On 2026年5月2日, China’s Ministry of Commerce officially issued a blocking order, lawfully prohibiting the United States from imposing SDN list sanctions on 5 Chinese petrochemical enterprises, including Hengli Petrochemical, Luqing Petrochemical, Jincheng Petrochemical, Xinhai Chemical, and Shengxing Chemical, on the grounds of Iran-related oil transactions. This event directly concerns crude oil trade, refining and chemical processing, cross-border settlement, and international supply chain compliance management, and has a substantive impact on segmented fields such as petrochemical trade, energy logistics, chemical raw material procurement, and cross-border financial services.

Event Overview

On 2026年5月2日, the Ministry of Commerce of the People’s Republic of China, in accordance with the Provisions on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, issued a formal prohibition order, explicitly requiring that organizations and individuals within China must not recognize, must not enforce, and must not comply with the SDN (Specially Designated Nationals) sanctions measures imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) against 5 Chinese petrochemical enterprises: Hengli Petrochemical, Luqing Petrochemical, Jincheng Petrochemical, Xinhai Chemical, and Shengxing Chemical. The order has been publicly released through the official website of the Ministry of Commerce, and its content focuses on blocking the extension of the effectiveness of U.S. Iran-related sanctions measures within China.

Which Segments Are Affected

Direct Trading Enterprises

The 5 enterprises involved are all entities qualified for crude oil imports, refined oil exports, or bonded fuel oil supply. Their overseas customers, especially buyers in the Middle East, Southeast Asia, and Africa, had previously suspended payments or refused cargo due to U.S. sanctions. After the order takes effect, Chinese enterprises may lawfully claim continued contract performance, but overseas banks may still delay disbursement or refuse to issue letters of credit based on their own compliance policies. The impact is mainly reflected in reduced settlement timeliness, increased need to restructure payment channels, and the need to reassess liability boundaries under trade terms such as CIF/FOB.

Raw Material Procurement Enterprises

Some refining and chemical supporting enterprises that were not named but have raw material mutual supply, toll blending and packaging, or warehousing coordination relationships with the above 5 enterprises may face unilateral suspension of supply by overseas suppliers or higher prepayment ratios. The impact is mainly reflected in greater uncertainty in procurement contract performance, longer development cycles for alternative suppliers, and increased difficulty in bonded warehouse receipt pledge financing.

Processing and Manufacturing Enterprises

Downstream deep-processing enterprises using imported crude oil/fuel oil as raw materials, such as producers of aromatics, asphalt, and solvent oil, will face short-term supply fluctuation risks if they rely on the above 5 enterprises for intermediate components or blending components. The impact is mainly reflected in greater pressure to ensure process continuity, the need to dynamically raise inventory safety thresholds, and the need to supplement and revise quality standard interface clauses.

Supply Chain Service Enterprises

Enterprises engaged in international shipping, customs brokerage, vessel bunkering, and bonded logistics may encounter temporary avoidance of cooperation by overseas partners if their business involves listed enterprises or their affiliated shipowners, terminals, or warehousing parties. The impact is mainly reflected in stricter document review procedures, longer bill of lading issuance cycles, and greater complexity in coordinating VGM filing and ISPS certification.

What Relevant Enterprises or Practitioners Should Focus On and How to Respond at Present

Pay Attention to Subsequent Official Statements or Policy Changes

The Ministry of Commerce has not yet issued operational guidelines on the supporting implementation rules of the order, such as standards for determining violations, appeal channels, and exemption scenarios; meanwhile, it remains to be seen whether the Ministry of Foreign Affairs, the General Administration of Customs, and the State Administration of Foreign Exchange will simultaneously introduce coordinated measures. Enterprises should establish a cross-departmental policy tracking mechanism and prioritize subscribing to updates in the “Laws and Regulations” section of the Ministry of Commerce official website.

Pay Attention to Changes in Key Product Categories, Key Markets, or Key Business Links

The current order clearly limits its coverage to SDN sanctions imposed by the U.S. on the grounds of “Iran-related oil transactions” and does not automatically extend to other sanction grounds such as human rights or technology transfer. Enterprises should sort out the substance of their own Iran-related business—if there is actual procurement of Iranian crude oil, other compliance risks may still be triggered; if it only involves re-export, bunker fuel supply, or trade in non-Iranian petroleum products, then this order constitutes a direct basis for protection.

Distinguish Between Policy Signals and Actual Business Implementation

The order has mandatory domestic legal effect, but it does not alter the legal effect of OFAC sanctions in third countries. For example, a Singapore trader may still refuse to trade with a listed enterprise due to local regulatory requirements even if it is aware of China’s blocking order. Enterprises must avoid equating “lawful domestically” with “accepted overseas”; they should add force majeure clauses and alternative performance mechanisms to contracts, rather than unilaterally relying on the order to claim exemption from liability.

Prepare Procurement, Supply Chain, Communication, or Contingency Plans in Advance

It is recommended that the enterprises involved and their affiliates immediately carry out 3 actions: (1) review the governing law clauses and dispute resolution mechanisms in all foreign-related contracts over the past 6 months; (2) send a legal-reviewed Explanation Letter on the Blocking Order of China’s Ministry of Commerce to major overseas customers, banks, and shipping companies; (3) initiate testing of backup settlement channels, such as direct connection to the RMB Cross-Border Interbank Payment System CIPS and clearing arrangements under bilateral local currency swap agreements.

Editor’s Viewpoint / Industry Observation

Observably, this is a procedural enforcement of China’s existing blocking statute—not a new policy shift, but the first publicly confirmed application targeting U.S. secondary sanctions on energy enterprises. Analysis shows it functions primarily as a domestic legal shield rather than an extraterritorial countermeasure: it empowers Chinese courts to nullify judgments based on blocked foreign measures, yet does not compel foreign entities to comply. From industry perspective, the notice signals heightened institutional readiness to defend trade sovereignty in strategic sectors—but actual transactional friction will persist where third-country compliance systems remain anchored to OFAC frameworks. Current attention should focus less on symbolic victory and more on operational adaptation across jurisdictional fault lines.

Conclusion

This blocking order is not a comprehensive countermeasure against U.S. sanctions, but a statutory response made under China’s existing regulations to specific extraterritorial measures. Its industry significance lies in establishing a new benchmark for cross-border business compliance review in the petrochemical sector: when identifying sanctions risks, it is necessary to simultaneously assess the applicable scope and enforcement boundaries of domestic blocking legislation. At present, it is more appropriate to understand it as a “defensive institutional activation” rather than a “complete elimination of risk.” Enterprises need to build contract governance and supply chain response mechanisms compatible across multiple jurisdictions on the premise of respecting legal differences among countries.

Source Information Note

Main source: official website of the Ministry of Commerce of the People’s Republic of China (announcement on 2026年5月2日);
Parts requiring continued observation: whether the General Administration of Customs will subsequently adjust the import and export credit rating of relevant enterprises, and whether the State Administration of Foreign Exchange will update the reporting scope for Iran-related transactions in the Statistical System for External Financial Assets, Liabilities, and Transactions.