After formally publishing its new ‘Regulations on Export Control of Dual-Use Items’ (Regulations) on October 19, 2024, the Chinese Ministry of Commerce (MOFCOM) published its ‘Announcement on Issuing the Dual-Use Items Export Control List of the People’s Republic of China’ (Announcement), which introduced which items would officially be impacted by the Regulations, on November 15, 2024. In it, MOFCOM outlined a consolidated list of about 700 dual-use goods – items that could be utilized for military or civilian purposes – that it indicated would be subject to export controls expected to be enforced from December 1, 2024.
Hundreds of dual-use items will be impacted by the Regulations, with MOFCOM dividing these items into ten industry categories: nuclear materials, facilities and equipment, and miscellaneous; chemicals, microorganisms, and toxins; materials processing; electronics; computers; telecommunications and information security; sensors and lasers; navigation and avionics; marine; as well as aerospace and propulsion. Each industry then contains items pertaining to one of five types: assemblies, equipment, and components; test, inspection and production equipment; materials; software; and technology.
Under the Regulations, exporters must obtain an export license for goods included in the Announcement and create and maintain a system to manage risks associated with end-users and end-uses of exported items. The Regulations will also introduce a watch and control list intended to monitor companies with the potential to cause harm to national security. Companies added to the watch list may face disruptions or restrictions while obtaining licenses, and companies on the control list may be disallowed from purchasing dual-use items from China altogether.
Finally, the Regulations extend the extraterritorial reach of MOFCOM, allowing it to regulate and investigate items that are produced or traded outside of China provided that they originate from, contain, or are manufactured with Chinese dual-use items.
Impacted materials and technologies critical to nearly all industries
The Regulations cover a number of tools like cutting and roll forming machines, pressure sensors, and computing devices that are utilized across various sectors. The Regulations also target several minerals and materials whose production is near dominated by China, including magnesium and magnesium alloys and critical minerals like gallium, tungsten, and bismuth. China controls at least 80% of the global production of each. In addition, the Regulations will apply to technologies used for the production of multiple minerals and materials like lithium, tritium, and titanium.
Given the breadth of materials included in the Regulations, industries as varied as electronics and semiconductors, automotive, aerospace, medical devices and pharmaceuticals, plastics, and chemicals would face disruptions if these controls inhibit Chinese exports or foreign production of materials. However, the dual-use items featured in the Regulations include many components that are especially critical to electronics and machinery manufacturing like high power DC power supplies, capacitors and accelerators. Some electromagnets, for which China leads with nearly half of all global production, have also been included in the Regulations. The designation of electromagnets follows a prohibition by MOFCOM on the export of rare earth magnet production technology and machinery in December 2023, adding further complications to magnet supply chains.
Western companies may face increased import barriers
There is a risk that in the future, Chinese authorities could implement bans of any of the dual-use products listed on the Announcement, as the Regulations may help China to identify any critical dependencies on Chinese materials and products American entities may have. However, western companies could face disruptions in sourcing dual-use products even in the absence of an export ban; U.S. business chambers have previously flagged that U.S. companies experience increased customs clearance delays and government inspections during trade war escalations.
This is evidenced in the case of gallium and germanium exports. While exports of these materials were ultimately banned on December 3, 2024, both saw earlier export controls that took effect in August 2023 and required foreign buyers to identify the material’s end-user, as is the case with the new dual-use Regulations. Although exports of gallium and germanium were possible with the procurement of an export license, Chinese customs data showed there have been no shipments of wrought and unwrought gallium or germanium to the U.S. or the Netherlands from the time the export control was implemented, suggesting that licenses were rejected based on destination country in retaliation for coordinated semiconductor controls. Large western companies deemed to be a threat to Chinese interests may also be cut off entirely from accessing Chinese materials and components through the Regulations’ watch and control list provision. United States-based clothing company PVH Corp. and the biotechnology company Illumina, Inc. have already been added to MOFCOM’s unreliable entities list following the imposition of tariffs on Chinese imports by the Trump administration on February 4. Intel Corporation, one of the largest chip providers in China, is also feared to be a future target of MOFCOM’s watch and control lists given previous allegations by the Cybersecurity Association of China that the company had impaired the country’s national security.
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