China Commerce Ministry: rare earth export control measures do not constitute ban on exports; eligible applications will be granted licenses

China Commerce Ministry: rare earth export control measures do not constitute ban on exports; eligible applications will be granted licenses

The Ministry of Commerce (MOFCOM) of China has issued a clarification regarding its recent export control measures on rare earth items. The move, announced on Thursday, aims to safeguard national security and interests, and is in accordance with relevant regulations, including the Export Control Law and the Regulations on the Export Control of Dual-Use Items .

The new measures require foreign organizations and individuals to obtain licenses from MOFCOM before exporting certain rare earth items, including those containing, integrating, or being mixed with rare earth metals or oxides originating from China, where the value of these Chinese-origin materials constitutes at least 0.1 percent of the total value. Additionally, rare earth metals and oxide manufactured outside China but involving Chinese relevant technologies in the process of rare earth mining, smelting, and separation, metal smelting, magnetic material manufacturing, or rare earth secondary resource recycling should also apply for the license .

The ministry has emphasized that these new regulations do not constitute a ban on exports. Instead, they aim to ensure that only eligible applications are granted licenses. Chinese regulators will not approve export applications for foreign military users, as well as export applications for importers and end-users listed on export control or watch lists. Applications for end-uses or potential end-uses in areas such as weapons of mass destruction, terrorist purposes, military purposes, or enhancement of military capabilities will also not be approved .

The export controls are part of a broader strategy to maintain China's dominance in the rare earth supply chain, which accounts for approximately 70% of global rare earth mine production . The move has triggered significant international tension, particularly with the United States, which has responded with threats of increased tariffs on Chinese imports .

The new export controls have been met with concern from various sectors, including defense contractors, electric vehicle manufacturers, and the semiconductor industry, which rely heavily on rare earth elements for their operations. The potential economic ripple effects include higher production costs, price increases for consumer technology products, and potential shortages of critical components for defense applications .

China's decision to implement stricter rare earth export controls appears to serve multiple strategic objectives, including economic leverage, technology competition, domestic industry protection, and supply chain dominance . The move follows historical precedent, such as the 2010-2011 Senkaku/Diaoyu Islands dispute, during which China reduced rare earth export quotas, causing prices to surge .

The current dispute over rare earths represents the latest chapter in increasingly complex U.S.-China trade relations, which have resulted in shifting manufacturing bases, increased domestic investment in critical industries, heightened economic nationalism, and volatility in global financial markets .

In conclusion, China's Commerce Ministry has clarified that its recent export control measures on rare earth items do not constitute a ban on exports. Eligible applications will be granted licenses, and the move aims to maintain China's dominance in the rare earth supply chain while ensuring national security and interests.