The regulatory and compliance tensions between the United States and China continue to intensify as Beijing expands its legal framework for countering foreign sanctions, export controls, and other forms of what it characterizes as improper extraterritorial jurisdiction. Recent Chinese measures, including the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States and the State Council’s Provisions on Industrial and Supply Chain Security, reflect a broader strategic effort to formalize China’s ability to respond to foreign regulatory pressure while simultaneously increasing state oversight of industrial and supply chain activity. Collectively, these developments underscore the increasingly difficult position facing multinational companies attempting to navigate competing legal obligations imposed by the United States and China. Increasingly, organizations operating across both jurisdictions are finding themselves subject to regulatory expectations that are not merely overlapping, but potentially incompatible in practice, particularly where one jurisdiction affirmatively expects compliance with measures that another jurisdiction characterizes as unlawful or contrary to national interests.

The Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States significantly expand the Chinese government’s ability to respond to foreign sanctions and export control measures that Beijing views as improperly extending beyond another country’s territorial jurisdiction. The framework authorizes Chinese authorities to prohibit compliance with certain foreign measures, establish mechanisms for affected Chinese parties to seek relief, and impose countermeasures against entities that assist in implementing foreign restrictions deemed harmful to Chinese interests. The regulations further contemplate coordinated government response mechanisms involving multiple ministries and agencies, reinforcing that countersanctions policy is increasingly being integrated into broader Chinese national security and economic policy objectives. Importantly, the regulations are not narrowly confined to traditional sanctions programs. Rather, the framework appears intentionally broad, potentially encompassing export controls, investment restrictions, technology transfer limitations, supply chain related restrictions, and other foreign legal measures affecting Chinese commercial or strategic interests. The measures also contemplate legal remedies for Chinese organizations and individuals adversely affected by foreign restrictions, including the ability to pursue compensation or injunctive relief where compliance with foreign laws causes economic harm. In practical terms, the framework appears designed to discourage multinational organizations operating in China from voluntarily aligning themselves with foreign restrictions directed at Chinese entities, industries, or technology sectors.

At approximately the same time, China adopted the State Council’s Provisions on Industrial and Supply Chain Security, which establish a national security oriented regulatory structure governing supply chain resilience, industrial security, and response mechanisms for perceived external threats to Chinese economic activity. The provisions establish systems for monitoring risks affecting industrial and supply chains, assessing vulnerabilities, coordinating emergency response measures, and implementing protective actions where disruptions are perceived to threaten national interests. The framework further contemplates centralized coordination mechanisms involving multiple government bodies, as well as enhanced supervision over strategically significant industries, technologies, and supply chain infrastructure. Notably, the regulations expressly situate industrial and supply chain stability within the broader context of geopolitical competition, foreign sanctions, export controls, and external economic pressure. In this respect, the provisions appear directed in substantial part toward responding to ongoing U.S. and allied efforts involving semiconductor restrictions, advanced technology controls, supply chain “de-risking,” and related national security measures affecting Chinese industries. Accordingly, the regulations represent more than a conventional supply chain resilience initiative; rather, they form part of a broader strategic framework designed to reduce perceived foreign leverage over Chinese industrial and technological development.

These developments are occurring against the backdrop of an increasingly aggressive U.S. regulatory posture toward China. Over the last several years, the United States has substantially expanded the use of export controls, Entity List designations, sanctions authorities, investment restrictions, and supply chain focused due diligence obligations involving Chinese entities. The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has continued to expand restrictions involving advanced semiconductor technology, artificial intelligence related exports, and other strategically sensitive sectors, while the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has increasingly targeted Chinese companies connected to Iranian, Russian, and other sanctions related activity. At the same time, broader scrutiny of Chinese counterparties across sensitive industries has significantly increased compliance expectations for U.S. companies and multinational organizations with operations, personnel, banking relationships, or other nexus points within the United States. China, in turn, has increasingly framed such measures as improper exercises of foreign extraterritorial authority directed at constraining Chinese economic development and technological advancement.

The practical result is the emergence of increasingly direct conflicts of law scenarios for multinational businesses. Companies operating in China, or maintaining relationships with Chinese counterparties, may now face circumstances in which compliance with U.S. sanctions, export controls, or supply chain restrictions could itself create regulatory exposure under Chinese law. Conversely, failure to comply with U.S. export control and sanctions requirements may expose those same organizations to substantial civil or criminal liability in the United States. The recent Chinese measures specifically contemplate circumstances in which foreign restrictions interfere with Chinese commercial activity, thereby creating the possibility that multinational companies may face competing legal mandates that are increasingly difficult to reconcile in practice. This dynamic is particularly acute in sectors involving semiconductors, advanced manufacturing, telecommunications, aerospace, artificial intelligence, critical minerals, and other strategically sensitive industries. Many companies now operate within supply chains that implicate both U.S. export control jurisdiction and Chinese industrial security measures simultaneously, while the increasingly expansive use of intermediaries, distributors, and multinational sourcing arrangements further complicates efforts to determine ultimate end users, end uses, and jurisdictional touchpoints.

For compliance professionals, these developments reinforce the importance of maintaining highly sophisticated and well documented compliance frameworks capable of evaluating cross border regulatory exposure from multiple perspectives simultaneously. Due diligence involving Chinese counterparties can no longer be limited solely to sanctions and restricted party screening. Companies must also evaluate supply chain dependencies, ownership structures, government affiliations, technology transfer implications, data localization requirements, intermediary relationships, and the possibility that ordinary compliance decisions may themselves create exposure under Chinese countersanctions or industrial security frameworks. At the same time, notwithstanding the increasingly difficult conflicts of law environment, U.S. companies—and foreign companies with operations, subsidiaries, personnel, financial touchpoints, or other nexus points within the United States—would nevertheless be well advised to continue prioritizing compliance with the Export Administration Regulations, OFAC sanctions programs, and related U.S. national security controls. The jurisdictional reach of U.S. export controls and sanctions regulations remains extensive, and recent enforcement activity demonstrates that U.S. regulators continue to aggressively pursue violations involving China related transactions, particularly in sensitive technology sectors.

Ultimately, the recent Chinese measures illustrate that the regulatory divide between Washington and Beijing is no longer confined to trade policy or geopolitical rhetoric. It is increasingly embedded in the legal and compliance frameworks governing cross border commerce itself. For multinational organizations, the challenge is no longer simply understanding one jurisdiction’s rules in iso...

Corruption, Crime & Compliance

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