New Chinese Export Controls Target Foreign Made Items, More Rare Earths

The measures, announced Oct. 9, came less than a month before Presidents Xi Jinping and Donald Trump are expected to hold their first face-to-face meeting in South Korea amid months of trade negotiations, and about a month before the current U.S.-China tariff deal expires. They also were announced one day after the U.S. added 19 new China-related entries to its Entity List, subjecting them to strict export licensing rules (see 2510080006).

One announcement will require foreign exporters to apply for and obtain an export license from China’s commerce ministry before shipping certain foreign-made items that contain certain levels of Chinese-origin content or that were made using technologies originating in China for “rare earth mining, smelting and separation, metal smelting, magnetic material manufacturing, or rare earth secondary resource recycling,” the ministry said, according to an unofficial translation. The measures specifically impose license requirements on foreign entities if they reexport or manufacture abroad any items containing over 0.1% of certain Chinese-origin controlled materials or are made using Chinese-origin rare earth technologies.

A ministry spokesperson said the new rules are meant to target “overseas organizations and individuals” that process Chinese rare earths and then transfer or provide them to “relevant organizations and individuals for direct or indirect use in sensitive areas such as military operations.”

“This has caused significant damage or potential threats to China's national security and interests, adversely impacted international peace and stability, and undermined international non-proliferation efforts,” the spokesperson said. “Therefore, the Chinese government has implemented controls on certain overseas rare earth-related items containing Chinese content in accordance with the law to better safeguard national security and interests and fulfill international obligations, including non-proliferation.”

The spokesperson added that the scope of items covered by the new controls is “limited, and various licensing facilitation measures will be implemented,” such as license exemptions for exports that are needed for humanitarian relief, emergency medical treatment, public health emergencies, and natural disaster relief.

But the ministry said it generally will reject license applications for certain prohibited end-uses -- such as for “terrorist purposes” and “military use or enhancement of military potential” -- along with certain restricted end-users -- such as “overseas military users” and companies on China’s “export control list and watch list.” China said that includes any of their majority-owned affiliates.

That condition follows a similar move by the Commerce Department last week, which extended its Entity List licensing rules, as well as certain other end-user restrictions, to majority-owned affiliates of listed entities (see 2510030041). The restrictions also appear to be similar to licensing requirements under Commerce’s Foreign Direct Product rule, which places export license restrictions on certain foreign-made items that are made with certain U.S.-origin software or technology. Beijing last year released new dual-use export control regulations that included a Chinese equivalent of the U.S. foreign direct product rule (see 2410210042).

China this week said export applications for the research, development and production of 14-nanometer and below logic chips -- or 256-layer and above memory chips -- along with certain chip manufacturing equipment and R&D related to AI “with potential military applications” will be reviewed on a case-by-case basis. Exporters of items for humanitarian or emergency relief items can ship their goods without a license as long as they inform China’s Ministry of Commerce no later than 10 business days after the export, China said.

It also said overseas exporters can use “intermediary service agencies, chambers of commerce, associations,” and other China-based entities to handle their export applications. “The relevant intermediary service agencies, chambers of commerce, and associations must be independent legal entities or unincorporated organizations that can independently bear legal liability.”

If an exporter can’t determine whether their shipment needs a Chinese license, the ministry said they should email jingwaizixun@mofcom.gov.cn. Beijing is also ordering domestic Chinese companies that export the controlled items to issue a "compliance notice" to their overseas importers and end-users to inform them about the new licensing rules. That notice, which “does not relieve the parties of their obligation to conduct necessary due diligence in accordance with Chinese export control laws and regulations,” informs the foreign importer that they must obtain a license before exporting the item to a third country, and they must pass on the compliance notice to “the next consignee, importer, or end-user.”

A portion of the new rule took effect Oct. 9 while other parts take effect Dec. 1, China said.

Beijing also announced new export controls on rare earth-related technologies; rare earth equipment and raw materials; medium and heavy rare earth-related items; lithium batteries and artificial graphite anode materials; and certain superhard materials, including artificial diamonds. Those controls take effect Nov. 8.

The measures would add the elements holmium, erbium, thulium, europium and ytterbium, along with related materials, and a range of rare earth processing equipment to China’s export control list, the ministry of commerce said in a statement. Exporters also will need a license to ship certain artificial diamond micropowders, single crystals, wire saws, grinding wheels, batteries, and more.

A ministry spokesperson said all the items have “distinct dual-use properties” and the controls are aimed at “safeguarding national security and interests, and fulfilling international obligations such as non-proliferation.” The restrictions “are not targeted at any particular country or region,” the spokesperson said, adding that the ministry will approve “legitimate and compliant export applications after review.”

“At the same time, China is willing to engage in communication and dialogue with relevant parties on export control policies and practices through the bilateral export control dialogue and exchange mechanism, jointly promoting and facilitating compliant trade,” the person said.

Beijing also added 14 entities and certain affiliates to its Unreliable Entity List for arms sales to Taiwan or for actions that undermine Chinese national security. The designations target Dedrone by Axon, DZYNE Technologies, Elbit Systems of America, Epirus, AeroVironment, Exelis, Alliant Techsystems Operations, BAE Systems, Teledyne FLIR, VSE Corporation Cubic Global Defense, Recorded Future, Halifax International Security Forum and TechInsights. China also listed 10 of TechInsights' affiliates, including offices located in Europe, Japan and South Korea.

The move prohibits those entities from participating in “import and export activities related to China” and subjects them to other restrictions.

A Ministry of Commerce spokesperson said China uses the list to target "only a very small number of foreign entities that pose a threat to national security. Honest and law-abiding foreign entities have nothing to worry about. The Chinese government, as always, welcomes investment and business in China and is committed to providing a stable, fair, and predictable business environment for law-abiding foreign enterprises operating in China."