We believe that MOFCOM has prioritized the groundwork for the enforcement of export control in the first year, with focuses on coordination mechanisms, integration of resources and building networks. The introduction of the new law has improved the previous pattern of overlapping management in China’s export control system. By far, MOFCOM has taken a leading position in China's export control management system via coordinating policies among ministries, regulatory legislation and regulation exporters’ business behaviors.

Export controls involve multiple departments of the State Council and the Central Military Commission (CMC) pursuant to Article 5 of the Export Control Law. MOFCOM has played a major role in establishing a sound working mechanism, coordinating inter-agency policies, and designating clear roles and responsibilities among agencies. In the export control management system of dual-use items, MOFCOM is responsible for lists development, verification of exporters’ qualifications, as well as examination of export transactions, either taking full responsibility or in a leading role. In the management of military products or nuclear materials, MOFCOM supports the supervision and enforcement with other agencies. And in the investigation section, MOFCOM and the General Administration of Customs set our different focuses and cooperate to hold violations accountable.

Based on the construction of the inter-agency regulatory regime for each major review, MOFCOM established a joint review mechanism for export control policies. In the pre-approval examinations, MOFCOM, coordinates the Ministry of Foreign Affairs, the Ministry of Industry and Information Technology, the State Administration of Science, Technology and Industry for National Defense, China Atomic Energy Authority, and the Equipment Development Department of the CMC in the joint working mechanism to review applications of regulated exports from perspectives of national security and national interests, international obligations, end users and end-use, to improve the efficiency of law enforcement.

In the meantime, MOFCOM amended laws and regulations to further clarify its authority in export controls. The revised Cryptography Law changes the previous authority to control the import and export of commercial encryption products and technologies. In the future, MOFCOM takes full jurisdiction of maintaining the item and entity lists, application assessment and supervision of imports and exports of the commercial encryption products and technologies subject to the Export Control Law. The Ministry also promulgates the Guidelines for Internal Compliance for Export Control of Dual-use Items and Guidelines for Import and Export Compliance Mechanism Building of Nuclear Items and other government documents, to provide guidance to industries and enterprises on fulfilment of compliance obligations.

In accordance with the Export Control Law, MOFCOM consolidated the export control functions of dual-use items that were previously scattered across various departments and further acquired import and export control jurisdiction related to commercial encryption.

MOFCOM and the General Administration of Customs published the List for the Management of Import and Export License of Dual-use Items and Technologies, covering both imports and exports, to regulate trade on controlled chemicals, precursor chemicals, radioisotopes, nuclear and nuclear dual-use and biological dual-use items by way of management of respective lists.[2] In accordance with the revised Cryptography Law, MOFCOM controls the import and export of commercial encryption and adds the import and export control list of commercial cryptography to the unified control list. [3]

By promoting the construction of internal compliance of enterprise export controls and the informatization of review and law enforcement, the impact of export control laws and regulations has been expanded in the field of industry and enterprise. Hence, MOFCOM extends its influence by regulating export control-related business activities of industries and enterprises.

In 2021, MOFCOM issued The Guidelines for International Compliance for Export Control of Dual-use Items for the first time in order to provide the industry and enterprise with more details and scenarios for reference. Further, MOFCOM provides facilitation measures for enterprises that have established a sound export control compliance system in accordance with the Export Control Law on general licensing and other related provisions. In terms of application and use of the license, the Ministry has realized online and paperless assessment, approval and regulatory processes via the closely collaborated network, employing digital tools through the entire process of application, review, license issuance and customs clearance. Regarding regulatory enforcement, MOFCOM has improved the use of enforcement information by sharing information among enforcement and regulatory agencies based on the informational network.

Based on our observation and analysis, we believe that the next phase of enforcement of the Export Control Law by MOFCOM will focus on strengthening its basic capabilities and law enforcement to deter illegal acts.

First, the mainline of policy orientation is still to expand opening-up. China's export controls will still focus on contributing to a higher-level open economy, continuously optimizing the business environment, effectively preventing major risks at the high level of opening up to the outside world, safeguarding and promoting a high-level opening up to the outside world.

Second, in terms of legislation, MOFCOM at present has few regulations and departmental rules on export control. In the field of export controls, there are still no departmental rules and regulations for review, facilitation, supervision and investigation.

Third, the control list as a unified list is set in motion. The current list of controlled items is still based on different laws, regulations and departmental rules, which have been developed separately. Products in the same broad category are sorted into different lists due to different control purposes. Moreover, China does not have a list of control objects yet. In the future, the development of a unified list of items and objects is one of the key directions for export control enforcement.

Fourth, the enforcement approach still focuses on promoting enterprise compliance. The export control enterprise compliance system is still focused on protecting and serving the high level of opening-up to the outside world, with the principle of government-guided, business-led, and coordinated action, to promote enterprises to improve export control compliance capabilities and levels. For suspected illegal practices, investigative proceedings may be introduced to redress them and deter future violations.

Fifth, in terms of international cooperation, the Chinese government in the past has established cooperation mechanisms and regular exchanges on export controls with neighboring countries, regional governments and trading partners. As the global environment changes, bilateral agreements related to export controls with more trade partners will be brought about to ensure the stability of the supply chain.

Under the Export Control Law, MOFCOM has the investigative and enforcement power. At present, MOFCOM has not yet issued any ministerial regulations related to export control investigations. However, we can observe the characteristics of export control enforcement of MOFCOM in the future from its past enforcement practices in trade remedies, trade barriers and antitrust investigations.

Except for exporters, the targets of the enforcement investigation of the Export Control Law also include financing, third-party e-commerce trading platforms and transaction intermediary services such as agency, shipping, consignment and customs declaration.

The Export Control Law provides for investigative means, significantly more than the usual tools of trade law investigation. In addition to the conventional means of written investigation, it also includes site visits, sealing off and detaining items, and checking bank accounts and other relatively severe investigative means.

High fines are the most significant sign directly reflecting the severity of the penalties. The fines are uncapped, usually 5-10 times or even 10-20 times the illegal business amount. At the same time, the confiscation of illegal income is also considered, and the economic punishment for the illegal enterprises will be very severe. In addition to fines, in some cases, there may also be criminal liability, as well as the revocation of controlled items export business qualifications.

In other types of trade enforcement investigations led by MOFCOM, safeguarding the procedural rights of the parties is a more prominent feature. The overall schedule of the investigation procedure is open, and could be announced in the form of public notice or notification at the initial stage, and stipulates the rights and obligations of the parties. The investigating authority hears arguments and comments from all interested parties and provides the parties an opportunity to defend themselves and supervise the procedure before a decision is made. The investigation process is documented. Decisions are based only on the facts in the record.

In previous trade law investigations, MOFCOM has focused on protecting the party's right to information and defense. On the one hand, the parties were informed of their obligation to submit evidentiary materials and the adverse consequences of not cooperating with the investigation. On the other hand, when a decision was made that might be unfavorable to the parties, the parties were asked to comment or confirm again before a new decision is made.

The distinctive feature of export control enforcement is the reliance on the inter-agency joint enforcement mechanism. At present, there is an inter-agency consultation mechanism in the export license review. So in the future the investigation and enforcement may also be conducted in the form of an inter-agency joint investigation team.

The Export Control Law has introduced new compliance requirements for imports and exports of controlled items. When engaging in trade activities related to controlled items, enterprises should pay attention to the legal risks before, during and after the relevant trade practices. We will also keep an eye on laws, regulations and policy developments and provide relevant legal and policy analysis and judgments.