The G7 leaders closed out the Hiroshima summit on 21 May with a communique that did something more consequential than most of the press coverage credited. The word “decoupling” is gone. In its place, the leaders wrote “de-risking and diversifying” when describing their approach to economic relations with China. Ursula von der Leyen, who’d been pushing this framing for months at the EU Commission, got her language adopted across the bloc. For anyone running a chemical raw material portfolio with meaningful Chinese exposure, this is the policy signal you’ve been waiting for.
De-risking is not decoupling, and the distinction matters commercially. Decoupling would mean full separation, tariff walls, and a push to exit Chinese supply entirely. De-risking means keeping the commercial relationship, reducing concentration in defined critical categories, and coordinating export controls on a narrow list of items. The narrow list is the part that matters for your sourcing strategy, because the specific chemical precursors and intermediates that fell inside the de-risking perimeter got heavier policy attention, while the broader commodity chemical trade was explicitly protected from blanket restrictions.
This post walks through exactly what the G7 communique said, what the EU Commission’s parallel chemical dependency work identified, what the US and EU coordinated export control tightening looks like in practice, and what your sourcing plan should look like for the rest of 2023 and into 2024 as a result.
What the Communique Actually Said
The Hiroshima communique, released on the final day of the summit, contained several passages worth knowing verbatim. The key language: “We will coordinate our approach to economic resilience and economic security that is based on diversifying and deepening partnerships and de-risking, not decoupling.” It went on to identify “critical supply chains, including on semiconductors, batteries, and critical minerals” as priorities, and crucially noted that this coordination would include “appropriate measures, including export controls where necessary, to address the challenges posed by non-market policies and practices.”
Chemicals are not named as a top-line critical category in the way semiconductors and critical minerals are, but the communique references “economic coercion” and “technology that might be used to threaten international peace and security,” and both US and EU officials in the Hiroshima readouts were explicit that chemical precursors used in dual-use applications sit inside the de-risking perimeter. The EU’s Economic Security Strategy, which was published in draft form the week before Hiroshima, is more specific. It identifies five chemical categories where EU dependency on single-source suppliers, overwhelmingly China, exceeds acceptable thresholds:
- Rare earth-containing specialty compounds used in permanent magnets and catalysts
- Certain pharmaceutical active ingredients and precursors
- Specific battery chemistry precursors, particularly cathode active materials
- Selected agrochemical intermediates
- A handful of electronics-grade high-purity chemicals
The communique doesn’t promise blanket export controls on these categories. What it promises is coordination between G7 members when controls are applied, to prevent arbitrage between jurisdictions and to align the scope of restrictions. That’s a much more targeted framework than “decoupling” implies, and for commercial chemical importers it’s a workable one.
Why “De-Risk” Is Commercially Very Different from “Decouple”
Decoupling as a policy frame would have forced chemical importers into a binary. Either exit China entirely, or accept a deteriorating trade and tariff environment that eventually makes the exit forced. That binary was driving some genuinely bad sourcing decisions through 2022, where importers were paying premiums to migrate product lines to higher-cost origins based on a read that the US-China trade environment would keep deteriorating toward full separation.
De-risking is different. De-risking says: identify the categories where concentrated dependency creates real vulnerability, diversify those specifically, and preserve the commercial relationship across the remaining 90-plus percent of the trade. In practice, this means the policy pressure will target a narrow list of precursors, dual-use intermediates, and high-purity specialty chemicals, while commodity organic and inorganic chemicals, standard plasticisers, commodity solvents, and the long tail of industrial specialties will remain in normal commercial trade.
For an Australian or US chemical importer, the planning implication is that you should segment your portfolio into three tiers rather than making one blanket decision:
- Tier 1, inside the de-risking perimeter. These are categories where US, EU, or allied export controls and tariff escalation are credibly likely in the next 12 to 24 months. You need an active diversification plan here, even at some cost penalty.
- Tier 2, adjacent to the perimeter. Categories that could drift into controls depending on how specific trade episodes play out, but where the base case is continued normal trade. You need optionality here, meaning qualified alternative suppliers and ideally small ongoing orders to keep those relationships warm, but you don’t need to migrate volume.
- Tier 3, clearly outside the perimeter. The bulk of commodity chemical trade. Keep buying from China where the economics work, maintain normal supplier relationships, and don’t pay a de-risking premium that the policy environment doesn’t actually require.
The mistake to avoid is treating the entire China chemical book as Tier 1. That’s what decoupling logic implied. De-risking logic is much more surgical.
The EU-US Coordination on Chemical Precursor Export Controls
Alongside the communique language, the concrete deliverable from Hiroshima was a commitment to tighter US-EU coordination on export controls for a defined list of items. For chemicals, the list hasn’t been fully published in its final form, but the Commerce BIS and EU Commission DG Trade readouts have telegraphed the direction clearly enough to plan around.
The specific categories where we expect tighter controls within the next 6 to 12 months:
| Category | HS code / CAS example | Control direction | Expected timing |
|---|---|---|---|
| High-purity electronic gases | HS 2811, HS 2901 subsets | License required for CN destination | Q3 2023 to Q1 2024 |
| Fentanyl precursors and analogues | Already controlled; list expansion | Additional CAS numbers added | Rolling, mid-2023 |
| Advanced battery cathode precursors | HS 2827 and HS 2841 specific grades | Notification and reporting | Q4 2023 |
| Semiconductor process chemicals | HS 3808 and HS 3824 specific | License required | Aligned with chip controls |
| Certain catalyst formulations | HS 3815 specific | Targeted controls | 2024 likely |
None of these are blanket HS-chapter restrictions. They’re specific, narrowly defined product-level controls, consistent with the de-risking framework. If your import book touches any of them, you need to be working now with your customs broker and a qualified trade counsel to map your specific SKUs against the likely control list.
The other direction worth watching is Chinese reciprocal controls. MOFCOM and GACC have a track record of responding to US and EU controls with targeted Chinese export restrictions on their own critical materials. Gallium, germanium, and certain rare earth categories are the examples most discussed, but chemical precursors including certain specialty silicones and phosphorus compounds are also on the reciprocal list that MOFCOM has been quietly curating. That’s a two-way vulnerability, and it argues for diversification on both sides of your supply chain.
Concrete Diversification Moves That Actually Work
The honest reality of chemical supply chain diversification is that it’s harder than the policy discussion suggests. Qualifying a new supplier in a regulated chemical category takes 6 to 18 months from first sample to production-scale purchase. Customer acceptance of origin change can take another 3 to 6 months where the material specification is tight. So if your Tier 1 list has 12 SKUs on it, you’re looking at a two-year program to meaningfully de-risk, not a two-quarter program.
With that timing caveat, the origin shifts that are actually delivering commercial results right now:
- Indian specialty chemicals for HS 2933 heterocyclic nitrogen compounds and some HS 2934 categories. Indian producers including SRF, Aarti Industries, and Navin Fluorine have been qualifying into US and EU supply chains, and the regulatory documentation depth is meaningful.
- South Korean and Japanese advanced specialties for HS 3910 silicones, HS 3907 specialty resins, and electronic-grade chemicals. These origins carry a cost premium over Chinese, but the TSCA, REACH, and IECSC documentation is airtight.
- Vietnamese and Malaysian capacity for the lower-technology end of the spectrum, particularly HS 2915 simple esters and HS 3208 coatings. Quality has improved markedly in the past three years.
- Middle East producers (SABIC, Sadara, Equate) for the petrochemical end of the spectrum, HS 2901 and HS 2902 olefins and aromatics.
Where diversification remains genuinely hard is in the MDI and TDI space dominated by Wanhua, in certain titanium dioxide grades, in a band of specialty plasticisers, and in specific catalyst formulations. These are the categories where your Tier 1 plan needs to be realistic about multi-year timelines and about accepting some cost premium to maintain dual-sourcing optionality.
The Landed Cost of De-Risking, Worked
Let’s make the math concrete. Say you’re buying 500 MT per year of a specialty silicone fluid from a Chinese supplier at FOB Shanghai USD 4,800 per MT. Total goods cost USD 2,400,000. This sits in Tier 1 under the de-risking framework, and you want to build a dual-source option to a Korean supplier who’s quoted you FOB Busan USD 5,350 per MT.
The first move is not 100% migration, it’s qualification plus a modest initial volume, say 50 MT per year, 10% of total volume. That qualification volume carries a cost premium of USD 550 per MT, so USD 27,500 per year in additional goods cost. Add qualification work, SGS or Bureau Veritas testing, customer acceptance, regulatory documentation, and the first-year program cost is probably USD 55,000 to USD 75,000 on top of the goods premium.
If you never increase the Korean volume beyond 10%, your all-in de-risking insurance costs roughly USD 100,000 per year on a USD 2.4M book, or about 4% of category spend. That’s the price of optionality.
If policy conditions deteriorate and you need to scale Korean volume to 50% within 18 months, the dual-sourcing premium at that point is USD 137,500 per year in goods cost delta, which you’d likely pass through to customers in a policy-disruption pricing conversation. Because you did the qualification work in the current window, the scale-up is operational, not a new qualification cycle.
Compare that to the alternative of doing no qualification now and needing to scramble if a specific export control lands in Q4 on silicone fluids. Emergency qualification under time pressure typically costs 2 to 3 times a planned qualification, customer acceptance is rushed, and spot-market Korean FOB in a disruption scenario would likely run 15 to 20% above the contract price you can negotiate today. That’s the risk you’re insuring against.
What Your Sourcing Committee Should Do This Quarter
Concrete steps for the next 90 days.
First, segment your China-origin book into Tier 1, 2, and 3 using the de-risking framework. Don’t use volume thresholds, use policy-vulnerability thresholds. Tier 1 is the list of products where you can credibly imagine US or EU export controls, Chinese reciprocal controls, or sharp tariff escalation within 18 months.
Second, for each Tier 1 SKU, identify at least one qualified or qualifying alternative supplier outside China. Start the qualification conversation now if you haven’t already. The specialist regulatory testing capacity at SGS, Bureau Veritas, and Intertek is booking out on lead times of 8 to 14 weeks depending on the analyte, so the sooner you’re in queue, the cheaper the qualification.
Third, for Tier 2, focus on maintaining optionality rather than migrating volume. A small ongoing PO with a qualified alternative supplier, even at a modest cost premium, keeps the relationship live and preserves the ability to scale quickly if policy conditions change.
Fourth, for Tier 3, stop paying de-risking premiums that the actual policy framework doesn’t require. A large share of chemical importers have been reflexively adding 5 to 10% to their Chinese landed costs on the assumption that decoupling would come for everything. Hiroshima’s language says explicitly that it won’t. Adjust your planning accordingly.
Fifth, talk to your customs broker and trade counsel about the specific control lists that are in draft at BIS and at the EU Commission. A surprising share of chemical importers don’t know whether their specific CAS numbers are on the lists in circulation. They should. The lists are not yet public in final form but the draft categories are discoverable through the formal consultation processes that BIS and DG Trade are running.
The de-risking framework is a more workable policy environment than the one chemical importers have been planning against for the past three years. It’s narrower, more specific, and more compatible with continued large-scale commercial trade with China. It also rewards preparation more than it rewards panic. The importers who’ll come out of the next 18 months in the strongest commercial position are the ones who segmented their book intelligently, built real optionality on their Tier 1 categories, and didn’t overpay to migrate the bulk of their trade that was never actually in the perimeter.
Your next concrete action this week: pull your 25 highest-spend China-origin SKUs, map them against the Tier 1, 2, 3 framework, and identify the two or three that most urgently need a qualified alternative supplier. That’s the starting list for the diversification program that Hiroshima just made the explicit policy framework to fund.