MOFCOM published the notice at 5:46pm Beijing time on Monday, 3 July 2023. Two paragraphs of plain administrative Chinese and a short schedule of HS codes covering gallium metal, gallium compounds, gallium-arsenide wafers, germanium metal, germanium dioxide, germanium tetrachloride, and a handful of alloys. Any outbound shipment of those items from 1 August onward requires an export licence issued by the Ministry of Commerce, with applications reviewed on a case-by-case basis against national security and foreign policy considerations. No blanket bans, no named countries, no explicit US-China framing in the text. Read the text literally and it is a paperwork change. Read it in context and it is the first time China has weaponised a critical mineral supply on the way out.
The context matters because China supplies about 80% of the world’s refined gallium and 60% of the world’s refined germanium. US domestic production of both, at commercially meaningful scale, is effectively zero. Alternative producers exist in Russia, Ukraine, Canada, Belgium, and Japan, but the combined non-China output is well under 20% of global demand in each case, and that output is already spoken for by long-term contracts with downstream users in Europe and East Asia. When MOFCOM gates the Chinese outflow behind a licence process, the rest of the market does not absorb the displacement without serious price movement.
If your company imports LED epitaxial precursors, gallium-nitride substrates, gallium-arsenide wafers, germanium-doped fibre optic preforms, germanium-based solar absorbers, or specialty optical coatings, you are in the immediate blast zone. Even if your line item is not on the MOFCOM HS code list directly, your supplier’s upstream probably is. Chinese producers of trimethylgallium for MOCVD, for example, are not named on the export control list, but their raw gallium feedstock is. Your supplier’s lead times, pricing, and allocation behaviour are about to change in ways their English-speaking sales team may not fully understand yet.
What the MOFCOM Notice Actually Controls
Licenced customs brokers on both sides have been parsing the HS code schedule all week. Here is the practical read.
| HS Code | Material | Typical End Use | China Share of Supply |
|---|---|---|---|
| 8112.92.90 | Gallium, unwrought | LED precursor synthesis, semiconductor feedstock | ~80% global |
| 2849.90.00 (part) | Gallium arsenide, gallium phosphide | Power semiconductors, LED substrates | ~90% of compound output |
| 8112.92.91 | Gallium scrap and waste | Recycled gallium supply | Dominant |
| 8112.92.30 | Germanium, unwrought | Fibre optic preforms, solar absorbers | ~60% global |
| 2825.60.00 | Germanium oxides (incl. dioxide) | Catalyst, fibre optic doping | ~60% global |
| 2827.39.00 (part) | Germanium tetrachloride | Fibre optic preform feedstock | Dominant |
| 7112.99 (part) | Germanium-containing scrap | Recycled germanium supply | Dominant |
Read this carefully and notice what is not on the list. Downstream finished products such as packaged LEDs, assembled solar modules, finished fibre cable, and polished GaAs wafers above a certain specification are not controlled. Feedstock materials and intermediate compounds are. That is a classic chokepoint design. MOFCOM has chosen to control the upstream without openly disrupting the downstream trade in finished goods. The message to the US semiconductor and electronics industry is clear. Your finished product imports continue. Your ability to build an alternative supply chain inside your own borders is what just got harder.
The Licence Process, Week by Week, from 1 August
The notice does not publish a decision timeline, but past MOFCOM export licence regimes for dual-use goods give a reasonable framework. Expect something like the following for the first wave of applications landing in August.
Week 1 after submission is administrative review. Is the application file complete? Does the Chinese exporter hold the relevant business licences? Is the end-user declaration filled in and does it name a consignee that MOFCOM can assess? Incomplete files get returned and the clock restarts. Expect 30 to 50% of first-wave applications to hit this.
Weeks 2 to 4 are the substantive review. MOFCOM coordinates with the relevant industry associations and, on any application flagged for sensitivity, with the Ministry of State Security and the military commission. End users in sectors such as defence, advanced packaging, radar, and satellite will draw extra scrutiny. Commercial end users in LED lighting, consumer solar, and standard fibre optic cable will in theory move faster but will still be slower than the current licence-free regime.
Weeks 5 to 8 are where the first tranche of decisions lands. Expect a mix of approvals, conditional approvals with end-use restrictions, and denials. Approvals will typically name the consignee and often the end use and will not be freely transferrable. If your US buyer changes hands or the shipment diverts, you will need a new licence.
Lead time impact on your procurement will therefore push out by 4 to 8 weeks on a best-case basis, and 10 to 16 weeks on anything remotely sensitive. Your current procurement cycle that runs on 6-week lead time from Chinese gallium and germanium suppliers probably runs on 14 to 20 weeks from August until the system settles.
Prices will move before that. Spot gallium in Rotterdam already climbed 27% between the notice date and the end of the first week of July. Germanium dioxide traders quoted 18% increases on new orders with 60-day delivery. Those are the early movers. By early August expect the spot market to have repriced a further 30 to 60% above pre-announcement levels. Long-term contract pricing will take longer to reset but reset it will, particularly on renewal negotiations for Q4 2023 and calendar 2024.
The Real Chemical Importer Impact: Precursors, Doped Compounds, and Coatings
Stepping down one layer from raw gallium and germanium metal, here is where your company actually feels this.
Trimethylgallium and triethylgallium are MOCVD precursors used in every LED and every GaN power device fabrication line. They are synthesised from raw gallium metal. China supplies a meaningful share of world output, and Chinese producers in Jiangsu and Zhejiang source their feedstock gallium from domestic refiners who are now licence-gated. Expect 20 to 35% price increases on trimethylgallium and similar precursors by October, with delivery-window pushouts on long-lead orders.
Germanium tetrachloride is the feedstock for germanium-doped fibre optic preforms. Corning, Prysmian, and the Asian preform majors are heavy users. The HS code 2827.39.00 line in the MOFCOM notice hits this directly. Expect fibre-optic preform prices to move as germanium tetrachloride availability tightens. If your company imports specialty optical fibre or preform blanks from Chinese or Asian producers, your cost base just moved.
Germanium-doped solar absorber material for high-efficiency multi-junction cells, primarily used in space applications and in high-concentration terrestrial solar, is a small-volume but high-sensitivity segment. Defence and aerospace end uses will draw the longest MOFCOM review times and in many cases outright denials.
Specialty coatings containing gallium or germanium compounds used in IR optics, thermal imaging, and certain aerospace applications will see input costs rise and in some cases supply interruptions. Bureau Veritas and SGS are already fielding requests from chemical importers to re-certify alternative-source materials for customer qualification runs, and qualification runs for defence-adjacent end uses take months.
Landed Cost Repricing: Trimethylgallium From Jiangsu
Walk through the arithmetic on a real product line. 500 kg of trimethylgallium in sealed bubblers, FOB Shanghai, shipped as hazardous air cargo to Los Angeles.
Pre-announcement pricing in late June 2023.
FOB Shanghai, 500 kg at $3,800 per kg = $1,900,000 Hazardous air freight, including special handling and dry ice = $42,000 Marine insurance, 0.4% of CIF given hazardous class = $7,768 US customs entry and hazmat broker fees = $1,450 Harbour Maintenance Fee, not applicable on air = $0 Merchandise Processing Fee, capped at $538 = $538 Section 301 List 3 duty, 25% of FOB = $475,000 Drayage from LAX to a Bay Area specialty chemical warehouse = $1,850
Total landed = $2,428,606. Per kg landed = $4,857.21
Same shipment at likely Q4 2023 pricing after MOFCOM licence process is settled and spot prices have repriced 40%.
FOB Shanghai, 500 kg at $5,320 per kg = $2,660,000 Hazardous air freight, broadly unchanged = $42,000 Marine insurance, 0.4% of CIF = $10,848 US customs entry and hazmat broker fees = $1,450 MPF capped = $538 Section 301 List 3 duty, 25% of FOB = $665,000 Drayage = $1,850
Total landed = $3,381,686. Per kg landed = $6,763.37
The delta is $1,906.16 per kg, or $953,080 on a single 500 kg shipment. That is the full cost impact of the gallium licence regime plus the flow-through Section 301 duty on the higher FOB. Your customer pricing for Q4 does not absorb this without a structural price increase. If your sales team has not had the conversation yet, it needs to have it this week.
The same arithmetic runs against germanium tetrachloride for fibre-optic preforms, against germanium dioxide for catalyst markets, and against doped specialty coating precursors. The FOB gap between the June quote and the settled Q4 quote is where you lose or make margin.
Alternative Sources and Why Most of Them Are Already Full
The natural reaction is to call a non-Chinese gallium or germanium producer. Here is the problem. The commercially meaningful non-Chinese producers of these materials have known capacity and known customer books, and those books were already full before 3 July. A quick walk through the realistic options.
Gallium alternative sources are Russia’s Aluminum Rus Group, Ukraine’s Mykolaiv alumina refinery (compromised by the war), Kazakhstan’s Pavlodar refinery, and small operations in Hungary and Germany tied to alumina byproduct recovery. Russia is a sanctions minefield for US importers. Ukraine’s output is disrupted. Kazakhstan and European producers have existing contracts with European and Japanese electronics customers and are unwilling to reallocate on short notice. Expected non-China capacity increases over 12 months: 10 to 15%, not 200%.
Germanium alternative sources are Umicore in Belgium, Teck Resources in Canada, Nyrstar in Australia and Europe, and small Russian output. Umicore and Teck are the two names that come up in every Western electronics supply review, and both are explicit that their current customer commitments leave limited room for new large-volume contracts before 2025. Nyrstar has announced capacity expansions but these are small relative to Chinese volume.
Recycled material is a real option in both cases but requires feedstock, process capability, and time. Companies like Indium Corporation, 5N Plus in Canada, and several small US refiners can recycle gallium and germanium from production scrap, but the volumes are fractional relative to primary demand and the scrap itself is in tight supply.
The practical near-term playbook for a US chemical importer is therefore not “switch suppliers.” It is three things running in parallel. Book your Chinese licenced volume as aggressively as your supplier will accept. Open secondary supply negotiations with European and Canadian producers accepting that you will get 10 to 25% of your historical volume at a 15 to 35% premium. Start a recycled-content qualification programme with a North American processor for a 10% portion of your supply by 2025. None of these individually solves the problem. Together they shift your risk profile enough to weather the next 18 months.
Compliance Triggers You May Not Have Considered
A few traps for US chemical importers that the first-week coverage has glossed over.
The licence regime applies to the Chinese exporter, not to you. If your Chinese supplier fails to secure a licence for your shipment, your contract remedy is against the supplier under Chinese law, not against MOFCOM. Force majeure clauses in your purchase contracts need to be reviewed this month. Many standard China-origin chemical purchase agreements have force majeure carveouts that cover natural disasters and port closures but not export control denials. That is now a live gap.
End-user declarations on gallium and germanium shipments are about to become far more invasive. MOFCOM applications will request detailed information on the US consignee, the downstream end user, and often the final product. Your chemical importing company may be asked to sign statements describing how the material will be used, by whom, and in what final goods. Your legal team should review these declarations before your signature goes on them. Misstatements can create exposure under both Chinese and US law.
OFAC and BIS implications are subtle but real. If you onward-sell gallium or germanium material to a US entity that is on a BIS Entity List, even unwittingly, your Chinese supplier’s licence may be revoked retroactively and your future applications denied. Customer know-your-customer checks on downstream buyers of these materials need to be tightened immediately.
Insurance reviews are the quiet one. If a shipment is held at a Chinese port awaiting licence approval, is the cargo covered? Standard marine cargo policies typically cover transit. A cargo container sitting in a Chinese bonded warehouse for 8 weeks pending a licence may or may not be covered depending on the policy wording and the reason for the delay. Get your broker to clarify in writing.
What to Do in the Next 30 Days
The MOFCOM notice takes effect 1 August. You have roughly three weeks before the new regime bites. Here is the action list.
Pull every purchase order for gallium or germanium-containing materials with a delivery date between 1 August and 31 December. For each, confirm with the supplier whether they have filed or intend to file a licence application, what HS code they will file under, and what their expected approval window looks like. Get it in writing.
Reprice your customer-facing contracts for Q4 2023 and calendar 2024. Use the repricing arithmetic above as a template. Negotiate material cost pass-through clauses into any long-term customer contract that does not already have one. If customers push back, explain the MOFCOM notice in one paragraph and hand them the landed cost worksheet.
Open commercial conversations with Umicore, Teck, and at least one Japanese or Korean alternative-source supplier for germanium. For gallium, open conversations with 5N Plus in Canada and with Indium Corporation on recycled material. These are 2024 and 2025 supply conversations, not spot buy conversations, but you need the relationships live now.
Review and refresh force majeure and export control clauses in every Chinese chemical supply contract you signed in the last 24 months. Your legal team has a fortnight of work ahead.
Brief your finance team on the Q4 landed cost movement and the cash flow impact. At the scale most specialty chemical importers work at, the extra working capital requirement from higher FOB prices, longer lead times, and potentially larger safety stock is material to your revolving credit line. Talk to your bank.
The gallium and germanium notice is not a one-off. It is a template. Expect similar announcements on other critical minerals over the next 12 to 18 months as Beijing establishes the licence infrastructure and the political choreography. What you build in response to this one is what will protect you against the next one.