Filenews 15 April 2024
The Russian Copper Company (RCC) and Chinese companies have evaded taxes and circumvented the effects of Western sanctions by trading copper disguised as scrap metal, three experts on the matter told Reuters.
In the form of a copper wire rod is being shredded in the remote Xinjiang Uyghur region by an intermediary to make it difficult to distinguish from scrap, the sources said, allowing both exporters and importers to take advantage of differences in tariffs applied to scrap and new metal.
Russia's export tariff on copper bars was 7% in December, lower than the 10% levy on scrap. Imports of copper bars into China are taxed at 4%, while there is no tariff on imports of Russian scrap.
Sales of new metal disguised as scrap metal, which began in December, are reflected in a discrepancy between Chinese and Russian components.
Chinese customs data showed China bought significantly more copper scrap from Russia since December, while Russian data obtained by Reuters from a trade data provider showed the amount of scrap exported to the country's biggest trading partner was negligible.
China has become a major destination for Russian companies seeking to export their goods after the United States imposed sanctions on Russia over its invasion of Ukraine in February 2022.
The United States and the European Union have imposed sanctions on Chinese companies for supporting Russia's war efforts in Ukraine.
How do they do it?
Shredding the newly created copper rod is an effective way to hide new material that looks very different from scrap. New, elongated, thin high-purity copper rods, mainly used to manufacture power cables, are usually coiled for easier transportation.
Copper scrap, on the contrary, is a mixture of wires, pipes and pipes that have already been used. They are cut into grain-sized pieces or rolled and pressed, like packets of pasta, to transport them.
In addition to the economic incentive of avoiding taxes, shredded metal is harder to identify and track down — making it easier to sell to Chinese manufacturers.
In theory, there are no legal obstacles preventing China from buying metal from Russian companies under Western sanctions, but manufacturers may still be wary of losing export businesses to buyers seeking to avoid providing capital to Russia.
Penalties can also mean difficulties processing payments and borrowing money. The sources said some Chinese companies have created new teams to deal with Russia-related businesses.
