By: Matthew Rowe
Background. On November 10, 2026, two suspended export-control regimes are scheduled to return: China’s extraterritorial rare-earth controls and the U.S. Bureau of Industry and Security’s 50 percent “Affiliates Rule.” This piece argues that China’s rules deliberately copy the architecture of U.S. export law, and that the copy leaves third-country manufacturers exposed to conflicting licensing demands that no existing legal doctrine resolves.
Terms: De minimis – foreign made item if its controlled U.S. origin content is above a set percentage of its overall value.
Foreign Direct Product Rule – Foreign made item can be subject to U.S. law its it’s a “direct product” of U.S. technology
50 Percent Ownership Rule – Entry list restrictions may apply if a company is owned 50% or more by listed parties to the transaction
I. Introduction
Less than two weeks from now, the one-year U.S.–China export-control truce reaches its built-in expiration date. China’s suspension of its October 2025 rare-earth measures runs through November 10, 2026. The U.S. suspension of the Affiliates Rule ends November 9, 2026, and the rule’s license requirements return automatically the next day. Unless one or both governments act, the two largest export-control systems in the world will reassert extraterritorial reach on the same morning.
Most commentary treats the deadline as a supply-chain problem, however it is also a legal one. China’s Announcement No. 61 is the first time Beijing has used its Export Control Law to reach goods made entirely outside China, and it does so with tools borrowed directly from the U.S. Export Administration Regulations (EAR): a de minimis threshold, a foreign direct product rule, and a 50 percent ownership rule.
This piece makes two claims. First, the U.S. cannot easily object to China’s rules in principle, because they are modeled on its own. Second, the real casualties of the snapback are firms in third countries, who may soon need licenses from two governments whose policies point in opposite directions.
II. Background: The 2 Rules
China’s October 2025 measures. On October 9, 2025, China’s Ministry of Commerce (MOFCOM) issued a coordinated set of rare-earth announcements. The centerpiece, Announcement No. 61, asserts licensing jurisdiction over three categories of foreign-made goods:
- Chinese-origin controlled rare earths that are re-exported from a third country;
- Foreign-made permanent magnets and target materials in which Chinese-origin rare earths make up 0.1 percent or more of value; and
- Products made abroad using Chinese rare-earth production technology, with no value threshold at all.
Announcement No. 61 also extends restrictions to subsidiaries of companies on China’s export control and watch lists, a Chinese analogue to the U.S. 50 percent concept. Announcement No. 62 separately controls rare-earth technologies.
The U.S. Affiliates Rule. Ten days earlier, on September 29, 2025, BIS (Bureau of Industry and Security) issued an interim final rule extending Entity List and Military End-User List restrictions to any foreign company owned 50 percent or more by listed parties. Before the rule, BIS generally treated a listed company’s subsidiaries as legally distinct unless separately listed. The rule imported the ownership logic that the Treasury Department’s Office of Foreign Assets Control has long applied to sanctioned persons.
The Busan bargain. After the October 30, 2025 meeting between Presidents Trump and Xi, each side paused its new rule. China suspended Announcements Nos. 61 and 62, among others, through November 10, 2026. BIS suspended the Affiliates Rule for one year and wrote its return into the same final rule: the license requirements come back on November 10, 2026, absent a future extension. Treasury Secretary Bessent described the Affiliates Rule pause as the price of China’s rare-earth suspension.
Distinctly, the pause is a suspension, not a repeal, on both sides. And China’s earlier April 2025 licensing requirements for seven medium and heavy rare earths, including dysprosium and terbium, were never suspended and remain in force.
III. Analysis: The Mirror and the Trap
A. China built its regime from the U.S. blueprint
Each jurisdictional hook in Announcement No. 61 has a direct counterpart in the EAR.
Figure 1. U.S. and Chinese extraterritorial export-control mechanisms, side by side.
The parallel is not by mistake, and practitioners noticed it immediately. U.S. officials have long defended the foreign direct product rule as a legitimate exercise of jurisdiction over U.S. technology wherever it travels. That defense rests on the idea that a state may follow its own technology into foreign products. China now makes the same claim about its rare earths and its processing know-how. Washington can object to China’s policy choices, but it is not in a position to call the theory illegitimate.
B. Third-country firms face two barriers of sale
The problem is concurrent jurisdiction. Imagine a magnet maker in Vietnam or Germany. It buys Chinese rare earth mental, uses a process that traces to China, and sells into a supply chain that includes a U.S. defense contractor or a subsidiary of an Entity List company.
After November 10, that one shipment could need two licenses. Because the magnets contain Chinese-origin rare earths above the 0.1 percent threshold and are made with Chinese processing technology, Announcement No. 61 would require a MOFCOM license. If the item is also subject to the EAR and the buyer is at least 50 percent owned by an Entity List company, the Affiliates Rule would require a BIS license as well. The firm would then be applying to two agencies about the same transaction, and each agency asks a different question about the same end user.
The real problem is that the two agencies apply opposite review policies. MOFCOM’s controls target foreign military end users. Under Announcement No. 61, applications to supply overseas military users are generally denied, and exports tied to advanced semiconductors or military-relevant AI are reviewed case by case. BIS’s controls run the other way, toward Chinese military-linked buyers: under the Affiliates Rule, a covered subsidiary inherits its listed parent’s license requirements and, often, a presumption of denial. A buyer that one government considers acceptable is often exactly the kind the other government restricts. The effects also reach beyond any single shipment. To get a license from either government, the firm must say who its customers are and what they will use the goods for. Information that helps with one government’s application may hurt the firm in front of the other. A firm can meet either requirement on its own, but where its customer base spans both sides, meeting both may be impossible.
The ownership rules compound the problem. One estimate suggests the Affiliates Rule could triple the number of entities subject to Entity List restrictions. Every company added on the U.S. side is a potential Chinese-law problem for anyone who refuses to deal with it.
IV. What to Watch Before November 10
Analysts see three likely outcomes on the Chinese side: another extension, selective reinstatement aimed at particular elements or end uses, or full reimposition of the October 2025 measures. In April, a MOFCOM spokesman said only that the suspension runs through November 10 and that talks continue through existing channels. On the U.S. side, the suspension rule’s “absent a future extension” language leaves BIS free to extend by rule, and practitioners have read it as a bargaining chip.
Whatever happens, three steps make sense for compliance counsel now:
- Map Chinese content, not just Chinese suppliers. The 0.1 percent threshold and the technology-based rule mean a non-Chinese supplier can stil create Chinese legal challenges.
- Ownership screening at the 50 percent level. Name-based screening will miss the subsidiaries the Affiliates Rule discovers.
- Document the conflict when it arises. A firm that cannot satisfy both regimes should record why, before an enforcement agency asks.
V. Conclusion
The November 10 deadline is usually framed as a question of whether rare earth metals keep moving. However, the legal question is what happens when two governments claim the same foreign factory. China answered the U.S. not by rejecting extraterritorial export controls but by adopting them, rule for rule. If both suspensions lapse, the burden of that similarity will fall on companies that are neither American nor Chinese. Until the two governments negotiate a way to coordinate conflicting license demands, a truce is the only thing standing between those companies and an a choice who to align with.
