CONTENTS
- 1. Chinese Law Advisory | China Announces Strengthened Rare Earth Export Controls and Related Measures
- - Supply Chain Risks Becoming a Reality
- 2. Chinese Law Advisory | Institutionalization of Sanction Authority Through the Amended Foreign Trade Law
- - Expanded Secondary Sanction Risk Arising From Export Control Measures Against Japan
- 3. Chinese Law Advisory | The Need for a Legal Response That Looks at the ‘Entire Transaction Structure’
- - Daeryun Law Firm LLP's Chinese Law Advisory
1. Chinese Law Advisory | China Announces Strengthened Rare Earth Export Controls and Related Measures
Recently, the Chinese government has issued a series of measures, including strengthened rare earth export controls, an amendment to the Foreign Trade Law, and export restrictions targeting specific countries, causing the China-related business environment to change rapidly.
These regulatory changes function as factors that directly affect global supply chains and corporate transaction structures as a whole, and the importance of Chinese law advisory is accordingly expanding further.
In particular, as China simultaneously pursues protection of its domestic industries and control over strategic resources, it is building a high-intensity regulatory framework that goes beyond its existing export-regulation system to include extraterritorial application, so Korean companies are also facing an increasing likelihood of exposure to substantial legal risks.
Supply Chain Risks Becoming a Reality
The Chinese Ministry of Commerce has announced a policy to strengthen its existing export control regime, to expand the scope of regulation over rare earths and key minerals, and to introduce extraterritorial application for certain items.
Previously, an export-licensing system centered on specific rare earth elements was operated; through these measures, however, the covered items have been expanded, and the scope of regulation has broadened significantly to include strategic materials such as synthetic diamonds.
Going further, the reach of the regulation is expanding in such a way that, even where a product is manufactured abroad but contains any portion of Chinese-origin raw materials, the export of that product to a third country requires authorization from the Chinese government.
Under this structure, even when a Korean company exports to another country a product made using Chinese-origin raw materials, it may become subject to regulation, so a comprehensive review of the entire supply chain is unavoidable.
2. Chinese Law Advisory | Institutionalization of Sanction Authority Through the Amended Foreign Trade Law
Through an amendment to the Foreign Trade Law scheduled to take effect in 2026, China has expressly codified its authority to impose sanctions on foreign governments, companies, and individuals, and has substantially expanded the scope of that authority.
The core of the amendment is that it allows high-intensity sanctions, such as import and export restrictions, transaction bans, and restrictions on financial transactions, to be imposed on acts that infringe China's “sovereignty, security, and development interests” or that obstruct transactions with Chinese companies.
Particularly noteworthy is that the targets of sanctions extend not only to the direct actors but also to third parties that support or facilitate such acts.
Because various entities participating in the transaction process, such as logistics, customs clearance, and platform services, may also become subject to regulation, companies need to review the legal risks across their entire transaction structure.
These changes show that China is combining its trade policy with its diplomatic and security strategy in its use of such measures.
Expanded Secondary Sanction Risk Arising From Export Control Measures Against Japan
China is also strengthening its export controls on dual-use items targeting specific countries.
In particular, under the measures targeting Japan, it has introduced comprehensive regulation, including a ban on the export of all goods that may contribute to the enhancement of military capability, not merely goods for military use.
The core of these measures is that they bring within the scope of regulation even the re-export of products containing goods of Chinese origin.
That is, even where a Korean company imports raw materials from China and then processes and exports them to a specific country, it may become subject to sanctions.
This means that companies must simultaneously take into account not only their own domestic laws but also China's export-control framework, and it is a factor that affects the very design of global transaction structures.
3. Chinese Law Advisory | The Need for a Legal Response That Looks at the ‘Entire Transaction Structure’
This series of measures shows that China is using trade regulation as a strategic means of control.
In particular, extraterritorial application and the expansion of third-party sanctions operate in a direction that brings a company's entire transaction structure within the scope of regulation.
Accordingly, companies need to conduct a comprehensive risk analysis that extends beyond responses at the level of individual contracts or transactions to include the supply chain, raw-material procurement, re-export structures, and counterparties.
In addition, because the practical impact of Chinese regulation can vary depending not only on the statutes but also on administrative enforcement and policy direction, continuous monitoring of the local legal environment and the development of response strategies are crucial.
Daeryun Law Firm LLP's Chinese Law Advisory
China-related regulation is an area that requires consideration not only of statutory interpretation but also of administrative practice, policy direction, and local enforcement practices.
Centered on an attorney with experience as a legal cooperation officer at the Korean Embassy in China who handled international criminal and corporate legal matters, Daeryun Law Firm LLP provides practical Chinese law advisory based on experience accumulated across a wide range of fields, including investment in China, trademark and copyright disputes, arbitration, and civil and criminal litigation.
In addition, through a system of collaboration with local Chinese law firms, it can provide an integrated response to complex legal issues such as cross-border transactions, responses to export controls, and dispute resolution, and it also supports companies in analyzing supply chain risks arising from changes in Chinese regulation and in designing contract structures.
Principal Scope of Support in Chinese Law Advisory
1. Advisory on Responses to Export Controls and Trade Regulation
· Risk analysis and development of response strategies regarding extraterritorial application (re-export regulation)
· Interpretation of regulatory frameworks such as China's Foreign Trade Law, Export Control Law, and Anti-Foreign Sanctions Law
· Review of sanctioned transaction structures and advisory on strategies to suspend or replace transactions
2. Diagnosis of Global Supply Chain Risks
· Review of whether regulation may apply upon export to a third country
· Due diligence on sanction risks relating to counterparties (vendors and distributors)
· Advisory on strategies for restructuring the supply chain and securing alternative sources of supply
3. Contract and Transaction Structure Design
· Review of import and export, distribution, and OEM and ODM contract structures
· Design of contract termination and indemnification clauses in the event of sanctions
· Review of legal risks relating to customs clearance, logistics, and payment structures
4. Advisory on Investment and Business Operations in China
· Responses to permits and regulation relating to foreign investment
· Management of legal risks arising during local business operations
· Advisory on exit strategies and asset-recovery structures
5. Responses to Litigation, Arbitration, and Criminal Matters in China
· Advisory on responses to international arbitration and Chinese arbitral institutions
· Responses to contract disputes, debt recovery, and transaction disputes
· Responses to criminal risks (such as economic crimes and data-related crimes)
6. Integrated Cross-Border Legal Response
· One-stop response through collaboration with local Chinese law firms
· Coordination of conflicts arising from multinational regulation (China, the United States, and Korea)
· Development of response strategies for foreign sanctions and trade risks
7. Advisory on Responses to Local Regulation and Policy
· Advisory on responses to administrative agencies and on regulatory interpretation
· Redesign of business strategies in response to industry-specific regulatory changes
The China trade-regulation environment is changing rapidly, and how companies respond to it has a direct impact on their global competitiveness.
Daeryun, ranked the 9th-largest law firm in the Republic of Korea (based on 2025 value-added tax filings with the National Tax Service), will provide strategic and practical Chinese law advisory so that companies can conduct their business stably within this changing regulatory environment.
