According to sources familiar with the matter, Russian Copper Company (RCC) and Chinese firms have reportedly employed a strategy to avoid taxes and circumvent the impact of Western sanctions by engaging in the trade of new copper wire rod disguised as scrap. The copper wire rod is said to have been shredded in the remote Xinjiang Uyghur region by an intermediary, making it difficult to differentiate from scrap and allowing both exporters and importers to benefit from variances in tariffs applied to scrap and new metal.
In December, Russia’s export duty on copper rod stood at 7%, lower than the 10% levy on scrap, while imports of copper rod into China are taxed at 4%, with no duty imposed on Russian scrap imports. This discrepancy in tariffs has reportedly facilitated the trade of new metal disguised as scrap, enabling the exploitation of differences in tax rates to gain a competitive advantage.
The alleged sales of new metal disguised as scrap, which commenced in December, have resulted in a noticeable disparity between Chinese and Russian data. Chinese customs data indicated a significant increase in copper scrap imports from Russia since December, while Russian figures obtained from a commercial data provider revealed negligible exports of scrap to China, its largest trade partner.
This purported trade practice raises concerns about the circumvention of regulations and the potential evasion of taxes and sanctions, underscoring the need for enhanced scrutiny and oversight within the copper trade between Russia and China.