China Demands Sensitive Information in Exchange for Rare Earth Exports, Companies Warn

China has been demanding sensitive commercial information as a condition for approving the export of magnets and rare earth elements, according to Western companies — raising concerns over potential misuse of data and exposure of trade secrets.

The Chinese Ministry of Commerce has reportedly required companies to provide production details and confidential client lists as part of the approval process for export licenses covering magnets and critical minerals, according to several firms and official guidelines.

China dominates the processing of rare earths and the manufacture of the magnets in which they are used.

These magnets are critical components in electronics, electric vehicle motors, and wind turbines, as well as in military applications, such as fighter jets — giving Beijing significant leverage over global trading partners.

According to Frank Eckard, CEO of German magnet manufacturer Magnosphere, Chinese authorities have been requesting that companies disclose “confidential information” about their products and businesses in exchange for export approvals.

“It’s a matter of [China] obtaining information officially rather than trying to steal it,” Eckard said.

In April, Chinese authorities implemented stricter controls on the export of seven rare earth metals and magnet-related materials as part of its ongoing retaliatory trade dispute with the U.S. The move forced companies worldwide to scramble to secure supplies and maintain their production lines.

This week, the U.S. and China reached a preliminary agreement, according to U.S. President Donald Trump, under which Beijing would ease restrictions on the flow of rare earth materials — a priority for the White House.

However, China has not yet announced the end of export controls. Moreover, it remains unclear whether the new agreement will simplify the export approval process for these critical materials.

Under the current export licensing system, China requires foreign companies to submit extensive data about their operations, workforce, end-use applications, and production processes.

Companies may also be asked to provide photos of their products and facilities, as well as details of previous commercial relationships, according to guidelines from the Ministry of Commerce for the export of dual-use (civilian and military) goods.

“They ask for a lot — really a lot,” said Andrea Pratesi, supply chain director at B&C Speakers, an Italian firm that makes loudspeakers for live events, at a factory near Florence.

Pratesi said the company had to send photos and a video of its production line, plus market information, customer names, and some purchase orders with buyer names blurred.

“We had to do it — otherwise, they just set your papers aside and wait,” Pratesi said, noting that B&C had received export approvals for two orders and was awaiting a third. “We have nothing to hide — we make loudspeakers.”

Experts say that in some cases, China’s Ministry of Commerce demands even more than what is listed in official guidance. A Chinese export control lawyer, who asked to remain anonymous, said the ministry often seeks detailed information on production, operations, and end-user process flows.

Matthew Swallow, product manager at UK-based Magnet Applications, said his company had several export requests rejected in April “due to a lack of end-user verification.”

“We now submit photos of magnets in production, details of final usage, and information on the end customers, among other things,” Swallow said — which helped the company obtain multiple export approvals.

Swallow acknowledged there is “genuine concern” about exposing customers and said he advises them not to include trade secrets or proprietary information in their submissions.

Generally, export approval requests are submitted to local commerce departments by Chinese suppliers on behalf of their foreign clients, which raises concerns about commercial secrecy and the potential compromise of customer data.

The Chinese Ministry of Commerce did not immediately respond to a request for comment.

Jens Eskelund, president of the EU Chamber of Commerce in China, said the level of detail required makes it difficult for companies in sensitive sectors to comply — or even to apply for licenses.

“For some applications, you must specify the use so precisely that it raises intellectual property concerns,” Eskelund noted.

Even so, according to another European executive who requested anonymity, most companies are currently prioritizing access to rare earth magnets over longer-term security issues.

“Companies are willing to do whatever China demands to secure the supplies,” the executive said.

Source: Valor Econômico

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