Trade Groups: BIS' 50% Rule Risks Overwhelming Agency’s Licensing Capacity

Although BIS has since suspended the 50% rule for one year -- delaying new regulations that were set to impose license requirements on exports to majority-owned affiliates of parties on the Entity List and other restricted party lists -- the agency said in September that it expected to receive an increase of only about 250 applications annually (see 2510310020, 2511100017, and 2511180061).

In public comments on the rule released this month, several trade groups said that number could be much higher, overwhelming a BIS licensing system that has been mired in slowdowns this year (see 2506110008, 2504020051 and 2504140055).

The National Foreign Trade Council said it believes 250 license applications per year is a “substantial under-estimate,” noting that the rule significantly expands the scope, impact and compliance obligations of Entity List designations. It also said some open-source tools used by corporations have been “unable to confirm ownership information” for certain companies receiving export-controlled goods, which could lead to a higher number of license applications.

The council asked BIS to provide data showing that the agency has the “capacity to process surges in license applications in a timely manner,” especially because it “already has a backlog of export license applications, particularly for items destined for China.” Chinese parties represent a "disproportionate" number of Entity List designations, which could make any impact on transactions with China “exceptionally severe.”

The Semiconductor Industry Association also said it expects the rule to “substantially increase the licensing burden,” particularly during a time when BIS has “significantly slowed and, in some cases, temporarily halted processing export license applications to certain markets.”

SIA -- which represents major chip and advanced technology companies such as Nvidia, ASML and Samsung -- said its members still have “billions” of dollars worth of licenses pending at BIS. The 50% rule’s new requirements could “lead to further delays and gridlock in the export license process,” the group said. “SIA continues to support calls to increase funding and resources for BIS, including to improve licensing review capacity and reduce backlogs.”

Semi, which represents companies operating in the microelectronics industry, similarly said its members are concerned that the rule will lead to a “significantly higher volume of license applications than anticipated, placing additional strain on an already resource-constrained licensing regime.” It added that many of its members depend on revenue from licensed exports to fund research and development and make long-term investments.

“Increased administrative burdens could lead to processing delays and greater uncertainty for U.S. exporters, undermining the predictability necessary to sustain business continuity, innovation, and global competitiveness,” Semi said.

The Consumer Technology Association said a “sudden” expansion of entities requiring licenses risks “overwhelming BIS processing capacity,” and it’s worried about how that strain on government could affect regular commerce. “Companies may face substantial delays in obtaining necessary authorizations, effectively pausing commercial activity.”

The U.S.-China Business Council said BIS should prepare by choosing to “fast-track” certain categories of licenses, such as those involving medical supplies or affiliates in allied countries. The agency could also announce that it will provide “favorable consideration” for license applications involving only items controlled under the Export Administration Regulations as EAR99 -- which are generally low-level, lower-risk items that are subject to fewer license requirements -- “absent specific national security concerns.”

“This would deter foreign customers from immediately abandoning US suppliers due to fear of lengthy license delays,” the council said. “If US export licenses become too slow or unpredictable, customers will shift to non-US sources permanently. The Affiliates Rule should not inadvertently accelerate that shift by casting too wide a net without adequate license processing support.”

The Association of University Export Control Officers, which represents export control professionals working at American schools, said BIS also likely will see more license applications from universities. Some may switch to a “license-by-default” approach “whenever ownership cannot be verified,” which would demand “significant staff time for both the exporter and for BIS and interagency reviewers, creating an unmanageable workload for small compliance offices.”

The group said it can specifically envision BIS seeing a “sharp” uptick in license applications that are more “precautionary” or low risk, as universities try to be cautious about not inadvertently violating the new restrictions. “This could slow processing times, create backlogs, and divert attention from genuinely sensitive transactions,” it said. “Instead of improving control, the system could become clogged with unnecessary filings -- adding delay and expense for low-risk transactions.”

The Council on Government Relations, the Association of American Universities and the Association of Public and Land-Grant Universities also said in joint comments that BIS appears to have underestimated the volume of new license applications, arguing that "many" institutions will "lack confidence" in their ability to determine foreign ownership and will likely submit license applications as a "precautionary measure."

The agency's "assumption that only a modest increase in license volume will occur may therefore be unrealistic," the groups said. "As license requests surge, processing delays are likely to follow, creating bottlenecks that directly affect research operations."