New Export Control Bill Targets Foreign Entities, Including Subsidiaries 50% Owned by Listed Companies.

The “ADVERSARIES Act” (Addressing Dangerous Vulnerabilities in Exports and Research to Strategic Adversaries, Regimes, and Industrial Entities of Security Concern Act) is all about tightening the screws on who can access sensitive U.S. technology and research. Specifically, Section 2 of this bill takes aim at the Export Control Reform Act of 2018 by significantly broadening the definition of a “foreign person” subject to restrictions.

This isn't just bureaucratic language; it’s a major expansion of the net cast by the Bureau of Industry and Security (BIS). The bill explicitly includes any entity identified as a Chinese military company, any entity already on the BIS Entity List (which restricts exports), or the Military End User List (MEU). If you’re on these lists, you’re now firmly designated as a “foreign person” for export control purposes, making it much harder to get U.S. goods and data.

The 50% Ownership Rule: Compliance Just Got Complicated

Here’s where things get tricky for businesses with global supply chains. The bill automatically includes any subsidiary or affiliate that is 50 percent or more owned, directly or indirectly, by any of the specifically named entities. This provision closes a common loophole where restricted companies try to skirt controls by operating through partially owned affiliates. For example, if a company on the Entity List owns 51% of a seemingly unrelated research firm, that research firm is now also considered a restricted “foreign person.”

This level of detail is good for national security, as it makes the rules clearer and harder to evade. However, for a U.S. manufacturer or university researcher, compliance just became a lot more complex. They now have to perform serious due diligence to trace the ownership structure of any foreign partner to ensure none of the restricted entities have a 50% or greater stake. Missing that detail could result in serious penalties for violating export controls, even if the mistake was unintentional.

Real-World Impact on Research and Business

Think about a U.S. tech startup that licenses its software to an international distributor. Under this new rule, the startup isn't just checking the distributor’s name against the Entity List; they have to investigate who owns the distributor. If they find out an entity on the MEU list owns exactly half of the distributor, the deal is fine. But if that ownership ticks up to 50.1%, the U.S. startup is suddenly dealing with a restricted “foreign person,” and the transaction could be illegal without a specific license. This forces companies to dig deep into corporate records, adding time and cost to international agreements.

Ultimately, the ADVERSARIES Act strengthens the government's ability to restrict sensitive exports and research partnerships. It provides a clear legal basis for targeting the affiliates of already restricted entities. While this is a win for closing security loopholes, it places a significant new burden on U.S. businesses and researchers to meticulously track the ownership percentages of their foreign partners to avoid inadvertently violating the expanded export control rules.