China significantly expanded its export control regime on 9 October 2025, implementing its most comprehensive restrictions to date on rare earths and related technologies. This move signals a strategic tightening of control over dual-use items and know-how, with potentially far-reaching implications for global supply chains and technology-intensive industries.
1. Covered items
New controls cover not only rare earth elements but also associated mining, processing equipment, and technologies. More specifically, the covered items include:
- Rare Earth Elements: various rare earth elements, including samarium, dysprosium, gadolinium, terbium, lutetium, scandium, and yttrium, as well as their metals, specific alloys and oxides, as well as certain products (permanent magnet and target materials) made from the controlled elements. These additions build on the list of key elements covered in the export controls that China has imposed since April 2025.
- Rare Earth Technologies: Technologies and the vehicles for carrying those technologies related to rare earth mining, smelting separation, metal smelting, magnetic material manufacturing, secondary resource recycling and utilization, as well as related technologies for production line assembly, testing, maintenance, repair, and upgrades.
- Rare Earth Production Equipment: A wide array of rare earth production and processing equipment, including centrifugal extraction equipment, specialized kilns, extraction tanks, ion adsorption equipment, various types of furnaces, electrolytic cells, permanent magnet forming presses, air mills, and grain boundary diffusion equipment.
2. Expanded and more restrictive controls
These export controls introduce several mechanisms that mirror the extraterritorial elements of the US export control regime, significantly expanding China's regulatory reach.
Extraterritorial Application
China has explicitly applied extraterritorial controls to rare earth elements. The rules require a license for overseas entities and individuals to export or reexport covered rare earth items to or between countries outside of China if the item originated in China, was produced using controlled Chinese technology, or incorporates certain Chinese-origin rare earth elements.
- De Minimis Rule: A foreign-produced item is subject to Chinese export controls if it contains controlled rare earth elements sourced from China representing at least 0.1% of the item’s total value. This rule applies to the export of items that contain foreign-produced rare earth magnets and select semiconductor materials.
- Foreign Direct Product Rule: Under the new measures, Chinese export controls apply if an item was manufactured abroad using Chinese-origin rare earth mining, smelting separation, metal smelting, magnetic material manufacturing, or rare earth secondary resource recycling and utilization technologies. This mechanism is similar to the United States’s foreign direct product rule, which has been deployed in recent years to curb China’s access to advanced chips and semiconductor equipment by extending US export control restrictions on an extraterritorial basis.
For now, these new extraterritorial mechanisms are limited to the rare earths and related technologies covered by the new rules.
End-Use and End-User Restrictions
- Policy of denial for military end-use: Exports are generally prohibited if the end-use relates to weapons of mass destruction, terrorism, or military purposes or enhancing another country’s military potential. Additionally, licensing applications to foreign military end-users and entities listed on China's control or watch lists will in principle be denied. These restricted parties include entities on the Ministry of Commerce of China (MOFCOM) Export Control List and Watch List. The Export Control List identifies entities to which export of dual-use items is prohibited, and the Watch List is intended to identify entities that have not adequately cooperated with China’s end-use and end-user verification procedures, making it similar to the US’s Unverified List. (As of writing, MOFCOM has not added any entity to the Watch List).
- 50% Rule: Exports are also restricted to subsidiaries and branches where an entity (or entities) on China’s Export Control List or Watch Lists hold 50% or more of the shares, a direct response to the functionally identical Affiliates Rule adopted by the US Department of Commerce Bureau of Industry and Security (BIS) on 29 September 2025.
- Case by case review for advanced semiconductor and AI industries: MOFCOM will conduct case-by-case review for items intended for specific advanced technological end-uses, including '14-nanometer and below logic chips,' '256-layer and above memory chips,' and 'artificial intelligence with potential military applications'. These specifications are almost identical to those used in US export controls relating to China and semiconductors in recent years. Companies are required to make detailed disclosure of end-use and end-users in applications, and the case-by-case approach is intended to allow MOFCOM to take into account geopolitical implications in its review of licensing applications.
Compliance and Enforcement Obligations
- Compliance obligations for intermediaries: any individual or entity is prohibited from providing a range of services (intermediary, matchmaking, agency, freight, delivery, customs clearance, third-party e-commerce trading platform, and financial services) to facilitate export activities that violate the controls over rare earth technologies. Service providers are under an obligation to proactively inquire whether the export activity is subject to licensing requirements. This places the burden on intermediaries and service providers to verify the compliance of their clients' export transactions.
- Obligation to issue notice of compliance: Similar to the EAR’s destination control statement requirements, exporters will need to issue a “notice of compliance” to downstream recipients of the controlled item (including the end user), declaring the controlled content in the exported item and identifying the relevant export control requirements. Through this notice, the rule places compliance obligations on exporters that also establish a mechanism for tracing and identifying controlled items throughout the supply chain.
- Restrictions on Chinese support for overseas rare earth production: Chinese citizens and entities are prohibited from providing any 'substantive assistance or support' for overseas rare earth exploration, smelting and separation, metal smelting, magnetic material manufacturing, or secondary resource recycling and utilization activities, unless duly licensed.
Licensing exceptions for humanitarian aid: Exceptions are granted for urgent medical care, responses to public health emergencies, and natural disaster relief. However, foreign persons must make a report to MOFCOM within 10 working days and provide a commitment that the items will not be used in any manner detrimental to China’s national security and interests.
Effective dates: The controls on direct exports of Chinese-origin rare earth items became effective immediately upon announcement on 9 October 2025, while the controls related to the de minimis rule and foreign direct product mechanism for offshore items will come into effect on 1 December 2025.
3. Potential business impact
These expanded controls may have meaningful and immediate implications for global businesses operating in technology, manufacturing, and defense sectors, or with complex supply chains involving rare earth materials, regardless of whether such companies operate in China or directly source rare earth materials from China.
Supply Chain Disruption and Restructuring: Companies reliant on rare earths sourced from China, advanced materials, or specialized equipment using rare earths face risks of supply delays, increased costs, and potential outright export denials. This necessitates urgent review of supply chain resilience and diversification strategies.
Increased Compliance Burden: The new licensing requirements, extraterritorial scope (0.1% de minimis rule and foreign direct product rule), and obligation to issue compliance notices may necessitate an overhaul of internal compliance programs for companies that rely on China’s critical minerals and related technologies. This includes enhanced due diligence on suppliers, customers, and partners across the entire value chain, potentially requiring detailed technical specifications and end-use attestations for relevant transactions.
China’s expanded measures and its incremental approach establish the legal infrastructure for systematic export controls over rare earth supply in the long term, rather than a one-off tactical manoeuvre in immediate US-China trade talks. Instead of removing rare earth export controls altogether, China’s trade negotiations with the United States and other countries may result in relaxed licensing requirements, and so companies should be prepared for the mid- and long-term implications of these rules.
4. Geopolitical context and broad implications
Given China’s dominance in the rare earth sector, these controls could be China’s leverage in future geopolitical negotiations. They can be seen as a strategic response to export controls imposed by the United States and other countries on China’s access to critical technologies, such as semiconductors and AI.
Importantly, the export controls on rare earths are part of a broader set of measures enacted by China around the same time. In recent days, China has taken several other countermeasures, including:
- imposing port fees on US-owned, operated, built, or flagged vessels, as a direct response to US port fees on China-linked ships;
- starting an antitrust investigation into a major US technology company,
- designating various US entities, including technology firms and several anti-drone technology companies, to China's Unreliable Entity List; and
- imposing export controls on superhard materials, certain lithium batteries, and artificial graphite anode materials, which are expected to have wide-ranging implications for critical industries such as electric vehicles, energy storage, green transition technologies, and high-precision manufacturing.
China has demonstrated an increasingly assertive posture in deploying retaliatory measures as the United States expands its restrictions on Chinese companies. Irrespective of any potential trade agreements between the two countries, many of these restrictive measures are likely to persist, creating ongoing business and compliance challenges for multinational companies.
The interpretation and enforcement of China’s rare earth controls and other regulations are dynamic and continue to evolve. Freshfields remains prepared to assist clients in navigating this complex regulatory landscape.
