China has established a counter sanction and blocking statute regime that can create significant liability for complying with foreign sanctions. This regime synergizes with other penalty rules, which can create a multiplier effect sufficient to cause a total shutdown in China. Private parties harmed by US or EU sanctions can sue over your compliance with extraterritorial laws. What makes blocking statutes particularly hazardous is a complex set of look-through rules designed to make evasion impossible, one that requires specialized compliance scanning techniques to avoid liability. Fortunately, the rules are highly defined and risk can be controlled with the right strategy. This article will explain how you can do that.

Contents

• What the Blocking Statutes Contain
• How Counter Sanctions Are Enforced
• Look Through Approach Compliance Hazards
• What Are Your Risks?
• How to Manage Risks

 What the Blocking Statutes Contain

Amid geopolitical tensions and rising unilateralism, China enacted the Countering Foreign Sanctions Act of 2025 and Administrative Rules in response to what it saw as discriminatory constrainment. This marks a transition from ad hoc executive action, to defensive Lawfare. The Countering Foreign Sanctions Act and implementing regulations provide countermeasures, defining how powers are delegated and law enforcement lists are used. It intends to provide a private cause of action that does not compromise economic utilitarianism. The Act imposes a dual compliance regime on multinational corporations while adding to compliance challenges by applying a look-through approach.

Businesses can maintain predictability and continue to grow in this complex legal landscape by employing dynamic risk management process such as 360-degree compliance reviews, effective contract provision design.

Chinese sanction blocking was previously achieved through executive action but is now codified in several laws: the Countering Foreign Sanctions Act, its Administrative Rules, and Untrustworthy Entity List Rules.

The Entity List protects Chinese sovereignty, security, and legitimate interests by imposing sanctions that restrict import/export activities with those parties.[1]

The Countering Foreign Sanctions Act is meant to protect national sovereignty and interests by authorizing active countermeasures, such as using blocking lists, restricting transactions, freezing assets, and directly targeting anyone who has enacted sanctions against China, including their affiliates.[2] This law is sometimes confusingly called the “Anti-Foreign Sanctions Law,” but in Mandarin it literally means an Act of Congress to Counter Foreign Sanctions. The law is modeled on Europe’s blocking statutes against US sanctions.

The Administrative Rules comprise blocking measures that provide teeth to enforce the Act, supplementing the regime, by defining the appropriate agencies and procedures for responding.[3]

How Counter Sanctions Are Enforced

The law comes with guarantees for businesses to provide predictability about how PRC government agencies and courts will behave when countering foreign sanctions.

At the policy level, the Act limits executive agency action. A required condition to approving blocking measures sanctioning Western countries and their officials is that the action will further sovereignty and the national interest. More plainly, aggression is not authorized. Instead, diplomats are given leverage with powers to suspend, modify, or revoke the blocking measure as appropriate, or to further investigate, as they negotiate with foreign parties.[2]

The Act establishes a strict set of rules on how executive authority is applied. Clear advance notice is required under §4 and §9, where the Foreign Ministry together with other cabinet level agencies jointly publishes the blocking list.[2] Blocking measures include travel restrictions, such as visa denials, cancellations, or deportation; it can be action against property in China including sealing, impounding, or freezing. Organizations and individuals within China can be restricted from transacting or working with a sanctioned blocked entity.

So far, the Ministry has published counter-measures targeting US and Canadian entities and individuals on its website, which impose export controls and maritime tax charges.

Caselaw Gives Right to Sue

The China Countering Foreign Sanctions Act has judicial precedents establishing a domestic cause of action against extraterritorial sanctions. The Act provides that citizens and organizations have standing to sue in Chinese courts to claim damages arising from foreign sanctions. This provides a potent domestic legal remedy to claim restitution for losses caused by foreign extraterritoriality.

A case highlighted by the Supreme Court applies § 12 of the Act. The facts were, a Chinese maritime engineering company entered into a ¥140 million shipbuilding subcontract with a foreign party, S Equipment Company. The Chinese company fulfilled its obligations in June 24, but payment of the remaining ¥86 million was refused due to third country sanctions. The company obtained an injunction from the Nanjing Maritime Court to seize and impound the ship, bringing a suit under the Act. In court, Company S posted a ¥99,743,000 injunction bond to release the ship.[4]

Ultimately, the case was settled with court mediation. As the first tort suit brought under the Act, it has major precedential significance for future disputes where companies face due to unilateral sanctions.

Asset freezing on blocked entities is the most efficacious direct deterrent. However, impounding assets that are needed in the global supply chain such as ships, could lead to wrongful injunction damages and harm the interests of companies of other countries. The court in this case was able to balance these interests by requiring an injunction bond: trade continuity was maintained by releasing the business asset and a posted bond sufficient to deter foreign sanctions. The precedent illustrates how judges use sophisticated legal analysis to simultaneously pursue two of China’s policy goals: minimize economic disruption and protect the national interest.

Look Through Approach Compliance Hazards

Traditional transaction legal compliance processes may not be effective to prevent liability under China’s blocking statutes. The Act creates systemic compliance problems that transcend the US Entity List regime, because the § 5 look-through approach expands the range of compliance risks from entities to a much larger set of related parties. The China Countering Foreign Sanctions Act clearly delineates which entities will come under these compliance pressures, which multiplies risk.[2]

Multinationals’ subsidiaries and JVs in China may be investment vehicles for someone connected to a foreign sanction decision, thus subject to the blocking list. Entities in the high-tech or dual use supply chain may be subject to linked restrictions from export controls, the Untrustworthy Entity List, and the Act. (this list is sometimes misleadingly called the “Unreliable Entity List,” but the Mandarin literally means “cannot be trusted”)

Look-Through Classifications

The law’s greatest peril is the § 5 blocking measures that apply a look-through approach to affiliate entities, which may be imposed by a cabinet-level agency on four entity classifications:

• Spouse and immediate family
• Executives or persons with actual control
• An organization under such persons’ governance or control
• Persons or organizations that have participated in their formation or operation

This greatly increases what a compliance due diligence investigation needs to analyze. The provision’s look-through approach gives it teeth against businesses, with broad reach to personal relationships—i.e. spouse and immediate family—and persons controlling or operating organizations, on top of US law’s secondary sanctions and 50% rule.[2][3]

Legacy due diligence investigations looked at whether the counterparty or its 50%+ subsidiaries are on the list, but the China Countering Foreign Sanctions Act extends it to executives, persons with actual control, immediate family, and any organizations they were involved with setting up or running. Internal discovery and risk management is frustrated by how the relevant information is private or involves complex foreign structures with opaque public records.

Consider asking CBL’s to help you find a lawyer to understand your compliance obligations in this area.

What Are Your Risks?

A business faces an extensive range of liability for failing to diligently look for possible attempts at circumventing China’s counter-sanction decisions. The blocking measures are different for individuals as for organizations/entities. For individuals, the blocking list designates restricted parties, but the look-through approach adds indirect or intermediary parties, which can include spouses, immediate family, or organizations where they are executives. Blocking measures include travel restrictions, visa cancellation, and frozen assets.

The need to investigate family relationships makes compliance hard. In the entity and organizations context, the blocking list designates restricted parties, while the look-through approach adds indirect or intermediary parties, which are anyone involved in their formation or operation.

Risks can multiply in the broader sanction regime. Compliance scanning should take into account how the Act has synergized with other sanctions regimes to have a multiplier effect. Its stringent blocking measures, i.e. asset freezing and transaction restrictions, can be combined with the entity list, which uses import/export restrictions. Together they can amount to a ban on doing business in China.

When the export control list is considered, a party’s inclusion on the Act’s blocking list means companies must immediately cease or limit transactions with them. Risk assessments and compliance declarations are required even for entities on the export control watch list, and there is no limit to the review period for licenses.

Overall, risks are greatly multiplied since you are not looking at just one counterparty, you have to consider an entire social network. Transacting with a blocked entity or affiliate may be unlawful and may be restricted or blocked by the PRC government.

How to Manage Risks

Multinational corporations need a dynamic, layered risk management and emergency response process to handle the complexity and dual restriction risks under the China Countering Foreign Sanctions Act. Below, we’ll introduce seven techniques that can protect your business in the country.

Control risks from the look-through approach by adopting a similar process to examine whether any of the following are on the list: the company, its direct partners, affiliates, spouse, immediate family members, persons with actual control, and affiliates. Write tailored compliance manuals to manage the dual compliance regime. For example, companies in the high-tech supply chain must follow export controls and sanction blocking rules. financial institutions needing to provide staff with clear instructions, must first determine asset freezing reporting processes and time limits.

Use compliance software to get real time notification of changes to the blocking list or policy by the State Council and other government agencies to rapidly identify where risks may emerge. To get accurate results, properly weight the multiplier effect. Regularly audit compliance for partner licenses, flow of funds, and contract provisions contrary to the Act, especially for related party transactions affected by international sanctions.

A response process & team that provides advance warning can mitigate blocking measures, so you should have an organization-wide crisis response capability. When sanctions/blocking risks emerge, key members from legal, compliance, PR, operations, and finance have defined roles to analyze legal risks, suspend risky transactions, and communicate with the public

Provide compliance training for internationally exposed executives and employees about the Countering Foreign Sanctions Act and its regulations, i.e. Entity List and Blocking Procedures, about concerns over look-through approach risks.[1][2][5]

Get regulatory and legal relief as available under the Act. Petition for administrative approval/exemptions and ask the appropriate agency if it has an approval application process for affected parties. You can rely on supplemental regulations to request a cabinet level agency offer administrative exemption or approval to carry on essential business activities as necessary to protect business or national interest.[2]

File a lawsuit to seek damages in Chinese courts when your rights are infringed upon by foreign sanctions or extraterritoriality. Strategically mitigate economic losses by posting injunction bonds in lieu of assets imperiled by blocking measures to ensure business continuity.

Seek legal advice to provide risk control management when facing these complex compliance issues.

Conclusion

The PRC Countering Foreign Sanctions Act adopts a lawfare approach to protect its sovereignty and interests, regularizing how battle is fought on the international stage.[2] A statutory foundation enables it to achieve both judicial discretion and economic utilitarianism, providing stronger deterrence as a legal instrument. The Act and its multiplier effect with other legal regimes complicates compliance for global multinational corporations, escalating penalties to full shutdown in China.

A 360-degree compliance management system is needed. Legal vigilance can enable you to react to political and economic fluctuations in a world where the rule-based order has been disrupted by geopolitics and keep you safe from dual sanctions. Consider asking CBL’s to help you find a lawyer to set up the compliance system.

Compliance management is no longer just a cost but should be seen as a strategic investment aimed at maximizing legal definiteness in indefiniteness and ensuring the long-term stability of business operations. Treat compliance management as a strategic investment in business continuity that provides legal definiteness in an uncertain world, not a cost center.

Footnotes

[1] Untrustworthy Entity List Rules, (不可靠实体清单规定), (Ministry of Commerce, Sept. 19, 2020), (in Mandarin)

[2] Countering Foreign Sanctions Act, (反外国制裁法), (Ministry of Justice, Mar. 24, 2025), (in Mandarin)

[3] Administrative Rules, (实施《中华人民共和国反外国制裁法》的规定), (Ministry of Justice, Mar. 24, 2025), (in Mandarin)

[4] Jiangsu Case No. 72-cv-2157 (2024), (苏72民初2157号(2024)), (Court Case Repository, October 6, 2025), (in Mandarin)

[5] Blocking Procedures, (阻断外国法律与措施不当域外适用办法), (Ministry of Commerce, Jan. 9, 2021), (in Mandarin)

Bibliography

The secondary sanctions and 50% rule commentary in this article is derived from the following publications.

Li Jin,The Law of Unilateral US Secondary Sanctions, Journal of Qinghai Normal University (Social Sciences Edition), 2021, 43(05): 25-33. DOI: 10.16229/j.cnki.issn1000-5102.2021.05.014.

50% Rule of U.S. Sanctions, WeChat, accessed on July 15, 2026.