JIPYONG LLC

Jipyong News|GLOBAL LEGAL INSIGHT

China’s Tightened Export Controls and Sanctions Against Japan: Strategic Responses for Global Enterprises

2026.02.12

Introduction 
 
Since the enactment of the Export Control Law of the People’s Republic of China in 2020, the Chinese government has steadily tightened controls over strategic materials as part of a broader effort to safeguard national security and state interests.  With the implementation of the Regulations on the Export Control of Dual-Use Items on December 1, 2024, followed by the comprehensive revision of the Foreign Trade Law on December 28, 2025, China has completed the legal foundation for what can be described as comprehensive "trade retaliation," extending beyond the scope of conventional export administration. 
 
Against this backdrop, on January 6, 2026, China’s Ministry of Commerce (MOFCOM) and the General Administration of Customs (GACC) implemented stringent measures effectively banning the export of all dual-use items destined for Japan.  This marks the first instance of China applying comprehensive export controls targeting a specific nation, signaling a shift toward the use of its export control regime as an instrument of economic statecraft. 
 
This newsletter provides an in-depth analysis of China’s export control legal framework and the key controlled items affecting global supply chains.  Furthermore, it examines the implications of the recently enacted sanctions against Japan and offer detailed risk mitigation strategies for non-Chinese enterprises operating within the ecosystem. 
 
 
1. Legal Basis and Framework of Export Controls 
 
China’s export control system operates on a three-tier hierarchy: Laws, Administrative Regulations, and Departmental Rules.  At the highest level of the framework is the Export Control Law.  As the overarching statute, it codifies the legal basis for extraterritorial application and retaliatory measures.  Article 2 comprehensively defines "dual-use items" covering goods, technologies, services, and data with both civil and military applications.  Article 12 further introduces a strict licensing requirement for any item listed on the applicable control lists. 
 
To implement this statute, the Regulations on the Export Control of Dual-Use Items came into effect on December 1, 2024.  These regulations set out detailed criteria and procedures for licensing reviews.  Notably, they mandate exporters to verify the identity of importers and end-users and to submit an End-User and End-Use Certificate (EUC).  The regulations strictly prohibit unauthorized usage or transfer to third parties, significantly strengthening procedural binding force.
 
 
2. Detailed Analysis of Key Controlled Items (The Arsenal) 
 
Under Article 4 of the Export Control Law, MOFCOM is vested with authority to designate and regulate specific strategic materials.  Control is determined not solely by HS Codes but also by technical specifications and chemical composition.  These controlled items are currently being leveraged in external negotiations, reflecting a more targeted and strategic application of China’s export control framework. 
 
A. Rare Earths and Related Technologies

<ul>
	<li>Materials: Seven heavy rare earth elements (REEs), including samarium, gadolinium, terbium, and dysprosium are already subject to licensing.  Starting November 2026, five additional elements, including holmium and erbium will be added, bringing the total to 12 fully controlled types.</li>
	<li>Technology: The export of manufacturing technology for rare earth permanent magnets (e.g., neodymium magnets) is fundamentally prohibited. </li>
	<li>Foreign Direct Product Rule (FDPR): Effective November 2026, goods produced in third countries will be subject to control if they contain more than 0.1% of Chinese-origin REEs or utilize Chinese technology and/or equipment. </li>
</ul>
 
B. Semiconductor & Communication Materials

<ul>
	<li>Gallium: Includes Gallium Nitride (GaN) and Gallium Arsenide (GaAs)—eight types in total (critical for power semiconductors and 5G communications).</li>
	<li>Germanium: Includes Germanium Tetrachloride—six types in total (used in optical lenses and solar cells).</li>
</ul>
 
C. Battery Materials: Graphite

<ul>
	<li>High-Sensitivity Graphite: High-purity (>99.9%), high-strength, and high-density artificial graphite, as well as spheroidized natural graphite, are subject to control.</li>
</ul>
 
D. Defense & Fine Chemical Materials

<ul>
	<li>Antimony: Used in missile propellants, flame retardants, and lead-acid batteries.</li>
	<li>Superhard Materials: Includes high-pressure synthetic diamond windows and press equipment essential for aerospace component machining.</li>
</ul>
 
E. Security Threat Equipment: Drones (UAVs)

<ul>
	<li>Includes finished high-performance drones (Max takeoff weight >7kg, flight time >30min) and core components (e.g., engines, infrared cameras).</li>
</ul>

<div> 
 
3. January 2026 Sanctions Against Japan (Specific Application) 
 
The controlled items listed above have been converted into "practical weapons" amid recent geopolitical tensions.  Following the rapid deterioration of Sino-Japanese diplomatic relations, China has implemented measures aimed at restricting access to critical material supply chains in which it maintains a dominant market position as a reciprocal countermeasure. 
 
Key provisions of the MOFCOM & GACC Notice No. 1 of 2026, effective immediately on January 6, include: 
 
A. Total Ban on Exports to the Japanese Military Sector  
China prohibits the export of all items listed in the "Dual-Use Items and Technology Export License Management Catalogue" to Japanese military end-users or for military end-uses.  This is a comprehensive measure covering not only direct weaponry but also all advanced civilian materials, parts, and technologies that could contribute to Japan’s military capabilities. 
 
B. Catch-All Control on Non-Listed Items   
Even for items not explicitly listed, exports are prohibited if the exporter knows, or should have known, that the goods could be diverted for military use in Japan. 
 
C. Prevention of Third-Country Circumvention (Secondary Boycott Risk)    
The Notice also explicitly states, "no organization or individual in any country or region shall provide Chinese-origin dual-use items to the Japanese side in violation of these regulations."  If a third-country enterprise imports materials from China and re-exports them to a Japanese defense contractor, the Chinese government may designate that enterprise as an "Unreliable Entity" (blacklist) and impose corresponding restrictive measures. 
 
 
4. Licensing and Official Inquiry Procedures (Step-by-Step) 
 
The first step in the export process is "Accurate Classification." Procedures differ depending on whether the control status is clear or ambiguous.    
 
[Preliminary Stage] Classification and Official Inquiry

<ul>
	<li>Case A—Clearly Controlled: Proceed immediately to the Main Stage (License Application).</li>
	<li>Case B—Ambiguous Status (Official Inquiry): This applies to "Gray Zone" items where specifications border the control threshold (e.g., extremely low rare earth content or high degree of processing).  Arbitrary judgment carries the risk of smuggling allegations.  Therefore, it is imperative to submit an official inquiry to MOFCOM through the Chinese partner to secure a written interpretation stating "Not Subject to Control."</li>
</ul>
 
[Main Stage] Export License Application

<ul>
	<li>Step 1) Documentation (Foreign Importer): Provide the Chinese exporter with an End-User and End-Use Certificate (EUC).  It is crucial to specifically describe the final application to prove "Civil Use."</li>
	<li>Step 2) System Submission (Chinese Exporter): The exporter submits the application via the MOFCOM unified platform.</li>
	<li>Step 3) Agency Review: Typically takes 45 working days, but cases involving national security may be delayed indefinitely.</li>
	<li>Step 4) Issuance and Customs Clearance: Upon approval, a license is issued, serving as the basis for customs (GACC) clearance.</li>
</ul>
 
 
5. Risk Mitigation and Practical Strategies for Foreign Enterprises 
 
A. Precise Diagnosis and Utilization of Official Inquiries

<ul>
	<li>Classification beyond HS Codes: HS Code verification alone is insufficient.  Exporters should conduct a comprehensive bill of materials (BOM) review, examining chemical composition (including CAS numbers), purity levels, and relevant physical properties against the applicable control specifications.</li>
	<li>Key compliance measure: Where any uncertainty exists regarding control status, exporters should refrain from unilateral determinations and instead obtain a formal “Non-Control Confirmation” through the official inquiry mechanism.  Such confirmation can function as an important legal safeguard in the event of subsequent enforcement actions or disputes.</li>
</ul>
  
B. Auditing the Business Value Chain Involving Japan

<ul>
	<li>Exports from Chinese Subsidiaries: Even if the Japanese counterparty is a civilian entity, if there is any suspicion of military connection, rejection is highly likely.</li>
	<li>Re-export Risks via Headquarters/Third Countries: If a foreign enterprise imports Chinese materials and re-exports them to Japan after processing in a third country, China may view this as circumvention.  Discrepancies between the final destination stated in the EUC and the actual distribution channel can lead to blacklisting.</li>
</ul>
 
C. Integrity of End-Use Certification (EUC)

<ul>
	<li>Chinese authorities may request information on 2nd-tier vendors and final customers.  Prepare a compromise strategy that protects trade secrets (e.g., using initials for customer names) while providing detailed descriptions of the industry and usage.</li>
	<li>For shipments destined for Japan, obtain and present robust documentation from the Japanese end-user proving "Non-Military / Civil Use."</li>
</ul>
 
D. Refinement of Force Majeure Clauses

<ul>
	<li>Update contracts to explicitly include "Enactment or amendment of laws," "Administrative orders," and "Trade sanctions and countermeasures" as Force Majeure events.</li>
	<li>To protect against indefinite delays without formal rejection (De Facto Ban), include a clause deeming delays exceeding a reasonable period (e.g., 90 days) as a Force Majeure event.</li>
</ul>
 
 
Conclusion 
 
China’s expanded export control regime, highlighted by the January 2026 measures against Japan, reflects a shift from technical export administration to strategic regulatory leverage.  These developments significantly heighten compliance, supply chain, and contractual risks for global enterprises with China-linked operations, particularly where dual-use items, re-exports, or Japan-related transactions are involved.  Effective risk management now requires substantive technical analysis and proactive regulatory engagement rather than reliance on formal classifications alone.  In light of the complexity and enforcement exposure, interested parties and affected stakeholders must consult experienced legal and compliance professionals when assessing transactions and structuring cross-border operations. 
 
 
<div style="line-height: 110%;"><img alt="" height="220" src="https://www.jipyong.com/newsletter/kli/61_202501/img/board.png" usemap="#Map" width="820" /><map name="Map"><area coords="10,53,197,207" href="https://www.jipyong.com/en/member/member_view.php?seq=145" shape="rect" target="_blank" /> <area coords="209,53,402,209" href="https://www.jipyong.com/en/member/member_view.php?seq=689" shape="rect" target="_blank" /> <area coords="409,54,587,209" href="https://www.jipyong.com/en/member/member_view.php?seq=81" shape="rect" target="_blank" /> <area coords="593,54,767,208" href="https://www.jipyong.com/en/member/member_view.php?seq=41" shape="rect" target="_blank" /></map>

</div>
 </div>

News JIPYONG Established Jipyong IP 2024.11.25

KOREA LEGAL INSIGHT The Transition of Korea’s ESG Regulatory Framework from Guidance to Enforcement: What Global Businesses Should Watch for in 2026 2026.02.02

Back to List

Related Practices

Professionals

Partner
Deok Jung SON
+86-21-5208-2808 / +82-2-6200-0918 djson@jipyong.com

Related Practices

Professionals

SHARE

Disclaimer

Limited Liabilities