EU Official: China Says It Will Grant Gallium, Germanium Licenses to EU Firms

The EU has received assurances that Beijing will grant export licenses for shipments of gallium and germanium to European businesses despite the restrictions China placed on exports of the two metals in August (see 2307050018), European Commission Vice President Valdis Dombrovskis said this week. Dombrovskis also said the bloc is looking to sanction additional Chinese firms that may be skirting restrictions against Russia and is hoping to ensure its upcoming supply chain due diligence regulations don’t impose excessive compliance burdens on EU companies.

Dombrovskis, questioned Oct. 3 by member state representatives during a European Parliament plenary session, said several European companies have so far requested licenses from China to import gallium and germanium, which are used to make semiconductors and other key technology. Dombrovskis said those licenses are still being processed, but Chinese authorities so far are “making reassuring noises that those licenses are going to be granted.”

He added that those assurances aren’t a guarantee that all licenses will be approved. “This is something we need to monitor very closely, and we will be monitoring very closely,” Dombrovskis said. “So whether China actually restricts exports by failing to approve those licensing applications -- that's something we will need to see in the coming weeks and months.”

Those export restrictions are “exactly an example” of why the EU needs to diversify its supply chains, especially for critical raw materials, Dombrovskis said. He pointed to the EU’s proposed Critical Raw Materials Act, which could lead to limits on annual imports of certain raw materials from third countries. Dombrovskis said the commission wants to “alleviate EU’s dependencies on single suppliers.”

Dombrovskis said he has raised this issue and the EU’s derisking plan (see 2303310036) in meetings with his Chinese counterparts. “Clearly they see this with a degree of concern,” he said. “We have to be clear that derisking is not another word for decoupling.”

Dombrovskis also said the commission has been raising Russia-related sanctions evasion concerns in meetings with Chinese officials. He noted the EU sanctioned multiple China-based companies in its most recent Russia sanctions package (see 2306230013), and those companies are “now subject to more stringent export restrictions on dual-use and advanced technologies.”

Dombrovskis said more designations may be coming.

“We are working with member states’ customs to identify other entities that have been circumventing our sanctions through China or Hong Kong,” he said.

The EU also is working to implement a new corporate sustainability due diligence directive (see 2202230073, 2306010022 and 2308310035), which could require large companies to conduct specific due diligence on their supply and value chains to address various environmental and social concerns, including forced labor risks.

One member of Parliament during the plenary asked Dombrovskis how the EU should address unreliable third-party auditors that help European companies conduct due diligence on their China-related supply chains. The person said many European companies hire Chinese nationals to conduct on-site visits at factories in China but said it’s “very difficult for Chinese nationals to call out human rights abuses that they may identify in these on-site visits.”

Dombrovskis said the commission is still working through this issue and others and welcomes feedback from industry. “It's clear that we also need to engage with EU industry to see how to ensure meaningful compliance” but also “to make sure that it does not end up as an excessive administrative burden for EU companies,” he said. “So we are clearly ready to engage with European companies on all those aspects to make sure that we have a smooth application of this due diligence regulation.”