The two-month extension tracks the U.S.-China trade truce; the rule, which the administration says closes a national-security loophole, stays on the books and can be revived.
The Commerce Department has given exporters two more months before a rule that would sharply widen the reach of its trade blacklist can take effect, a decision with direct consequences for the Bay Area companies that build the machines used to make computer chips.
In a final rule published in the Federal Register on Monday, the department’s Bureau of Industry and Security extended its suspension of what is known as the Affiliates Rule through Jan. 10, 2027. The suspension had been set to end on Nov. 9. Restrictions on companies already named on the Entity List and the Military End-User List remain in force.
What the rule would do
Under the rule, any company at least 50 percent owned by one or more entities on those lists would automatically face the same restrictions, whether or not it is named. Significant minority ownership by a listed company would be a red flag requiring extra due diligence by exporters. Before the rule, companies not specifically named were outside the lists’ reach, “even if there were extensive corporate and financial ties with listed entities,” the bureau said when it announced the rule on Sept. 29, 2025.
The administration’s rationale is national security. “For too long, loopholes have enabled exports that undermine American national security and foreign policy interests,” Jeffrey I. Kessler, the under secretary of commerce for industry and security, said at the time. “Under this Administration, BIS is closing the loopholes and ensuring that export controls work as intended.” Lawyers at Crowell & Moring have compared it to the Treasury Department’s 50 percent rule for sanctions.
Why it is paused
A month after the rule took effect, it became part of a trade bargain. After President Trump met President Xi Jinping of China in South Korea, the White House said in a Nov. 1, 2025, fact sheet that the United States would suspend the Affiliates Rule for one year starting Nov. 10, 2025. In return, China committed to suspend its sweeping new export controls on rare earth elements and other critical minerals and to end retaliation against U.S. semiconductor manufacturers, among other steps. The White House described the deal as one that “safeguards U.S. economic strength and national security while putting American workers, farmers, and families first.”
The new extension matches the broader truce. Treasury Secretary Scott Bessent said in September that it would stay in effect until Jan. 10, 2027, and both governments formalized the two-month extension on Monday, Supply Chain Dive reported; China’s Commerce Ministry said it would keep pausing certain export controls. On Friday, U.S. Trade Representative Jamieson Greer pressed Vice Premier He Lifeng to take concrete steps on agricultural purchases, rare earths and other critical minerals.
The notice itself gives no reason beyond extending the stay, and it says comments filed on the original rule will be considered in future rulemakings. The bureau issued the extension under the Export Control Reform Act of 2018, which allows such changes without prior notice and comment.
What it means for the Bay Area
The rule’s financial stakes fall heavily on the Bay Area’s chip-equipment cluster: Applied Materials in Santa Clara, Lam Research in Fremont and KLA in Milpitas, all of which sell equipment to chipmakers in China.
When the rule was announced, Applied Materials told investors it would reduce the company’s revenue by about $110 million in its fiscal fourth quarter of 2025 and about $600 million in fiscal 2026, Investopedia reported from the company’s securities filing. China accounted for more than a third of its revenue at the time. Analysts at UBS estimated Lam’s maximum annualized exposure at $300 million and said KLA would be affected “even less.”
The suspension spares those sales for now, but it does not remove the risk from forecasts. The Crowell & Moring lawyers noted that the suspension “is not a repeal”: the regulatory text and the mechanism to reimpose it remain in place, and the bureau retains authority to reinstate the rule without further notice. The firm advised exporters to keep updating ownership checks, denied-party screening and end-user certificates, and noted that existing due-diligence and recordkeeping obligations apply regardless of the pause.
For Bay Area toolmakers and their suppliers, that means planning around two scenarios at once. If the truce holds and is extended again, sales to Chinese affiliates of listed companies can continue under existing licensing rules. If the stay simply runs out on Jan. 10, the rule would take effect unless the bureau acts again.
The Commerce Department’s Office of Public Affairs, Lam Research and the Chinese Embassy in Washington did not respond to The Inquirer’s requests for comment on Monday.
Wendell Yamashiro covers business, technology, labor, trade and the Bay Area economy for Trade and Commerce. More from Wendell Yamashiro
