Hello, this is Ryuta Hamamoto from TIMEWELL.
Many readers who saw headlines that "China listed 20 U.S. defense companies" immediately worry about what that means for their own transactions. Coverage often frames the move as "Chinese retaliation against the United States." From a practitioner's seat, the U.S. OFAC SDN List and Entity List, and China's Anti-Foreign Sanctions Law, are structurally very similar regimes grounded in each country's economic security.
I want to organize the facts of the December 26, 2025 designation of 20 companies side by side with the comparable U.S. regimes, without moral ranking of either side. If you are searching "Anti-Foreign Sanctions Law 20 companies," you should leave with a decision framework for whether your counterparty list needs review.
What this piece covers
- How the Anti-Foreign Sanctions Law, the Unreliable Entity List, and the OFAC SDN List differ (one comparison table)
- The full picture of the 20 U.S. defense companies and 10 individuals designated on December 26, 2025
- The structure of key AFSL articles (Articles 3, 4, 5, 6, 9, and 15)
- A symmetry comparison with the U.S. OFAC SDN List and Entity List
- Practical issues of dual compliance (compliance conflict) facing Japanese companies
- Common misconceptions and FAQ (including problems with calling this "retaliation")
Three terms to learn first
China's sanctions-related statutes have similar names, and media coverage often blurs them, so first-time readers struggle to see the system. Start with three entry points.
Anti-Foreign Sanctions Law (AFSL)
- Enacted: June 10, 2021, at the 29th session of the Standing Committee of the 13th National People's Congress (Presidential Order No. 90)
- Articles: 16 in total
- Legislative purpose (Article 1): Safeguarding national sovereignty, security, and development interests, and protecting the lawful rights and interests of Chinese citizens and organizations
- Operating authorities: Ministry of Foreign Affairs of China and relevant State Council departments
- Main measures: Freezing of assets in China, prohibition of transactions with Chinese organizations and individuals, entry bans and visa cancellations
The key point is that this is a basic-law-level statute. It sits above MOFCOM rules such as the Unreliable Entity List and the Blocking Measures, and is the center of China's external sanctions architecture. In March 2025, State Council Order No. 803 promulgated Implementing Provisions on the Anti-Foreign Sanctions Law, filling in operational procedures.
Unreliable Entity List (UEL)
- Created: September 2020, as a MOFCOM rule
- Operating authority: Ministry of Commerce of China (MOFCOM)
- Targets: Foreign organizations (mainly companies) judged by Chinese authorities to present designated risks for China
- Main measures: Ban on import/export with China, investment restrictions into China, entry restrictions, fines
- U.S. analogue: Closest to the Commerce Department Entity List
The Anti-Foreign Sanctions Law and the Unreliable Entity List are separate systems. The former is a Foreign Ministry-operated countermeasure list; the latter is a MOFCOM-operated market-access cutoff list. They are complementary, and the same company can appear on both.
OFAC SDN List (the corresponding U.S. concept)
- Full name: Specially Designated Nationals and Blocked Persons List
- Operating authority: U.S. Treasury Office of Foreign Assets Control (OFAC)
- Legal basis: Sanctions-program statutes including IEEPA
- Main measures: Freezing of U.S. assets, comprehensive ban on dealings with U.S. persons, visa restrictions
- Extraterritorial effect: Secondary sanctions can affect non-U.S. persons in practice
To understand AFSL structure, the SDN List comparison is the most practical. Both regimes use the same three-part set — asset freeze + transaction ban + entry restrictions — and are structurally symmetrical. Reading the Chinese regime as a mirror image of the U.S. regime, rather than as something "special," makes practical response design easier. That is the framing I use with Japanese export-control teams.
Overview of the December 26, 2025 announcement
China's Ministry of Foreign Affairs designated 20 U.S. defense-related companies and 10 individuals as countermeasure targets under the Anti-Foreign Sanctions Law on December 26, 2025.
Date facts (important)
Some coverage refers to "China's January 6, 2026 sanctions announcement." That may be a confusion with a different measure.
| Date | Content | Legal basis | Operating authority |
|---|---|---|---|
| December 26, 2025 | 20 U.S. defense-related companies and 10 individuals designated as countermeasure targets | Anti-Foreign Sanctions Law | Ministry of Foreign Affairs of China |
| January 6, 2026 | Strengthened dual-use export controls toward Japan (MOFCOM Announcement 2026 No. 1) | Dual-use export control law | Ministry of Commerce of China |
The two measures differ in both legal basis and operating authority. This piece addresses the former (the December 26 designation of 20 companies).
The 20 designated companies (defense, UAVs, related technology)
The 20 companies published by the Ministry of Foreign Affairs are as follows. Major players in the U.S. defense industry appear. Designation here is a regulatory listing under Chinese law; it is not, by itself, a judgment on the companies' commercial legitimacy outside that legal frame.
| # | Company | Main business |
|---|---|---|
| 1 | Northrop Grumman Systems Corporation | Major defense and aerospace |
| 2 | L3Harris Maritime Services | Communications and electronic warfare |
| 3 | Boeing (St. Louis defense unit) | Military aircraft and weapons systems |
| 4 | Gibbs & Cox | Naval vessel design |
| 5 | Advanced Acoustic Concepts | Undersea acoustics |
| 6 | VSE Corporation | Defense support and logistics |
| 7 | Sierra Technical Services | Aerial target systems |
| 8 | Red Cat Holdings | Military drones |
| 9 | Teal Drones | Small UAS |
| 10 | ReconCraft | Tactical craft |
| 11 | High Point Aerotechnologies | Counter-UAS technology |
| 12 | Epirus | Directed-energy weapons |
| 13 | Dedrone Holdings | Counter-drone |
| 14 | Area-I | Unmanned aircraft systems |
| 15 | Blue Force Technologies | Autonomous aircraft |
| 16 | Dive Technologies | Autonomous undersea vehicles |
| 17 | Vantor | Satellite imagery |
| 18 | Intelligent Epitaxy Technology | Semiconductor materials |
| 19 | Rhombus Power | AI weapons-situation analysis |
| 20 | Lazarus Enterprises | Defense services |
The 10 designated individuals
Ten officers of defense-related companies are included. Public reporting has noted that Anduril Industries founder Palmer Luckey is among them.
China's stated purpose
According to the Ministry of Foreign Affairs, U.S. arms sales to Taiwan (including a decision that month valued at about 1.7 trillion yen) "harmed China's sovereignty and territorial integrity, security, and development interests." China frames the measures as legitimate defensive measures, not as "retaliation." For operational purposes, I treat that framing as China's legal self-description and pair it with the comparable U.S. statutory self-description, without ranking either.
Practical impact assessment
Because the targets are U.S. defense-related companies, many already had limited China-market exposure. Multiple expert assessments conclude that the move is largely symbolic, with limited real economic impact. Even so, indirect transactions through third-country firms, and decisions at U.S. and Chinese subsidiaries, can still be affected, so Japanese supply-chain management cannot ignore the issue.
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Structure of the Anti-Foreign Sanctions Law (Articles 3, 4, 5, 6, 9, and 15)
Next, the core articles. Remembering the article numbers makes law-firm reviews much easier to navigate.
Article 3: Triggers for countermeasures
Countermeasures may be taken against foreign conduct such as:
- Conduct that violates basic norms of international law and international relations
- Conduct aimed at suppressing or containing China
- Discriminatory restrictive measures against Chinese citizens or organizations
- Interference in China's internal affairs
Article 4: Designation of targets
Individuals and organizations that directly or indirectly participate in formulating, deciding, or implementing the measures above may be listed. The inclusion of "indirectly" means related companies, consulting firms, and similar parties can fall within scope.
Article 5: Extension to related persons
Measures may also reach spouses and close relatives of listed persons, and related organizations (senior officers, investors, actual controllers, and similar). The design is analogous to OFAC's "50% rule" logic of extending to related parties.
Article 6: Content of countermeasures
- Visa denial or cancellation; entry refusal or expulsion (visa denial / entry ban)
- Seizure, confiscation, or freezing of movable and immovable property and other assets in China (asset freeze)
- Prohibition or restriction of transactions and cooperation with organizations and individuals in China (business prohibition)
The three-part set of "asset freeze + transaction ban + entry restrictions" is the same structural shape as the OFAC SDN List.
Article 9: Public announcement
The Ministry of Foreign Affairs and other relevant State Council departments announce decisions to adopt, suspend, modify, or cancel countermeasures. Operation as a public list is also shared with the OFAC SDN List and the Entity List.
Article 15: Extended application (third-country reach)
This is the most important article for Japanese companies.
Necessary countermeasures may also be taken, by reference to the provisions of this Law, against foreign countries, organizations, and individuals that implement, assist, or support conduct that threatens China's sovereignty, security, or development interests.
In other words, even a third-country company (including a Japanese company) that is neither Chinese nor U.S. can, if China judges it a potential countermeasure target, fall within the architecture of extended application.
Symmetry comparison with OFAC SDN and the Entity List
Practitioners increasingly need a flat comparison of U.S. and Chinese sanctions regimes. Key elements side by side:
| Element | U.S. OFAC SDN List | U.S. Entity List | China AFSL | China Unreliable Entity List |
|---|---|---|---|---|
| Operating authority | U.S. Treasury OFAC | U.S. Commerce BIS | Ministry of Foreign Affairs of China | MOFCOM |
| Legal basis | IEEPA and related | EAR Part 744 | Anti-Foreign Sanctions Law | Unreliable Entity List Provisions |
| Main measures | Asset freeze + transaction ban + visa restrictions | Licensing for designated items | Asset freeze + transaction ban + entry ban | China import/export ban + investment restrictions |
| Targets | Individuals and organizations | Individuals and organizations | Individuals and organizations | Mainly organizations (companies) |
| Extraterritorial effect | Secondary sanctions reach non-U.S. persons | De minimis / FDP Rule | Article 15 third-country application | De facto China-market cutoff |
| List publication | Public (OFAC website) | Public (Federal Register) | Public (MFA / MOFCOM announcements) | Public (MOFCOM announcements) |
Both countries operate these regimes on the basis of each country's economic security. This is not a ranking of support or criticism for either side. It is a practical point that global companies should put both regimes at equal weight into screening.
Differences between the Anti-Foreign Sanctions Law and the Unreliable Entity List
The two regimes are often discussed in similar contexts, but legal basis, operating authority, and measures all differ.
| Item | AFSL (countermeasure list) | Unreliable Entity List |
|---|---|---|
| Legal basis | Anti-Foreign Sanctions Law (basic law) | Unreliable Entity List Provisions (MOFCOM rule) |
| Operating authority | Mainly MFA (some State Council) | MOFCOM |
| Targets | Individuals and organizations (including natural persons) | Mainly organizations (companies) |
| Main measures | Asset freeze / transaction ban / entry ban | China import/export ban / investment restrictions / fines |
| U.S. analogue | Closest to OFAC SDN List | Closest to Entity List |
As of October 2025, cumulative Unreliable Entity List designations stood at 72 companies (55 currently under active sanctions), all U.S.-related. The two regimes are complementary, and the same company can appear on both lists.
Major past designations (timeline)
This is not a sudden regime; it has been built and operated step by step since 2020.
| Period | Main development | Basis |
|---|---|---|
| September 2020 | Unreliable Entity List system created | MOFCOM order |
| January 2021 | Blocking Rules promulgated | MOFCOM rule |
| June 2021 | Anti-Foreign Sanctions Law enacted | NPC Standing Committee |
| February 2022 | Countermeasures against Raytheon and Lockheed Martin over Taiwan arms sales | AFSL |
| December 2024 | Countermeasures against seven companies and executives including Insitu, Hudson Technologies, Saronic Technologies, Raytheon Canada, Raytheon Australia, Aerkomm, Oceaneering International | AFSL |
| March 2025 | AFSL Implementing Provisions promulgated | State Council Order No. 803 |
| April 2025 | Six companies including Shield AI, Sierra Nevada, Cyberlux, Edge Autonomy, Group W, Hudson Technologies added to the Unreliable Entity List | UEL Provisions |
| October 2025 | 14 companies including U.S. defense-related firms and a Canadian research firm (including a Japanese subsidiary) added to the Unreliable Entity List | UEL Provisions |
| December 26, 2025 | 20 U.S. defense-related companies and 10 individuals designated as countermeasure targets | AFSL Articles 3, 4, 5, 6, 9, and 15 |
The December 2025 designation of 20 companies sits on the same line as the 2022 Raytheon and Lockheed Martin designations, and has been operated in tandem with U.S. announcement cycles for Taiwan arms sales.
Impact on Japanese companies and dual compliance
From a Japanese practitioner's seat, direct targeting risk is limited, but indirect supply-chain effects are not ignorable.
Direct impact
- In defense-equipment procurement, if the 20 designated companies appear in a U.S. component path, indirect impact can arise through those companies' Chinese subsidiaries or Chinese-related suppliers
- A Japanese company's U.S. subsidiary (defense business) that has commercial relationships with listed companies can become a pressure point on the Chinese side
Legal impact (dual compliance)
This is the center of the issue. Japanese companies can face two conflicting legal demands at once.
- AFSL Article 12: Organizations and individuals in China must not deal with parties on the countermeasure list (with extraterritorial effect). Violation by a Japanese company's Chinese subsidiary can risk seizure of China assets, business suspension, fines, and similar
- Blocking Rules Article 9: Unilaterally cutting off transactions with Chinese companies because of U.S. sanctions can create Chinese damages claims and injunction risk
- U.S. sanctions-compliance duties: Dealings with U.S. SDN / Entity List parties continue to carry U.S. penalty risk
In other words, Japanese companies face a compliance conflict between "U.S. sanctions-compliance duties" and "Chinese transaction-maintenance duties." This is not a political stance problem. It is pure legal risk management. I keep repeating that line in briefings because the media frame tends to pull people toward politics instead of contracts and screening.
Government response history
When the AFSL was enacted in June 2021, then Chief Cabinet Secretary Katsunobu Kato said the government would "watch the impact on Japanese companies." CISTEC (Center for Information on Security Trade Control) has continued to publish reports; when the Unreliable Entity List was expanded in October 2025, the fact pattern of "including a Japanese subsidiary" was organized explicitly.
Five practical steps
For officers who also handle export control, five realistic steps.
Step 1: Match your counterparty list against both countries' latest lists
- U.S. OFAC SDN List, Entity List, MEU List
- China AFSL countermeasure list (MFA announcements)
- China Unreliable Entity List (MOFCOM announcements)
Note that the U.S. Consolidated Screening List (CSL) alone does not cover Chinese lists.
Step 2: Walk ownership structures upstream
As with OFAC's 50% rule, the Chinese architecture can reach actual controllers and related organizations (AFSL Article 5). Check not only the direct counterparty but also parents, subsidiaries, and investors.
Step 3: Confirm end use of transaction items
Items that fall into defense or dual-use categories are targets of both U.S. and Chinese export-control law. Organize ECCN classification, USML relevance, and dual-use export-control coverage.
Step 4: Build compliance clauses into contracts
Where U.S. sanctions-compliance duties and Chinese law-compliance duties cannot both be satisfied, review termination clauses, governing law, and dispute-resolution forums. This is an area often left on standard templates.
Step 5: Build continuous monitoring
AFSL lists are updated on an ongoing basis. Combine quarterly matching, not only annual counterparty reviews, with alerts on government announcements.
If I had to pick one checklist item for next week: Step 1 against both countries' lists, not CSL alone. Most Japanese teams still underweight Chinese list coverage.
Common misconceptions / FAQ
Q1. Should we understand this Chinese measure as "retaliation against the United States"?
A. Media often use "retaliation," but practitioners should be careful about that framing. China positions the measures as "legitimate defensive measures" and operates a regime functionally symmetrical to the OFAC SDN List and Entity List. Both the United States and China invoke "each country's economic security"; unilaterally calling one side "retaliation" implicitly assumes the legitimacy of the other side's measures. The more practical framing is a mutual response structure: China's response to U.S. Taiwan arms sales (under the Taiwan Relations Act, National Defense Authorization Act, and similar U.S. law).
Q2. Can Japanese companies become direct targets?
A. The possibility is not zero. Under AFSL Article 15, third-country companies and individuals that participate in conduct threatening China's sovereignty, security, or development interests can fall within extended application. In October 2025, "U.S. defense-related companies and a Canadian research firm (including a Japanese subsidiary)" were added to the Unreliable Entity List. Direct targeting risk is low, but risk management should not assume it is zero.
Q3. Which is stricter — the Anti-Foreign Sanctions Law or the Unreliable Entity List?
A. The types of measures differ, so a simple ranking is hard. AFSL is a comprehensive package including asset freezes and entry restrictions; the Unreliable Entity List specializes in cutting off China market access. On the U.S. side, think of the relationship between the SDN List (comprehensive) and the Entity List (market-access restriction).
Q4. Can designated companies be removed from the list?
A. AFSL Article 8 provides procedures for suspending or canceling countermeasures, and the Implementing Provisions (Order No. 803) specify administrative process. Actual delistings to date have been limited.
Q5. Do Japanese companies with no direct China market exposure still need to respond?
A. Indirect paths are numerous: secondary sanctions under the U.S. SDN List, third-country application under AFSL Article 15, and effects via U.S. or Chinese subsidiaries. Even companies without direct China-bound transactions cannot rule out listed parties in their supply chains, so minimum screening is recommended.
Latest developments as of July 2026
As of July 2026, government-level supply-chain diversification is becoming more concrete as a hedge against Japanese companies being drawn into U.S.–China sanctions exchanges. The 16th Japan–India summit on July 2, 2026 produced a joint declaration on economic-security cooperation in five fields — semiconductors, critical minerals (rare earths), clean energy, ICT (subsea cables), and pharmaceuticals — with investment on the order of about 2 trillion yen (Japan–India summit joint press conference (Prime Minister's Office of Japan, July 2026)). Dual-compliance issues discussed above remain, but options for sourcing outside the U.S.–China axis are becoming more real. Detail is in the Japan–India summit and economic security.
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Summary
Key points on the December 26, 2025 Chinese designation of 20 companies and 10 individuals:
- Legal basis: Articles 3, 4, 5, 6, 9, and 15 of the Anti-Foreign Sanctions Law (enacted June 2021; 16 articles total)
- Operating authority: Ministry of Foreign Affairs of China (separate from the Unreliable Entity List)
- Main measures: Freezing of assets in China / transaction ban / entry ban
- Relationship to U.S. regimes: Functionally symmetrical to the OFAC SDN List (three-part set of asset freeze + transaction ban + entry restrictions)
- Impact on Japanese companies: Direct targeting is limited, but dual compliance (compliance conflict) is the live issue
- Neutral framing: Avoid "retaliation" or "attack on the United States"; understand both sides as symmetrical regimes operated on "each country's economic security"
Do not treat the Chinese regime as a "special countermeasure." Put it into screening as a "state economic-security measure" in the same frame as the U.S. SDN List / Entity List. That is becoming the export-control practice standard, and it is the standard I recommend.
Monday morning: match major counterparties against MFA AFSL announcements and MOFCOM Unreliable Entity List entries in addition to OFAC/CSL. If your process only covers the U.S. side, dual-compliance risk is already structural.
Related articles
- Differences Among the Entity List, MEU List, and SDN List — and When Your Company Is Caught: How to read the three major U.S. lists
- Complete Guide to the BIS Affiliates Rule (50% Rule): An introduction to ownership-structure investigation
- China × Japan Export Control Trends 2026: Dual-use export control law and impact on Japanese companies
- End-User Screening and Customer Due Diligence: An introduction to screening practice
- EAR Affiliate Rule Risk: U.S. affiliate regulation
Final check: if you are unsure you can handle this in-house
Screening that covers both U.S. and Chinese lists is incomplete with CSL (U.S. side) alone or MOFCOM announcements (China side) alone. You need continuous matching of both countries' lists, plus ownership structure, relationship chains, and name-variant coverage (Chinese/English transcription variants). Running that by hand is high load even with a dedicated officer.
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References
Chinese official sources
- Presidential Order of the PRC No. 90, "Anti-Foreign Sanctions Law of the PRC" (June 10, 2021)
- State Council Order No. 803, "Implementing Provisions on the Anti-Foreign Sanctions Law" (March 2025)
- Ministry of Foreign Affairs of China, "Decision on Taking Countermeasures Against U.S. Military Companies and Senior Executives" (announced December 26, 2025)
- MOFCOM Unreliable Entity List announcements
- MOFCOM Announcement 2026 No. 1, "Announcement on Strengthening Export Controls of Dual-Use Items to Japan" (January 6, 2026; separate matter)
English commentary
- China Law Translate, "Law of the PRC on Countering Foreign Sanctions"
- China Law Translate, "Provisions on the Implementation of the Anti-Foreign Sanctions Law"
Japanese materials
- CISTEC, "China Adds 14 Companies Including U.S. Defense-Related Firms and a Canadian Research Firm (Including a Japanese Subsidiary) to the Unreliable Entity List" (October 2025)
- CISTEC, "China Strengthens Dual-Use Export Controls Toward Japan (Flash)" (January 6, 2026)
- JETRO, "China Issues Prohibition Order Against U.S. Sanctions Measures on Chinese Companies"
- Anderson Mori & Tomotsune, "Overview of China's Dual-Use Export Restrictions Toward Japan and Impact on Japanese Companies" (January 15, 2026)
Major law-firm reviews
- WilmerHale, "China Tightens Sanctions and Trade Restrictions Amid US-China Trade Ceasefire" (January 21, 2026)
- Jones Day, "Caught in the Crossfire: Two New Chinese Decrees Raise the Stakes on Sanctions Compliance" (May 2026)
- Morgan Lewis, "China Issues New Regulations on Countering Foreign Extraterritorial Jurisdiction" (April 2026)
- Mayer Brown, "China Expands Its Playbook: New Industrial Supply Chain and Counter-Extraterritoriality Regulations" (May 2026)
- Paul Hastings, "Enactment of China's Anti-Foreign Sanctions Law and Impact on Foreign Companies" (June 22, 2021)
Major reporting
- Defense News, "China sanctions 20 US defense companies over arms sales to Taiwan" (December 26, 2025)
- PBS NewsHour, "China sanctions 20 U.S. defense companies and 10 executives over Taiwan arms sale"
- Sustainable Japan, "China MFA Imposes Economic Sanctions on 20 U.S. Defense Companies and 10 Individuals" (December 27, 2025)
- Newsweek Japan, "China Sanctions 20 U.S. Defense Companies and Others"
