Recent China Export Control Actions Signal Active Enforcement for Rare Earths and Strategic Minerals

A series of recent developments—including the reported detention of foreign nationals in China, domestic enforcement actions against Chinese exporters, and MOFCOM Announcement No. 26 of 2026 formalizing a public reporting mechanism for strategic mineral export control violations—signal an increasingly active enforcement posture in this area. This LawFlash examines these developments and their practical implications for multinational companies.

FOREIGN NATIONALS DETAINED FOR SMUGGLING

Earlier this week, the Japanese government confirmed that two Japanese nationals employed by a major Japanese company were detained in Dalian in May 2026 on allegations of smuggling goods subject to export restrictions, reportedly involving rare-earth-related items. Based on public reports, this represents one of the first known instances of foreign nationals being detained in China in connection with an alleged export control violation involving such items.

Although the full facts of the case have not been publicly disclosed, the development is notable from a compliance perspective. China’s export controls in this area are grounded in national security and nonproliferation considerations, as certain rare-earth-related items, technologies, and end uses may be subject to China’s dual-use export control regime depending on the applicable control list, technical parameters, item form, and end-use/end-user factors. Some high-profile prior detentions of foreign nationals in China have involved national security–related allegations, but the reported use of customs smuggling and export control theories in a rare-earth-related matter may indicate a more active and visible enforcement posture in the strategic minerals area.

Companies operating in sectors that may involve controlled strategic minerals and dual-use items should carefully evaluate their compliance frameworks and ensure their personnel understand the current regulatory environment.

DOMESTIC ENFORCEMENT PRESSURE ON CHINESE EXPORTERS

Enforcement pressure is not limited to foreign nationals. On June 18, 2026, a major Chinese precision optics company (market capitalization approximately 11.7 billion renminbi) disclosed that its chairman had been placed under compulsory measures by the Shanghai Customs anti-smuggling bureau. The alleged violation involved falsely declaring the material composition of exported lenses containing germanium as ordinary optical glass to circumvent export licensing requirements.

China initially controlled germanium-related items under the Ministry of Commerce (MOFCOM) and General Administration of Customs Announcement No. 23 of 2023. They have since been incorporated into China’s unified Dual-Use Items Export Control List published under MOFCOM Announcement No. 51 of 2024, effective December 1, 2024. Customs reportedly reviewed approximately three years of export records in reaching its determination.

This domestic enforcement action carries important implications for foreign buyers and supply chain participants. As Chinese exporters face heightened scrutiny and personal criminal liability risk for misclassification or false declarations, they are likely to adopt more conservative compliance postures.

Foreign companies should anticipate that Chinese suppliers may impose more rigorous end-use and end-user certification requirements, request additional documentation, or decline transactions where the compliance risk is perceived as elevated. Also, foreign buyers should ensure they are not placing pressure on Chinese suppliers to misclassify items, omit relevant end use or end user information, reroute shipments through third countries, disassemble controlled items into components, or otherwise circumvent export control requirements.

MOFCOM ANNOUNCEMENT: PUBLIC REPORTING MECHANISM FOR STRATEGIC MINERAL EXPORT CONTROL VIOLATIONS

On June 24, 2026, MOFCOM published Announcement No. 26 of 2026, which formalizes the reporting and handling of violations involving strategic mineral dual-use export controls. Effective July 1, 2026, the announcement establishes a mechanism encouraging organizations and individuals to report suspected violations. The scope of reportable conduct is broad, including, among other things:

• Exporting controlled items without a permit or exceeding license scope
• Disguising controlled items through modification or disassembly into components
• Routing exports through third countries to circumvent controls
• Transferring controlled technologies through trade, investment, exhibitions, joint research and development, consulting, or similar channels
• Providing logistics, customs brokerage, ecommerce, or financial services in support of unlawful exports
• Assisting importers or end users in evading controls
• Transacting with restricted importers or end users
• Failing to seek authorization for non-listed strategic-mineral-related goods, technologies, or services where the exporter knows or should know that Article 12 export-control risks may exist
• Accepting or committing to accept foreign government requests for access, on-site verification, or similar activities related to strategic mineral dual-use export controls without authorization

Voluntary self-reporting is identified as a potential mitigating factor, while malicious false reporting may be penalized. The practical effect of this mechanism is to significantly increase the likelihood of detection through employees, competitors, and other market participants—expanding enforcement beyond the capacity of government inspectors alone.

THE BROADER REGULATORY CONTEXT

These enforcement developments are not confined to any single bilateral relationship. China’s tightening of export controls on rare earths and strategic minerals has affected companies across multiple jurisdictions. Some restrictions apply broadly, requiring export authorization for any destination. Others more recently focused on tightening controls to specific countries and entities.

With respect to Japan, China tightened controls on dual-use exports involving certain Japanese entities and military end uses beginning in January 2026, with reported practical effects on rare-earth-related supply chains. With respect to the United States, which traditionally relies heavily on rare earth materials originating in China, in June 2026 China added 10 US entities to its export control list, including rare earth miners MP Materials and USA Rare Earth. The restrictions also prohibit parties located anywhere from transferring or providing dual-use items originating in China to these entities.

This action followed the US Department of Defense’s update to its Section 1260H list, which prohibits the Department from entering into, renewing, or extending contracts for goods, services, or technology with a 1260H-listed entity or any entity it controls. On June 30, 2027, the prohibition expands to the procurement of goods or services produced or developed by such entities. The response by China’s Ministry of Finance also restricted government procurement of products manufactured by 46 listed US companies, many of which are US defense contractors, but also excluded US-invested enterprises operating in China.

These developments indicate that China applies its export control enforcement over strategic minerals broadly. The extraterritorial reach of its jurisdiction to anyone dealing in China-origin rare earth material means the compliance exposure is not limited to targeted companies. Businesses in any jurisdiction that source, process, or trade in rare earths and strategic minerals should assess their compliance posture accordingly and evaluate supply chain exposure.

PRACTICAL STEPS FOR MULTINATIONAL COMPANIES

These developments require a more deliberate and informed approach to compliance. Companies should consider the following:

Evaluate the Risk Environment

Companies with personnel in China involved in procurement, logistics, or export compliance for strategic minerals and dual-use items should conduct a thorough assessment of their exposure under the current regulatory framework. This includes understanding which items in their supply chain may be subject to Chinese export controls and ensuring that classification determinations are defensible and exports comply with any licensing restrictions.

Strengthen Internal Compliance Frameworks

The new public reporting mechanism means that compliance failures are more likely to be detected. Companies should review internal procedures for handling export-controlled items, ensure that personnel understand the scope of China’s export controls, and establish clear escalation protocols for ambiguous situations. For companies that also may be subject to US jurisdiction, reviewing and updating their compliance programs to address both Chinese and US requirements is increasingly necessary to avoid legal conflicts.

Exercise Caution with Foreign Government Verification Requests

Announcement No. 26 explicitly identifies unauthorized acceptance of foreign government requests for access, on-site verification, or similar activities related to strategic mineral export controls as reportable conduct. Companies should carefully review any foreign-government request, or any customer or prime-contractor request that appears to implement, relay, or satisfy a foreign-government access, on-site verification, audit, or end-use check requirement involving strategic minerals. Where such requests arise, companies should pause and conduct legal review to identify a path that is consistent with both Chinese law and any applicable foreign legal obligations, rather than accepting or declining without analysis.

Prepare for Contingencies

Companies should ensure they have allocated sufficient resources to compliance teams to address these new risks and have crisis management plans in place, such as legal counsel identified in advance, communication protocols, and consular notification procedures.

Monitor Supplier Behavior and Maintain Compliance Discipline

As Chinese exporters face increased enforcement pressure, foreign buyers may encounter supply disruptions, requests for additional certifications, or refusals to transact. In particular, companies are receiving significantly more detailed end use and end user due diligence requests from Chinese exporters regarding a company’s business operations, market, customers, intended use for products and other information that companies may consider confidential or proprietary.

Companies should proactively engage with their Chinese suppliers to understand how this evolving regulatory environment may affect their commercial relationships. Companies should also ensure that their own procurement practices do not encourage or facilitate noncompliance by Chinese counterparties—including through pressure to misclassify items, omit information that may be relevant to a product’s end use or end user, reroute through third countries, or minimize export control obligations.

LOOKING AHEAD

Companies should monitor MOFCOM announcements, customs enforcement actions, and related regulatory developments that may signal further changes. Similarly, given the back-and-forth escalations between the United States and China, it is important to pay attention to any potential new export or business restrictions imposed by the US government.

The reported detention of foreign nationals in connection with alleged rare-earth-related export control violations, combined with the new MOFCOM public reporting mechanism taking effect July 1, indicates that the enforcement framework around strategic minerals is becoming more active, visible, and practically relevant for companies.

Companies that proactively assess their exposure, strengthen their compliance frameworks, and prepare for contingencies will be best positioned to navigate this environment effectively.