Being incorporated in South Korea does not, by itself, put a technology company outside U.S. export controls or sanctions. A Korean company may need to assess U.S. rules when a transaction involves an item, software, or technology subject to the Export Administration Regulations (EAR), a U.S. person, a restricted counterparty, a covered destination or end use, or conduct that U.S. sanctions prohibit. The answer depends on the specific item and transaction—not simply where the company is based or where a product was made.
When can U.S. rules apply to a Korean company?
Start with the transaction and its connections to the United States. Different U.S. regimes have different jurisdictional tests, so a U.S. connection that matters under one set of rules does not automatically establish that another applies.
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- An item, software, or technology subject to the EAR: The Bureau of Industry and Security (BIS) administers the EAR. Its scope includes commodities, software, and technology, not just physical goods. Foreign production does not automatically take an item outside the EAR.
- A U.S. person or U.S.-based activity: U.S. persons must comply with applicable sanctions administered by the Office of Foreign Assets Control (OFAC). The facts may also matter if a non-U.S. company causes or conspires to cause a U.S. person to violate sanctions, or evades restrictions.
- A restricted party, destination, or end use: Export-control and sanctions obligations can depend on who receives or uses an item, where it goes, and what it will be used for. A list match is a reason to investigate the details, not a substitute for checking the specific rule or list entry.
- A U.S. financial or technology connection: Identify any U.S. financial institution, U.S.-origin content, or U.S. technology involved, then determine whether and how the relevant rule applies. Do not assume that a U.S. connection alone settles the legal analysis.
BIS’s EAR Part 734, Scope of the EAR, and its guidance, Determine What Is Subject to the EAR, explain the item-scope analysis. OFAC’s FAQ 11, updated August 21, 2024, addresses who must comply with U.S. sanctions. The governing rule and the facts of the transaction determine the result.
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The EAR covers commodities, software, and technology. A transfer of technical information or software therefore deserves the same careful scoping as a shipment of hardware. Determine whether the item is subject to the EAR before asking whether a particular export, reexport, or transfer requires authorization.
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Foreign-direct-product rules
Some foreign-produced items may be subject to the EAR under foreign-direct-product rules when the rule’s specified product-scope and destination or end-user conditions are met. Depending on the rule, relevant facts can include U.S.-origin technology or software, classification, production equipment, destination, and end user. These rules do not mean that every foreign-made product is controlled; manufacturing outside the United States does not, on its own, exclude the EAR either.
What to establish about an item
- What exactly is being supplied: a commodity, software, technology, or a combination?
- What is its origin and classification, and what information supports those determinations?
- Does a foreign-direct-product rule or another EAR scope provision apply?
- For the specific destination, end user, end use, and transaction roles, what license requirement, exception, or other authorization path applies?
A classification or scope conclusion is not itself a license determination. Check the applicable EAR requirements against the complete transaction.
What do the Entity List and the 2025 BIS affiliate announcement mean?
BIS’s Entity List identifies persons or addresses associated with activities contrary to U.S. national-security or foreign-policy interests, or a significant risk of such activity. The consequences depend on the particular entry and transaction. Review that entry’s license requirement and review policy alongside the item and each party’s role; the same treatment should not be assumed for every listed name or transaction.
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Ownership requires a separate check
In an announcement dated September 29, 2025, BIS said entities at least 50 percent owned by one or more Entity List or Military End-User (MEU) List entities would automatically be subject to the relevant restrictions. BIS also described significant minority ownership as a red flag requiring additional due diligence. The threshold is a legal ownership threshold, not a measure of how many Korean companies are affected.
For a live transaction, check the current rule text and implementation, the relevant list entries, and the ownership facts. BIS’s announcement and associated FAQ describe the new rule and exporters’ duties; neither an entity’s location in Korea nor a superficial name check resolves whether the restrictions apply.
How are OFAC sanctions different from the EAR?
Export controls and sanctions are distinct regimes. The EAR analysis centers on whether an item is subject to the rules and on applicable controls such as destination, end user, end use, and licensing. OFAC analysis centers on the relevant sanctions program, its prohibitions and definitions, and the people and entities involved. A company may need to assess both; resolving one does not automatically resolve the other.
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| Question | EAR and BIS | OFAC sanctions |
|---|---|---|
| What is the central starting point? | Whether a commodity, software, or technology is subject to the EAR, followed by the controls relevant to the transaction. | Which sanctions program applies and whether the conduct, parties, or transaction are prohibited or require authorization. |
| Who administers the rules discussed here? | The Bureau of Industry and Security (BIS). | The Office of Foreign Assets Control (OFAC). |
| What ownership issue needs attention? | BIS’s September 2025 announcement described restrictions for entities meeting its stated ownership threshold and additional diligence for significant minority ownership. | OFAC’s 50 Percent Rule generally blocks entities owned, directly or indirectly and in aggregate, at least 50 percent by blocked persons. |
| What does a control finding mean? | It does not by itself determine the outcome; check the relevant controls, entry, transaction facts, and authorization requirements. | Control without 50 percent ownership does not automatically block an entity under the 50 Percent Rule, though other designation authorities may apply. |
OFAC’s 50 Percent Rule is not the BIS affiliate provision
OFAC’s rule generally treats an entity owned directly or indirectly, 50 percent or more in aggregate, by blocked persons as blocked even if it is not separately named on the Specially Designated Nationals and Blocked Persons (SDN) List. OFAC cautions that other designation authorities may apply. This ownership rule is distinct from BIS’s affiliate provisions; do not use one regime’s test as a substitute for the other’s.
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OFAC FAQ 398 and OFAC’s consolidated FAQs explain the 50 Percent Rule. The applicable sanctions program and its definitions still need to be checked for the transaction at hand.
What should a Korean technology company review before a transaction?
Use a documented, transaction-specific review. The March 6, 2024 interagency compliance note from Commerce, Treasury, and Justice recommends risk-based compliance measures, including internal controls, current customer and location information, affiliate training, escalation, and risk mitigation before mergers or acquisitions.
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- Define the transfer. Identify each commodity, software component, technical data set, service, and movement involved. Record the item’s origin and classification and assess whether it is subject to the EAR, including under any potentially relevant foreign-direct-product rule.
- Map the transaction parties. Identify the customer, consignee, intermediaries, banks, end user, and other parties with a role. Resolve possible list matches using identifying details rather than names alone.
- Trace ownership. Gather current direct and indirect ownership information for relevant counterparties. Apply the OFAC 50 Percent Rule and any relevant BIS affiliate provisions separately; refer significant minority ownership or unclear ownership for additional review.
- Confirm destination, end use, and end user. Ask where the item will go, who will receive and use it, what it will be used for, and whether diversion risks or inconsistencies need investigation.
- Identify U.S. connections. Check for U.S. persons, U.S. financial institutions, U.S.-origin items, or U.S. technology, and determine which regime—if any—those facts bring into play.
- Determine the authorization path. Assess the relevant license requirements and whether an exception, exemption, or OFAC authorization is available. Do not treat a possible authorization as permission until its conditions are verified.
- Record the decision and recheck. Keep the facts, screening results, ownership information, analysis, and approvals together. Recheck relevant rules and list entries at transaction time because they can change.
Build controls around recurring transactions
For repeated sales, software access, technical support, or transfers through affiliates, assign responsibility for screening and escalation, keep customer and geolocation information current, and train relevant affiliate personnel. Put internal controls around payments and the movement of goods involving affiliates and counterparties. Before a merger or acquisition, assess sanctions and export-control risk and plan mitigation; when a problem is identified, take prompt remedial steps.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What are common mistakes to avoid?
- Assuming Korean incorporation settles jurisdiction: Analyze the item, parties, destination, end use, and relevant U.S. connections.
- Assuming foreign manufacture settles EAR scope: Check whether a foreign-direct-product rule or another scope provision applies; do not generalize it to every foreign-made product.
- Treating every list match alike: Verify identity and review the specific list entry, transaction role, and applicable requirements.
- Combining the BIS and OFAC ownership tests: Apply the relevant rules independently, including their different treatment of ownership and affiliates.
- Relying on a one-time screen: Ownership, list entries, destinations, and transaction details can change, so keep information current and recheck for each transaction.
- Assuming a license or authorization is unnecessary or available without analysis: Determine the applicable requirement and confirm any authorization’s scope and conditions before proceeding.
How should companies interpret the 2025 BIS announcement?
In its September 29, 2025 announcement, BIS presented the affiliate measure as a response to what it described as loopholes in export controls. Under Secretary of Commerce for Industry and Security Jeffrey I. Kessler said the administration was closing loopholes and ensuring export controls worked as intended. That is the administration’s stated rationale, not an independent estimate of the measure’s effects on Korean companies.
The official sources described here do not quantify how many Korean technology companies are affected, or establish figures for their licensing delays, compliance costs, or enforcement rates. A company’s exposure can only be assessed from its own items, counterparties, ownership, destination, end use, and authorization facts.
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Which sources should a company check for a live transaction?
Rules and restricted-party lists can change. For a transaction review, consult the current text and guidance rather than relying solely on a summary:
- BIS, EAR Part 734, Scope of the EAR, and Determine What Is Subject to the EAR, for item scope.
- BIS, EAR § 744.16, Entity List, for applicable entries and requirements.
- BIS’s September 29, 2025 Entity List affiliates announcement and associated FAQ for its affiliate provisions and implementation.
- OFAC FAQ 11, updated August 21, 2024, for who must comply with sanctions.
- OFAC FAQ 398 and consolidated FAQs for the 50 Percent Rule.
- The Commerce, Treasury, and Justice interagency compliance note dated March 6, 2024 for risk-based compliance practices.
This overview is general information, not a legal determination for any particular company or deal. When classification, ownership, the scope of an affiliate rule, or a potential authorization is uncertain, obtain advice from qualified export-control and sanctions counsel before proceeding.
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