China’s export control compliance guide provides essential guidelines for businesses navigating the complexities of trade regulations, ensuring they adhere to both domestic and international standards.

When it comes to Chinese guidance, the Chinese Ministry of Commerce or MOFCOM is responsible for formulating policies on foreign trade, export and import regulations, foreign direct investments, consumer protection, market competition (competition regulator) and negotiating bilateral and multilateral trade agreements.

MOFCOM has not established an official compliance program framework.

However, it provides for certain key components that a compliance program should include. An effective ECP needs to be carefully tailored to address unique PRC export control risks that any multinational company faces in China.

Companies should conduct a comprehensive assessment of their PRC export control risk based on, inter alia, their size, industry and operational circumstances management.

China’s Export Control Compliance Guide

Each program should incorporate at least these eight essential components of compliance:

Statement of Policy

This statement is similar to the ‘Management Commitment’ aspect in other jurisdictions.

Organization Structure and Responsibilities

Ideally, this structure includes three components. A management level entity, such as a Chief Compliance Officer (CCO), an independent department for coordinating and supporting tasks and supervision, and finally, the normal departments being responsible for implementation.

Risk Assessment

The risk assessment has been recently added by the MOFCOM. For items to be exported, research and development (“R&D”), internal operations and practice, circumstances of customers, destination and third parties involved in export processes, and their risk solutions, MOFCOM requires a complete risk assessment.

Screening Procedure

MOFCOM has published a detailed description on how the screening procedure should be conducted, listing every single step as well as potential “red flags”. 

Emergency Measures

This aspect has been newly added by MOFCOM. It includes recommendations for companies to be prepared for emergencies, for example by establishing a whistleblowing procedure. 

Record-Keeping

The MOFCOM guidance contains specifics on how documentation should be conducted. This includes details on export documents, correspondence as well as licensing documents and internal records. In the guidance, the MOFCOM recommends companies to store and keep their documents and records for a period of at least five years.

Audits and Training

Compliance audits have been only recently added by MOFCOM. MOFCOM also recommends companies train their employees properly regarding sanctions compliance issues to make them aware of potential issues and how to react to them. 

Compliance Audits

Regarding compliance audits, MOFCOM has introduced standard audit procedures. 

MOFCOM guidance in general expresses the importance of a compliance program to be independent, effective, and in accordance with the applicable laws (legal). The program needs to be periodically reviewed, assessed, and improved to make sure it is up to date and works in practice.

Final Thoughts

The Chinese Ministry of Commerce (MOFCOM) plays a pivotal role in shaping policies around foreign trade, foreign investments, consumer protection, and trade agreements. Despite the absence of an official compliance program framework, MOFCOM underscores several essential components that a compliance program must incorporate, particularly to navigate the unique export control risks in the People’s Republic of China (PRC). These components range from clear policy statements and well-defined organizational structures to meticulous risk assessments, comprehensive screening procedures, and provisions for emergencies.

Emphasis is also placed on systematic record-keeping, with a recommended retention period of five years, and the recent inclusion of compliance audits underscores the importance of regular oversight. Furthermore, the directive on training showcases the need for employee awareness and preparedness. MOFCOM’s guidance encapsulates the essence of a compliance program’s autonomy, efficiency, and legal adherence, highlighting the significance of continual evaluations and refinements to ensure practical applicability.