China imposes extraterritorial jurisdiction and a 50% Rule for export controls on rare earth elements and other items

Alert

13 October 2025

7 min read

Lin Li |

Bob Li |

On October 9, 2025, China’s Industry Safety and Import/Export Control Bureau under the Ministry of Commerce (MOFCOM) issued several notifications to impose export controls on products, equipment, and technologies related to rare earth elements, semiconductors, superhard materials, and lithium batteries, among others.¹ Notably, MOFCOM exercised the extraterritorial jurisdiction for the first time, as permitted by law, within its export control regime, by requiring foreign entities to obtain licenses when exporting certain controlled rare earth elements from one country/region outside China to another country/region outside China. MOFCOM’s action closely resembles the concept of “reexport” under US export control law, where transfers between third countries involving controlled content may be subject to licensing. MOFCOM also introduced an “Affiliates Rule” (or “50% Rule”) within its export control regime by imposing presumptive denial of any export licensing applications from importers and end-users on China’s export control entity list or watch list, as well as their branches and subsidiaries where the listed entities own 50% or greater ownership.

Extraterritorial jurisdiction in the export controls regime

MOFCOM Notification No. 61/2025 (Article 1) imposes extraterritorial jurisdiction on foreign “specific export operators”, defined as individuals and entities outside China who engage in export activities of the following rare earth items, from a country/region outside China to another country/region outside China:

Rare earth permanent magnet materials and target² that are produced outside China, and contain, integrate, or are mixed with any of 13 specified crucial rare earth elements subject to China’s export control,³ provided the value of such controlled rare earth elements constitutes no less than 0.1% of the total value. The 13 specified crucial rare earth elements are: (1) Samarium (Sm); (2) Dysprosium (Dy); (3) Gadolinium (Gd); (4) Terbium (Tb); (5) Lutetium (Lu); (6) Scandium (Sc); (7) Yttrium (Y); (8) Samarium-Cobalt Alloy (SmCo); (9) Terbium-Iron Alloy (TbFe); (10) Dysprosium-Iron Alloy (DyFe); (11) Terbium-Dysprosium-Iron Alloy (TbDyFe); (12) Dysprosium Oxide (Dy2O3); and (13) Terbium Oxide (Tb4O7).
Specified crucial rare earth elements, regardless of whether they originate in China, produced using relevant Chinese controlled rare earth technologies as listed in MOFCOM Notification No. 62/2025.
Specified crucial rare earth elements originating in China.

In addition to needing to obtain export licenses from MOFCOM, any foreign “specific export operator” as described above must also issue a “Compliance Statements” to its overseas recipient(s) when transferring the controlled items outside China.⁴This requirement means that exporters, whether in China or abroad, must inform downstream recipients of applicable regulatory obligations — including licensing requirements for further export — to ensure that compliance with China’s export control laws is effectively passed down the supply chain.

Entry into effect

Measure (3) above comes into effect immediately as of October 9, 2025, while Measures (1) and (2) above will have an implementation grace period until December 1, 2025.

Legal basis of the actions

MOFCOM imposed these measures pursuant to Article 49 of China’s Regulation on Export Control of Dual-Use Items (the “Regulation”), which permits MOFCOM to exercise extraterritorial jurisdiction in the export control regime under specified conditions (except that the Regulation does not provide for any minimal content requirement as stated in Measure (1) above). It is noteworthy that this is the first time that MOFCOM has exercised extraterritorial jurisdiction in its export controls regime.

China’s version of the “Affiliates Rule” (or “50% Rule”)

As a direct response to the “Affiliates Rule” (or “50% Rule”) earlier imposed by the US Department of Commerce Bureau of Industry and Security (BIS) in the United States’ export control framework,⁵ MOFCOM introduced its own version of the “50% Rule” in Chinese export control regime. According to Article 2 of MOFCOM Notification No. 61/2025, China now imposes a presumptive denial of any export licensing application from importers and end-users that are subject to China’s export control entity list or watch list (“Listed Entities”), as well as their branches and subsidiaries in which the Listed Entities own 50% or greater ownership. While China has not yet publicly released a watch list, it has periodically published export control entity lists through formal MOFCOM announcements.⁶

The Regulation permits MOFCOM to reject export licensing applications from domestic branches and subsidiaries of Listed Entities.⁷With the implementation of the “50% Rule,” MOFCOM now extends its export control authority to cover entities that are majority-owned (i.e., 50% or more) by Listed Entities, even if the entities are not explicitly named.

As background, MOFCOM maintains a consolidated Export Control List of Dual-Use Items (“ECL”), which specifies items subject to export licensing requirements. This list is periodically supplemented through separate MOFCOM announcements as illustrated further below. Notably, the 50% Rule does not apply to the List of Unreliable Entities (“UEL”), which is a separate sanctions-related list aimed at restricting blacklisted entities from trading with China.⁸

The “50% Rule” is a standalone provision in MOFCOM Notification No. 61/2025. It does not appear to apply to all items listed in the ECL. Rather, it is understood to apply specifically to the controlled items referenced in the same notification — most notably, rare earth items listed in Article 1 as specified above, and certain semiconductor and artificial intelligence items listed in Article 4.⁹ However, none of the other notifications published by MOFCOM on the same day specifically indicate the application of the “50 % Rule.” It remains unclear whether the “50% Rule” will also apply to all the other export control measures currently in effect or those that may be imposed in the future.

Presumptive denial for military end use and end users

MOFCOM Notification No. 61/2025 also stipulates presumptive denial for any export licensing application involving exports to foreign military users (Article 2), or items that are used or have the potential to be used for design, development, production, or use of weapons of mass destruction and their delivery systems, terrorism, or military use or enhancement of military potential capabilities (Article 3).

Export licensing requirements for rare earth technologies

As mentioned above, MOFCOM Notification No. 62/2025 imposes export controls on rare earth technologies, covering areas such as rare earth mining, smelting and separation, metal smelting, magnetic material manufacturing, and recycling of rare earth secondary resources, as well as technologies related to production line assembly, debugging, maintenance, repair and upgrade.

Supplementary additions to ECL

Separately, MOFCOM has issued a number of other notifications that supplement the ECL. These notifications primarily target items relating to emerging technologies and strategically sensitive sectors, including advanced manufacturing, electronics, and resource extraction.

MOFCOM Notification No. 55/2025 imposes export controls on superhard materials, including artificial diamond in powder and in single crystal forms, wire saws and grinding wheels made of artificial diamond, and DCPCVD equipment and technology.
MOFCOM Notification No. 56/2025 imposes export controls on (i) rare earth production and processing equipment; and (ii) rare earth minerals, ore flotation reagents, and extraction agents.
MOFCOM Notification No. 57/2025 imposes export controls on certain medium and heavy rare earth items, specifically, certain items of holmium, erbium, iron, bronze, and ytterbium, as specified in the notification.
MOFCOM Notification No. 58/2025 imposes export controls on (i) lithium batteries (including cells and battery packs), and relevant production equipment and technologies; and (ii) artificial graphite anode materials (including various cathode materials and graphite anode materials), as specified in the notification.

_{1 See}_{MOFCOM Notification No. 55/2025}_{, export control measures on superhard materials;}_{MOFCOM Notification No. 56/2025}_{, export control measures on certain rare earth equipment and materials;}_{MOFCOM Notification No. 57/2025}_{, export control measures on certain medium and heavy rare earth items;}_{MOFCOM Notification No. 58/2025}_{, export control measures on lithium batteries and artificial graphite anode materials;}_{MOFCOM Notification No. 61/2025}_{, export control measures on certain overseas rare earth items (among others); and}_{MOFCOM Notification No. 62/2025}_{, export control measures on certain rare earth technologies (all in Chinese).}
_{2 Specified in}_{MOFCOM Notification No. 61/2025, Annex 1, Part 2}_{(.wps file download link, in Chinese).}
_{3 Id.,}_{Annex 1, Part 1}_{(.wps file download link, in Chinese).}
_{4 MOFCOM provides its guidance and template of “Compliance Statement” in}_{Notification No. 61/2025, Annex 2}_{(.wps file download link, in Chinese).}
_{5 For White & Case’s discussion of the new U.S. Affiliates Rule, see,}_{BIS implements “Affiliates Rule” (a 50% rule) applicable to Entity List and Military End User List}_{(October 1, 2025).}
_{6 See e.g., Ministry of Commerce (MOFCOM),}_{Announcement No. 21 of 2025 on Including 16 U.S. Entities in the Export Control List}_{(April 4, 2025).}
₇_{See Article 20(3) of the Regulation (in Chinese)}_.
_{8 For White & Case’s discussion of the UEL and China’s Export Control Law, see,}_{China Enacts Export Control Law Following Its Announcement of the Unreliable Entities List}_{(January 15, 2021).}
_{9 See MOFCOM Notification No. 61/2025, Article 4, which requests a case-by-case review of export licensing application for (i) memory chips that are ultimately used for research, development or production of logic chips in 14 nanometer and below or with 256-layer and above, as well as the production equipment, testing equipment and materials for manufacturing the above-mentioned semiconductors; and (ii) artificial intelligence research and development of artificial intelligence with potential military applications.}

We provide below a list of partners and senior attorneys within the Global International Trade Practice of White & Case. Please contact any of them with questions about this report or other trade issues.

Washington, DC: David Bond (Partner); Ryan Brady (Partner); Cristina Brayton-Lewis (Partner); Jay Campbell (Partner); Nicole Erb (Partner); Farhad Jalinous (Partner); David Lim (Partner); Gregory Spak (Partner)
Mexico: Francisco de Rosenzweig (Partner); Carlos Vejar (Local Partner)
Brussels: James Killick (Partner); Sara Nordin (Partner)
Geneva: Jasper Wauters (Partner); Charles Julien (Partner)
London: Chris Thomas (Counsel); Ed Pearson (Senior Associate)
Paris: Orion Berg (Partner)
Tokyo: William Moran (Partner)

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}