China Strengthens Export Control Regime: New Licensing Rules and Enhanced Compliance Requirements Transform Cross-Border Trade

Introduction: Comprehensive Export Control
Modernization

On October 1, 2025, China implemented a comprehensive overhaul of its export
control regime, introducing enhanced licensing procedures, real-name tax reporting
requirements, and strengthened compliance obligations that fundamentally transform
the landscape for cross-border trade in controlled items. These reforms, developed
through coordinated efforts by the Ministry of Commerce (MOFCOM), General
Administration of Customs, and State Administration of Taxation, represent the most
significant modernization of China’s export control framework since the establishment
of the dual-use items control system. For international law firms advising clients
engaged in technology transfer, manufacturing exports, or cross-border supply chain
operations, these developments create immediate compliance imperatives and
require comprehensive strategic recalibration.

The October 2025 reforms address longstanding gaps and inefficiencies in China’s
export control implementation while aligning the regime more closely with
international best practices and China’s evolving strategic priorities. The introduction
of real-name tax reporting for export licenses creates unprecedented transparency in
controlled item exports, enabling authorities to track transactions from licensing
through customs clearance to tax filing. Enhanced compliance requirements for
exporters establish more rigorous standards for internal control systems, due diligence
processes, and record-keeping practices. Expanded enforcement authorities and
penalties signal China’s determination to ensure strict adherence to export control
obligations and to prevent unauthorized technology transfers that could undermine
national security or foreign policy interests.

These reforms arrive amid intensifying global competition over critical technologies
and growing emphasis on export controls as tools of economic statecraft. Major
economies worldwide have strengthened their export control regimes in recent years,
targeting emerging technologies including artificial intelligence, quantum computing,
advanced semiconductors, and biotechnology. China’s October 2025 reforms reflect
both defensive responses to foreign export controls targeting Chinese entities and
proactive measures to protect China’s own technological advantages and strategic
interests. For businesses navigating this environment, understanding and complying
with China’s enhanced export control requirements becomes essential not only for
regulatory compliance but also for maintaining market access and competitive
positioning.

Real-Name Tax Reporting: Creating End-to-End
Transaction Transparency

The introduction of real-name tax reporting for export licenses represents perhaps the
most significant operational change in the October 2025 reforms, creating
unprecedented linkage between export licensing, customs procedures, and tax
administration. Under the new framework, export licenses for controlled items must
include specific taxpayer identification information, and tax filings for export
transactions must reference corresponding export license numbers. This creates an
integrated compliance chain enabling authorities to track controlled item exports from
initial licensing approval through physical export to final tax reporting, closing gaps
that previously enabled some transactions to escape full regulatory oversight.

The real-name reporting requirement applies to all exports of items on China’s Export
Control List of Dual-Use Items, encompassing a broad range of technologies,
materials, and equipment with both civilian and military applications. Exporters must
ensure that export license applications include accurate taxpayer identification
numbers for both the exporter and the foreign recipient. Upon receiving export
licenses, exporters must provide license information to customs authorities during
export clearance procedures. Subsequently, when filing tax returns for export
transactions, exporters must reference the corresponding export license numbers,
enabling tax authorities to verify that licensed exports have been properly reported
and that appropriate tax treatment has been applied.

This integrated reporting framework creates multiple compliance touchpoints where
authorities can verify transaction legitimacy and detect potential violations. MOFCOM
can cross-reference licensing data with customs export records to identify exports that
should have been licensed but were not. Customs authorities can verify that exports of
controlled items are covered by valid licenses and that license terms are being
observed. Tax authorities can ensure that controlled item exports are properly
reported and that exporters are not using export control licenses to facilitate tax
evasion or other financial misconduct. The multi-agency coordination enabled by real-
name reporting significantly enhances the government’s ability to enforce export
control requirements and to identify compliance failures.

For exporters, the real-name reporting requirements create new operational
obligations and compliance risks. Companies must establish processes to ensure
accurate taxpayer information is included in license applications, as errors or
omissions could delay licensing or trigger enforcement scrutiny. They must maintain
systems linking export licenses to specific transactions, enabling proper license
number reporting in tax filings. They must coordinate among licensing, logistics, and
finance functions to ensure consistent information flows across the compliance chain.
Failure to properly implement real-name reporting could result in licensing delays,
customs holds, tax penalties, or export control violations, each carrying significant
business and legal consequences.

The real-name reporting framework also has implications for corporate structure and
transaction planning. Companies using complex corporate structures for export
operations must ensure that taxpayer identification information accurately reflects the
entities involved in licensed transactions. Companies engaged in triangular trade or
other arrangements where the licensing party differs from the exporting or tax-filing
party must carefully structure transactions to satisfy real-name reporting
requirements. Companies should also consider whether the enhanced transparency
created by real-name reporting affects their broader tax planning strategies, as export
control licenses now create clear audit trails that tax authorities can leverage in
examining export transaction taxation.

Enhanced Compliance Requirements: Elevating
Internal Control Standards

The October 2025 reforms establish significantly enhanced compliance requirements
for exporters of controlled items, elevating internal control standards and creating
more rigorous expectations for corporate compliance programs. These requirements
reflect recognition that effective export control enforcement depends not only on
government licensing and inspection activities but also on robust private sector
compliance systems that prevent violations before they occur. By mandating specific
compliance program elements and establishing clear standards for due diligence and
record-keeping, the reforms aim to create a compliance culture where exporters take
primary responsibility for ensuring their activities adhere to export control
requirements.

The enhanced compliance requirements encompass multiple dimensions of export
control management. First, exporters must establish comprehensive internal
compliance programs addressing export control risks specific to their operations.
These programs must include written policies and procedures defining export control
obligations, identifying controlled items in the company’s product portfolio,
establishing approval processes for export transactions, and specifying roles and
responsibilities for compliance oversight. The programs must be tailored to the
company’s specific circumstances rather than adopting generic templates,
demonstrating genuine engagement with export control risks.

Second, exporters must implement robust due diligence processes for assessing
foreign customers and end-uses. This includes screening customers against relevant
restricted party lists, evaluating the legitimacy of stated end-uses, and identifying red
flags that might indicate diversion risks or unauthorized end-uses. Due diligence must
be documented in detail, creating records that can demonstrate the company’s good
faith efforts to prevent improper exports. When red flags are identified, companies
must conduct enhanced due diligence or decline transactions rather than proceeding
with exports that carry unacceptable risks.

Third, exporters must maintain comprehensive records of export control activities,
including license applications and approvals, due diligence assessments, internal
compliance reviews, and training activities. Records must be retained for specified
periods—typically five years or longer—and must be organized to facilitate regulatory
inspections and audits. The record-keeping requirements extend beyond transactional
documentation to encompass compliance program development and
implementation, enabling authorities to assess not only whether specific exports were
properly licensed but also whether companies maintain adequate systems to ensure
ongoing compliance.

Fourth, exporters must provide regular training to employees involved in export
activities, ensuring they understand export control requirements and their
responsibilities for compliance. Training must be documented and must be updated to
reflect regulatory changes and lessons learned from compliance incidents. Companies
must also establish mechanisms for employees to report potential violations or
compliance concerns without fear of retaliation, creating internal channels for
identifying and addressing issues before they escalate into regulatory violations.

For multinational companies with China export operations, these enhanced
requirements necessitate significant investments in compliance infrastructure and
ongoing operational attention to export control management. Companies must assess
their existing compliance programs against the new standards, identifying gaps and
implementing enhancements to satisfy requirements. They must allocate resources for
compliance personnel, training programs, due diligence tools, and record-keeping
systems. They must integrate export control compliance into broader corporate
governance frameworks, ensuring that boards and senior management provide
appropriate oversight and that compliance receives adequate priority in operational
decision-making.

The enhanced requirements also create potential liability risks for companies that fail
to maintain adequate compliance programs. Regulatory authorities may view
compliance program deficiencies as aggravating factors in enforcement actions,
potentially resulting in enhanced penalties or more severe sanctions. Companies
involved in export control violations may face challenges demonstrating good faith if
their compliance programs are found inadequate. Conversely, companies with robust
compliance programs may benefit from more favorable treatment in enforcement
proceedings, as authorities recognize their genuine efforts to prevent violations.

Expanded Enforcement Authorities and Penalties: Strengthening Deterrence

The October 2025 reforms significantly expand enforcement authorities and penalties
for export control violations, strengthening deterrence and signaling China’s
determination to ensure strict compliance with export control requirements. These
enforcement enhancements encompass broader investigative powers for regulatory
authorities, increased penalties for violations, and new mechanisms for holding
individuals and entities accountable for export control misconduct.

Regulatory authorities now possess expanded powers to conduct investigations of
suspected export control violations, including authority to inspect business premises,
review records and electronic data, interview personnel, and require companies to
provide information and documentation relevant to investigations. These powers
enable more thorough investigations of complex violations and reduce companies’
ability to conceal evidence of misconduct. Authorities can also coordinate
investigations across agencies, leveraging the real-name reporting framework to
identify discrepancies between licensing, customs, and tax records that might indicate
violations.

Penalties for export control violations have been substantially increased, reflecting the
seriousness with which China views unauthorized technology transfers and export
control circumvention. Companies found to have exported controlled items without
required licenses face fines of up to ten times the value of the exported items, with
minimum fines set at levels designed to ensure meaningful deterrence even for low-
value transactions. Companies that obtain licenses through fraud or
misrepresentation face enhanced penalties and potential criminal liability. Companies
with repeated violations or particularly egregious misconduct may face business
license revocation or prohibition from engaging in export activities.

Individual liability for export control violations has also been strengthened, with
executives and employees directly involved in violations facing personal fines,
professional disqualification, and potential criminal prosecution in severe cases. This
personal liability framework creates direct incentives for individuals to ensure
compliance and reduces the ability of corporate structures to shield responsible
parties from consequences. The reforms also establish liability for supervisory failures,
enabling authorities to hold executives accountable when inadequate oversight
enables violations by subordinates.

Beyond monetary penalties, the reforms introduce administrative sanctions that can
significantly impact business operations. Companies found in violation may be placed
on restricted party lists, limiting their ability to engage in future export transactions or
to receive imports of controlled items from foreign sources. They may face enhanced
licensing scrutiny, with applications subject to more rigorous review and potentially
higher denial rates. They may be required to implement remedial compliance
measures under regulatory supervision, incurring costs and operational constraints
beyond direct penalties.

For companies engaged in export activities, these enforcement enhancements create
heightened risks that demand proactive compliance efforts. The expanded
investigative authorities mean that violations are more likely to be detected, as
authorities possess greater capabilities to uncover misconduct through
comprehensive investigations. The increased penalties mean that violations carry
more severe consequences, potentially threatening business viability in cases of
serious or repeated misconduct. The individual liability provisions mean that
executives and employees face personal stakes in ensuring compliance, creating
additional pressure for robust compliance programs and careful operational practices.

Strategic Implications for Cross-Border Technology Transfer and Supply Chains

The October 2025 export control reforms create profound strategic implications for
companies engaged in cross-border technology transfer, manufacturing exports, and
supply chain operations involving China. These implications span immediate
compliance adaptations, medium-term operational restructuring, and longer-term
strategic positioning in an environment of intensifying export control enforcement.

Compliance Program Overhaul
Companies must conduct comprehensive assessments of their export control
compliance programs against the enhanced requirements, identifying gaps and
implementing necessary improvements. This includes reviewing and updating written
policies and procedures, enhancing due diligence processes, strengthening record-
keeping systems, and expanding training programs. Companies should engage
experienced export control counsel to conduct compliance audits and to provide
guidance on program enhancements that satisfy regulatory expectations while
aligning with business operations.

The compliance program overhaul should also address the real-name tax reporting
requirements, ensuring that systems and processes enable accurate taxpayer
information in license applications and proper license number reporting in tax filings.
This may require coordination among legal, compliance, logistics, and finance
functions that have traditionally operated independently, necessitating organizational
changes and enhanced information sharing protocols.

Supply Chain Visibility and Control
The enhanced export control regime demands greater supply chain visibility and
control, particularly for companies whose products incorporate controlled items or
technologies. Companies must implement systems to track controlled content in their
products, enabling accurate export control classifications and appropriate licensing
when required. They must establish supplier management processes ensuring that
suppliers provide necessary information about controlled content and that supply
chain arrangements do not inadvertently create export control violations.

For companies with complex global supply chains involving multiple jurisdictions, the
China export control reforms add another layer of complexity to already challenging
compliance landscapes. Companies must navigate potentially conflicting
requirements across different countries’ export control regimes, each asserting
authority over aspects of global technology flows. This may require sophisticated
compliance architectures capable of addressing multiple regulatory frameworks
simultaneously and making difficult decisions when requirements conflict.

Technology Transfer Strategy
Companies engaged in technology transfer with Chinese partners must reassess their
strategies in light of the enhanced export control requirements. Technology licensing
agreements, joint development arrangements, and other collaborative activities may
require export licenses under the strengthened regime, particularly for emerging
technologies subject to enhanced scrutiny. Companies must conduct careful export
control analyses before entering technology transfer arrangements, ensuring that
required licenses can be obtained and that license conditions can be satisfied within
contemplated business structures.

The enhanced enforcement environment also creates risks for technology transfer
arrangements that might have been tolerated under previous practice. Companies
should review existing technology transfer activities for export control compliance,
identifying potential issues and implementing corrective measures before they attract
regulatory attention. This may require difficult decisions about modifying or
terminating arrangements that cannot be brought into compliance with current
requirements.

Strategic Positioning in Global Technology Competition
The export control reforms reflect and contribute to intensifying global competition
over critical technologies, with major economies employing export controls as tools to
protect technological advantages and to limit adversaries’ access to sensitive
capabilities. Companies must consider how China’s enhanced export control regime
interacts with similar measures by other countries and how this affects their strategic
positioning in global technology markets.

For some companies, the proliferation of export controls may create opportunities to
serve as trusted intermediaries capable of navigating complex regulatory
environments and facilitating legitimate technology flows while ensuring compliance.
For others, the regulatory complexity may necessitate difficult choices about market
focus, potentially requiring withdrawal from certain markets or technologies where
compliance burdens exceed business benefits. Companies should develop long-term
strategies addressing how they will position themselves in an environment where
export controls increasingly shape technology development, transfer, and
commercialization.

Conclusion: Adapting to China’s Modernized Export Control Landscape

China’s October 2025 export control reforms represent a comprehensive
modernization that significantly enhances the regime’s effectiveness while creating
substantial new compliance obligations for exporters. The introduction of real-name
tax reporting, enhanced compliance requirements, and expanded enforcement
authorities collectively establish a more rigorous and transparent export control
framework aligned with China’s strategic priorities and international best practices.

For companies engaged in cross-border trade involving controlled items, these
reforms demand immediate compliance action and longer-term strategic adaptation.
The immediate priority involves ensuring compliance with the new requirements,
particularly the real-name tax reporting framework and enhanced compliance
program standards. Companies must assess their current practices against new
requirements, implement necessary changes, and ensure that personnel understand
their obligations under the reformed regime. Failure to adapt promptly could result in
licensing delays, enforcement actions, or business disruptions that could have been
prevented through proactive compliance efforts.

Beyond immediate compliance, companies must consider the broader strategic
implications of China’s enhanced export control regime. The reforms signal China’s
determination to exercise greater control over technology exports and to prevent
unauthorized transfers that might undermine national security or strategic interests.
They also reflect the global trend toward more assertive export control enforcement
and the use of such controls as tools of economic and strategic competition.

Companies must develop strategies that enable them to navigate this environment
effectively while maintaining business operations and competitive positioning.
For international law firms, the export control reforms create significant advisory
opportunities spanning compliance program development, licensing strategy,
enforcement defense, and strategic counseling. Firms must develop deep expertise in
China’s export control framework, maintain current knowledge of regulatory
developments and enforcement trends, and provide integrated advice addressing
both legal compliance and business strategy. The firms that successfully build these
capabilities will be well-positioned to serve clients navigating the complexities of
China’s modernized export control landscape.

The message is clear: export control compliance in China has entered a new era of
rigor and transparency. The October 2025 reforms establish standards that demand
sophisticated compliance programs, careful operational practices, and ongoing
regulatory engagement. Companies that rise to meet these challenges will be
positioned to participate effectively in cross-border technology transfer and trade
while managing regulatory risks. Those that fail to adapt may find themselves facing
enforcement actions, business disruptions, or strategic disadvantages that could have
been avoided through proactive compliance and strategic planning.

References

[1] China Ministry of Commerce. (2025, October 1). Enhanced Export Control Licensing
and Compliance Requirements. [Official MOFCOM Publication]
[2] General Administration of Customs. (2025, October 1). Implementation Guidelines
for Export Control Real-Name Reporting. [Official GAC Publication]
[3] China Law Blog. (2025, October 5). China’s Export Control Overhaul: What Foreign
Companies Need to Know. https://www.chinalawblog.com