In May 2026, two Japanese employees were stopped on the spot at Dalian Customs – they tried to smuggle components containing rare earth magnets out of the country disguised as ordinary industrial finished products.
This is no accident.
Since the Chinese Ministry of Commerce issued Announcement No. 1 in January 2026 to establish an export control system for dual-use items to Japan, many companies have been punished for violating control red lines.
For foreign trade companies with Japan, compliance risks are no longer “something that may happen in the future” but a real problem that needs to be faced immediately.
Interpretation of the policy framework for export control of dual-use items to Japan
China’s control measures can be understood as “kindergarten teacher’s rules” – not to prevent children from playing with building blocks, but to prohibit anyone from making the building blocks into weapons.
Specifically, the Ministry of Commerce established general principles in January 2026: Prohibit the export of all dual-use items to Japanese military users and military purposes.
On February 24, Announcements No. 11 and 12 further divided 40 Japanese entities into two categories: 20 “control lists” (directly involved in the military, all transactions stopped) and 20 “watch lists” (required to submit risk assessment reports and non-military commitments).
The simple understanding is:Some controlled items cannot be sold to military-related entities at all. When selling other items, it is necessary to prove that the other party is indeed using them for legal civilian purposes.
Four common traps that ordinary foreign trade companies are most likely to step on
Minefield 1: Product classification is far more important than expected
In June this year, a technology company was fined 10,000 yuan by Qingdao Customs for declaring a titanium reactor worth less than 30,000 yuan as ordinary chemical equipment and misclassifying the product number. The goods were also seized by Qingdao Customs.
This is like putting a power bank in your suitcase when checking in at the airport. The value of the item is not high, but the subsequent impact is not small: not only will the goods be detained, but the company’s subsequent application for export licenses will also be affected.
Countermeasures: Before exporting, check the product codes one by one against the “Catalogue for the Administration of Import and Export Licenses for Dual-Use Items and Technologies”, and if in doubt, consult the customs or professional compliance agency in advance.
Minefield 2: Failure to check the military background of Japanese customers
The “military-civilian integration” of Japanese companies is an objective and realistic problem. Many well-known civilian companies also undertake military orders: Mitsubishi Electric produces both civilian air conditioners and military radars, and Sony’s sensors are used in both consumer mobile phones and missile guidance systems.
If the exporter does not conduct preliminary investigations and sells high-purity gallium to a Japanese materials supplier that is out of stock, and the other party turns around and uses it in military radars, the transaction will become a “ticking time bomb” for subsequent accountability.
Response plan: Penetrating verification is the key. The equity structure and business scope of the other party can be verified through the Japanese Ministry of Economy, Trade and Industry database and corporate public annual reports, and the partner is required to sign a non-military commitment letter.
Minefield 3: Thinking that sample entrainment is an insignificant matter
The parties involved in the aforementioned Dalian smuggling case processed products containing rare earth magnets in China and tried to smuggle them out of the country under the name of “ordinary processed products.”
This kind of behavior directly violates the “Export Control Law” and the “Criminal Law”. Once the value involved exceeds 200,000 yuan, the person will be sentenced to a fixed-term imprisonment of not more than 5 years in the light case, and to life imprisonment in the serious case.
Response plan: Any sample of controlled items required to leave the country needs to apply for a special license, and there are no exceptions.
Minefield 4: The trade contract does not set compliance-related clauses
The contracts of many foreign trade companies only stipulate price and quantity, without clarifying the relevant clauses that “if the buyer violates control regulations, all responsibilities shall be borne by the buyer.” In the current regulatory environment, it is tantamount to exposing itself to joint and several liability risks.
Response plan: It is recommended to add two clauses to the contract. The first is a compliance joint and several liability clause, which clarifies that customers must bear all legal liability for violations; the second is a dynamic adjustment clause, agreeing that both parties will renegotiate the transaction rules within 7 days after the policy changes.
Compliance is not a cost, it is the moat for a company’s survival
Many practitioners are worried that the control policy will completely block the trade channel with Japan. In fact, the opposite is true.
In May 2026, China directed the release of 6 tons of metallic gallium to Japan. This batch of gallium was all locked for civilian end-use. The export company was required to submit the production line surveillance video of the Japanese consignee to the commerce department to prove that this batch of gallium was indeed used for base station chip production rather than military radar manufacturing. The transaction was eventually completed successfully.
This sends a clear signal: Compliant civilian trade not only has a way forward, but also a more stable path.
Current core action suggestions for enterprises
- Dynamic monitoring of policy changes: Pay attention to the “Export Control Information Release Column” of the Ministry of Commerce. The current policy is updated frequently, and goods that were compliant last year may be included in the controlled catalog this year.
- Entrust a third-party due diligence: Entrust a professional compliance agency to conduct military background screening of Japanese partners. Do not judge the attributes of the partner based on experience alone.
- Organizing the internal compliance process: Purchasing, sales, logistics, and legal departments need to establish a “cross-departmental collaboration” compliance review mechanism to ensure that every export order undergoes multi-layer compliance verification.
For China, export control is not the purpose of this “compliance game”, but a policy tool to accurately combat Japan’s remilitarization tendency. It also leaves ample economic and trade space for companies that abide by the rules.
The future survival rule for foreign trade companies with Japan is to transform compliance from an additional cost item into their own core competitiveness.
