FQAs on China’s Export Control and Anti-Sanction Lists

1 FQAs on China’s Export Control and Anti-Sanction Lists -- Overview of Regulatory Requirements and Enforcement Trends∗ (As of April 3, 2025) On March 23, 2025, Chinese Premier Li Qiang signed the Regulations on the Implementation of the Anti-Foreign Sanctions Law of the People’s Republic of China (“AFSL Regulations”) to implement the Anti-Foreign Sanctions Law (“AFSL”, adopted in June 2021, see our analytical note for more detail at Measure vs Countermeasure - China Adopts Anti-Foreign Sanctions Law) for strengthening China’s countermeasures to relevant foreign sanctions, one of China’s latest legislative efforts safeguarding its interests against the backdrop of rapidly evolving geopolitical climate worldwide. (Also see our analytical notes at China Upgrades Toolkits Dealing with Foreign-Related IP Disputes, Pitfalls for Multinationals in Doing Research Activities in China, How China Blocking Rules Affect Multinationals, and What You Should Know About China’s New Unreliable Entity List Provisions) The AFSL Regulations elaborate on the specific punishments included in the relevant countermeasures and procedural steps the Chinese government can take to enforce the AFSL. In recent years, China has increasingly resorted to export control and countermeasures as legal tools to counter discriminatory and harmful foreign sanctions targeting China interests. For instance, in 2024 alone, China conducted twelve rounds of countermeasure enforcement under the AFSL, placing 118 persons (including 56 individuals and 62 entities) onto the Anti-Sanctions List. For the first two months of 2025, China’s Ministry of Commerce (“MOFCOM”) issued four consecutive announcements adding 23 foreign entities, including PVH Group, Illumina, Inc., and Lockheed Martin Missiles and Fire Control, to the Unreliable Entity List (“UEL”)1. On January 2, 2025, China, for the first time, placed 28 U.S. entities, including General Dynamics and Raytheon Technologies, onto the Export Control List due to relevant arms sales to Taiwan. 2 Against the above backdrop and dynamics, multinational enterprises (“MNEs”) should watch closely about China’s regulatory developments in export control and countermeasures legislation and enforcement actions. In this note, we will attempt to ∗ Prepared by Frank Jiang and Jason Jia, partners at Zhong Lun Law Firm (Compliance & Government Regulation Practice), with assistance from Yinuo Zhang, for reference purpose only. For more detail, please contact Frank Jiang at [email protected] or +86-10- 5957-2131, or Jason Jia at [email protected] or +86-10- 5957-2263. 1 https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_02fa53a498c24b5e8070255b0928c6bf.html； https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_59e527223f6848eea0dc988d4e418bad.html； https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_6278ce5b05e04d8da49d203dc6c36e6d.html； https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_bf2f0c9c33d14f14ac18f08f51ffa409.html. 2 https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_c14d6b7d45e247c596f4d3ecdda9b291.html. 2 address the following key queries frequently posed by our clients in the form of Q&As to help audiences better understand China’s export control and countermeasures framework. FQAs Q1. Does China maintain any export control or countermeasures lists? Who are the relevant authorities? Q2. For what may subject MNEs to China’s export control or countermeasures lists? Q3. What are the consequences of being listed on China’s export control or countermeasures lists? Q4. How do Chinese authorities identify entities for export control and countermeasures listing? Q5. Any mechanism to challenge the inclusion on or to be removed from China’s export control or countermeasures list? Q6. What are the key considerations when engaging with entities on China’s export control or countermeasures lists? Q7. How do MNEs (including their subsidiaries and joint ventures in China) comply with China’s export control and countermeasures regulations in daily operation? Q8. How should MNEs navigate China’s export control and countermeasures risks in M&A transactions? 3 Q1 Does China maintain any export control or countermeasures lists? Who are the relevant authorities? No List Laws and Regulations Authorities Public Access 1. UEL Provisions on the Unreliable Entity List (the “UEL Provisions”) (2020) Work mechanism of the UEL, with an office in the Bureau of Industrial Security and Import/Export Control of the MOFCOM https://aqygzj.mof com.gov.cn/flzc/gz jgfxwj/index.html 2. Export Control List Export Control Law of the People’s Republic of China (2020) Regulation of the People’s Republic of China on the Export Control of Dual-use Items (“Dual-use Regulations”) (2024) Bureau of Industrial Security and Import/Export Control of the MOFCOM http://aqygzj.mofc om.gov.cn/flzc/gzj gfxwj/index.html 3. Anti-Sanctions List AFSL (2021) AFSL Regulations (2025) Ministry of Foreign Affairs (“MOFA”) https://www.mfa.g ov.cn/web/wjb_67 3085/zfxxgk_6748 65/gknrlb/fzcqdcs/ 4. Watch List Dual-use Regulations (2024) Bureau of Industrial Security and Import/Export Control of the MOFCOM N/A Under the AFSL and its implementations, while MOFCOM and MOFA will be primarily responsible for administrating the above export control or countermeasure lists, certain other government agencies overseeing such areas as justice, development, finance, banking, public security, natural resources, transportation, customs, market regulation, intellectual property will perform related duties in accordance with their division of responsibilities. Also, the AFSL empowers Chinese court to adjudicate lawsuits brought against the relevant organization or individual (including a foreign entity) who were to take “discriminatory restrictive measures” to infringe upon relevant Chinese entity’s legitimate rights and interests. 4 Q2 For what may subject MNEs to China’s export control or countermeasures lists? Risk Scenarios Possible Listings Legal Basis Enforcement Cases Arms sales to Taiwan, China Anti-Sanctions List UEL Export Control List The AFSL (Article 3) The AFSL Regulations (Article 3) The UEL Provisions (Article 2) The Dual-use Regulations (Article 28) Lockheed Martin Missiles and Fire Control (“LMMFC”)  In May 2024, LMMFC was listed on the AntiSanctions List for arms sales to Taiwan, with its property in China being frozen.3  In January 2025, LMMFC was listed on the UEL for the same reason, and was prohibited from engaging in import/export activities related to China and making new investments in China. Its senior management personnel has also been prohibited from entry into China.4  On the same day, LMMFC was listed on the Export Control List, and was restricted from obtaining dual-use items from China.5 Xinjiangrelated, Tibetrelated or Hong Kong-related activities Anti-Sanctions List The AFSL (Article 3) The AFSL Regulations (Article 3) Kharon6  Kharon is a U.S. intelligence data company that has long collected sensitive information on Xinjiang and provided data for illegal U.S. sanctions related to Xinjiang.  In December 2023, Kharon and its investigation director were listed on the AntiSanctions List. Kharon’s properties in China have been frozen, and Chinese individuals and entities have been prohibited from engaging in any transactions or cooperation with Kharon. Participation in litigation and enforcement of foreign judgments against China or Chinese companies which Anti-Sanctions List The AFSL (Article 3) The AFSL Regulations (Article 19) Provisions of the State Council on N/A 3 https://www.mfa.gov.cn/web/wjbxw_new/202405/t20240522_11309756.shtml. 4 https://aqygzj.mofcom.gov.cn/flzc/gzjgfxwj/art/2025/art_b81f6a3e44cc4ab5995b16378a5408e2.html. 5 https://aqygzj.mofcom.gov.cn/flzc/gzjgfxwj/art/2025/art_23aa2fcf1fca4e4c9edb6bec193acfe0.html. 6 https://www.fmprc.gov.cn/web/fyrbt_673021/jzhsl_673025/202312/t20231226_11213135.shtml. 5 Risk Scenarios Possible Listings Legal Basis Enforcement Cases jeopardize Chinese sovereignty and development interests the Handling of Foreign-related Intellectual Property Disputes (Article 15) Transfer of goods procured from China to enterprises on the UEL UEL The UEL Provisions (Article 2) Caplugs7  US-based Caplugs Corporation transferred goods procured from China to Lockheed Martin Corporation and Raytheon Missiles & Defense which had already been listed on the UEL (the “illegal diversion”).  In May 2024, MOFCOM decided to impose UEL measures on Caplugs. MOFCOM urged Caplugs to take proper measures to avoid illegal diversion. Chinese enterprises were also asked to strengthen their due diligence when conducting export business with Caplugs and to pay attention to identifying the risk of illegal diversion. Interruption of normal transactions with Chinese companies and imposing discriminatory measures against Chinese enterprises UEL The UEL Provisions (Article 2) PVH Group8  In September 2024, MOFCOM announced that it had launched a UEL investigation into PVH Group. PVH Group was alleged to interrupt normal transactions with Chinese companies and adopt discriminatory measures in relation to Xinjiang products.  In February 2025, PVH Group was listed on the UEL, however, the punishment of which has not yet been decided by the MOFCOM. Violation of end-user or end-use regulation, or use of dual-use items for highrisk uses such as terrorist purposes Export Control List The Dual-use Regulations (Article 28) N/A 7 https://m.mofcom.gov.cn/article/zcfb/zcblgg/202405/20240503510680.shtml. 8 https://aqygzj.mofcom.gov.cn/flzc/gzjgfxwj/art/2024/art_f5ac8919a05743f78a3c25f3d0c138f5.html. 6 Risk Scenarios Possible Listings Legal Basis Enforcement Cases Failure to cooperate with MOFCOM’s verification of end-users and end-uses of dual-use items Watch List The Dual-use Regulations (Article 26) N/A It is noteworthy that the above risk scenarios may not only subject the relevant companies to China’s export control and countermeasures lists, but may also trigger potential follow-on private actions. Article 12 of the AFSL and Article 18 of the AFSL Regulations explicitly entitle Chinese citizens and organizations (which will very likely cover citizens and organizations of Hong Kong and Macau, and even Taiwan) to file lawsuits before Chinese courts to seek injunction and damages in response to “discriminatory restrictive measures” imposed by foreign countries. Indeed, there exists actual court case filed against foreign counterpart for its refusal to pay settlement and cut off communication because of plaintiff Chinese company being added to a foreign sanctions list, where the Chinese court ruled in favor of plaintiff to settle the outstanding payment through enforcement proceedings. See more detail below. First case in anti-foreign sanctions tort litigation9 In 2023, a Chinese marine engineering company entered into a shipbuilding subcontract with a foreign equipment provider ("Company S") for constructing equipment modules for the vessel owned by Company S, with a contract value of approximately USD 19.45 million (equivalent to RMB 140 million). The Chinese contractor completed module construction and vessel assembly as scheduled on June 7, 2024. On June 12, 2024, a third-country government placed the Chinese company on sanctions list. For this reason, Company S suspended payment of the outstanding USD 11.86 million balance and ceased communication. The Chinese company applied to the Nanjing Maritime Court for pre-litigation arrest of the "A-001" vessel. The court granted the arrest warrant on September 18, 2024. Pursuant to Article 12 of the AFSL, the Chinese contractor filed a lawsuit with Nanjing Maritime Court on October 11, 2024, seeking compensation of over RMB 86 million for unpaid construction fees and relevant losses. Company S obtained payment authorization from the third country and posted a counter-guarantee bond of RMB 99.743 million with the court to secure vessel release. During defense periods, the court explained to Company S the legal consequences under Chinese law for enforcing extraterritorial unilateral sanctions. Both parties subsequently requested court-mediated settlement. Nanjing Maritime Court facilitated intensive negotiations between the parties, culminating in a mediated settlement agreement within 39 days. The court issued Civil Mediation Document (2024) Su 72 Min Chu No. 2157 on November 19, 2024. Upon the application of the Chinese company, the settlement funds were disbursed to the Chinese company from the counter-guarantee account. 9 For more details, please refer to: Case Number (2024) Su 72 Min Chu No. 2157. 7 Q3 What are the consequences of being listed on China’s export control or countermeasures lists? No List Consequences Enforcement Cases 1 AntiSanctions List (1) Denial of visas, denial of entry, cancellation of the visa or deportation; (2) Seizure, detention and freezing of movable property, immovable property and other types of property in China. Other types of properties include cash, notes, bank deposits, marketable securities, fund shares, equity, intellectual property, accounts receivable and other property and property rights; (3) Prohibit or restrict Chinese organizations and individuals from engaging in relevant transactions, cooperation and other activities with listed persons, including but not limited to activities in the fields of education, science and technology, legal services, environmental protection, economy and trade, culture, tourism, health, and sports; (4) Other necessary measures, including but not limited to, prohibiting or restricting import and export activities related to China, prohibiting or restricting investment in China, prohibiting or restricting the export of relevant items to listed persons, prohibiting or restricting the provision of data and personal information to listed persons, canceling or restricting relevant personnel’s work permits, stay or residence in China, and imposing fines. In December 2024, 13 entities including Teledyne Brown Engineering, Inc. and their senior management personnel were listed on Anti-Sanctions List, and were imposed the following measures:10  For the listed entities: freezing of property in China; prohibiting Chinese organizations and individuals from conducting relevant transactions, cooperation and other activities with them.  For the listed individuals: freezing of property in China; prohibiting Chinese organizations and individuals from conducting relevant transactions, cooperation and other activities with them; denying visas and entry into China. 2 UEL (1) Restrict or prohibit from engaging in import and export activities related to China; (2) Restrict or prohibit investment in China; (3) Restrict or prohibit relevant personnel from entering China; (4) Restrict or cancel the work permit, stay or residence qualification of relevant In January 2025, 4 entities including Pacific Rim Defense were listed on the UEL, and were imposed the following measures:11  Prohibit them from engaging in import and export activities related to China;  Prohibit them from making 10 https://www.mfa.gov.cn/web/wjb_673085/zfxxgk_674865/gknrlb/fzcqdcs/202412/t20241217_11495202.s html. 11 https://aqygzj.mofcom.gov.cn/flzc/gzjgfxwj/art/2025/art_e3de33abcac74ea7b8c63ceff76b2aab.html. 8 No List Consequences Enforcement Cases personnel in China; (5) Impose fines; (6) Other necessary measures. new investments in China;  Prohibit their senior management personnel’s entry into China;  Deny and revoke the senior management personnel’s work permits, stays, or residences qualifications in China. 3 Export Control List (1) Prohibiting or restricting transactions of dual-use items; (2) Order the suspension of the export of dual-use items; (3) Other necessary measures. In March 2025, 15 entities including Leidos were listed on the Export Control List, and were imposed the following measures:12  The export of dual-use items to the entities is prohibited; relevant ongoing export activities should be stopped immediately.  In the event that there is a genuine need to export under exceptional circumstances, the exporter shall submit an application to the MOFCOM. 4 Watch List Imposing stricter compliance requirements for listed companies to obtain dual-use items from China: (1) When exporting dual-use items to the importers or end users included in the watch list, exporters shall not apply for a general license or obtain export certificates; (2) When applying for single licenses, exporters shall submit the risk assessment report of the importer or end user listed in the watch list, and make a commitment to comply with the export control laws and regulations and relevant requirements; (3) Export to entities listed on the Watch List may be subject to a longer license review period. N/A 12 https://aqygzj.mofcom.gov.cn/flzc/gzjgfxwj/art/2025/art_23aa2fcf1fca4e4c9edb6bec193acfe0.html. 9 Among the above lists, the Anti-Sanctions List has the most impactful effect on listed entities, followed by the UEL, and the Export Control List or the Watch List have the relatively limited scope of impact. Specifically:  For entities listed on the Anti-Sanctions List, all of their assets in China might be frozen, and Chinese companies and individuals are restricted from transacting or cooperating with them.  For entities on the UEL, not only their import and export activities may be hampered, new investments in China may also face obstacles.  For entities on the Export Control List or the Watch List, only their import and export activities involving dual-use items might be affected. Besides, since the listing reasons of almost all the above lists contain national security concerns, it cannot be ruled out that the relevant listed entities may also receive queries or even face obstacles when seeking other regulatory approvals (e.g., antitrust, foreign investment security review, security assessment on cross-border data transfer, etc.) in carrying out their global operations and transactions having China nexus. Furthermore, the relevant listed entities may face supply chain disruptions, resulting in failure to fulfill contractual obligations, which may trigger potential lawsuits from upstream and downstream business partners. We recommend companies take these potential risks into account when planning project schedule and making contractual arrangements. 1 Q4 How do Chinese authorities identify entities for export control and countermeasures listing? In practice, Chinese authorities may use a variety of channels to identify entities that may be subject to export control or countermeasures. The primary sources include:  Proactive regulatory investigations. Authorities such as MOFCOM may independently initiate investigation against suspected violations or activities contrary to China’s national security or interests.  Complaints from Chinese companies. Domestic enterprises can submit reports or complaints to authorities, triggering official investigation. This is particularly common in cases involving unfair treatment or discriminatory practices adopted by foreign entities.  Media reports and public disclosures: Authorities may also take note of investigative journalism or other credible media sources highlighting foreign companies’ involvement in actions detrimental to China’s security, economy or sovereignty.  Referral from other government departments: Article 10 of the AFSL Regulations clearly stipulates that MOFA, MOFCOM, National Development and Reform Commission, and other relevant judicial or administrative departments shall strengthen cooperation and information-sharing with regard to the determination and implementation of countermeasures. Together, the above channels form a multi-source monitoring system that enables Chinese authorities to act swiftly and decisively in identifying and designating entities for export control or countermeasure purposes. Therefore, MNEs should be cautiously mindful about any cutting off ongoing normal business relationship with Chinese companies that may otherwise be deemed as restrictive or discriminatory considerations (e.g., Xinjiang-related factors), and are recommended to review publicity materials issued in the name of the company to ensure that they do not contain any content that may harm China’s sovereignty and security. 1 Q5 Any mechanism to challenge the inclusion on or to be removed from China’s export control or countermeasures list? While almost all the current export control and countermeasures lists provide for removal procedures, there are currently very limited successful cases in practice. No List Removal Conditions and Procedures Successful Cases 1 AntiSanctions List  Removal Conditions: If the circumstances on which countermeasures are based change, the relevant countermeasures may be suspended, changed or canceled.  Removal Procedures: The listed entities or individuals may apply to the MOFA for the suspension, change or cancellation of the countermeasures by providing evidence of ceasing illegal behavior or eliminating the consequence of illegal behavior. MOFA will organize an assessment of the implementation effect of the countermeasures and make the decision to maintain or suspend the countermeasures based on the application materials and the assessment. Viasat, Inc.: Viasat, Inc. is an American satellite communications provider, and was added to the Antisanctions List on January 7, 2024. Viasat was removed from the list on July 22, 2024, but the detailed reasons for removal have not been disclosed. 2 UEL  Removal Conditions: If the UEL entity ceases its illegal behavior and takes measures to eliminate the consequences thereof within the time limit specified in the announcement, the working mechanism may make a decision to remove the entity from the UEL.  Removal Procedures: The UEL entity may apply for removal from the UEL, and the working mechanism may decide whether or not to remove it in light of the actual situation. N/A 3 Export Control List Where an importer or end user included in the Export Control List cooperates with the MOFCOM in investigation, truthfully states the relevant facts, ceases the illegal behavior, actively takes measures to eliminate the harmful consequences, makes and fulfills commitments as required, and no longer falls under the listing reasons, it may file an application with the MOFCOM for removal from the Export Control List. The MOFCOM may decide to remove the importer or end user from the Export Control List based on the actual conditions. N/A 4 Watch List Where the importers and end users listed on the Watch List cooperate in the verification, and have no unauthorized change of end use or unauthorized transfer to a third party, the MOFCOM may remove them from the Watch List. N/A 1 Q6 What are the key considerations when engaging with entities on China’s export control or countermeasures lists? In commercial practice, MNEs may encounter situations where counterparties or their affiliates are added to China’s export control or countermeasures lists. Whether and how the relevant transactions can proceed depends on the specific measures imposed on the counterparties and the actual case circumstances. For example:  Anti-Sanctions List. If the counterparty is designated on the Anti-Sanctions List, enterprises in China must fully implement the countermeasures imposed by the authorities and cease all transactions with such listed entity. Only in exceptional cases where the enterprises apply to MOFA with substantive justifications and obtain its approval can the prohibited transactions proceed.  UEL. For UEL entities, companies should evaluate the specific restrictions imposed on their counterparties, and avoid engaging in prohibited activities such as Chinarelated import/export activities or investments in China with UEL entities.  Export Control List. If the transactions with the listed entities do not involve Chinese dual-use items, the transactions at issue will not be affected. On the other hand, if the transactions involve Chinese dual-use items, Chinese exporters are prohibited from conducting dual-use items transactions with importers/end-users on the Export Control List without authorization. Only in exceptional cases where the Chinese exporters apply to MOFCOM and obtain its approval can the restricted transactions proceed.  Watch List. If the transactions with the listed entities do not involve Chinese dual-use items, the transactions will not be affected. On the other hand, if the transactions involve Chinese dual-use items, Chinese exporters shall apply for single licenses, submit risk assessment reports and make commitments to comply with export control regulations before exporting. We recommend that enterprises take the above risks into consideration when making contractual arrangements with their foreign counterparties, and try to mitigate the exposures in advance in the form of compliance clauses, so as to avoid facing the dilemma of not being able to terminate the contract without liability when the counterparty is included in the export control or countermeasures lists. 1 Q7 How do MNEs (including their subsidiaries and joint ventures in China) comply with China’s export control and countermeasures regulations in daily operation? MNEs, including their wholly foreign-owned enterprises and joint ventures operating in China, are subject to the same compliance obligations under China’s export control and countermeasures framework as domestic Chinese entities. Based on our experience and observation, we set forth below some key obligations for compliance:  Compliance with the Export Control Law. MNEs must obtain the necessary export licenses before transferring controlled items—whether commodities, technologies, or services—outside of China or to restricted end-users or end-uses.  Internal compliance programs (ICP). Companies are encouraged to establish and maintain internal compliance mechanisms tailored to Chinese regulatory requirements. A typical effective ICP includes: screening business partners against Chinese export control and countermeasures lists; monitoring end-use and end-user certifications; training local staff on Chinese export control and countermeasures obligations.  Adherence to the AFSL. Under the AFSL and its implementing rules, companies are prohibited from enforcing or complying with foreign sanctions that are deemed discriminatory against Chinese entities. This may pose a particular challenge for MNEs operating under multiple legal regimes. MNEs must carefully navigate these overlapping regimes, and are advised to adopt a coordinated global compliance approach. 1 Q8 How should MNEs navigate China’s export control and countermeasures risks in M&A transactions? When conducting M&A transactions involving Chinese entities or assets, companies should incorporate export control and countermeasures risk assessment as a key component of their transaction strategy. Proactively addressing these issues can reduce regulatory uncertainty, prevent deal disruptions, and support long-term compliance after closing. Below are some recommended practices:  Conducting export control and countermeasures due diligence on the target. Companies should assess whether the target company is listed on or interacts with parties on Chinese export control or countermeasure lists, or engaged in prohibited activities under China’s export control and countermeasures regimes.  Including contractual safeguards. Transaction documents should reflect the findings of due diligence and introduce risk management mechanism. This usually includes:  Springing conditions precedent to capture any potential regulatory requirements (e.g. a “called in” for merger filing, foreign investment security review and so on) that may arise following the signing but before certain obligations take effect;  Representations and warranties confirming compliance with Chinese export control and countermeasures regulations;  Disclosure obligations regarding potential or ongoing investigations by Chinese authorities;  Covenants requiring continued compliance post-closing;  Termination rights or indemnification provisions in the event of regulatory designation.  Engaging specialized legal counsel: Parties should engage experienced counsel familiar with both Chinese and international export control and sanctions regimes to ensure consistency and prevent conflicts between legal obligations across jurisdictions. 1 ***** The above interpretation is for reference only and does not constitute formal legal advice from our firm. Our team will continue closely follow the implementation of the AFSL and other China’s export control and anti-sanction lists. Should you have any questions, please feel free to contact us. Jason (Shen) JIA (Senior Counsel) Frank (Huikuang) Jiang (Partner) E-mail: [email protected] E-mail: [email protected] Ext: +86 010 59572263 Ext: +86 010 59572131 Phone: +86 13810625170 Phone: +86 13811757909