How Will China’s Rare Earth Export Controls Impact Industries and Businesses?

In early October, China significantly expanded its rare earth export controls, adding five new rare earth elements and extending extraterritorial jurisdiction to products made using Chinese technologies abroad. The measures were expected to have broad implications for global supply chains, particularly in sectors reliant on Chinese inputs or know-how. These controls reinforce China’s strategic oversight of rare earth materials and their global trade. In November, China agreed to suspend the controls for one year after a trade agreement was reached with the US.

UPDATE (November 7, 2025): China has officially suspended the implementation of the rare earth export controls announced on October 9,  2025, which are outlined in this article, for one year until November 10, 2026. The measures were due to come into effect on November 8, 2025. The decision is part of an agreement reached between the US and China following the Xi-Trump meeting to roll back a variety of tariffs and trade barriers, including a range of export controls on critical minerals, materials, and production equipment. The suspension applies both to the export controls on an additional five rare earth elements, as well as wider restrictions on the export of rare earth materials and technologies, including items produced overseas using Chinese source materials and technologies. While the White House has previously stated that China has also agreed to issue general-purpose export licenses for rare earth items on the previous export control list implemented in April 2025, the Chinese side has yet to confirm this, and these controls remain in place at the time of writing.

UPDATE (October 30, 2025): China has agreed to suspend the implementation of its latest round of rare earth export controls for one year, in exchange for a one-year suspension of the US’s 50 percent ownership rule, announced at the end of September. The suspension applies only to the export controls announced on October 9, which were set to come into effect on November 8, and not the previous round of controls enforced in April 2025. These earlier controls impact seven rare earth elements (REEs) and their derivative products, meaning companies that need to export these controlled items will need to apply for an export license from MOFCOM, a process that can significantly delay shipments. This means that Trump’s claim that the rare earth issue has been “settled” is not entirely true, as the controls still apply to a long list of critical materials and products.

However, the suspension of the extraterritorial rules for export controls announced in October is significant, as it means production occurring outside of China will no longer be affected for the time being.

Nonetheless, given that REEs are one of China’s most important levers in global supply chains and high-impact industries such as defense, it is very unlikely that China will relinquish its influence over exports in the long term. Instead, China may opt for a more targeted and calibrated approach, preserving its leverage while maintaining the cooperative tone set during the consultations.

On October 9, 2025, China’s Ministry of Commerce (MOFCOM) announced a sweeping expansion of its export controls on rare earth materials, technologies, and dual-use items.

Under the new measures, export restrictions on an additional five rare earth elements (REEs) will come into effect on November 8, 2025. More significantly, China’s updated rare earth export controls now include extraterritorial provisions, requiring export licenses for products made outside China if they contain Chinese-origin materials or are produced using Chinese technologies. This extension of jurisdiction marks a significant escalation in scope and is expected to have broader implications for global supply chains, particularly in sectors reliant on Chinese inputs or know-how. 

The announcement prompted an immediate political reaction, with US President Donald Trump threatening to impose an additional 100 percent tariff on Chinese goods on November 1 if China doesn’t reverse its decision. 

While many companies have already adjusted to the previous round of REE controls introduced in April, the expanded measures have the potential to affect new applications and sectors.

China’s new rare earth export controls

Expansion of restricted REE items 

The headline announcement is the expansion of export controls to cover an additional five REEs to the control list, meaning export controls are now in place on 12 of the 17 REEs. 

The additional five REEs are holmium, erbium, thulium, europium, and ytterbium. Companies will need to apply for an export license from the State Council’s commerce department before export, a process that takes 45 days as stipulated in the Regulations on the Export Control of Dual-Use Items. These restrictions will come into effect on November 8, 2025. 

Extraterritorial export controls on rare earth products and technologies 

In a separate announcement, MOFCOM detailed additional export restrictions on certain rare earth products of Chinese origin or products made using Chinese technology.

Starting on October 9, overseas entities and individuals must obtain a dual-use item export license issued by MOFCOM before they can export certain rare earth items of Chinese origin to countries or regions outside of China.  

These rare earth products include 13 types of rare earth input materials (elements, alloys, and oxides), as well as four rare earth permanent magnet materials and seven types of rare earth target materials.  

REE products manufactured outside of China involving Chinese technologies 

Beyond direct exports, the new rules also introduce extraterritorial provisions that significantly expand the scope of control. 

Starting December 1, 2025, overseas entities and individuals must also obtain a dual-use item export license issued by MOFCOM to export any of the rare earth products listed in the table above (REE Products Subject to Extraterritorial Export Controls), if they are manufactured outside of China using Chinese technologies related to: 

• Rare earth mining
• Smelting and separation
• Metal smelting
• Magnet manufacturing
• Recycling and utilization of secondary rare earth resources 

REE products manufactured outside of China involving a certain ratio of Chinese REE inputs 

Overseas entities and individuals must obtain a dual-use export license from MOFCOM to export certain REE products manufactured outside China to a third country or region if they contain even small amounts of input materials of Chinese origin. Specifically, entities that produce any of the rare earth permanent magnet or sputtering target materials outlined in List 2 in the table on “REE Products Subject to Extraterritorial Export Controls” outside of China must obtain an export license if: 

• The product contains, integrates, or is mixed with any of the 13 types of rare earth input materials of Chinese origin included in List 1; and 
• The value of the 13 types of these Chinese-origin input materials accounts for 0.1 percent or more of the final product.  

Export ban on dual-use items for military end users, WMDs, terrorism, or military purposes 

The announcement explicitly states that MOFCOM will generally not approve applications for an export license for items destined for overseas military end-users, effectively banning their export for these purposes.  

Additionally, applications for exports to importers and end-users listed on the “export control list” and “watchlist” will generally not be approved. This includes exports to their subsidiaries, branches, and other affiliates in which they hold a 50 percent or greater stake.

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The “export control list” and “watchlist” refer to two lists established under the Regulations of the People’s Republic of China on Export Control of Dual-Use Items. Under these regulations, the Commerce Department of the State Council must carry out verification of the end-users and end-uses of dual-use items. Any relevant organizations and individuals are required to cooperate with this process. If they do not, and the Commerce Department is thereby unable to verify the end-use or end-user of the dual-use items, then the importer or end user will be placed on the “watchlist”. 

Meanwhile, importers or end-users may be placed on the “control list” if they violate end-user or end-use management requirements, potentially endanger national security and interests, use dual-use items for terrorist purposes, or use dual-use items for the design, development, production, or use of weapons of mass destruction (WMDs) and their delivery vehicles. 

Reflecting these regulations, the announcement also stipulates that the State Council will generally not approve any applications for dual-use items export permits for items that will be or could be used for the design, development, production, or use of WMDs and their delivery vehicles, terrorism, military uses, or the enhancement of military potential. 

Case-by-case approval of licenses for certain advanced semiconductor items and AI 

The new restrictions also require export licenses for the export of items for use in the production of advanced chips and the development of AI for potential military applications.  

The controls apply to chips with the following specifications: 

• 14-nanometer or below logic chips
• 256-layer or above memory chips 

Production equipment, testing equipment, and materials for manufacturing the above chips are also subject to the controls. 

The export of items for the R&D of AI with potential military applications is also subject to the controls. Applications for export licenses of items for these applications will be approved on a case-by-case basis. 

Exemptions 

The announcement stipulates that exports for humanitarian purposes, such as emergency medical use, disaster relief, or public health response, are exempt from needing an export license, provided that exporters report and certify that the items will not endanger national security no more than 10 business days after exporting the products. 

Compliance notification letter 

Domestic export operators exporting 13 types of rare earth input materials (elements, alloys, or oxides) must, at the time of customs declaration, specify the final destination country or region as required and issue a Compliance Notification Letter to the overseas importer and end user. 

Overseas export operators must issue a compliance notification letter to the next recipient when transferring or exporting items subject to control, as detailed in the table “REE Products Subject to Extraterritorial Export Controls”. 

Impacts of China’s REE export restrictions 

In the months following the implementation of the April export controls, official customs data showed a sharp but temporary disruption in outbound shipments. Exports of rare earths fell markedly in April and May, slowing to 4.8 percent year-on-year growth in April and declining by 5.7 percent year-on-year in May, as exporters adjusted to the new licensing procedures and MOFCOM dealt with a surge of applications. These declines reflected administrative bottlenecks rather than deliberate supply restrictions. In June, exports soared by 60.3 percent year-on-year. This surge likely reflects the release of shipments that were held in April and May due to the processing of export licenses. In July and August, exports leveled off, growing 21.4 percent and 22.6 percent year-on-year, respectively. 

This pattern clearly shows that the new regulatory framework was not intended as an outright export ban, but rather as a means for Beijing to exercise tighter administrative control and oversight over the flow of strategic resources. Exporters have continued to receive licenses, but the process has become more rigorous and time-consuming. The experience of the past several months shows that exporters and foreign buyers of Chinese REEs must now factor in the likelihood of procedural delays even when exports are ultimately approved. The system of case-by-case licensing effectively grants authorities the discretion to evaluate each shipment’s end use and destination, adding a layer of uncertainty to supply timelines. 

Given this precedent, similar disruptions should be expected when the next round of restrictions takes effect on November 8, 2025. Although the new regulations stipulate that export license applications must be processed within 45 working days, backlogs are likely as exporters rush to submit applications ahead of implementation. In practice, actual approval times could exceed the nominal deadline, as was observed in the spring when licensing offices faced a surge in filings. 

More significantly, the broader reach of China’s export control regime, which includes provisions for extraterritorial jurisdiction, introduces an additional layer of compliance risk. The authorities have made clear that applications involving civilian or general-purpose uses will continue to be reviewed and approved, albeit with potential delays due to the administrative workload. However, exporters linked to buyers with known or suspected defense-related activities are expected to face lengthier reviews and, in some cases, denials. This could lead to further supply chain disruptions in advanced manufacturing industries, particularly in areas such as lasers, semiconductors, and sensing technologies, which rely on the newly controlled rare earth elements and have overt military applications. 

What impact could China’s REE export restrictions have on industries? 

Permanent magnets 

On the one hand, the impact of the new export controls on the production of permanent magnets may not be as extensive as initially feared, as they are an extension of control measures that have already been in place since April. Companies that rely on imports of REEs and derivative products from China to produce permanent magnets have already had to adjust to the new normal of permit applications and alternate sourcing for materials where possible.

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For instance, the initial seven REEs restricted for export included samarium, dysprosium, and terbium, among others, which are important input materials for permanent magnets. Notably, while neodymium has not been included in either the April or November controls, neodymium magnets are still impacted, as the restricted products include neodymium-iron-boron (NdFeB) magnets that contain terbium and dysprosium. 

At the same time, the extraterritorial jurisdiction of the customs controls effectively asserts China’s control of the global permanent magnet market. The controls explicitly restrict exports to a third country or region (which means domestic transfers are also affected) of samarium-cobalt permanent magnet materials, NdFeB permanent magnet materials containing terbium or dysprosium, and any parts, components, and assemblies containing any of these materials that contain as little as 0.1 percent of Chinese-origin input materials. Additionally, permanent magnets produced using Chinese rare earth technologies will be subject to the controls.  

In practice, this means that reshoring production of permanent magnets to circumvent the export controls is no longer feasible, unless it is done without using Chinese input materials or technologies – a challenging prospect considering China accounts for almost 70 percent of the world’s REE production and dominates REE processing.

It is unclear how effectively China will be able to enforce these controls, as tracing products manufactured overseas that contain small amounts of Chinese input materials or are produced using Chinese technologies is an almost impossible task. However, large companies with operations in China will face higher levels of scrutiny and come under pressure to proactively comply, with the risk of serious legal consequences for their China operations if they fail to do so. Under China’s Export Control Law, companies that export controlled items without a permit can be fined up to 10 times the amount of the turnover obtained from the illegal activity, or up to RMB 5 million (US$701,552), and in serious cases, be ordered to suspend operations and have their export licenses revoked. 

Sputtering targets 

As with permanent magnets, companies sourcing REE materials for sputtering targets, or REE-containing sputtering targets, have already begun to adapt to the export controls introduced in April, which covered target materials containing seven restricted REEs. However, the October announcement broadens the scope of these measures to include target materials incorporating an additional five REEs, bringing a range of applications that were previously unaffected into the sphere of the controls.

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For instance, holmium target materials, newly added to the export control list, are prized for their unique magnetic properties that are crucial for the production of high-performance magneto-optical storage devices used for high-density data storage. Meanwhile, europium oxide sputtering targets, also a new addigion to the list, are key to producing rich red colors in LED and LCD screens used in high-end televisions and monitors. 

Companies involved in a broad range of industries and fields, from electronics manufacturing to data center construction to materials research, will find it harder to source materials without experiencing delays, additional administrative hurdles, and heightened scrutiny of end-use certifications, potentially affecting production timelines and project planning. 

As with permanent magnets, target materials are also subject to the extraterritorial jurisdiction of the export controls. The list of controlled items for export to third countries includes various types of sputtering targets containing samarium, gadolinium, terbium, scandium, yttrium, dysprosium, and lutetium. This means that even shipments routed through intermediate countries or used in multinational supply chains could be subject to licensing requirements, creating broader uncertainty for global manufacturers and potentially complicating sourcing strategies for industries reliant on these critical REE materials. 

REEs for military applications 

The new rules make it clear that exports of the controlled REEs and derivative products for clear military end users or uses will no longer be possible. While these rules are clear-cut, their application may become a headache for companies that maintain some commercial ties to military-linked entities but also export products for civilian uses, as they will need to provide evidence that their exports will not be used for military applications. This may be difficult to prove in practice, particularly in complex global supply chains where end-use verification is challenging and downstream customers may not fully disclose how or where the materials will ultimately be applied.  

In such cases, exporters may experience longer review periods and additional scrutiny during the licensing process, resulting in delayed shipments and extended lead times. These administrative slowdowns could, in turn, lead to further supply chain disruptions and greater uncertainty for companies dependent on timely deliveries of REE materials. 

Controls on semiconductors and AI technology 

The case-by-case reviews of export license applications for REE materials used in advanced semiconductors and AI technologies show that the Chinese government aims to prevent Chinese-origin products and technologies from indirectly enhancing foreign military capabilities. Chip manufacturers with defense contracts, such as NVIDIA, Intel, and TSMC, will be particularly exposed and will be required to provide documentation demonstrating that their exports are not destined for military end users or applications.

Many leading AI companies, including Anthropic, Google, OpenAI, and xAI, also provide AI services for military applications, meaning they may face heightened scrutiny and longer approval timelines when sourcing REE-containing components or technologies from China, even for projects intended for civilian or commercial use. This intertwining of civilian and defense applications introduces an additional layer of uncertainty and potential delay across the supply chain. 

Controls on REE recycled materials 

A smaller but perhaps consequential outcome of the controls is the extraterritorial jurisdiction over recycled rare earth materials. The new rules require companies that export resticted REE materials produced overseas using Chinese REE recycling technology to a third country to apply for an export license. This means the export controls extend beyond China’s borders to cover materials that have been processed or regenerated abroad if Chinese-origin technology was used at any stage of production.

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While REE recycling – which involves the recovery and reprocessing of rare earth elements from end-of-life products such as magnets, batteries, catalysts, and electronic components – is still a relatively small market, it has significant potential for future growth as companies seek to reduce the environmental impact of REE mining and diversify their supply chains. Crucially, it has also been viewed as a means of possibly reducing reliance on China for raw materials. Now, however, companies will need to ensure recycling procedures are done without Chinese technology or be required to apply for an export license, even if the materials are recycled outside of China. 

These rules therefore have the potential to significantly shape the future trajectory of the REE recycling market by effectively extending China’s influence over global recycling activities. This could discourage the use of Chinese technologies in foreign recycling facilities and potentially slow efforts by other countries to establish independent REE recycling capabilities. 

Possible developments 

While some observers have dismissed the new controls as a temporary bargaining chip for the upcoming Xi-Trump meeting, it is increasingly evident that China’s export controls on REEs and other critical minerals are intended to be a lasting feature of its trade and industrial policy. 

As Cory Combs, Head of Critical Minerals and Supply Chain Research at Trivium China, notes, “We do not see licensing requirements themselves as negotiable. They are the means for Beijing to tighten or loosen control over particular countries’/companies’/industries’ supplies — not (in Beijing’s demonstrated approach) the actual damage to be done.” This suggests that rather than removing the licensing system altogether, Beijing will continue to use it as a flexible tool to calibrate access to critical materials in response to geopolitical or economic developments.

Negotiations with trade partners may therefore focus not on abolishing the licensing mechanism, but on securing guarantees for license issuance or streamlining approval procedures. However, any such arrangements will be negotiated on a bilateral basis. A potential deal between the US and China, for instance, would not necessarily benefit importers in Europe or Japan.

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Several governments outside the US have already sought to reach their own understandings with Beijing to ease potential bottlenecks in REE supply chains. Following the EU-China summit in July, the EU announced that both sides had agreed to establish an “upgraded supply chain mechanism” designed to “immediately check and solve issues” should bottlenecks occur. In Japan, industry groups have similarly urged MOFCOM to standardize and clarify export license application procedures to minimize uncertainty for manufacturers. 

In June, Trump told reporters that the US had reached a deal with China to facilitate rare earth exports to the US. This was – partially – confirmed by MOFCOM, which stated that it would “review and approve eligible export applications for controlled items in accordance with the law” in exchange for the US lifting “a series of restrictive measures it has imposed on China”. 

However, it remains unclear whether these developments have led to any substantive changes in the licensing process. Trump’s continued criticism of Beijing’s implementation of the agreement, including threats in August to impose tariffs of up to 200 percent if China failed to supply rare earth magnets to the US, suggests that Washington remains dissatisfied with the pace or scope of progress. 

Building resilience into rare earth supply chains 

For companies operating in or sourcing from China, compliance with the new export control regime will be essential. Large multinationals with a significant manufacturing footprint in China, in particular, will need to ensure that their operations fully align with the new rules or risk facing potentially severe consequences, including license denials or even fines. As seen following the April restrictions, companies can expect export licensing procedures to cause delays, which, while often temporary, will need to be factored into production schedules and delivery timelines. 

At the same time, firms can take steps to reengineer their supply chains for the longer term. While it remains virtually impossible to source all rare earth inputs entirely from outside China or without Chinese technologies, companies are increasingly exploring options for partial diversification, whether through alternative suppliers, substitute materials, or strategic stockpiling.

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Firms with potential military affiliations, meanwhile, will need to strengthen their compliance systems and demonstrate, with clear documentation, that exports are intended solely for civilian purposes, a process that is likely to be time-consuming and closely scrutinized by regulators. 

For some manufacturers, particularly those producing components that rely heavily on Chinese input materials, localizing more of their production within China may prove the most practical solution. China’s rare earth supply chains are already mature and vertically integrated, allowing companies to continue producing finished products domestically even if exports of intermediate materials become more tightly controlled. 

In the longer term, companies may also look to invest in proprietary rare earth recycling and processing technologies as a way to reduce their exposure to China’s export licensing regime. Developing independent recycling capabilities could provide a measure of supply security and help companies meet growing sustainability targets, though such investments will require time, scale, and technological expertise to be viable. 

Ultimately, there will likely be an adjustment period as companies, regulators, and governments adapt to the new framework. Over time, industries will settle into a new normal in which export licensing becomes a routine part of doing business. The longer-term question remains whether further restrictions will follow, or whether bilateral negotiations can succeed in easing some of the bottlenecks.

This article was originally published on October 20, 2025, and last updated on November 10, 2025.

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