The implementation of China’s new rare earth magnet export controls

The implementation of China’s new rare earth magnet export controls necessitates a nuanced understanding by international businesses. While the policy introduces new compliance layers, its design and official clarifications aim to minimize disruption to legitimate commercial trade.

A Targeted, Not Blanket, Restriction

The most critical takeaway for businesses is that the controls are highly specific. They primarily target raw and intermediate materials—certain rare earth metals, oxides, and specific types of magnet powders or blanks. As clarified by China’s Ministry of Commerce, the vast majority of downstream components and finished products are explicitly excluded from these material controls.

Implication: Companies importing finished magnets (if they contain controlled heavy rare earths), or the primary raw materials (like terbium or dysprosium metals), will need to navigate the licensing process with their Chinese suppliers.

Reassurance: Companies importing sub-assemblies like electric motor rotors, or integrated final products like drones, hard disk drives, or electric vehicles, should not face direct export barriers from these rules regarding the magnet content.

Increased Focus on Compliance and Due Diligence

The policy shifts a significant compliance burden onto both Chinese exporters and their foreign customers.

• Supply Chain Transparency: Importers will likely need to provide more detailed documentation on the end-use and end-user of their purchased materials to assist Chinese exporters in securing licenses. Applications for military or sensitive high-tech (e.g., advanced semiconductor) end-uses face strict scrutiny or denial.
• “Know Your Customer” (KYC): The rules include a “catch-all” provision. Even for non-listed items, if an exporter knows they are intended for a prohibited end-use (like rare earth mining or military applications), a license is required. This mandates enhanced due diligence across the supply chain.
• Cost and Delay: The licensing process itself, while promised to be efficient for civilian use, inevitably adds administrative steps, potentially leading to longer lead times and increased transaction costs.

Strategic Responses for Businesses

In response, prudent companies are taking several steps:

• Product Classification: Conducting thorough audits to determine if their imported materials or components fall under the controlled lists.
• Supplier Engagement: Working closely with Chinese partners to ensure they understand the licensing requirements and can provide the necessary support.
• Diversification: The policy provides a fresh impetus for global efforts to diversify rare earth supply chains outside of China, a long-term strategic move for many governments and large corporations.

For now, the business impact is manageable for most downstream manufacturers but requires proactive compliance measures and closer collaboration with supply chain partners.