On December 3, 2024, the Chinese Ministry of Commerce announced strict export restrictions on “dual-use” technologies. Dual-use technologies are those that are developed for civilian markets but also have military utility or can be applied to military platforms and munitions. 

The export ban specifically targets the United States, including banning exports of critical minerals such as antimony, gallium, and germanium which are used in semiconductor and defense technology manufacturing. These critical minerals are essential to U.S. economic and national security and have supply chains vulnerable to disruption. 

The day before this announcement, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced new rules aimed at restricting China’s ability to produce advanced semiconductors, which are critical for military applications.  The rules include new export controls on 24 types of semiconductor manufacturing equipment and three types of software tools for developing or producing semiconductors, new controls on high-bandwidth memory, and the addition of 140 entities to BIS’s restrictive Entity List that are involved in advancing the Chinese government’s military modernization. Importantly, BIS also created two new Foreign Direct Product (“FDP”) rules that extend the jurisdiction of U.S. export controls over certain foreign-made (i.e., non-U.S. made) items related to semiconductor manufacturing that are made or developed using U.S.-origin technology or software, or which contain a foreign product made from tools that are a product of U.S.-origin technology or software.  Exports, re-exports, and in-country transfers of items subject to the recently imposed export controls will likely require a license from BIS, unless a license exception applies. 

As global demand for critical minerals continues to grow, securing a robust and resilient supply chain is paramount for national interests, economic stability, and technological advancement.  This week’s announcement further emphasizes the trade issues impacting critical minerals from a national security perspective.

Key legal issues arising out of the escalating trade war over critical minerals include: 

Trade Compliance: U.S. companies must navigate new export restrictions, ensuring compliance with both U.S. and Chinese regulations.

Supply Chain Security: Companies will need to navigate securing alternative sources for critical minerals, potentially involving new strategic partnerships.

Intellectual Property: Companies will continue to assess protections to safeguard their IP more rigorously to prevent unauthorized use by third parties including foreign entities.

Regulatory Changes: Ongoing adjustments to trade policies and regulations will require continuous legal monitoring and adaptation.