In April 2025, China introduced new export licensing requirements on certain rare earth elements, significantly affecting European companies in the life sciences sector. These measures are not merely fallout from the ongoing U.S.-China trade conflict; they increasingly serve as a strategic lever in negotiations with the EU, catching many European stakeholders by surprise. With nearly 90% of global rare earth refining capacity located in China – and alternatives often limited, costlier, or technically inferior – affected businesses face a complex compliance landscape with growing commercial implications. This includes impacts on M&A activity and company valuations.

Rare Earth Elements Covered by the New Regulations

The new Chinese export controls apply to seven out of the seventeen rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These medium to heavy rare earths are critical for advanced technologies. The regulations extend not only to the pure elements, but also their oxides, alloys, compounds, and mixtures.

All exports of these substances now require a license from China’s Ministry of Commerce (MOFCOM), under the country’s Export Control Law. Shipments lacking proper licenses or documentation may be held or denied at customs. Beijing’s stated rationale is the “dual-use” nature of these materials, which have strategic relevance for industries ranging from defense to medical technology. As such, companies sourcing these materials from China must comply with the new regime or face supply interruptions.

Although the application must be submitted by the Chinese exporter, the process depends heavily on detailed information from the European customer regarding the end use and end user. Any imprecision or inconsistency in this documentation can result in processing delays.

Implications for Life Sciences Companies

While much attention has focused on the impact of these restrictions on defense and high-tech manufacturing, the life sciences sector is increasingly exposed. Rare earth elements play a vital role in numerous medical technologies used in diagnostics and treatment. Affected life sciences companies may include:

Diagnostic Imaging Suppliers

Gadolinium is a key component in MRI contrast agents. Leading manufacturers such as Bayer, Bracco, GE HealthCare, and Guerbet rely on Chinese-sourced gadolinium. If supply is restricted, MRI diagnostics may be severely affected. Experts warn that without gadolinium, “patient care will suffer,” as there are no adequate substitutes for these contrast agents.

Radiopharmaceutical Developers

Cutting-edge cancer therapies, such as Novartis’s Lutetium-177-based Pluvicto for prostate cancer and Boston Scientific’s Yttrium-90 microspheres for liver tumors, depend on rare earth isotopes. Export delays affecting lutetium or yttrium could jeopardize production and distribution. Some Chinese chemical suppliers have already paused exports, pointing to possible shortfalls for European pharma and biotech firms.

Medical Device Manufacturers

Lutetium and yttrium are used in medical lasers and in components for advanced imaging equipment such as scintillators. If these inputs become unavailable, medical device producers could face supply bottlenecks. Although Chinese authorities suggest that impacts on healthcare will be minimized, many in the industry remain skeptical, and disruptions to hospital procurement and device manufacturing remain a tangible risk.

Impact on M&A Transactions: Valuation, Timing, and Deal Certainty

The new export controls are beginning to influence M&A activity, particularly in sectors that depend on stable supplies of rare earths. In our experience:

• Ongoing transactions involving rare-earth-dependent businesses have been paused or delayed due to supply concerns and the need for additional regulatory and commercial due diligence.
• Planned deals are being reassessed, especially when buyers view supply chain fragility as a material commercial risk.
• Buyers and investors are now conducting targeted due diligence on rare earth exposure, evaluating licensing obligations, feasibility of material substitution, and reliance on Chinese suppliers.
• Valuations and deal structures are being adjusted to reflect supply-side uncertainty and potential delays in product delivery or revenue recognition.

The core issue is that Europe’s dependency on China for refined rare earths cannot be resolved in the short term. This creates risk around cash flow, capex planning, and customer retention – all of which can affect deal pricing and risk allocation.

In addition to financial implications, many companies face significant operational disruptions. We have seen cases where production lines had to be temporarily shut down due to a lack of input materials, with employees placed on mandatory leave. To mitigate delivery delays and fulfill contractual obligations, companies have had to plan for extra shifts and overtime once material becomes available – creating downstream strain on workforce planning and labor relations. These cascading effects make rare earth shortages not just a commercial issue, but an HR and operations challenge as well.

Moreover, companies experiencing delivery delays may face customer claims. Whether these claims can be contractually deflected depends heavily on the specific wording of force majeure provisions. A thorough review of such clauses is critical when negotiating or finalizing deals under these conditions.

Export Licensing Procedure: What European Companies Need to Know

Under the new regime, MOFCOM offers two types of export licenses:

• Individual License – authorizes a one-time shipment for a specific end user
• General License – covers multiple shipments, usually granted to trusted exporters with strong compliance histories

Applications must include:

• The material type and volume
• A clear and credible end-use description
• Full identification and documentation of the end user

The process is document-heavy, and in our experience, the most frequent cause of delay is incomplete or inconsistent submission of technical or end-use data. Although applications are filed by the Chinese supplier, the European customer must provide most of the required detail.

Expected Processing Time

• Standard applications: Up to 45 working days
•  Delays: Possible for incomplete or sensitive applications
• “Green channel” option: MOFCOM has discussed expedited review for EU-related shipments, but this remains a conceptual proposal. Companies should continue to plan based on standard processing times.

How We Can Support You

We combine deep sectoral knowledge in life sciences, regulatory law, export control, and M&A. With teams in Europe and China, we help clients:

• Assess exposure to rare earth supply risks (including in due diligence and carve-outs)
•  Prepare and verify MOFCOM license documentation
• Coordinate with Chinese legal counsel on licensing and strategy
• Advise on deal structuring and supply-related risk mitigation
• Review and adapt force majeure clauses and key supply agreements
• Respond to compliance and commercial risks stemming from export control developments

Whether your business is procuring contrast agents, structuring a cross-border transaction, or mitigating delivery risk in ongoing operations, we offer tailored, cross-disciplinary advice to help you manage uncertainty with confidence.