Export Controls

Sarah Rice

Director

 

TLDR

In April 2025, China imposed strict export controls on medium- and heavy-rare earth elements, requiring individual licences for each shipment and detailed end-use reporting. Businesses reliant on Chinese REEs now face higher compliance burdens, supply-chain disruptions, and price volatility. Early adaptation – through diversification, compliance, and scenario planning – is essential to mitigate operational, strategic, and geopolitical risks.

What China has done: licensing and export controls

In April this year (2025), China introduced strict export controls on medium- and heavy-rare earths. 

The impact of this is that exports of certain rare earth elements (REEs), such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, now require export licences. 

For any business trading or depending on Chinese rare earths, the era of low-friction sourcing is over. Organisations can expect tighter customs compliance requirements, higher and more volatile costs, and a premium on diversified supply chains.

The companies that adapt early by building redundancy, enhancing transparency, and securing alternative sources, will be best positioned to weather the current enforcement regime and any future geopolitical shocks.

 

Why this matters

  • Increased compliance requirements: every shipment of restricted rare earths now needs a separate export licence and detailed end-use reporting.
  • Supply chain vulnerability: delays, bottlenecks, and price volatility threaten production schedules, especially for automotive, electronics, renewable energy, and defence sectors.
  • Strategic risk: dependence on China exposes businesses to IP risks, contract breaches, and potential regulatory scrutiny in other regions.
  • Actionable steps: diversify sourcing, strengthen compliance, maintain buffer inventories, scenario plan for supply disruptions, and engage with policymakers to stay ahead.

“One-batch, one-license” rule

For these restricted materials, each individual export shipment (“batch”) must have its own permit. Even some of the REEs alloys are treated as dual-use (meaning that they can be used in both  civilian and military applications.) In these circumstances, exporters will need to provide detailed data on who will use the materials and for what purpose, often meaning that sensitive corporate data may be required. Whether for individual or dual-use shipments, paperwork and delays are going to be increased. 

China has not only restricted domestic production and export licensing, but also extended oversight to imported minerals. Enterprises refining imported REE materials also have to report flows monthly into traceability systems. 

Business and licensing consequences for non-compliance

Under these recent laws/regulations, companies that fail to enter required data (for example, traceability of product flows) may be fined or, in severe cases, their business licences may be revoked. For exporting, if there are discrepancies or doubts about classification, end-use, or compliance, shipments can be held up, and customs delays have already been reported.

And, while there has been a partial resumption of exports/licences for certain firms – such as with automaker suppliers in the U.S. and Europe – under the new licensing regime, approvals have been slow, many applications are pending, and the flow is limited. 

Some reasons why China is enforcing these measures

Strategic leverage in trade / geopolitical competition

  • The licensing measures come amid tensions with the U.S. Therefore, rare earths offer China leverage in the supply chains of high-tech, defence, and electric vehicles, for example. 

Security / dual-use concerns

  • Because many REEs have potential military uses (or are used in technologies that could be military or dual-use), China asserts that stricter export controls are justified on national security grounds. 

Control of supply chains / preventing stockpiling or illicit outflows

  • To avoid foreign firms hoarding, or materials leaking out via smuggling, China is also enforcing traceability, stronger inspections, and anti-smuggling operations. 

Ensuring domestic quotas and regulation compliance

  • China is also tightening internal regulation including quotas on mining, smelting and separation; traceability; monthly reporting; and ensuring imported materials processed domestically are subject to oversight. 

What are the impacts so far? 

Delays and bottlenecks

  • Companies (especially in the UK, EU, India, and U.S.) are facing delays in license approvals and some production; the automotive sector, for example, has been affected. 

Uncertainty and supply chain risk

  • Because licensing decisions can be opaque, many firms are unable to plan long-term with some reporting a loss of business and increased costs – both of which significantly impact business continuity and growth. 

Diplomatic and political pressure

  • The EU, and other affected regions, have raised complaints, with the European Parliament passing motions condemning the restrictions.

Increased cost and risk of substitution / diversification

  • Companies are looking into alternate suppliers, alternative materials, or stockpiling outside China, although this is impacting both supply chains, which take time to build, and speed to market.

Outstanding issues and risks

Transparency in licensing
It’s not always clear why some licences are approved and others aren’t. End-use / end-user disclosures may disadvantage some buyers as well as increasing risks around IP and proprietary business information requests. 

Capacity of the system
Given the “one batch, one licence” rule and additional traceability and reporting requirements, there’s a risk of administrative overload, with the result that delays may persist or worsen.

Dependence on China
Many global industries still heavily depend on Chinese rare earths and magnets. Alternatives for other sources and refining capacity are limited, and building new supply chains takes time.

Potential retaliatory measures or escalation
As this is part of trade/geopolitical friction, there’s risk of further policy escalation, and countermeasures by other countries.

How the situation could, realistically ease, over the next 6–24 months…

1. Diplomatic and trade negotiations: 

Likely near-term lever (3–9 months)

  • Bilateral or multilateral talks

China and key buyers (EU, U.S., Japan, Korea) could negotiate carve-outs or “trusted end-user” arrangements – similar to how rare-earth export quotas were softened after WTO disputes a decade ago.

  • Reciprocal concessions

China may link rare-earth licensing flexibility to concessions on unrelated issues; for example, tariffs or semiconductor restrictions. A broader trade package could therefore include phased relaxation of export-licensing hurdles.

2. Chinese domestic policy adjustments:

Moderate probability (6–18 months)

  • Quota expansion and streamlined approvals

Beijing could raise mining/separation quotas or issue multi-shipment “umbrella licences” if it wants to stabilise markets without appearing to capitulate.

  • Refined dual-use list

Re-classifying certain REEs or downstream magnet products as “civilian only” would cut the paperwork burden.

  • Pilot trusted-trader program

Some exporters might gain pre-approval to ship specified volumes after security vetting, reducing one-batch/one-licence friction.

3. Supply-Chain diversification outside China:

Slow but inevitable (1–5 years)

  • New mines and processing in Australia, U.S. and Africa

Projects in places like Lynas (Australia/Malaysia), MP Materials (U.S.), and emerging African deposits are expanding, though refining capacity remains the choke point.

  • Alliances and subsidies

U.S. – EU Critical Minerals Club initiatives and Japanese/Korean investment in non-Chinese refining aim to reduce dependency.

  • Recycling and substitution

Magnet recycling and research into REE-lean motors (for example, ferrite magnets and induction motors) will cut demand for the most critical heavy REEs.

Organisations that trade, process, or rely on Chinese rare-earth materials now face a different risk landscape, both operationally and strategically.

Here’s what it means in practice:

1. Higher compliance burden

  • Export-licence paperwork and end-use disclosures:

Every shipment of covered rare earths or magnet alloys needs its own permit (“one batch, one licence”). Exporters and importers must provide detailed end-user and end-use information which will often include sensitive IP or customer data.

  • Traceability and reporting:

Chinese refiners and foreign buyers may be asked for monthly product-flow reports. Missing or incorrect filings can result in fines or suspension of business licences.

2. Supply-chain disruption and cost pressure

  • Longer lead times and unpredictable delivery:

Licensing reviews can delay shipments by weeks or months, complicating just-in-time manufacturing.

  • Price volatility:

Tightened supply and speculative stockpiling drive spot prices higher, which themselves become more erratic in nature, affecting budgeting and contract negotiations.

  • Potential production halts:

Automotive, electronics, renewable-energy and defence industries – where heavy rare earths (including dysprosium, terbium) are hard to substitute – face real shutdown risk if licences stall.

3. Strategic and competitive risks

  • Customer obligations:

Firms that cannot guarantee delivery may breach supply contracts or lose key clients.

  • Data security / IP concerns:

Disclosing detailed end-use information to Chinese authorities can expose sensitive designs or customer relationships.

  • Regulatory scrutiny elsewhere:

Governments in the EU, U.S. and elsewhere, are watching for compliance with sanctions or export-control regimes; dual-use concerns can trigger their own investigations.

4. Action points for organisations

  • Diversify sourcing:

Lock in long-term contracts with non-Chinese suppliers, including (for example) Australia, U.S., Africa; even at a premium. Also, potentially explore recycling or alternative chemistries.

  • Increase inventory buffers:

Hold larger safety stocks to bridge potential licensing delays.

  • Strengthen compliance and due diligence:

Set up dedicated teams for export-control paperwork, traceability, and real-time monitoring of Chinese regulatory changes.

  • Scenario planning:

Model best-, base-, and worst-case supply disruptions to guide pricing, customer commitments, and production scheduling.

  • Engage policymakers:

Join industry associations or government dialogues to help shape “trusted trader” schemes or advocate for reciprocal trade measures.

From customs to governance, and horizon scanning to export controls, clearBorder is the tried and tested consultancy for regulated international trade. We work with businesses helping to reduce risk, remove friction, make sense of complexity, and ensure you can continue to trade and grow with confidence.  

Get in touch to find out more → 

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Technology transfer compliance: what boardrooms need to know about IP control, cloud risk, and R&D governance

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For boardrooms, the implication is stark: compliance must evolve from shipment tracking to an enterprise-wide model of data mobility control, covering IP, code, datasets, and algorithmic outputs. Even firms that would never self-identify as “exporters” carry export-control exposure simply because they handle proprietary technology in modern digital environments. A boardroom checklist for technology transfer governance Technology classification Do we maintain a current, defensible classification of all controlled technology, codebases, datasets, model weights, or design files? Access control segmentation Who exactly can access controlled IP? Are access rights segmented by jurisdiction, nationality, and project role? Cloud and collaboration governance Are cloud platforms, MLOps environments, repositories, and shared drives configured to reflect licensing boundaries? 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Technology transfer compliance: what boardrooms need to know about IP control, cloud risk, and R&D governance
Export Controls

UK export controls set to tighten in 2026. What new regulations (and a £620k enforcement case) mean for exporters

TLDR The Export Control (Amendment) (No.2) Regulations 2025 broaden UK controls on emerging technologies, dual-use goods, and sensitive items. Enforcement is tightening, and liability increasingly touches third parties and digital operations. Boardrooms should treat export control governance as a strategic, enterprise-wide responsibility to reduce risk and maintain market access. The UK’s export control landscape is entering a period of accelerated change. In December 2025, the government brought forward amendments to the UK’s strategic export control framework; updates designed to align with international commitments, emerging technology controls, and recent EU regulatory changes. Simultaneously, a UK exporter was recently obliged to pay a £620,515.04 compound settlement for unlicensed military exports, serving as a stark reminder that enforcement sits at the centre of the UK’s trade compliance strategy. 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Certain emerging technologies and dual-use items will move from Schedule 3 of the Export Control Order 2008 to Annex I of the (assimilated) Dual-Use Regulation. This prevents duplication of controls between Great Britain and Northern Ireland. Revised controls linked to torture and capital punishment. Updates to Annexes II and III of the assimilated Torture Goods Regulation to mirror EU Regulation 2019/125. Policy changes affecting Armenia and Azerbaijan. Following the lifting of the UK arms embargo, Schedule 4 will be updated while retaining transit controls for certain goods. International regime consistency. Several control entries will be refined, to ensure alignment with multilateral control regimes. Enforcement in practice A £620k reminder On 1 December 2025, HMRC announced that a UK exporter had paid £620,515.04 in relation to unlicensed exports of military-listed goods. This compound settlement was offered only because: HMRC Criteria Explanation Inadvertent breach Internal control failures, not deliberate evasion Voluntary disclosure The company proactively informed HMRC The case underscores a key message – weak internal controls represent material financial and regulatory risk. Corporate implications and takeaways For UK exporters, the combined effect of tighter controls and stricter enforcement reaches well beyond export compliance teams. The 2025 updates widen the scope of what counts as a controlled activity (especially for dual-use and emerging technologies), meaning businesses may suddenly fall within licensing requirements they previously didn’t consider relevant. This elevates the issue to a governance priority: boardrooms must be confident they understand where export control exposure sits across products, partners, and digital operations. For instance, consider a (hypothetical) UK-based AI company that uses an EU contract manufacturer, a US cloud platform for testing, and a research partner in Armenia. Before the amendments, the firm may have considered itself “low-risk.” But the migration of new items into Annex I, changing geopolitical rules, and the involvement of third-party logistics now create new licensing obligations and potential diversion pathways. The business hasn’t changed, but the regulatory perimeter around it has. The core implication is that risk sits in the interfaces: between engineering and procurement, between digital access and physical exports, between suppliers and logistics routes. Understanding who touches sensitive technology, where it transits, and how third parties operate is now operation-critical. Strong governance ownership, clear escalation routes, and the ability to evidence “reasonable knowledge” will increasingly determine whether companies avoid disruption and costly settlements. What UK Exporters Should Do Now A practical response would include: Reclassification review Confirm whether products are affected by the Annex I migration. Supply chain mapping Assess exposure to Armenia/Azerbaijan and any transit-control implications. Internal control testing Validate record-keeping, screening, and export licensing workflows. Voluntary disclosure readiness Ensure the organisation has a structured escalation pathway if issues emerge.   Looking ahead: strong governance becoming the differentiator The direction of travel is unmistakable: tighter controls, broader technology coverage, and more assertive enforcement. Exporters who treat compliance as an operational formality will, increasingly, find themselves exposed. Meanwhile, those who adopt a governance-led, risk-tiered approach – integrating legal, trade, HR, security, and supply-chain disciplines – will be better placed to navigate the next wave of regulatory changes. Now is the moment for boardrooms and senior business leaders to ask a key question: Are our export control systems built for the regime we have… or for the one that’s incoming? For trade advisory tailored to your business, contact clearBorder today → 

UK export controls set to tighten in 2026. What new regulations (and a £620k enforcement case) mean for exporters
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