Feng Wang, Menghao Dai, Regulatory & Compliance Group, King & Wood Mallesons

The official release of the Export Control Law of the People’s Republic of China (the “Export Control Law”) on 17 October 2020 marks the beginning of a new phase in China’s export control legislation – from law-making to law enforcement. The new law has many material changes and breakthroughs to the existing rules and concepts of export control in China. Therefore, how the export control enforcement will unfold in China under the Export Control Law to be effective on 1 December 2020 has aroused wide public attention.

In this article, we will discuss several issues that may be further clarified while implementing the Export Control Law by looking into the provisions, the practices in China and other jurisdictions in export control management, and sharing our experience in advising on matters involving the import and export of technologies. We hope this can be helpful.

Issue 1: How to establish a new regulatory system under the Export Control Law?

Prior to the enactment of the Export Control Law, the existing legal system related to export control in China was largely based on theForeign Trade Law of the People’s Republic of China (the “Foreign Trade Law”). However, as a general law governing China’s foreign trade, the Foreign Trade Law does not have specific provisions on export control, which causes series of problems in relevant administrative regulations and ministerial rules on export control by the State Council and its relevant ministries – lacking top-level design and uniformity in regulations and administrative measures. In addition, the ministries under the State Council do not have law enforcement power in practice, while the field operations personnel responsible for day-to-day regulation cannot effectively identify export control violations, which directly compromises the implementation of the existing export control rules in China.

The framework of this new law reflects China’s resolution to unify its regulatory system of export control. Articles 4 and 5 of the Export Control Law respectively highlight the necessity to establish a unified export control list and an export control system coordinated by the State Council, the Central Military Commission, and relevant ministries. However, this goal cannot be achieved simply by the Export Control Law itself. In order to realize such visions, it is imperative to fully amend relevant administrative regulations and ministerial rules or even start from scratch. In a sense, these are even more challenging than the enactment of the Export Control Law. Based on our understanding of the existing export controls regulations, in general, the two aspects below may be the key to establishing the regulatory system under the Export Control Law:

  1. To define the regulatory framework of the Export Control Law

Article 1 of the Export Control Law clearly states that it is enacted for the purpose of safeguarding national security and interests, performing non-proliferation and other international obligations, and strengthening and standardizing export control. This means that the implementation rules of the Export Control Law should determine their regulatory priorities based on the above legislative purpose. However, the existing administrative regulations and ministerial rules with provisions on export control, such as theRegulations of the People’s Republic of China on the Administration of Import and Export of Technologies (the “Regulations on the Administration of Import and Export of Technologies”), focus more on maintaining the order of import and export trade while giving little thought to national security. In addition, they include both import and export regulations, which is inconsistent with the purpose of the Export Control Law focusing on export control only. Therefore, after the implementation of the Export Control Law, how to control the export of technologies involving national interests and national security remains an issue calling for further consideration in future legislation – whether through an overall amendment to the Regulations on the Administration of Import and Export of Technologies to make it a subordinate administrative regulation that implements the relevant requirements of the Export Control Law or through a separate draft of a new regulation focusing on export control of technologies to take away and inherit this part of the function of the Regulations on the Administration of Import and Export of Technologies. Either way, the purpose is to ensure the unity and consistency of the entire export control system and avoid conflicts between the principal and subordinate laws in future law enforcement. As mentioned above, we are also engaged in the discussion of regulations governing the import and export of technologies in China, and we look forward to timely feedback from enterprises in this regard so that we can make joint contributions to the development of the legal regime of China.

  1. To specify the authorities and duties of each regulatory agency

As mentioned above, since the Export Control Law has specified the unity of export control regulation as a general principle, it is necessary to change the situation that the current administrative regulations and ministerial rules governing export control in China involve multiple law enforcement agencies with overlapping duties. Taking the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) as an example – currently, the goods and technologies restricted from export and dual-use items and technologies are respectively regulated by the Foreign Trade Department, the Service Trade Department and the Bureau of Industry, Security, Import and Export Control under MOFCOM. Each regulatory agency has its own regulation system, and the control information in the published catalog overlaps with each other (e.g. some technologies are listed both in the catalog of technologies restricted from export and in the catalog of dual-use items and technologies). Thus, a single export may require multiple reviews and approvals, posing challenges to enterprises in their export business.

In contrast, the current US export control legislation system also involves multiple agencies in the regulation of export control, such as the Bureau of Industry and Security (“BIS”), the Directorate of Defense Trade Controls (“DDTC”), the Nuclear Regulatory Commission (“NRC”), and the Office of Foreign Assets Control (“OFAC”) responsible for imposing sanctions. However, the US has distinguished and clarified the duties of each regulatory agency by means of unified authorization (e.g. the export license for controlled items involved in Iran sanctions is uniformly issued by OFAC) and clear scopes of duties (e.g. the relevant mechanism for adjusting items between the US Munitions List (“USML”) maintained by DDTC and the Commercial Control List (“CCL”) maintained by BIS), etc. The applicants thereby can avoid unnecessary approvals. This sets a great example for China. We can refer to such framework and mechanism in our future legislation on export control, so as to achieve unified regulation in export control.

Issue 2: How to define controlled items under the Export Control Law?

Article 2 of the Export Control Law provides that controlled items include goods, technologies and services, as well as technical information and data related to the items. This is clearer than what was defined in China’s previous regulations such as the Measures for the Administration on Import and Export Licenses for Dual-use Items and Technologies. Although the forms of controlled items are provided, the law does not specify the sources, contents, possible exceptions and other details of the controlled items. Considering the diversity of current supply chain arrangements and cross-border R&D in international trade, the existing definition may not be sufficient for enterprises to identify controlled items in their daily operations, for instance:

1) Are foreign-made items containing components of China-origin controlled items? If yes, what is the threshold for the proportion, and what is the standard for calculation?

2) Should public information developed in China (such as certain open source code) be regarded as controlled items? If yes, how to regulate and keep track of the export of public information?

3) Should technologies and other items developed by Chinese nationals outside China be considered as controlled items?

4) If the externally provided object code based on technical services does not contain the underlying technical information, should it also be regarded as a controlled item?

5) Should non-technical data such as personal data related to items be regulated under Article 2 of the Export Control Law, or should they be deemed as non-controlled items and regulated by other laws and regulations such as the Cybersecurity Law?

In addition, China’s current control lists share some common problems to varying degrees, such as vague descriptions of listed controlled items, lack of clear technical standards for the control, and lagging update of the lists. The formal procedures of confirmation and Q&A for the control of items are also absent in the previous legislation, leaving difficulties for enterprises, Customs and other field regulation departments to decide whether the items are controlled in their daily operations, which affects the compliance and enforceability of relevant provisions.

In comparison, other major economies in the world all have more specific restrictions and explanations on the definition and scope of controlled items, as well as special consultation and Q&A procedures. Taking the US as an example – Section 734 of theExport Administration Regulations (the “EAR”) clearly provides the definition and exceptions of controlled items under EAR, and establishes a special Export Control Classification Number (“ECCN”) classification system pursuant to the Wassenaar Arrangement to identify and distinguish all controlled items through CCL. In addition, Section 748.3 of EAR specifies the procedure for confirming the identification and classification of specific items with BIS. Pursuant to BIS’s 2019 annual report, it handled 3,258 applications for ECCN classification in 2019, each with an average response time of 44.6 days. It also responded to 20,654 compliance inquiries by phone e-mails. Such procedure has long been a routine in its daily operations. Similarly, the EU has also established its own ECCN classification system based on Regulation (EC) 428/2009 (“Regulation 428”) of the Council of the EU. Since all EU members are parties to the Wassenaar Arrangement, the framework, notes and other contents of the EU’s ECCN classification system are very similar to those of the CCL of the US, which also ensures the coordination of multinational regulation and control to some extent.

China is not a participating state to the Wassenaar Arrangement, and our interests in export control are not always consistent with those of European countries and the US. Therefore, it is still open to discussion whether China should fully borrow the ECCN classification systems of the US and the EU and corresponding notes of the catalogs. In order to enable enterprises and relevant institutions to better identify controlled items in their daily operation by themselves, the following adjustments may be considered:

  • Clearer definition and standard of controlled items;
  • A more detailed catalog and technical notes of controlled items ;
  • A clearer procedure for the consultation and classification application of controlled items.

Issue 3: How to regulate the controlled activities under the Export Control Law?

Compared with the previous export control regulations, the Export Control Law explicitly includes deemed export and re-export as controlled activities for the first time, greatly expanding the scope of controlled activities. In physical exports, the controls could be conducted through regulating customs declaration. In technology exports, however, due to their various forms and the lack of checkpoints, there are many difficulties in actual regulation. Under the current Regulations on the Administration of the Import and Export of Technology, China controls cross-border technology-related exports based on contracts. This contract-based control is inapplicable to deemed exports taking place within the territory of China and the widespread non-contract-based cross-border technology transfers (e.g., intra-group collaborative development of technology). Therefore, it is necessary to adjust the regulation regime  after the implementation of the Export Control Law. The difficulties in this regard mainly lie in the following two aspects:

  1. How to strengthen the regulation of technology export control?
  2. Owing to the unique nature of technology, it is difficult to regulate technology export control through a single channel. In order to enforce the regulations effectively, it is necessary to have a comprehensive understanding of the characteristics of the entire business process of technology from R&D to export, and to identify feasible checkpoints according to different circumstances and stages. For example, for R&D involving foreigners in China, the corresponding export license may be a pre-condition for the relevant foreigners to obtain a work permit in China; for technology exports with cross-border income, the foreign exchange receipts of the relevant entities in cross-border trade in services may be verified. This also implies that the technology export regulatory authorities may not rely on a single export control authority, but rather require the coordinated supervision of multiple non-export control regulators, such as the government authorities in relation to labor, foreign exchange, and banking. Article 29 of the Export Control Law provides for the obligations of other departments to assist the export control authorities, and it is believed that the requirements will be further clarified in future rulemaking.
  3. How to balance the demand for facilitating daily technological R&D activities with the compliance to regulatory export controls requirements?
  4. Due to the current diverse forms of international trade and R&D, intra-group cross-border R&D and technical services and the provision of a full range of after-sales technical services for products have become common business models. The overly tight regulatory requirements may affect the daily operation of enterprises or force some enterprises to relocate their affected R&D activities out of China, thereby weakening China’s competitiveness in international trade and technology competition. In view of this, in addition to a clear control licensing system, it is also necessary to prepare corresponding general license, license exceptions and exemption mechanisms for technology export regulation, so as to facilitate frequent and routine cross-border technology exchanges. The export control regimes of other jurisdictions generally set up a series of licensing exceptions and exemption conditions for certain business activities. For example, under the US export control regime, while there are very broad criteria for controlled acts, an exemption mechanism is also set for acts, such as basic research, that are not controlled under the EAR. Acts such as cloud data transfer between multinational corporations are not considered controlled under the EAR if certain conditions are met. In specific scenarios such as the employment of overseas R&D personnel and technical exchange and cooperation between parent and subsidiary companies, corresponding license exceptions can be applied according to the control risks and requirements of different items without the requirement to obtain relevant licenses. These regulations facilitate the daily operation of enterprises while meeting regulatory requirements, and help enhance their awareness of and compliance. We suggest that these mechanisms could be referred in the follow-up implementation rules of the Export Control Law.

Issue 4: How to ensure the enforcement of the Export Control Law?

The Export Control Law imposes significantly heavier penalties on violations of export control regulatory requirements, and introduces a blacklisting system into China for the first time. This reflects China’s resolution to strengthen its export control enforcement in the future. To ensure the effectiveness of the export control regulatory system, a powerful enforcement agency is a must. Given the specialty of export control enforcement and the difficulty in relevant investigations, we can refer to the experience and regulations of the US for the improvement and enforcement of the enforcement agency. The US enforcement of export control is led by the Office of Export Enforcement (“OEE”) of the BIS, and supported by several departments. As the lead agency, OEE has eight field offices in the US, has deployed special agents to the Federal Bureau of Investigation (“FBI”) in nine locations, and has regional Export Control Officers in eight locations around the world, including Beijing and Hong Kong SAR. As federal law enforcement officers, OEE agents have the same powers as FBI agents, including the authority to carry guns, make arrests, execute search warrants, serve subpoenas, and seize cargo. The enforcement actions of the OEE have access to technical support from the Office of Enforcement Analysis of the BIS. Besides the Department of Commerce, the US Customs, as a port supervisory authority, confirms the declared export control information of goods through the Automated Commercial Environment in the export declaration, examine and supervise suspicious goods, and communicate with BIS on relevant information in real time to ensure full supervision on the export of controlled goods in the customs clearance process. Relying on such a comprehensive enforcement system, BIS enforces the law with high efficiency. In fiscal year 2018, BIS confiscated property valued at more than US$9.6 million, launched 43 investigations on administrative violations, and imposed civil fines of more than US$1 billion.

Compared with the US, China has not yet established an agency with the functions stated above under its current export control enforcement framework. In practice, China has been regulating controlled goods by Customs. Since Customs is not a specialized agency for export control, no statutory mechanism is in place for Customs to collaborate with departments such as the MOFCOM, who is responsible for technical management, to address problems in export control enforcement. In addition, Customs is only empowered to supervise tangible goods, but do not have the function of supervising technology export, which leads to certain deficiencies in export control regulation. The Export Control Law expressly specifies the unified control and enforcement mechanism of the State Council and the Central Military Commission. In this context, China will improve the structure of the relevant law enforcement departments in a timely manner to ensure effective export control enforcement.

Issue 5: How to understand the countermeasures under the Export Control Law?

Article 48 of the Export Control Law provides that countermeasures may be taken against the countries or regions that are found to have abused export control measures endangering the national security and interests of China. Considering this unique export control mechanism and the recently released Provisions on the Unreliable Entity List (the “UEL Provisions”), we believe that many foreign enterprises are concerned about the subsequent regulatory and enforcement developments, especially the interpretation of rules that may be issued. For the provisions of Article 48, we believe that subsequent legislation may provide further clarification, including:

  1. How to understand the abuse of export control measures endangering China’s national security and interests?

Specific countermeasures may require an assessment of the status and impact of existing international multilateral export controls. The US first proposed that export control regulation would be strengthened in the area of emerging and fundamental technologies following the enactment of the Export Control Reform Act of 2018. Instead of unilateral legislation, the US seeks to integrate relevant technologies into the multilateral control mechanism under the Wassenaar Arrangement, making the US actions multilateral, aiming to achieve joint control of other regions by relevant participating states. In December 2019, the plenary meeting of the Wassenaar Arrangement participating states adopted the US proposal to strengthen multilateral controls on six emerging technologies and added them to the multilateral control list of Wassenaar Arrangement. Since China is not a participating state of the Wassenaar Arrangement, the revised list means all future exports of relevant technologies from Wassenaar Arrangement participating states to China will be subject to corresponding control requirements. In addition to the US, other countries and regions, including the EU and Japan, have corresponding military embargoes and special export control requirements on China. For example, Japan’s export control system excludes China from its non-white list and includes many Chinese entities in its foreign user control list. In light of the above, careful consideration is needed on how to define the criteria for determining abuse of export control measures in order to achieve the effect of anti-boycott and blocking without affecting the normal development of China’s international trade.

  1. How to understand countermeasures?

Countermeasures may be taken in the following options:

1) Imposing equivalent export control restrictions on the relevant countries and regions;

2) Imposing equivalent export control restrictions on specific entities from relevant countries and regions;

3) Denying the applicability in China of the export control requirements of relevant countries and regions.

For the first option, because of the different positions of different countries in international trade and their correspondingly different needs for items and technologies, it may be difficult to assess and identify applicable equivalent export control restrictions in practice. It may be debatable whether direct export controls imposed on the relevant countries and regions would have the expected anti-boycott effect;

The second option is an applicable countermeasure immediately available after the implementation of the UEL Provisions. However, as we mentioned in another article entitled “Four Key Issues on China’s Unreliable Entity List”, the implementation of the UEL Provisions also has a series of problems. Therefore, if China intends to adopt this option in future export control, it still needs to further improve relevant supporting legislation and operational rules to ensure the enforceability and effect of countermeasures.

The third option is the anti-boycott regime prevailing in the US and the EU to prevent domestic entities from complying with the requirements of unilateral controls and sanctions imposed by other countries. As we have stated in the previous article, the US and the EU have extensive and successful experience in anti-boycott regimes, so the EU blocking statute and the US anti-boycott laws are ideal references for China to establish its anti-boycott regime. However, neither the UEL Provisions nor the Export Control Law directly and explicitly prohibits domestic entities from complying with the export control regimes of other countries. It is hard to clearly explain the underlying considerations for the absence of such prohibitions at the current state of China. However, we can clearly see the anti-boycott policy is trending in China.


Since the end of World War II, the European and American countries have implemented the export control regimes for more than 70 years. China has not made major adjustments in its export control regime until 2020. Following the milestone enactment of the Export Control Law, China is bound to have further rules and regulations to improve relevant regulatory systems. We will pay close attention to the relevant legislative development and share our insights about the possible impacts on your enterprises.