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China Issues the First Implementing Regulations in Draft Form under its Export Control Law

On Thursday 21 April, the Ministry of Commerce of the People’s Republic of China (MOFCOM) issued a draft for public review and comment of its first set of implementing regulations1 under the 2020 Export Control Law of China. These draft regulations contain many significant elements of which all companies operating in China should take note. You will notice throughout this summary there are many references to China’s national security, national interests and foreign policy. These are the overarching themes of China’s Export Control Law (ECL). As such, we anticipate the items subject to control, the country-specific controls, and individual entity controls will all have a heavy political element as do other export control regimes around the world. We will continue to monitor further developments that may impact what items may be considered of China-origin under the ECL as well as broader trade controls such as sanctions. In the meantime, we have summarized below the key elements of the draft export control regulations issued by MOFCOM:

1. No Re-Export Controls

The Export Control Law under which these draft implementing regulations have been issued, provide for extraterritorial effect for investigating violations of the ECL that occur outside of China and imposing penalties or criminal punishment for violations. However, there are no re-export controls provided for under these draft regulations. A re-export is the transfer to a foreign country from another foreign country of technology or products that are subject to the ECL of China. Accordingly, there is no provision for a “de minimus2” test under the draft regulations as was contemplated in earlier drafts of the ECL and which remained possible under the final ECL enacted in late 2020. It appears this may have been dropped due to an inability to properly enforce controls on re-exports.

2. Dual-Use Control List

The list of dual-use goods, technology and services that are subject to the ECL of China has not yet been issued. Legacy export controls in China have utilized the harmonized system code to identify items subject to those legacy controls. These draft regulations make reference to a list that will be formulated by MOFCOM and updated frequently . In addition, these draft regulations provide that the dual-use items on the control list will be assigned control codes. This seems to indicate that HS codes will no longer be used to identify dual-use items. It should also be noted that the draft regulations state that the export control of dual-use items shall adhere to the overall concept of national security. This could mean that the items ultimately included on the control list could vary significantly from the typical dual-use lists in more mature export control jurisdictions.

3. Deemed-Export Controls?

These draft regulations define “export controls” to include the transfer of controlled items from within the territory of China to abroad as well as the provision of controlled items by Chinese citizens and legal persons (companies) to foreign organizations or individuals. There is no qualifier that this provision be made outside of China. We interpret this to be a deemed-export provision. A deemed export under the U.S. EAR is the defined as a release to a foreign national in the United States of “technology” or “source code” “required” for the “development,” “production,” or “use” of a controlled item. The export controls will apply to dual-use goods and technology that These draft regulations from MOFCOM.

4. General Licenses and Shipment-Specific Licenses

The draft regulations provide for the issuance of shipment-specific licenses that apply to a shipment of controlled dual-use items to a particular end user for a particular end use. These licenses will be valid for a one-year period. In addition, the draft regulations provide for a general license whereby an exporter from China can send multiple shipments of controlled dual-use items to multiple end-users under a general license that is valid for a two-year period. The documents that are required when applying for a license include:

  • A copy of the contract or agreement for the export of dual-use items;
  • Technical descriptions or lab reports of dual-use items as relevant;
  • Documents establishing the end-user and end-use;
  • Identification and description of the importers and end-users;
  • Proof of the identity of the applicant’s legal representative, main business manager, and manager; and
  • Other documents as required

5. License Exceptions?

There are very few license exceptions provided for under the draft regulations. Dual use items subject to export controls may be exempt from the license requirements where the controlled dual-use items are being exported to:

  •  Return to the original place of export for a controlled dual-use item that has been returned to China for   repair, maintenance, or testing;
  •  Participate in exhibitions held within the territory of the People’s Republic of China and return to the place   of export as they were immediately after the conclusion of the exhibition;
  •  Outbound maintenance of civil aircraft parts; and
  •  Other circumstances that may be provided for by MOFCOM.

Notably, even where a controlled dual-use item may be exported without a license under the above very limited and narrow circumstances, that export must still be registered with MOFCOM prior to the export.

6. Plan Ahead!!

The licensure processing timelines provided for under the draft regulations is long. An application for an export license will take 45 working days (exclusive of holidays and weekends) and may be extended for an additional 10 working days for the granting an approval. Any item that has “a major impact on national security, national interests of China or foreign policy” will have no timeline for the approval of a license application. There is no definition as of yet as to what items will be considered to have a “major impact on national security, national interests, or foreign policy.” It can be anticipated that these items may include items of commercial competition with foreign nations or even those that have certain retaliatory aspects even if not explicitly for that reason.

7. Items Subject to Temporary Control

The draft regulations contain a provision for the issuance of temporary controls on certain items. Such temporary controls are contemplated to last for two years unless extended. Once the conditions leading to the temporary controls have changed sufficiently, a public notice removing the temporary controls will be issued. Items subject to temporary controls are those not already included in the dual-use controls list.

8. Risk-Based Regional and Country-Level Controls

MOFCOM will evaluate the risks associated with the regions and countries to which dual-use controlled items may be sent. Based upon this risk assessment, MOFCOM will implement controls accordingly. The factors to which MOFCOM will look in assessing the risks are:

  • Implications for national security and national interests;
  • International treaty and convention obligations as well as UN Security Council Resolutions;
  • The needs of foreign policy;
  • The destination country’s cooperation with China on export controls; and
  • Other factors.

9. Entities List

The draft regulations prohibit the export of controlled-dual use items to any overseas importers and end users that have been included in the control list. In addition, no license exceptions will apply to such overseas importers and end-users.

This appears to be akin to the U.S. entities list, or the not-fully implemented “unreliable entities list” that has been codified but on which no entities have yet been named.

10. Self-Governance

Continuing on a long-standing trend, the draft regulations provide that MOFCOM will issue and maintain guidelines for the implementation of internal compliance programs specific to the ECL of China. Successfully maintaining an internal compliance program that meets or exceeds MOFCOM’s guidance will enable the exporter to participate in facilitation measures such as the granting of a general license. The draft regulations also state that chambers of commerce in China will play a role in industry outreach and education on export controls, the maintenance of internal compliance programs as well as a role in coordinating and encouraging voluntary compliance.

11. Brokers and Freight Forwarders have Independent Liability

The draft regulations place a burden on customs brokers, freight forwarders, carriers, e-commerce platforms and banks for maintaining compliance with the ECL of China. Where such entities discover potential violations, they must cease their services and report the potential violation to the relevant group within MOFCOM. The provisions of the draft regulations that address internal compliance programs also provide that customs brokers, freight forwarders and carriers may also maintain such internal compliance programs under the guidance and direction of MOFCOM.

12. Providing Information and Cooperation is Prohibited

The draft regulations state that providing information concerning China’s export controls must only be done in accordance with law and where national security and national interests are implicated, such information may not be provided outside of China. It is not clear what this means or how it will be enforced. If other regulatory provisions are any guide, this may mean that providing Chinese export control details and dual-use control details as part of an overseas investigation is likely to be a negative impact on China’s national security and national interests and therefore should be seen as prohibited.

In addition to the national security implications of providing information about China’s export controls outside of China, the draft regulations also provide that Chinese entities and individuals must seek specific approval before cooperating with or accepting on-site visits or review of export controls conducted by foreign governments.

13. Enforcement

MOFCOM, through its local entities, is expected to handle the issuance of licenses, the supervision of compliance with license conditions and the investigation of violations. Investigations may also be coordinated with other government agencies such as the Ministry of Public Security, the General Administration of Customs, and the State Administration of Market Supervision.

14. Civil and Criminal Liabilities for Violations—including customs brokers and freight forwarders

Violations of the ECL of China may be subject to administrative reprimand letters or fines of between RMB100,000 and RMB300,000. These fines are also applicable to customs brokers, freight forwarders, and carriers that may be in violation of the ECL of China. Violations of end-user or end-use restrictions may also be subject to the confiscation of five to ten times the illegal gains obtained as a result of these violations . Violations of the ECL of China that endanger national security will also be subject to criminal investigation and prosecution in addition to the financial penalties laid out here.

15. Mitigation Opportunity

In previous drafts of the ECL of China, voluntary self-reporting of potential violations was compulsory. In this draft regulation, such self-reporting may entitle a violating party to mitigation of the liabilities for such a violation but it no longer appears compulsory to make such a reporting. Specifically, the draft regulations provide that punishment for the violation of these regulations or the ECL of China may be mitigated for exporters as well as customs broker, freight forwarders, e-commerce platforms and banks, where the entity in violation:

  • Actively investigated and discontinued the unlawful conduct; or
  • Were coerced or lured by others to carry out the violations; or
  • Voluntarily disclosed the violations to MOFCOM or other competent government agency (e.g., the General     Administration of Customs); and
  • Cooperates with in the investigation of the violation.

Finally, where the violating exporter, customs broker, freight forwarder, carrier, e-commerce operator or bank maintains an internal compliance program and that compliance program contributed to the identification, self-reporting and correcting of the violations, then potential fines or other punishment under the ECL of China may be mitigated.

16. Pre-Classification Advice on Dual-Use Items

The draft regulations provide that exporters may seek guidance from MOFCOM as to whether their item is a controlled dual-use item under the ECL of China. Although no timeline is specified for a response to such requests. Where MOFCOM deems it necessary and appropriate, items may be sent to a third-party entity for testing and analysis in assisting in the determination of whether the item is indeed a controlled dual-use item under the ECL of China.

17. Record Retention

The draft regulations provide that documents relating to export transactions and license application materials must be maintained for a period of five (5) years. Neither the ECL nor these regulations, however, provide for a statute of limitations for the enforcement of violations.

The above summarized items are the most significant of the provisions of the draft regulations. Should you wish to submit comments for MOFCOM’s consideration, please feel free to contact us. The deadline for the submission of comments for consideration is May 22, 2022. We remain available to discuss how these draft regulations may impact your China business and operations.


1 Draft regulations available at the MOFCOM website are in Simplified Chinese only.

2 The de minimis rule provides that a foreign-made item may be subject to the US EAR if that foreign-made item contains more than a certain percentage (generally 25%) of controlled U.S.-origin content by value. The de minimis rule can render foreign manufactured goods outside of the U.S. but which incorporate U.S.-origin parts, components, technology, or software, subject to the US EAR.

Earlier drafts of the ECL of China contained similar provisions and a specific percentage test akin to the U.S. de minimus rule. This specific provision has not survived and does not appear in the final ECL, and these draft implementing rules appear to rule out the revival of this provision under the ECL of China.

 3Legacy export control lists in China were generally updated annually at the beginning of the calendar year.

4Small enterprises with turnover of RMB200,000 or less will be subject to fines of between RMB200,000 and RMB2,000,000.


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