligence (AI), quantum computing, and advanced semiconductor manufacturing.

Who is Affected and Why?

The Entity List restricts access to U.S. technologies for listed entities. Previously,the focus was largely on parent companies. Now, the U.S. is targeting subsidiaries, even those located outside of China, effectively closing loopholes that allowed for continued access through indirect routes.

* Key Sectors Impacted: Semiconductor manufacturing, AI progress, telecommunications, and aerospace.

* Geographic Focus: While Chinese companies remain a primary target,the expansion includes entities in Russia,Iran,and other countries deemed to pose a national security risk.

* Specific Concerns: The U.S. government cites concerns about these companies contributing to military modernization efforts and human rights abuses. Technology sanctions are a key tool in addressing these issues.

The Impact on Global Supply Chains

The broadening of the Entity List is already causing significant disruption. Companies are scrambling to find alternative suppliers,redesign products,and navigate the complex web of export regulations.

1. Increased Costs: Sourcing from alternative suppliers frequently enough comes at a higher price point, leading to increased production costs.
2. Lead Time Extensions: finding and qualifying new suppliers takes time, resulting in longer lead times for critical components.
3. Supply Chain Diversification: Businesses are actively pursuing supply chain resilience by diversifying their supplier base and reducing reliance on single sources.
4. Inventory Stockpiling: Some companies are preemptively stockpiling critical components to mitigate potential disruptions, further straining supply.

Understanding the New Rules: Key Changes

The recent changes aren’t simply about adding more names to the list.The approach is more nuanced.

* De Minimis Rule Scrutiny: The U.S.is tightening its interpretation of the de minimis rule, which previously allowed for some limited exports of U.S.-origin content even to listed entities if the U.S. content was a small percentage of the final product.

* Foreign Direct Product Rule (FDPR): The FDPR remains a powerful tool, prohibiting the use of U.S. technology in the production of items for listed entities, even if the production occurs outside the U.S.

* Increased Enforcement: The Bureau of Industry and Security (BIS) is increasing its enforcement efforts, conducting more audits and investigations to ensure compliance. Export compliance is now paramount.

Case Study: Huawei and its subsidiaries

Huawei’s experience provides a clear example of the impact of the Entity List. Initially placed on the list in 2019, the restrictions have steadily tightened, impacting its ability to source components for its smartphones and telecommunications equipment. The recent targeting of Huawei’s subsidiaries, like HiSilicon (its chip design arm), further restricts its access to critical technologies. This has forced Huawei to seek alternative chip suppliers and develop its own indigenous technologies, a process that is both costly and time-consuming.

Navigating the Complexities: Practical Tips for Businesses

Businesses need to proactively address the challenges posed by the expanded entity List. Here are some practical steps:

* Supply Chain Mapping: Conduct a thorough mapping of your supply chain to identify any potential exposure to listed entities, including subsidiaries.

* Due Diligence: Implement robust due diligence procedures to screen suppliers and customers against the Entity List and other restricted party lists.

* Export Control Classification: Accurately classify your products and technologies to determine if they are subject to export controls. ECCN (Export Control Classification Number) determination is crucial.

* License Applications: If you need to export to a listed entity, determine if a license is required and submit a license submission to the BIS.

* Compliance Program: Develop and implement a complete export compliance program to ensure ongoing adherence to U.S. regulations.

* Legal Counsel: Consult with experienced export control attorneys to navigate the complex legal landscape.

The Future of Export Controls

The trend towards stricter export controls is highly likely to continue. The U.S. government is increasingly viewing export controls as a strategic tool to protect national security and maintain its technological advantage. Expect further refinements to the entity List, increased enforcement, and potentially broader restrictions on technology transfer. Businesses must adapt to this evolving landscape by prioritizing export control management and building resilient supply chains. the focus on national security technology will remain a driving force behind these policies.