China Imposes Export Control and Government Procurement Restrictions on Designated U.S. Companies

On June 22, 2026, China’s Ministry of Commerce (MOFCOM) and Ministry of Finance (MOF) both announced restrictive measures targeting a total of 56 U.S. entities, likely in response to the U.S. Department of Defense’s (DoD) recent expansion of its list of “Chinese military companies,” also known as the “1260H List.” This Advisory provides an overview of the June 22 announcements, and summarizes the key prohibitions and latest developments.

Background

On June 8, 2026, the U.S. DoD released an updated version of the 1260H List, which added several prominent Chinese companies, including Alibaba, Baidu, and Tencent. As discussed in our June 2026 Advisory, inclusion on the 1260H List is significant because it may lead to a company’s designation as a “biotechnology company of concern” (BCC) under the BIOSECURE Act, which could trigger additional restrictions on contracting with federal agencies and counterparties, as well as on the use of such companies’ biotechnology equipment or services. In addition, the U.S. DoD is prohibited from contracting directly with entities identified as Chinese military companies, and will be prohibited effective June 30, 2027 from purchasing any goods or services produced or developed by an entity on the 1260H list, among other restrictions. These restrictions apply both to the designated Chinese military companies as well as entities subject to the control of a listed entity.

The MOFCOM Announcement: Export Controls on 10 Companies

In its June 22 announcement, MOFCOM added 10 U.S. companies to China’s Export Control List pursuant to the Export Control Law (中华人民共和国出口管制法) and the Regulations on the Export Control of Dual-Use Items (中华人民共和国两用物项出口管制条例),¹ imposing the following restrictions:

• Prohibiting the export, transfer, or supply of dual-use items to the listed entities, including banning any organizations or individuals, in any country or region, from providing China-origin dual-use items to the listed entities, and requiring the immediate cessation of any such ongoing export activities, 
• Requiring export operators to apply to MOFCOM for approval in exceptional circumstances where such exports are deemed necessary.

The 10 listed entities are primarily concentrated in the defense, aerospace, unmanned systems, and rare earth sectors. They include Red Cat Holdings, Teal Drones, and USA Rare Earth, among others.

The MOF Announcement: Government Procurement Restrictions on 46 Entities

In a separate June 22 announcement, MOF prohibited the procurement of products manufactured by 46 U.S. entities. This restriction does not apply to U.S.-funded enterprises operating in China.

The 46 entities consist of defense contractors and their affiliates, including major defense manufacturers such as Lockheed Martin, Boeing Defense, and Space & Security, as well as defense technology companies, such as Shield AI. Several of these companies, such as certain Lockheed Martin affiliates and the Raytheon/Lockheed Martin Javelin joint venture, had previously been added to China’s Unreliable Entity List (不可靠实体清单) in connection with arms sales to Taiwan.

While the latest U.S. government expansion of the 1260H List added a number of Chinese biotech and consumer tech companies, the announcements by MOFCOM and MOF did not follow suit. Their response has focused more narrowly on sectors such as defense, where U.S.-China trade was already minimal, and on U.S. rare earths producers, who have been working to insulate their supply chains from China. This may signal China’s view that avoiding significant escalation of political tensions with the United States at present is more helpful to China’s overall goals.

Legal Challenges to Latest U.S. 1260H Designations

At least two companies named on the United States’ updated 1260H List have initiated legal challenges to their designation as Chinese military companies as of the publication of this Advisory:

• WuXi AppTec, a well-known life sciences and pharmaceutical services company, in the U.S. District Court for the District of Columbia on June 11, 2026, asserting that its designation lacks factual and legal basis and seeking removal from the list.²
• Alibaba, a company with significant consumer tech operations, in the U.S. District Court for the Northern District of California on June 23, 2026, similarly asserting that its designation has “no basis in fact or law,” and seeking removal from the list.³

From publicly available information, no legal challenges have been mounted to the new Chinese restrictions at this time.

If you have any questions about the content discussed in this Advisory or would like more information, including about compliance with applicable U.S. law or the path to challenge designation as a Chinese military company, please reach out to one of the authors or your existing Arnold & Porter contact.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.