China has approved a new structure for regulating certain exports which include sensitive products, services, and data. The Republic of China’s National People’s Congress Standing Committee has approved this Export Control Law (ECL) to protect China’s national security. The law will go into effect on December 1, 2020.

The ECL will be implemented by state agencies and will apply to all companies in China. The law will create an export control regime with control lists and compliance requirements, with a list of prohibited importers, similar to the U.S.’s Entity List.

These lists will include military, nuclear, biologic, and high technology products. These lists will be adjusted by agencies, and agencies will be able to put restrictions on unlisted items through a “temporary” hold. These lists will require export licenses, and China plans to issue “guidelines” that will improve export control compliance.

Exports to people or entities on these lists will be restricted, however, some shipments may be eligible for licenses. The ECL includes monetary penalties for people and companies who violate the export controls.

In a possible response, the U.S. is considering import restrictions to reduce U.S. reliance on critical minerals used in high-priority manufacturing from foreign suppliers. The U.S. may be prepping for shortages based on products that may be on China’s list of controlled items to the U.S.

China’s ECL will widen the scope of products that could require licensure to export. Exporters will have to carefully examine their export compliance and navigation through globally competing regulations.

We will continue to watch for updates. For further questions, please reach out to your Mohawk Global representative.