Editor’s Note:
China’s evolving export control system is reshaping industry decisions and production in real time. Licensing regulations, extraterritorial concerns, end-use ambiguity, and disclosure requirements that can shift with little notice are creating significant uncertainty for companies trying to plan production, manage inventory, and meet customer demand. This uncertainty is increasing risks to global supply chains and accelerating the push to diversify away from China, even at higher cost.
In this commentary, Cameron Johnson, Senior Partner at Tidalwave Solutions, shares his inside-out perspective on China’s export control system. With decades of experience managing supply chains across industries in China, Cameron presents first-hand observations on the challenges firms currently face under China’s rare earth export controls. CCA Honorary Senior Fellow Paul Triolo weighs in with reflections on how U.S. policymakers might approach China’s rare earth export control regime, emphasizing the need for clearer policy alignment in Washington, sustained dialogue with Beijing on licensing transparency, and pragmatic tradeoffs that could help reduce uncertainty and stabilize strategically critical supply chains.
Navigating China’s Rare Earth Export Controls: Challenges for Industry and Paths Toward Greater Clarity
Cameron Johnson, Senior Partner, Tidalwave Solutions
In recent conversations with supply chain operators and multinational firms, I have heard a consistent concern: China’s current rare earth export control regime is creating operational uncertainty that is increasingly difficult for companies to manage.
Risks of Trade Secret Disclosure
Some companies that have applied for licenses have been asked to provide sensitive information, such as product specifications, photographs of production lines, customer identities, chemical compositions, and processing methods. Disclosing such information poses the risk of reverse engineering or information leakage. Companies with unique products or advanced materials face the possibility that their “recipe” — how the product is made — could be replicated once disclosed, along with their customers being identified.
Declaring precise chemical ratios or processing methods could reveal intellectual property that took years of R&D to develop. These processes can be recreated, circumventing the costs, risks, and time required for development. As a result, firms are extremely cautious and hesitant to provide information beyond end-use verification, even when they want to comply, because a single disclosure can erode years of competitive advantage and R&D.
In many industries, a customer’s identity is considered confidential and a strategic asset, often protected by contracts prohibiting disclosure. Firms may be forced to breach contractual obligations, therefore choosing between protecting critical business relationships and complying with export control regulations. It could also trigger situations in which they have to inform customers, resulting in lost business.
For example, companies across industries, such as automotive and aerospace, have contracts that prohibit disclosing technical details, supply chain structures, or customer identities to third parties, including governments, without prior authorization. Jet engine producers face strict confidentiality requirements because their supply chains include specialized coatings, alloys, and precision parts. Automotive companies also have strict requirements because component sourcing reveals costs, future model plans, and designs.
Uncertainty about Licensing and Regulatory Requirements
Beijing has now made case-by-case and individual export control review a core process, even for companies with long-standing compliant exports and established end use. For example, shipments that are almost identical could face different analyses, documentation requirements, and timelines. For companies operating on strict production schedules, planning becomes exceedingly difficult.
Security assessments also add additional layers of scrutiny, complicating the process, especially for dual-use classified components and advanced materials. An application is reviewed first by MOFCOM and then sent to other ministries for additional review, each of which might request additional information. These reviews are not transparent to applicants, who often do not know why their applications were escalated or whom to contact to resolve them. This lack of transparency adds uncertainty and can sometimes significantly extend approval times. It also contributes to perceptions of regulatory inconsistency or discrimination against certain applicants.
Uncertainty grips companies as license review timelines can shift, leaving them to wonder whether a license will be approved in weeks or months. The 45-working-day review period for license approval helped ease this challenge, but uncertainty persists. Regulations offer no guidance on detailed status updates, reasons for delay, the maximum review period, or other aspects of the process. Companies are left to navigate this uncertainty, making it difficult to plan production, manage inventory, or confirm delivery schedules. This unpredictability and the resulting operational challenges are disrupting global production flows, customer relationships, and industry foresight, forcing some businesses to turn away customers or prompting customers to find new suppliers, leading to the end of long-term relationships.
Some regulations do not clearly define the extent of their extraterritorial reach, and some applicants have been affected by political dynamics, with rare earth restrictions at times arbitrarily imposed on companies as part of China’s response to tensions with the United States. This leaves companies facing broader political undercurrents beyond their control, which can influence decisions in ways that are nearly impossible to predict. This level of uncertainty, faced by businesses around the world, makes routine business decisions much harder and is pushing companies to question their long-term reliance on Chinese-origin rare earths and products.
Conclusion
I believe predictable, transparent regulations give businesses a clear understanding of how they are implemented and what can trigger changes to licensing. Companies can adapt to any condition and plan production with greater confidence when they understand potential delays, restrictions, and the purpose of controls. This understanding allows businesses to organize themselves to meet customer needs while complying with regulations. Knowing the “rules of the road” is key to every business and stabilizes expectations in a fast-moving environment.
How U.S. Policymakers Might Approach China’s Rare Earth Export Control Regime
Paul Triolo, Honorary Senior Fellow on Technology, Center for China Analysis
From a policy standpoint, it is important to recognize that rare earth and magnet supply chains have moved well beyond the realm of normal commercial or industrial policy questions. They now sit squarely within a broader geopolitical and national security context. China’s policies in this space are closely intertwined with how Beijing views the actions of the United States, Europe, Japan, and other partners as they move to diversify supply chains, strengthen export controls, and reduce strategic dependencies. Because of this dynamic, it is difficult to approach the issue solely through the lens of what China might do to provide clarity or stability. Outcomes will increasingly be shaped by reciprocal policy choices on all sides.
For U.S. policymakers, the first priority should be achieving greater alignment within Washington on objectives and expectations. There is still a degree of adjustment underway as policymakers and industry stakeholders continue to assess the implications of China’s evolving export control framework around rare earth elements and permanent magnets. Different parts of the U.S. government approach the issue based on different institutional mandates. The United States Trade Representative and the Treasury Department, for example, both have important roles to play, but their priorities are not always fully aligned in terms of what the United States might seek from Beijing and what forms of flexibility might realistically be offered in return. Achieving greater internal clarity will be important before the United States formulates a durable external approach.
At the same time, policymakers should recognize that the April 4, 2025, and October 9, 2025 rules have already altered how markets and industry view the reliability of these supply chains. Whether these measures are actively enforced or simply remain a credible policy lever, they have shifted expectations across the sector. Many large U.S. manufacturers that rely on these materials are still mapping their exposure. In some cases, companies are only now realizing the extent of their dependence on Chinese rare earth processing and magnet manufacturing, and how limited near-term alternatives remain.
History offers a useful reminder of how slowly these markets adjust. During the 2010–2011 rare earth disruption, the export restrictions themselves lasted only a relatively short period. Yet even after supply resumed, it took nearly two years for markets to stabilize and for pricing and trade relationships to normalize. The current situation is considerably more complex. Supply chains are larger, more integrated, and far more strategically contested. Even under favorable circumstances, adjustment is likely to take years rather than months.
These realities point toward a dual-track policy approach. The United States should continue to invest in diversifying supply chains, expanding alternative processing capacity, and strengthening resilience across critical materials ecosystems with allies and partners. At the same time, maintaining channels of communication with Beijing on export control practices, licensing transparency, and technical implementation will remain important. Reducing uncertainty where possible can help stabilize global markets while the longer-term work of supply chain diversification proceeds.
In addition, the administration will want to consider whether there are tradeoffs that can be made that will reduce supply chain uncertainties and build even a small level of trust with Beijing, to avoid a sustained, high risk of “snapback” if the United States takes actions Beijing perceives as violating the spirit of the Busan agreement. For example, as I have laid out in my recent article, relaxing export controls in areas that have proven to be counterproductive, such as on memory and related semiconductor tooling, in exchange for guarantees from Beijing on broader and more expeditious licensing and transparency around the licensing process (e.g., sectoral white lists) should be considered as part of the bilateral trade negotiations. Such a deliverable would help to stabilize markets in the near term and allow time for companies to adjust and derisk supply chains.
MORE CCA FLAGSHIP PRODUCTS
Decoding Chinese Politics (DCP):
https://asiasociety.org/policy-institute/decoding-chinese-politics
Taiwan Policy Database (TPD): https://asiasociety.org/policy-institute/taiwan-policy-database
Global Public Opinion on China (GPOC): https://asiasociety.org/policy-institute/global-public-opinion-china
Cure4Cancer(C4C): https://asiasociety.org/policy-institute/cure4cancer