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China publishes Export Control Law and establishes a unified export control regime

On 17 October 2020, the Standing Committee of the PRC’s National People’s Congress approved the Export Control Law of the People’s Republic of China (the ECL), which will come into effect on 1 December 2020.[1]
It is China’s first comprehensive and unified export control law, and introduces various control mechanisms that resemble certain aspects of the US export control regime. The ECL will likely have a wide impact on businesses involved in the trading of items subject to the export controls.

Prior to the ECL, China had in place an export control regime that was scattered across multiple laws, administrative regulations and implementation rules. The previous regime mainly focused on the control of sensitive items such as materials and technologies relating to missiles, arms, nuclear items, chemicals, and biological weapons. The Ministry of Commerce (MOFCOM) and other authorities also maintained catalogues of goods and technologies that are subject to export bans or restrictions. The recent revision to these catalogues have been widely reported because of its potential to be used to block any sale of TikTok’s US operations, which follows on from pressure put on TikTok by the Trump Administration.

The first draft of the ECL was introduced by MOFCOM in June 2017. The ECL was then placed on the national legislature’s agenda in late 2019, and was made a legislative priority as the US-China tensions on trade and technology continued to escalate. Further drafts were published in December 2019 and July 2020. The final version of ECL retains most of the key features of the earlier drafts.

The ECL sets out the basic framework of a unified export control regime that grants wide powers to the authorities to implement such controls. We discuss its key features below and briefly analyse its potential impact.

Controlled Items

The ECL imposes export control measures over dual-use items, military items, nuclear items and “other goods, technologies, services and items relating to the maintenance of national security and interests and compliance with international obligations such as non-proliferation” (collectively, Controlled Items). For the purposes of the ECL, the key terms are defined as follows:[2]
• “Dual-use items” are goods, technologies and services that can be used for both civil and military purposes, or that are helpful to enhance military potential, especially those that can be used for the design, development, manufacturing or use of weapons of mass destruction and their transportation vehicles;
• “Military items” are equipment, special production equipment and other related goods, technologies and services used solely for military purposes; and
• “Nuclear items” are nuclear materials, nuclear equipment, non-nuclear materials for reactors and related technologies and services.

Notably, unlike the US Export Administration Regulations (the EAR), which mainly focuses on control over equipment, material, software and technology, the ECL explicitly includes “services” as a type of Controlled Items. With a catch-all clause that covers “other goods, technologies, services and items relating to the maintenance of national security and the interests of China”, the items subject to control may well extend beyond traditionally sensitive items.[3] The ECL specifies that technologies and data contained in Controlled Items are also subject to control. 

Controlled Items List

To identify the items subject to control, the ECL authorises the export control authorities, working with other authorities, to establish, publish and maintain a Controlled Items List, [4] which may build on the basis of existing catalogues of controlled goods and technologies.

Temporary control

The ECL allows export control authorities to impose temporary control over unlisted items for a period of no more than two years. Before the expiration of a temporary control, an evaluation will be conducted to determine whether to cease the temporary control, extend the temporary control, or add the items under temporary control to the Controlled Items List.

Controlled activities and extraterritoriality


Under the ECL, export is defined as the transfer of any Controlled Items out of China. This includes both physical and electronic transfers.


The ECL provides that “any transit, transshipment and through shipment, re-export of any Controlled Items or the export of any Controlled Items from bonded areas, export processing zones and other areas specially regulated by the customs and regulated bonded places such as regulated export warehouses and bonded logistics centers” are also subject to control under the ECL. [5]

In an earlier draft of the ECL in 2017, it contained a “percentage test” which was similar to the “de minimis rule” under the EAR. Under this earlier draft, the transfer of an item from a jurisdiction outside of China to a third country or region would also have been subject to the ECL, if the item had contained over a certain percentage of Controlled Items. However, this “percentage test” rule was eventually removed from the ECL.

As a result, it appears that only the transfer of Controlled Items (as opposed to any foreign products that contain a certain percentage of the Controlled Items) from a jurisdiction outside of China to a third country or region could potentially be subject to the ECL, although it remains to be seen how the potential extraterritorial application of the ECL would be implemented.

Deemed export

Under the ECL, the provision of Controlled Items by Chinese entities and individuals to non-Chinese entities and individuals is deemed to be an export.[6] An international company having a presence in China should be mindful that transfer of sensitive technologies and data from their subsidiaries in China to their subsidiaries outside of China, or from their Chinese employees to their non-Chinese employees, may be deemed as export.

Facilitating violations

The ECL provides that any person who provides agency, shipping, delivery, customs clearance, third-party e-commerce trading platform, financial, and other services for any exporter, knowing that the exporter engages in ECL violations, can be subject to penalties under the ECL.[7]

The range of potentially liable persons here does not appear to be limited to service providers domiciled within China. Rather, a foreign person that provides services to facilitate an ECL violation could also potentially face penalties.

This is similar to General Prohibition 10 under the US EAR, which prohibits dealing with any item subject to the EAR with knowledge that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with the item. [8]

Foreign perpetrators

The ECL also captures activities of foreign entities and individuals that violate the ECL, hinder the compliance with non-proliferation and other international obligations of China, or endanger the national security and interests of China. [9]

National/regional risk assessments and embargoes

The ECL allows the export control authorities to assess countries and regions, identify the level of risks, and take corresponding control measures.[10]

The ECL further allows the export control authorities to impose embargoes, i.e., prohibiting or restricting certain items from being exported to certain countries or territories.[11]

Monitoring of end-users and end-uses

An exporter of a Controlled Item is required to submit end-user and end-use certifications to the export control authorities, which appears to be a uniform requirement regardless of the sensitivity of the Controlled Items exported.
The end-user and end-use certifications could be issued by the end-user, or by the government of the countries or regions where the end-user is located.[12]                         
An end-user shall undertake not to alter the end-use of the relevant Controlled Item or assign the Controlled Item to a third party without prior approval from the Chinese export control authorities. The exporter and the importer are each obliged to report to the authorities as soon as it becomes aware of any change of the end-user or end-use.[13]

The ECL further requires the export control authorities to establish a risk monitoring system to “evaluate, verify and manage” end-users and end-uses.[14]

Importers and end-users list

The ECL requires the export control authorities to establish a list of importers and end-users who have:[15]
• violated their obligations under the ECL in respect of the monitoring of end-users or end-uses;
• potentially endangered the national security and interests of China; and
• used Controlled Items for terrorism purposes.

The export control authorities could (1) prohibit or restrict the listed importers and end-users from engaging in the trading of Controlled Items; or (2) suspend the export of the Controlled Items. Exporters can be prohibited or restricted from trading with the listed importers and end-users. Exporters who need to trade with listed importers, or end-users, could in special circumstances apply for permission to do so from the export control authorities.

In practice, this rule essentially creates an obligation on the exporters to verify (1) whether the item imported is a Controlled Item; (2) the importers, end-users and end-uses of that item; (3) whether the Controlled Items will be used for terrorism-related purposes; and (4) whether there is a risk of endangering the national security and interests of China.

The authorities may remove an importer or end-user from the list either on their own volition, or upon the listed party’s application, if the circumstances as set out above no longer exist.

The ECL is silent on whether the list may be categorised by the level of restrictive measures, similar to the “Unverified List”, “Entity List” and “Denied Persons List” adopted by the U.S.

Separately, China has recently established an Unreliable Entities List regime, under which blacklisted companies or individuals can be restricted or even banned entirely from trading with China.[16] The Unreliable Entities List may operate as a Chinese version of a “blocking statute” against other sanctions, export controls or other actions imposed by other nations which are considered by China to be hostile against the Chinese state, Chinese companies or Chinese individuals. It remains to be seen how the two lists would be coordinated and implemented.

Licensing regime

In order to export items that are listed in the Controlled Items List or subject to temporary control, an exporter is required to apply for an export licence from the export control authorities.

The obligation to apply for an export licence can be triggered even if the items are not listed as Controlled Items or otherwise subject to temporary control. The ECL requires an exporter to nevertheless still apply for an export licence, if it (1) knows or should have known, or (2) has been informed by the export control authorities, that the item has the following risks: [17]
• endangering the national security and interests of China;
• could be used for the design, development, production or use of weapons of mass destruction and their transportation vehicles; or
• could be used for terrorism purposes.

An exporter may consult with the export control authorities if it is unable to confirm whether any goods, technologies or services to be exported are subject to the relevant controls.

To determine whether to grant an export licence, the export control authorities will consider the following factors:
• national security and interests;
• international obligations and commitments;
• type of export;
• sensitivity of the items;
• destination country or region of the export;
• end-users and end-use;
• credit record of the exporter; and
• other factors stipulated under relevant laws and administrative regulations.

The ECL does not set out a clear timeline for the review procedure in respect of a licence application.

In addition to the licensing regime, a Chinese exporter may be required under relevant laws and regulations to obtain a special qualification for exporting certain Controlled Items.[18]

Export of military items

Stricter rules apply to the export of military items. An exporter of military items must have a special qualification approved by the military authorities,[19] and each export is subject to prior review and approval by the relevant departments.[20] A carrier providing transportation services for the export of military items must also obtain special qualifications.[21]

Export control authorities and their investigative powers

Under the ECL, the authorities that are responsible for export control are the “departments of the State Council and the Central Military Commission that perform export control functions”. The ECL does not specify which particular departments within the State Council and the Central Military Commission will be export control authorities. In practice though, these would primarily include MOFCOM and such other departments as the State Administration of Science, Technology and Industry for National Defense, the Ministry of Industry and Information Technology, and the Ministry of Foreign Affairs.

The export control authorities have broad powers to investigate potential violations of the ECL, including:[22]
• entering the place of business or other premises of the investigated person for inspection;
• interviewing the relevant persons on related matters;
• inspecting and copying the relevant documents and materials (including certifications, agreements, books and accounts, business correspondence, and other files);
• inspecting transportation vehicles, preventing the loading of suspicious items, and ordering the transportation of items that are exported illegally back to China;
• seizing and detaining relevant items; and
• inspecting the bank accounts of the investigated persons.

Moreover, the customs authority may withhold clearance of the relevant goods for export if a shipper or customs broker fails to submit licensing documents issued by the export control authorities to customs for verification, and the customs authority has reasonable evidence to believe that the goods to be exported may be subject to export controls.[23]

Compliance requirements

The ECL does not impose a mandatory requirement on exporters to establish an internal compliance system (which appeared in some earlier drafts but was removed in the January 2020 draft). Instead, if an exporter establishes an internal system for export control compliance and demonstrates that this system functions effectively, the export control authorities may grant licensing facilitation measures such as a general licence for the export of certain Controlled Items.[24] It remains to be seen what factors the authorities would take into account in determining whether a company’s internal compliance system can be considered as “functions effectively”. The ECL indicates that the export control authorities will issue compliance guidance to exporters.

Consequences for violations

Exporters that export Controlled Items in violation of the restrictions may face the following penalties:[25]
• confiscation of any illegal income;
• fines of five to ten times of illegal turnover if the illegal turnover is more than RMB500,000, or a fine of RMB500,000 to RMB 5 million if there is no illegal turnover or the illegal turnover is less than RMB500,000;
• suspension of business; and/or
• revocation of export operation qualifications.

Exporters that trade with listed importers and end-users may face the following penalties:
• confiscation of any illegal income;
• fines of 10-20 times of illegal turnover if the illegal turnover is more than RMB500,000, or a fine of RMB500,000 to RMB 5 million if there is no illegal turnover or the illegal turnover is less than RMB500,000;
• suspension of business; and/or
• revocation of export qualifications.

Other violations of the ECL, including exporting Controlled Items without qualifications, obtaining export licences by illegal means (such as fraud or bribery), fabricating or trading export licences, and facilitating violations, would be subject to corresponding penalties.

In addition, an exporter that has been penalised under the ECL may be denied the right to apply for export licences for five years commencing from the date the penalty decision becomes effective.[26] Management personnel directly responsible for such violation or any other directly responsible persons may be prohibited from engaging in relevant export activities during the same five year period.[27] ECL violations will also be recorded in the social credit records of the penalised exporters,[28] which may significantly hinder their business operations in China.

If an ECL violation also constitutes a criminal offence, the exporter and the relevant individuals may face criminal penalties. Any person who receives a criminal penalty for export control violations may be subject to a lifetime ban from export activities.[29]

National security violations

The ECL specifies that if a violation of the ECL further endangers the national security and interests of China, the offenders may face penalties under other laws, potentially including the National Security Law of the PRC.

International countermeasures

Article 48 of the ECL was one of the key clauses added to the final version of the ECL. It provides that if any foreign country or region “misuses” export control measures to jeopardise the national security and interests of China, the Chinese government may take “equivalent” countermeasures against such foreign country or region.

Potential implications

The ECL, with its broad coverage, strengthened controls, and extraterritorial application, will likely to have a direct impact on companies that are involved in the export and import of Chinese goods, technologies and services.

The ECL is enacted against the background of a significant escalation of US export control measures targeting Chinese companies, such as the placement of Huawei and many other Chinese companies on the Entity List and the broadening of the military end-use and end-user restrictions against China in June 2020. The ECL (including the Controlled Items List, the list of importers and end-users, and the geographical risk assessment regime) represents a new tool at China’s disposal to counter the actions of the current U.S. administration. Although the ECL is not limited to and does not explicitly target US companies, Article 48 of the ECL makes clear that China may take countermeasures against a country that imposes export controls against China. In light of these geopolitical dynamics, certain US companies may face a higher risk of being designated as prohibited or restricted importers or end-users.

In view of the extraterritorial reach of the export control regimes of both the U.S. and China, multinational corporations with a global presence and businesses from third countries are likely to find themselves at an increasing risk of being caught in the crossfire of US-China tensions, which have broadened beyond trade issues. These companies will have to actively monitor potential exposures under both regimes, and at some point, some of them might have to face the difficult decision on whom they continue to do business with.

It remains to be seen whether China will implement and enforce the ECL in an active manner and how extensive the various control lists will be. As is common with the introduction of new laws in China, we expect that the export control authorities will, in time, issue more detailed implementing regulations and rules. Companies would be well advised to evaluate and enhance their export control programmes to cope with the new requirements introduced by the ECL.

[1] The official Chinese version of the ECL can be found here.  There is no official English translation. 
[2] Article 2 of the ECL. 
[3] Article 2 of the ECL.  
[4] Article 9 of the ECL. 
 Article 45 of the ECL.
 Article 2 of the ECL.
[7] Article 20 of the ECL. 
 Section 736.2(b) of the EAR, “General Prohibition Ten — Proceeding with transactions with knowledge that a violation has occurred or is about to occur (Knowledge Violation to Occur). You may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item. Nor may you rely upon any license or License Exception after notice to you of the suspension or revocation of that license or exception.”
[9] Article 44 of the ECL. 
 Article 8 of the ECL.
[11] Article 10 of the ECL.
[12] Article 15 of the ECL.
[13] Article 16 of the ECL.
[14] Article 17 of the ECL.
[15] Article 18 of the ECL.
[16] See our recent alert on the Unreliable Entity List regime here.
[17] Article 12 of the ECL. 

[18] Article 11 of the ECL.
 Article 23 of the ECL.
 Article 24 of the ECL.
[21] Article 26 of the ECL. 
[22] Article 28 of the ECL. 
[23] Article 19 of the ECL. 
[24] Article 14 of the ECL. 
 Article 34 of the ECL.
[26] Article 39 of the ECL.
[27] Article 39 of the ECL. 
[28] Article 39 of the ECL. 
[29] Article 43 of the ECL.