Global parts and components trading is moving fast, and regulatory scrutiny is keeping pace.
On 29 September 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) introduced its Interim Final Rule - a move that reshaped how global firms must approach sanctions and export-control checks. Under this regulation, any entity that is 50% or more owned, directly or indirectly, by a listed or sanctioned party shall be subject to the same license requirements and restrictions that apply to that listed entity.
For suppliers and exporters of components, dual-use items, and high-tech parts, this marked one of the most significant changes in the compliance landscape.
Despite recent updates temporarily suspending the rule’s implementation for a one-year period beginning 10 November 2025, the BIS rule itself is not cancelled or rescinded and remains on the books.
Companies shouldn’t put updating their compliance processes on the back burner and should continue preparing for full implementation to stay on the safe side. In fact, it’s a wise strategy to treat this period as a chance to strengthen visibility over ownership structures and mitigate the impact when the BIS rule is reinstated.
Ownership-Based Compliance
In an alignment with the U.S. Treasury’s OFAC 50 Percent Rule, BIS is shifting from traditional name-matching to an ownership-based model. BIS’s “Red Flag 29” established the expectation that if you can’t verify that an entity is less than 50% owned by a listed party, you need a BIS license, putting the responsibility squarely on the exporter. The rule is ownership-based, not merely about control: entities under the 50% threshold may not automatically fall under the rule, although significant ties still trigger red-flag due diligence.
For companies trading in parts, particularly dual-use components, aerospace hardware, industrial electronics, and other controlled materials, this represents a sharp expansion of compliance obligations across the entire supply chain.
The message is clear: enforcement risk is rising. For parts manufacturers, distributors, and brokers, that means that it’s no longer enough to screen your customer - you should also screen their ownership structure, parent companies, and affiliates, and address risks of indirect ownership.
What’s the Impact on KYC and Onboarding?
Relying solely on traditional manual checks is no longer enough. Hidden ownership, tangled corporate structures, and shifting red flags can easily catch even seasoned compliance teams off guard. Tools like Dow Jones Risk & Compliance or LexisNexis Bridger Insight improve efficiency, while the latest AI-driven solutions (e.g., Quantifind, Arva) take compliance a step further by mapping ownership structures, continuously monitoring counterparties, and prioritizing true risk.
At the same time, the applicability of each tool should be verified for every specific case, and many businesses find that a hybrid approach, combining manual, automated, and AI-driven checks provides the most reliable coverage.
The table below compares manual, automated, and AI-driven sanctions screening approaches, helping you to understand the strengths, limitations, and best use cases for each in the context of parts transactions.
Sanctions Screening Approaches: From Manual Checks to AI-Driven Compliance
10-Step Action Plan for Parts Companies
Compliance gradually extends beyond screening - it touches procurement, contracting, payments, and logistics. Here’s a practical plan to help compliance teams act decisively:
1. Refresh all KYC and onboarding questionnaires.
Your standard forms should request clearer ownership percentages, layers of control, and ultimate beneficial owner information. Ensure questions map directly to BIS and OFAC expectations and can be supported with verifiable documentation.
Ensure every active customer, supplier, distributor, intermediary and reseller is reassessed for direct or indirect ownership of 50% or more by a listed entity. Any party that crosses the threshold should be flagged, risk-scored, and escalated under your enhanced controls.
2. Review payment channels - not just banks, but crypto exposure too.
If your business uses digital assets or deals with counterparties that do, update your reviews to include wallet screening, tracing potential shadow exchanges, and retaining information consistent with travel-rule norms. The goal is to ensure no payment route bypasses your sanctions controls.
3. Identify which parts you handle fall under advanced technology or Advanced Computing Foreign-Direct Product (FDP)-related controls.
Export classifications for items linked to AI, semiconductors, aerospace, navigation systems, and telecommunications should be revisited. Treat any component with potential dual-use implications as requiring closer review or licensing preparation.
4. Strengthen oversight of freight forwarders, logistics partners, and third-party distributors.
These entities are increasingly treated as “high-risk” nodes in complex supply chains. Update contracts to include warranties, audit rights, and disclosure obligations, ensuring that downstream actors are not creating sanctions exposure on your behalf.
5. Map ownership structures proactively.
Don’t wait for red flags to appear - build a clear picture of your counterparties’ ownership, including minority shareholders who may trigger BIS’s indirect-ownership rules. Visual charts, flow diagrams, or digital mapping tools can help compliance teams spot risk chains at a glance.
6. Implement a “sanctions checkpoint” in procurement workflows.
Embed screening early in your purchasing process. Before signing any purchase order or contract, run ownership checks, verify licenses, and flag any affiliates that could trigger license requirements. This ensures that compliance is not an afterthought but an integrated part of operations.
7. Train staff beyond compliance teams.
Ensure procurement officers, finance teams, and logistics managers understand the implications of ownership-based sanctions. Simple awareness sessions or quick-reference guides can prevent inadvertent transactions that fall foul of BIS or OFAC rules.
Use hypothetical case studies to test your controls. For instance, what happens if a freight forwarder handling sensitive electronics is partially owned by a sanctioned party? Running tabletop exercises or compliance drills will help your team respond efficiently under real-world conditions and reduce operational surprises.
8. Maintain audit-ready documentation.
Keep records of all screenings, ownership maps, license applications, and internal approvals. Regulators increasingly look for evidence of due diligence, not just policy statements. A well-documented trail can be the difference between demonstrating good faith and facing penalties.
9. Leverage technology judiciously.
Combine traditional automated screening (like Dow Jones or LexisNexis solutions) with AI-driven tools that analyse corporate networks, detect hidden affiliates, and prioritise high-risk counterparties. In practice, companies handling complex parts often find that a hybrid approach, automation for breadth, AI for depth, delivers both efficiency and coverage.
10. Monitor regulatory updates continuously.
The BIS Entity List, MEU List, and OFAC sanctions lists are constantly evolving. Subscribe to official update feeds and integrate them into your compliance platform to avoid missing a newly listed entity. Even a small oversight, for example, a newly added affiliate in a multi-tier supply chain, can have outsized consequences for business continuity.
Why It Matters?
Non-compliance with the fast-evolving rules carries significant enforcement risk.
Companies that export, re-export, or transfer controlled items without properly screening may face civil fines, criminal penalties, and reputational damage. BIS has made it clear that lack of knowledge is not a defense: firms are expected to conduct affirmative due diligence.
In practice, this means that screening lapses, incomplete ownership mapping, or reliance solely on outdated lists can trigger license violations and potential enforcement actions, making proactive compliance not just best practice, but a critical business safeguard.
Keeping pace with export-control requirements is no small task. Legal Nodes team can help you stay ahead of BIS and OFAC rules by handling your compliance processes, so you can focus on growth without worrying about unexpected enforcement actions.
