China Imposes Extraterritorial Export Control Measures Over Rare Earth Items

On October 9, 2025, MOFCOM announced a series of new export control and sanctions measures that strengthen Chinese regulation of certain sensitive materials and technologies. Key aspects of these new measures include: 

• Imposing extraterritorial export controls over certain foreign-made items that incorporate Chinese-origin rare earth items (MOFCOM Announcement No. 61, "Announcement 61");
• Imposing export controls on technologies associated with rare earth extraction, processing, and applications (MOFCOM Announcement No. 62); 
• Adding 14 foreign entities to China's Unreliable Entity List (Announcement No. 10 (2025) of the Working Mechanism of the Unreliable Entity List); and 
• Implementing export control measures on a range of dual-use items, including superhard materials, rare earth equipment and raw materials, medium and heavy rare earth elements such as holmium, as well as certain lithium batteries and artificial graphite anode materials (MOFCOM and General Administration of Customs Joint Announcements No. 55–58).  

Announcement 61 is particularly noteworthy for its elaboration of China's extraterritorial export control framework for the first time, as well as for introducing a 50% rule that applies certain export restrictions under Announcement 61 to subsidiaries of entities on China's Export Control List and Watchlist. According to MOFCOM's press release, the new measures reflect a response to recent observations that certain foreign persons have been transferring China-origin rare earth-controlled items—either directly or after processing—to parties outside of China for use in military and other sensitive applications. Under the new regime, certain foreign-made rare earth items described below are now subject to China's export control restrictions, and relevant foreign persons will be required to obtain a license from MOFCOM before transferring or supplying such items outside of China. 

This set of trade initiatives builds on Article 49 of the Export Control of Dual-Use Items Regulations (2024), which authorizes MOFCOM to require export licenses for transfers by foreign persons located outside of China to specified countries, regions, organizations, or individuals. This regulation applies where such transfers involve "goods, technologies, and services" falling into the following three categories: (i) foreign-made dual-use items that contain, integrate, or are commingled with specified Chinese-origin dual-use items; (ii) foreign-made dual-use items produced using specified Chinese-origin technologies; and (iii) specified Chinese-origin dual-use items themselves. This approach resembles certain aspects of the U.S. export controls, including concepts such as de minimis content thresholds, an FDP rule, and continued control of domestic-origin items regardless of location. Prior to Announcement 61, the Chinese government had not made clear how it would apply Article 49 to exercise extraterritorial jurisdiction.  

Announcement 61 represents MOFCOM's first detailed interpretation of the extraterritorial export control rules. The announcement specifically lists 13 categories of rare earth metals or alloys ("specified dual-use rare earth metals and alloys"), as well as four categories of rare earth permanent magnets and seven categories of rare earth sputtering targets ("specified dual-use rare earth magnets and sputtering targets"), that are now subject to extraterritorial control. Announcement 61 imposes the following restrictions on these items: 

• De Minimis Rule. Article 1(1) provides that foreign-made specified dual-use rare earth magnets and sputtering targets in which the proportionate value of China-origin dual-use rare earth metals and alloys reaches or exceeds 0.1% will be subject to China's export control license requirements.  
• FDP Rule. According to Article 1(2), foreign-made dual-use rare earth magnets and sputtering targets that are based on Chinese-origin technologies relating to rare earth mining, smelting, separation, manufacturing, and recycling will be subject to China's export control license requirements. 
• Chinese-Origin Rule. Article 1(3) reiterates that designated Chinese-origin rare earth items described above are subject to China's export control rules, wherever located.  
• 50% Rule. Article 2 introduces a presumption of denial for licenses for exports destined for foreign military users, as well as importers and end-users listed on China's Export Control List and Watchlist. Notably, the rule clarifies that subsidiaries, branches, and other affiliates in which a listed entity directly or indirectly holds 50% or more equity are also covered under this policy of denial. This "50% rule" has not previously appeared in China's export control regulations, and appears to be a direct response to the U.S. Department of Commerce's September 29 rule discussed in our recent Alert, "United States Expands Reach of Export Controls Entity List." Based on Announcement 61, subsidiaries of entities designated on other China restrictive lists, including the Unreliable Entity List and the Anti-Foreign Sanctions List, are not subject to the 50% rule in theory but may face strict scrutiny in practice.  
• Semiconductor, AI Restriction. Article 4 adopts a case-by-case licensing review approach for applications involving chips and artificial intelligence. Specifically, exports of items subject to licensing requirements under Article 1, which are intended for the research, development, or production of 14 nm or below logic chips, 256-layer or above memory chips, or equipment, testing tools, and materials for manufacturing such semiconductor chips, as well as AI with potential military applications, will undergo a case-by-case review process.  

Although China's extraterritorial export controls remain targeted at this point, MOFCOM's October 9 actions indicate a significant expansion of regulation, which may affect multinational companies' ability to source rare earth items globally. Multinational companies operating in rare earth supply chains, advanced materials, semiconductors, or related technologies should promptly assess their exposure and review their sourcing, manufacturing, and distribution practices.