China's Rare Earth Export License Requires Final User Information

Recent high-level trade talks between China and the U.S. in Geneva on May 12, 2025, resulted in a mutual agreement to significantly reduce tariffs within 90 days, lowering them by 115% in total (as per the joint statement). Despite this tariff détente, China’s tightened rare earth export controls have drawn international attention, positioning rare earths as a strategic "weapon" in the ongoing China-U.S. geopolitical rivalry. China has continued to tighten rare earth export controls and has implemented a new export licensing system, adopting a "one batch, one license" approach. This mandates that each rare earth shipment be accompanied by a separate rare earth export license, with exporters required to furnish detailed end-user information. This policy aims not only to plug regulatory gaps but also to give China a key advantage in the strategic competition with the U.S.

Rare Earths: A Strategic Resource

Rare earths, a group of 17 metallic elements including the 15 lanthanides (e.g., lanthanum, cerium, praseodymium, neodymium) plus scandium and yttrium, are critical raw materials for modern industry. They exhibit exceptional optical, electrical, magnetic, and catalytic properties, making them essential in high-tech industries, defense, renewable energy, healthcare, and agriculture. In defense applications, rare earths are used to manufacture missile guidance systems, radar, satellite communication equipment, stealth materials, and permanent magnets for aircraft engines. In high-tech electronics, they enhance the performance of smartphones, computer hard drives, LCD screens, and lasers. In renewable energy and environmental sectors, they are vital for electric vehicle motors, wind turbines, and catalysts (e.g., three-way catalytic converters for vehicle exhaust purification). This underscores their status as a vital strategic mineral.

China’s Dominance and Export Controls

In the context of recent China-U.S. tariff policy negotiations, rare earths have emerged as a powerful card for China. On April 4, 2025, China announced export controls on seven medium and heavy rare earth items—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. On May 9, 2025, China launched a special operation to combat the smuggling of strategic minerals like rare earths and tungsten, aiming to prevent illegal outflows, curb smuggling, safeguard national security, promote compliant trade, and ensure supply chain stability.

China is the world’s primary rare earth supplier and a key source for U.S. imports. According to the U.S. Geological Survey, in 2024, China held the largest global rare earth reserves at 44 million tons, accounting for 48.89% of the total, and produced 270,000 tons, representing 69.23% of global output. Between 2020 and 2023, the U.S. relied heavily on China for 70% of its rare earth compound and metal imports, making China the largest supplier.

Industry experts note that rare earth export controls are a significant countermeasure in China-U.S. trade friction, potentially impacting the U.S. defense industry. Following the trade talks, U.S. Trade Representative Jamison Greer attempted to alleviate industry concerns about this vulnerability, suggesting that China might ease rare earth export restrictions. However, there is scant evidence to support this, and the opposite appears true. Multiple experts indicate that China is intensifying regulatory efforts, with the licensing system now active rather than relaxed.

Implementation of the Licensing System

According to CNN, China has recently begun issuing rare earth export licenses under the "one batch, one license" system, requiring a separate application for each shipment with non-reusable permits. Applications, which require detailed end-user information, can take up to 45 working days for approval. This measure allows China to track the final destination of rare earths, identify downstream clients, and close regulatory loopholes.

Gracelin Baskaran, director of the Critical Minerals Security Project at the Center for Strategic and International Studies (CSIS), stated that if the U.S. changes its stance and violates tariff agreements, China could easily deny the necessary licenses. The export control system, designed as a dynamic licensing regime, empowers China to decide which companies or nations can access its rare earths and magnets at any time.

License Issuance and Geopolitical Implications

Caixin reports that as of May 18, 2025, at least six rare earth magnet companies—Zhongke Sanchuan, Ningbo Yunsheng, Zhenghai Magnetic Material, Tianhe Magnetic Material, Innuovo, and Dadi Bear—have received export licenses, while companies like Northern Rare Earth, Guangsheng Nonferrous, and Yingluohua are still applying. China recently removed 28 U.S. companies from its export control list, enabling them to source dual-use materials from China and apply for rare earth export licenses. However, it remains unclear whether licenses will be granted to U.S. defense-related firms.

Baskaran views the issuance of initial licenses as a geopolitical signal, possibly a friendly gesture toward Germany amid China-U.S. trade tensions, underscoring the licensing system’s role in global competition. Posts on X reflect mixed views: some highlight the resumption of rare earth magnet exports after a suspension, easing concerns for automakers and electronics firms, while others note the irregular process and uncertainty about China’s regulatory intentions, likening its control to a "faucet" it can adjust at will.

In summary, while the tariff reduction agreement signals a temporary de-escalation, China’s rare earth export controls reinforce its strategic leverage in the trade and geopolitical rivalry with the U.S., with profound implications for global supply chains, especially in defense and high-tech sectors. The dynamic licensing system enhances China’s regulatory oversight and serves as a flexible tool in international relations.

Related Information:

On May 12, 2025, following trade talks in Geneva, China and the U.S. issued a joint statement announcing a significant reduction in bilateral tariffs within 90 days, laying the foundation and creating conditions for further bridging differences and deepening cooperation. Both parties agreed to the following measures:

The U.S. committed to canceling 91% of the tariffs imposed on Chinese goods under Executive Orders 14259 (April 8, 2025) and 14266 (April 9, 2025), and revising the 34% reciprocal tariffs on Chinese goods under Executive Order 14257 (April 2, 2025), suspending 24% of these tariffs for 90 days while retaining the remaining 10%. In response, China agreed to lift 91% of its retaliatory tariffs on U.S. goods, suspend 24% of the 34% reciprocal tariffs for 90 days, and retain the remaining 10%.