Key Objectives and Framework

The regulation aims to safeguard national interests while enabling international cooperation. It formalizes the government’s approach to export control, particularly of dual-use items that could potentially enhance military capabilities or contribute to weapons of mass destruction. The regulations outline three core principles:

1. National Security: Ensuring that exports do not compromise China’s security or the security of allied nations.
2. International Commitments: Compliance with non-proliferation treaties and the United Nations Security Council resolutions.
3. Development and Security Balance: Coordinating high-level security controls with sustainable economic growth.

The regulation establishes a multi-departmental management structure led by the National Coordination Mechanism for Export Control Work. The competent department of commerce under the State Council, along with other government bodies, oversees the regulatory process, ensuring compliance across regions and industries.

Export Control Policies and Compliance

To implement effective control measures, the regulation provides guidelines and an export control list to manage dual-use exports. Policies are formulated and updated based on national security needs, treaty obligations, and non-proliferation agreements. A risk assessment framework evaluates the potential threats associated with exporting dual-use items to certain countries or entities, allowing for temporary or long-term restrictions.

Compliance is central to the regulatory framework. Exporters and service providers, including freight, finance, and e-commerce platforms, are encouraged to establish internal compliance systems. These systems must align with guidelines set by the competent department of commerce under the State Council, which also provides resources and training for industry participants.

Licensing and Control Mechanisms

A comprehensive licensing system differentiates between single-use and general-use licenses based on the export’s nature, frequency, and risk assessment:

• Single License: Valid for one-time exports of specific items within a set timeframe (up to one year).
• General License: Allows multiple exports within a specified period (up to three years).

To obtain a license, exporters must submit detailed documentation, including technical descriptions, end-user information, and compliance statements. For high-risk items, applications are subject to review by multiple departments or require additional approvals from higher authorities, including the State Council or the Central Military Commission.

In cases of ambiguity over whether an item qualifies as a dual-use product, exporters can consult with the State Council, which will provide determinations based on performance indicators and intended use. Temporary controls on unlisted items may also be imposed, with controls potentially becoming permanent if deemed necessary.

End-User and End-Use Management

The regulation mandates rigorous end-user and end-use certifications, which must be issued by relevant authorities in the destination country. Exporters must verify and report any changes in end-use or end-user during the licensing period. Regular assessments and audits of end-users ensure compliance, with high-risk or non-cooperative users placed on watchlists.

Watchlisted entities face restricted access to general licenses and must submit detailed risk assessments for each transaction. By enforcing end-user transparency, the regulation minimizes risks associated with unauthorized use, especially concerning sensitive technologies that could support military applications or violate non-proliferation commitments.

Control Lists and Enforcement Measures

Control lists target importers and end-users whose actions could threaten national security or facilitate terrorism. This proactive approach allows the government to swiftly restrict transactions with individuals, companies, or organizations posing a risk. Companies on the control list are prohibited from conducting transactions involving dual-use items unless explicitly approved. The government can remove entities from the list if they demonstrate compliance and cooperate in investigations.

Exporters are required to report any suspicious activities, such as attempted unauthorized use or transfer. This early reporting mechanism fosters an environment of vigilance, encouraging exporters to actively participate in security efforts while mitigating their own risk.

Legal Responsibilities and Penalties

Failure to adhere to these regulations carries severe penalties, including substantial fines, license revocation, or business suspension. Key violations include unauthorized exports, misuse of licenses, and circumvention of control measures through means such as dismantling items for unregulated export. Criminal liability may also be pursued if actions endanger national security or breach international commitments.

Individuals or organizations providing export-related services—such as logistics, finance, or customs brokerage—are also liable for fines if they fail to report or stop facilitating suspicious exports.

Impact on International Trade and Business Implications

The “Regulations on Export Control of Dual-Use Items” reflect China’s strategic commitment to aligning national security with its economic policy. By establishing stringent control measures, China aims to protect its interests while maintaining strong trade relations. For exporters, the regulation reinforces the importance of robust compliance programs to manage and document each stage of export transactions, including end-user and end-use verifications.

The regulation calls on businesses across sectors to prioritize compliance, effectively influencing global trade practices and requiring international partners to align with Chinese standards for regulated exports. As China implements this regulation, businesses operating within its jurisdiction will need to adapt to these compliance standards, while those importing dual-use items from China may face stricter oversight and potential delays.

Conclusion

The new regulations mark a significant step in China’s approach to managing dual-use exports, underscoring its commitment to national security, international non-proliferation, and a balanced approach to trade. As this regulatory framework takes effect on 1 December 2024, businesses must prepare for its implementation by updating their compliance systems, engaging in regular training, and fostering transparency in their export processes. The regulation reflects a pivotal evolution in China’s export control policy, setting the stage for a more secure and regulated trade environment while emphasizing responsible international cooperation.