The export control system in mainland China is a set of regulations designed to limit the export of specific items to fulfil non-proliferation requirements and other international obligations, maintain national security and protect development interests, ensuring that specific controlled items are not diverted for unintended purposes or to unauthorised users.
The system includes various legal frameworks such as the Export Control Law, the Foreign Trade Law and regulations regarding the prohibition and restriction of imports and exports of technologies. This article provides a general introduction to the PRC export control system and practical compliance tips.
Scope of PRC controlled items
Under the Export Control Law, the Foreign Trade Law and related regulations, exporters should obtain Chinese export licences from the competent authorities for the export of PRC controlled items and technologies or temporarily controlled items and technologies listed on the controlled items lists.
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Items not listed on the controlled items lists and items that are not identified as temporary controlled items, of which the exporters are aware or should be aware, or have been notified by the state export control authorities, may pose a risk of: (1) endangering national security and interests; (2) being used in the design, development, production or utilisation of weapons of mass destruction and their delivery vehicles; or (3) being used for terrorist purposes. In those cases, exporters should also obtain export licences from the state export control authorities for the export of these items.
When deciding whether an item is a PRC controlled item, exporters may refer to the following effective controlled items lists: the Arms Export Control list; the Catalogue of Dual-use Items and Technologies Subject to Import and Export License Administration; and the Catalogue of Technologies Prohibited or Restricted from Export.
Besides the above-mentioned catalogues, certain items are controlled under individual announcements or decrees. For example, the export control measures for potassium perchlorate and high-pressure water cannons were separately announced by the Ministry of Commerce (MOFCOM) and the General Administration of Customs.
Export licences
In terms of export licences, for the export of items listed on the Arms Export Control List, an exporter shall obtain an arms export licence from the Central Science and Technology Commission and the Equipment Development Department of the Ministry of National Defence.
For the export of items listed in the dual-use items and technologies export catalogue, an exporter shall obtain a dual-use items and technologies export licence from the relevant department of MOFCOM.
For the export of technologies subject to export restrictions under the Catalogue of Technologies Prohibited or Restricted from Export, an exporter shall obtain a technologies export licence from the State Council foreign economic and trade department.
End uses, end user restrictions
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The Export Control Law restricts the end users and end uses of PRC controlled items.
To apply for an export licence, the exporter needs to submit to the state export control authorities documents showing the end user and the end use of PRC controlled items, and such a document shall be issued by the end user or relevant government of the country or region where the end user is located.
The end user shall undertake not to change the end use of the PRC controlled items. and not to transfer them to any third party without the consent of the state export control authorities.
Both the exporter and the importer are obligated to report to the export control authorities if they find that the end user or the end use of the PRC controlled items is likely to be changed.
Additionally, it is recommended that exporters regularly check whether they or their end users are listed in China’s Control List, Unreliable Entity List, Countermeasure List, or individual sanction decisions (China Entity Lists).
Chinese exporters are also advised not to conduct transactions with companies and end users listed on the China Entity Lists.
Advice to exporters
According to the Export Control Law, if an exporter is unable to determine whether the export of goods, technologies or services is under restriction, it may submit an enquiry to the export control authorities, who will respond in a timely manner.
For exporters, compliance with export control laws and regulations is a critical aspect of international transactions. Suggestions for compliance can be summarised as follows:
- Gain a thorough understanding of China’s export control laws and regulations;
- Implement robust due diligence processes to identify whether products, technologies or services fall under controlled items lists;
- Ensure all required export licences are obtained before shipping of any controlled items, and regularly review licensing requirements;
- Regularly review and classify goods and technologies accurately according to the PRC controlled item lists;
- Develop and maintain an internal compliance programme that outlines procedures for export control compliance, including auditing and record keeping;
- Provide regular training to employees regarding export control regulations and internal control procedures;
- Stay up to date with domestic and international changes in export control regulations to adjust compliance programmes accordingly;
- Conduct periodic risk assessment of export control compliance and implement risk management strategies;
- Maintain thorough records of export transactions, licensing documentation and due diligence efforts as required by law; and
- When in doubt, consult legal experts specialising in export control to ensure your business remains compliant.
Qiu Mengyun is a partner and Han Xiaoxi is a paralegal at AllBright Law Offices
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