Law stated as at 28 July 2026
China continues to maintain export controls over specified rare-earth-related items under its export-control regime. Since the initial measures introduced in April 2025, the legal framework has developed through additional announcements, temporary suspensions and enhanced enforcement measures. Malaysian manufacturers purchasing rare-earth materials, magnets, components or related technology from China should therefore understand both the controls presently in force and the suspended measures that may become relevant again after November 2026.
This article provides a general overview of the principal legal issues affecting Malaysian businesses. It does not constitute legal advice.
## Current Legal Position
On 4 April 2025, China’s Ministry of Commerce and General Administration of Customs issued Announcement No. 18 of 2025, introducing export controls over specified medium and heavy rare-earth-related items. The announcement took effect immediately upon issuance.
The controls were introduced pursuant to China’s Export Control Law, Foreign Trade Law, Customs Law and Regulations on Export Control of Dual-Use Items. The legal framework generally operates as an export-licensing system rather than a blanket prohibition on all exports of rare-earth materials.
## Controlled Items
Announcement No. 18 applies to specified items relating to samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. Depending on their technical specifications, the controlled categories may include certain metals, alloys, oxides, compounds, mixtures, targets, magnetic powders and permanent-magnet materials.
Whether an item is subject to control depends on its technical characteristics and classification under the applicable Chinese control list. A broad commercial description, invoice description or customs tariff code may not be sufficient to determine whether the item is controlled.
Malaysian purchasers should therefore obtain accurate technical specifications and material-composition information from their suppliers, particularly where the products comprise magnets, powders, subassemblies or components containing controlled rare-earth elements.
## Export-Licensing Requirements
Where a controlled item is exported from China, the Chinese exporter is generally required to obtain an export licence from the competent Chinese authority before shipment. The primary legal responsibility for obtaining that licence currently rests with the exporter in China.
Nevertheless, the Malaysian purchaser may be required to provide supporting information relating to its identity, corporate ownership, ultimate end user, intended end use, destination of the goods, technical application and any proposed onward transfer or re-export.
The information provided may form part of the exporter’s licence application and may have legal significance. Malaysian purchasers should ensure that all declarations and supporting documents are accurate, complete and consistent with the actual transaction. They should avoid giving undertakings concerning downstream use, re-export or end-user control unless they have the contractual and operational ability to comply with those undertakings.
## Customs Declarations and Product Classification
Chinese exporters are required to accurately declare controlled goods during customs clearance and, where applicable, identify the relevant control classification.
If Chinese customs authorities suspect that goods may fall within the controlled categories, they may request further technical documents, supporting information or clarification before releasing the shipment. The goods may be withheld while the classification or declaration is examined.
Malaysian buyers should therefore ensure that technical descriptions, product specifications and material content supplied to the exporter are sufficiently detailed and accurate. A mismatch between the commercial documents and the technical characteristics of the goods may delay customs clearance or affect the licence application.
## Contractual Considerations
Although the Malaysian purchaser is not ordinarily the licence applicant under the current regime, Chinese export controls may have significant contractual consequences.
Supply agreements should clearly identify which party is responsible for classifying the goods, applying for export licences, preparing supporting documents and responding to regulatory enquiries. They should also specify the information that the Malaysian purchaser must provide and the timeframe within which it must be supplied.
The agreement should distinguish between a delay in obtaining a licence, an outright refusal of the licence, an incorrect product classification, incomplete information supplied by the purchaser and a subsequent change in export-control law. Each situation may justify different contractual consequences.
The parties should also consider whether a licensing delay permits an extension of the delivery period, whether additional compliance costs may be passed to the buyer, whether the buyer may source from another supplier and whether either party may terminate the contract if approval is not obtained within an agreed period.
For longer-term supply or offtake contracts extending beyond November 2026, the agreement should specifically address the possibility that suspended Chinese controls may be reinstated or replaced with new requirements.
## End-User and End-Use Declarations
Chinese exporters may require Malaysian purchasers to sign end-user or end-use declarations as part of the export-licensing process. These declarations may address the ultimate user of the goods, the intended civil or industrial application, the destination, the incorporation of the goods into another product and any proposed resale or re-export.
Malaysian businesses should review these declarations carefully before signing them. The language may create continuing obligations that extend beyond receipt of the goods, including restrictions on onward transfer, changes in use or supply to particular customers or countries.
A Malaysian purchaser should not provide an assurance that it cannot monitor or enforce, particularly where the goods will pass through several levels of a manufacturing or distribution chain. Where the purchaser intends to incorporate the controlled material into a finished product, it should determine whether the relevant declaration or export licence imposes restrictions on the finished product or its subsequent destination.
## Confidentiality and Personal Data
The export-licensing process may require Malaysian companies to disclose sensitive commercial information to the Chinese supplier or the relevant Chinese authorities. This may include technical drawings, product specifications, production volumes, customer identities, beneficial ownership information, business plans and details of downstream applications.
Before disclosing such information, the Malaysian company should review any confidentiality obligations owed to customers, licensors, joint-venture partners or other third parties. It should also consider whether the disclosure is permitted under existing non-disclosure agreements and whether the supplier may use the information solely for regulatory purposes.
Where personal data concerning directors, officers, beneficial owners, employees or customers is provided, the Malaysian company should also consider its obligations under the Personal Data Protection Act 2010 and the applicable cross-border data-transfer requirements. The regulatory nature of the request does not automatically displace contractual confidentiality or personal-data obligations.
Where possible, the parties should limit the information disclosed to what is reasonably required for the licence application and document the purpose for which it may be used.
## October 2025 Expansion and Extraterritorial Measures
In October 2025, China introduced a broader package of rare-earth export-control measures. Those measures covered additional rare-earth elements, certain production and processing equipment, and specified rare-earth technologies, including technical information such as process specifications and design materials.
The October 2025 package also included an extraterritorial framework under which certain foreign-produced items could be subject to Chinese export-control jurisdiction if they contained specified Chinese-origin controlled rare-earth content or were produced using controlled Chinese-origin rare-earth technology.
The extraterritorial provisions were particularly significant for manufacturers outside mainland China because, if operative, they could require a foreign manufacturer to obtain Chinese approval before exporting or re-exporting certain foreign-produced goods to a third country. This would potentially place a Malaysian manufacturer within the licensing framework, rather than leaving it merely as the purchaser or contractual counterparty of a Chinese exporter.
The relevant measures are presently suspended and are not currently operative. However, the suspension is scheduled to expire on 10 November 2026 unless extended, amended or replaced. Malaysian manufacturers entering contracts that will continue beyond that date should therefore address the possibility that the extraterritorial controls may revive.
## Potential Effect of the 0.1% Threshold
The suspended extraterritorial framework included a value-based threshold under which a foreign-produced item could fall within the Chinese controls where specified Chinese-origin controlled rare-earth content represented at least 0.1% of the value of the foreign-produced item.
This threshold is not presently operative because the relevant measure is suspended. Nevertheless, it may become important if the suspension expires without further action.
A Malaysian manufacturer potentially affected by the rule would need to identify Chinese-origin controlled content within its product, determine the relevant value at component level and maintain records capable of supporting the calculation. The analysis may be difficult where the rare-earth element is contained within a magnet, subassembly or component supplied through several tiers of the supply chain.
Long-term contracts should therefore require suppliers to provide sufficient origin, composition and valuation information to enable the Malaysian manufacturer to assess future compliance obligations.
## Re-Export and Onward Transfer
Under the current April 2025 framework, Malaysian purchasers should review whether any export licence, end-use undertaking or contractual provision restricts the resale, re-export or onward transfer of controlled goods.
The fact that the goods have lawfully entered Malaysia does not necessarily mean that they may be transferred without restriction. The conditions imposed by the Chinese export licence or the declarations given during the licensing process may continue to apply after importation.
Where the Malaysian purchaser intends to resell the goods, incorporate them into another product or export the finished product to another jurisdiction, it should review the licence conditions and contractual restrictions before proceeding.
If the suspended extraterritorial measures revive, the onward export of certain Malaysian-manufactured goods containing Chinese-origin controlled content may itself require Chinese approval. This potential risk should be reflected in supply, manufacturing, distribution and customer contracts extending beyond November 2026.
## General Export Licences
China has introduced or discussed facilitation measures, including general export licences for eligible exporters that satisfy the applicable compliance requirements. Such arrangements supplement the export-control framework but do not remove it.
A Malaysian purchaser should not assume that its Chinese supplier automatically holds a general licence or that every shipment is covered. The buyer should obtain written confirmation of the licence position, its validity period, the covered products, the permitted destinations and any excluded end uses.
The availability of a general licence may also depend on the exporter, end user, destination and intended application. It should not be treated as a universal exemption.
## Enforcement Developments
China has continued to strengthen enforcement of strategic-mineral export controls. In June 2026, MOFCOM introduced a formal public reporting mechanism for suspected violations involving strategic mineral export controls, effective from 1 July 2026.
The development increases the likelihood that questionable transactions, inaccurate declarations or unauthorised exports may be reported and investigated. Enforcement risk is therefore no longer limited to routine customs review.
Malaysian companies should ensure that technical descriptions, end-user declarations and intended-use statements are accurate and internally verified. They should also maintain records of the licence application, supplier confirmations, supporting documentation, internal approvals and any restrictions communicated by the exporter.
The reported detention of foreign nationals in connection with alleged rare-earth export-control violations also demonstrates that the consequences may extend beyond administrative delay or contractual disruption. Individuals involved in classification, documentation, shipment or approval decisions should understand the seriousness of inaccurate or misleading declarations.
## Destination-Specific Restrictions
China has also adopted destination- and end-user-specific restrictions in relation to certain dual-use items. Announcement No. 1 of 2026 prohibits the export of dual-use items to Japanese military users and to end uses that contribute to Japan’s military capability.
This restriction may be relevant to Malaysian manufacturers that purchase controlled Chinese-origin materials and subsequently supply Japanese customers. The legal analysis may depend on the ultimate customer, the end use and whether the finished product contributes to a prohibited military application.
Malaysian companies supplying Japanese customers should therefore conduct appropriate end-user and end-use due diligence and avoid assuming that a shipment is lawful merely because the immediate transaction takes place through Malaysia.
## Malaysian Strategic Trade Law
Compliance with Chinese export controls does not remove the need to comply with Malaysian law.
The Strategic Trade Act 2010 regulates the export, transhipment, transit and brokering of strategic items and unlisted items that may be used for restricted activities. Depending on the nature of the rare-earth material, component, equipment, technology, destination and end use, a Malaysian export or re-export may require a permit from the Ministry of Investment, Trade and Industry.
The Act also contains catch-all controls that may apply to unlisted items where the exporter knows, has reason to believe or has been informed that the item may be used in connection with restricted activities.
A Malaysian company may therefore face separate obligations under Chinese and Malaysian law. Approval for export from China does not constitute approval for re-export from Malaysia, and compliance with Malaysian permit requirements does not excuse non-compliance with Chinese licence conditions.
Before exporting controlled materials, components or finished products from Malaysia, the company should conduct an independent Malaysian strategic-trade assessment.
## Malaysian Rare-Earth Export Policy
Malaysia has also adopted policy restrictions concerning the export of unprocessed rare-earth minerals to support domestic downstream processing. Processed rare-earth materials may be treated differently depending on their nature and the applicable policy or regulatory requirements.
Malaysian manufacturers involved in mining, processing, refining or exporting rare-earth materials should therefore distinguish between unprocessed minerals, processed materials, components and finished products.
The legal position should be confirmed with the relevant Malaysian authorities before any export arrangement is finalised, particularly where the transaction involves raw or partially processed rare-earth materials.
## Legal Measures for Malaysian Manufacturers
Malaysian manufacturers should obtain complete technical specifications and composition data for rare-earth-related goods purchased from China. They should require suppliers to confirm in writing whether the goods are controlled, whether an individual or general export licence is required and whether any restrictions apply to end use, resale or re-export.
All end-user and end-use declarations should be reviewed before execution. The company should verify that the declaration reflects the actual intended use and should avoid accepting continuing obligations that it cannot monitor.
Supply contracts should allocate responsibility for classification, licensing, supporting information, compliance costs, regulatory delays and licence refusal. Contracts extending beyond 10 November 2026 should contain provisions dealing expressly with the possible reinstatement of the suspended extraterritorial rules.
The company should also review its obligations under the Strategic Trade Act 2010 before exporting or re-exporting any controlled material, component or finished product from Malaysia. Confidential information and personal data supplied for regulatory purposes should be protected through appropriate contractual restrictions and internal data-handling procedures.
Records of technical classifications, supplier confirmations, licences, declarations, customer information, internal approvals and regulatory correspondence should be retained for compliance and audit purposes.
## Conclusion
China’s April 2025 rare-earth controls remain in force and currently impose the primary licensing obligation on Chinese exporters. Malaysian purchasers nevertheless play an important role because they may be required to provide legally significant end-user, end-use and technical information and may be bound by restrictions governing resale, re-export or downstream use.
The suspended October 2025 measures create a separate and potentially more serious future risk. If the suspension expires on 10 November 2026 without further amendment, certain Malaysian manufacturers may themselves become subject to Chinese licensing requirements when exporting foreign-produced goods containing specified Chinese-origin rare-earth content or produced using controlled Chinese-origin technology.
The legal issues therefore extend beyond the initial importation of materials from China. Malaysian manufacturers should review their supply contracts, end-use declarations, product-content records, downstream customer arrangements and obligations under the Strategic Trade Act 2010 before entering long-term transactions involving controlled rare-earth materials or technology.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal advice. Chinese and Malaysian export-control laws, policies and administrative practices are subject to change. Businesses should obtain legal advice based on the technical characteristics of the relevant goods, the parties, destination, end use and contractual arrangements before proceeding with any transaction.
