BIS Entity List Addition: Impact on Contracts

BIS added 170+ entities to the Entity List through October 2025: 29 in January, 80+ in March, 32 in September, and 29 more in October (Federal Register filings, 2025). When your supplier or customer shows up on that list mid-contract, you have roughly 30 days to figure out whether you can complete shipments already in transit. Beyond that window, every export, reexport, or transfer requires a license — and BIS reviews Entity List applications under a presumption of denial.

Key Takeaways

• BIS Entity List additions take effect immediately upon Federal Register publication; the January 16, 2025 additions hit at 8:45 AM Eastern and were enforceable by 8:46 AM (Federal Register, 90 FR 3847)
• Shipments en route on the effective date get approximately 30 days to reach destination; the March 28, 2025 additions allowed until April 28 for goods already aboard carriers (15 CFR 744.11)
• Administrative penalties reach $374,474 per violation or twice the transaction value as of January 2025; criminal violations carry up to $1 million per violation and 20 years imprisonment (BIS Enforcement Guidelines, 15 CFR 766)
• The September 29, 2025 "Affiliates Rule" extended restrictions to entities 50% owned by listed parties, though BIS suspended implementation until November 2026 following U.S.-China trade negotiations (90 FR 47201; 90 FR 57823)
• Force majeure clauses require careful drafting; the UK Supreme Court's May 2024 MUR Shipping decision clarified that sanctions can trigger force majeure protections, but only where contract language explicitly addresses such events

What Happens the Day an Entity Gets Listed?

Export restrictions apply immediately. No grace period for "getting your house in order." The Federal Register publication date marks the cutoff, not when you find out about it or when your screening vendor pushes an update. BIS published the January 16, 2025 additions targeting Chinese semiconductor entities — including Sophgo Technologies and 15 others — at 8:45 AM Eastern. By 8:46 AM, any unlicensed shipment to those companies became a potential violation.

The en route exception provides limited breathing room. Shipments already aboard a carrier on the publication date can proceed to destination, but the clock is tight. The March 28, 2025 additions (70+ entities across China, Iran, Pakistan, and UAE) gave until April 28 for items already in transit. Miss that window, and you need a license regardless of when you originally shipped.

Items sitting in a warehouse abroad? Not covered. The en route provision protects goods physically moving toward their destination, not inventory held overseas pending final delivery. A pallet of semiconductors waiting in a Hong Kong distribution center for onward shipment to a newly-listed Chinese entity requires a license the moment that entity hits the list. Learned this one the hard way back in 2019 when a client's Shenzhen-bound shipment sat in Hong Kong for 11 days after a listing dropped.

How Does a Listing Affect Open Purchase Orders?

Outstanding orders don't grandfather in. The EAR doesn't care that you signed a $2 million contract eight months ago; it cares about whether the listed entity is a party to today's transaction. Every shipment under that contract now triggers license requirements, and BIS reviews those applications under a presumption of denial.

The math gets ugly fast. Say you have 18 months remaining on a supply agreement with quarterly shipments. Each shipment requires a separate license determination. At BIS's current processing capacity — which got backed up further after a February 2025 "hold without action" pause on new applications — you might wait 60-90 days for an initial response, longer if the application requires interagency review. Meanwhile, your customer expects delivery per the contract terms, your sales team is fielding calls, and you're trying to explain why the shipment that left on schedule last quarter can't leave this quarter.

Some entities get narrower restrictions than others. Not every listing blocks everything. The Federal Register notice specifies which items require licenses for each entity — you need to check the ECCN scope, look at the license review policy column, and verify whether footnote designations apply. A listing might cover only items classified under specific ECCNs while leaving EAR99 goods unaffected. Read the actual entry in Supplement No. 4 to Part 744, not just a headline confirmation that the company name appears on the list.

Can You Apply for a License and Keep Shipping?

You can apply. Getting approved is a different story.

BIS accepts license applications for exports to Entity List parties through the SNAP-R system (migrated to a new platform in June 2025, which caused its own headaches for compliance teams still figuring out the new interface). The application requires detailed information about the items, end use, and end user. For transactions involving listed entities, expect BIS to request additional documentation: end-user certificates, technology control plans, on-site verification agreements. The back-and-forth adds weeks or months.

The "presumption of denial" isn't marketing language — it's regulatory policy. BIS explicitly states this review standard in the Entity List entry for most designated parties (15 CFR 744.11). For semiconductor-related exports to China-based Entity List parties, especially those designated under "footnote 4" for advanced computing concerns, approvals are exceptionally rare. One compliance manager at a 200-person electronics distributor told me they submitted 14 license applications for Entity List parties between January and September 2025. Approvals: zero. Denials: 11. Still pending: 3.

Applying doesn't authorize continued shipments. Some companies operate under the mistaken belief that a pending license application creates a safe harbor. It doesn't. Shipping while an application is pending, without an approved license or valid license exception, constitutes a violation. The fact that you eventually receive a denial letter doesn't retroactively legalize shipments you made during the review period.

What Are Your Contractual Options?

Pull out your contract and look for three things: force majeure language, export compliance clauses, and termination rights.

Force majeure provisions require careful analysis. The UK Supreme Court's May 2024 decision in RTI v MUR Shipping actually upheld force majeure protection when U.S. sanctions prevented dollar payments under a shipping contract. The court ruled that "reasonable endeavours" obligations don't require accepting non-contractual performance — meaning a party can invoke force majeure rather than accept payment in alternative currencies. But here's the catch: the protection flowed from explicit contract language addressing the specific event. Generic boilerplate often fails.

U.S. courts take a narrower view. New York commercial courts require force majeure events to be specifically enumerated or fall clearly within "catch-all" provisions. A 2023 Southern District decision (Litasco v Der Mond) rejected force majeure and sanctions defenses where the real issue was the defendant's lack of foreign currency — a commercial problem, not a regulatory impossibility. The lesson: regulatory changes affecting international trade often fall on the "foreseeable commercial risk" side of the line unless your contract says otherwise.

Export compliance clauses shift liability — when drafted properly. Well-drafted contracts include provisions making each party responsible for compliance with their own jurisdiction's export laws. If your contract contains language like "Buyer shall ensure compliance with all applicable export regulations," the listed entity bears responsibility for the consequences of its own designation. That doesn't mean you can ship freely; it means you have a contractual basis for refusing to ship and potentially recovering damages for breach.

Termination for convenience or material change may apply. Many supply agreements include provisions allowing termination when circumstances fundamentally change the economics or legality of performance. An Entity List designation that blocks 80% of your contracted shipments arguably meets that threshold — but "arguably" is the operative word. Review your specific termination provisions with counsel before invoking them, because the counterparty's lawyers will be reading the same clauses.

Renegotiation beats litigation. Almost always. Both parties face material exposure when a designation hits. The listed entity loses access to U.S.-origin goods; the supplier loses revenue and faces potential breach claims. Negotiating a wind-down agreement, exploring alternative sourcing for non-U.S. items, or restructuring the relationship to remove controlled items frequently produces better outcomes than fighting over contract interpretation for two years.

What About Subsidiaries and Affiliates?

The rules got more complicated on September 29, 2025. BIS adopted the Affiliates Rule via interim final rule (90 FR 47201), extending Entity List restrictions to any foreign entity owned 50% or more by listed parties. Under this framework, if your counterparty has a listed parent company with majority ownership, the subsidiary automatically triggers the same license requirements as the parent — even if the subsidiary never appeared on any restricted list.

Then the rules got suspended 42 days later. Following U.S.-China trade negotiations in late October 2025 — part of the Trump-Xi summit discussions that also addressed rare earth licensing — BIS stayed the Affiliates Rule until November 9, 2026 (90 FR 57823, published November 12, 2025). During the suspension, the previous "legally distinct" standard applies: subsidiaries and affiliates of listed entities aren't automatically restricted unless they're separately named on the list or acting as fronts for listed parties.

Plan for the rule to return. BIS made clear the suspension is temporary, not a reversal. The November 2026 reimplementation date is baked into the regulation. Companies should use this 12-month window to audit ownership structures of counterparties, build screening infrastructure that can handle ownership-based restrictions, and draft contract language addressing potential future restrictions based on corporate affiliation. The compliance teams doing this work now won't be scrambling in October 2026.

FAQ

How quickly do commercial screening databases update after a BIS Entity List addition?

Lag varies by provider, ranging from 4 hours to 14 days after Federal Register publication. Direct downloads from the BIS Consolidated Screening List update within hours of publication. Commercial aggregators that add value through alias matching and fuzzy logic screening may take longer to incorporate new entries and verify transliterations.

Does the Entity List affect items manufactured outside the United States?

Yes, if those items contain more than de minimis U.S.-origin content (typically 25% by value, though lower thresholds apply for certain destinations like China). Foreign-produced items also become subject to the EAR if manufactured using U.S.-origin technology or produced by equipment made from U.S. designs. The Foreign Direct Product Rules, particularly the Entity List FDP rule in § 734.9(e), extend these controls significantly for certain designated parties.

Can I complete service obligations under existing contracts with newly-listed entities?

Maybe. Services and support activities become problematic when they involve items subject to the EAR, deemed exports of controlled technology, or direct support for items previously shipped. Routine warranty service using non-controlled parts might continue; technical support involving controlled software or technology requires a license. Each situation requires case-specific analysis — the distinction between "continuing service" and "new export" matters.

What happens if I inadvertently ship to a newly-listed entity before learning about the designation?

BIS evaluates violations on a strict liability basis, but lack of knowledge affects penalty calculations. Companies that can demonstrate they had compliance programs in place — documented screening procedures, regular database updates, trained personnel — and that the shipment occurred during the lag between Federal Register publication and database updates may receive reduced penalties. Voluntary self-disclosure to BIS can reduce base penalties by up to 50% for egregious violations and often results in warning letters rather than fines for minor or technical violations (15 CFR 764.5).

The operational reality of Entity List additions puts compliance teams in triage mode within hours. Contract obligations collide with export restrictions, customers demand explanations, and the law doesn't bend to accommodate commercial convenience. Screening platforms — whether Descartes, Lenzo, SAP GTS, or direct BIS feeds — reduce the detection lag problem but don't eliminate the underlying business disruption when a key trading partner lands on a restricted list. That disruption requires legal analysis, commercial negotiation, and operational restructuring that no software can automate.