China Expands Export Restrictions on Japanese Entities

China has broadened its restrictions on the export of dual-use goods to dozens of Japanese entities, including those in the upstream oil and gas sector. The Ministry of Commerce announced that 20 entities, such as Mitsui E&S and Terra Drone Corporation, have been added to an export watch list due to unverifiable end users and end uses of supplied dual-use goods. Additionally, another 20 Japanese entities have been placed on an export control list, prohibiting exporters from shipping dual-use goods to them.

Requirements for Export Watch List Entities

For the 20 entities on the export watch list, Chinese exporters must submit a risk assessment report and a written guarantee that the goods will not be used to enhance Japan's military capabilities. The ministry will also conduct stricter reviews of end-user and end-use for exports to these entities.

Specific Examples of Affected Entities

Mitsui E&S is involved in the Guanabara MV31 floating production, storage, and offloading (FPSO) unit project, deployed on Petrobras' Mero pre-salt field offshore Brazil. The FPSO has been under a 22-year lease since May 2022, with a processing capacity of 180,000 barrels of oil per day and 12 million cubic meters of natural gas per day. Mitsui E&S also holds a 3.66% stake in Modec, a Japanese floating systems specialist. Terra Drone collaborated with Modec in 2023 to address inspection challenges in offshore floating production vessel systems.

Broader Implications and Prohibitions

The ministry stated that overseas organizations and individuals, along with domestic exporters, are prohibited from transferring or providing Chinese-origin dual-use goods to the 20 entities on the export control list. Subsidiaries of Mitsubishi Heavy Industries (MHI), including MHI Oceanincs, MHI Sagami High-tech, MHI Logitec, and MHI Maritech, are included on this list. Upstream has contacted Mitsui E&S, Terra Drone, and Modec for comment, while MHI declined to comment.