A soon-to-be-implemented overhaul of the customs system
regulating exports and imports of mineral commodities in China
is creating widespread concerns about large-scale disruptions
to supply chains to and from the country.
China customs is imposing a new system of documentation
effective from August 1, 2018. This system will require Chinese
exporters to provide much more detailed information on the
nature, value and route of their shipments.
Officials expect these restrictions will clamp down on
widespread tax dodging that have been endemic in parts of the
Chinese exports industry for many years.
"Until now, you could go about your exporting business by
giving away almost no information to customs and, as a result,
to the taxman," one market participant said. "This way of doing
things is going away for good."
Changes coming in force
The new system will introduce several additional items of
information that exporters/importers will have to declare,
expanding greatly on the relatively limited details that are
Among the most relevant changes is the introduction of the
overseas consignee column in the export declaration form, where
specific information regarding the customer, port of
destination, total value of shipment will have to be added.
One source explained: "With the implementation of the new
system, the information of manifest, bill of lading, customs
declaration, etc, should all be consistent.
"If they [customs officials] see a discrepancy, they
will know that something dodgy is going on there, and will be
able to identify it."
From August 1, for sellers to be able to export, they will
have to disclose to customs key information including:
- The identity of their company (the seller’s
company in China)
- The identity of their customer
- The notify party of the shipping document
- The identity of the shipping company handling the
- The bank within China that is to receive the funds of the
- The company’s VAT registration number
- Names and contact details of the people involved on both
sides of the transaction (seller and buyer)
The seller will be required to provide a copy of the invoice
to their Chinese bank prior to the reception of the payment
into China. To authorize the transaction, the bank will have to
ensure that the value stated on the invoice matches the funds
coming in from overseas. If it does not, the transaction will
not be authorized.
Most of the above information was not needed under the
Clamping down on tax avoidance
The scale of the changes in regulation shows how quickly the
Chinese central government is willing to act to single out and
reduce cases of VAT and export tax avoidance by local
Tax avoidance and smuggling have been often mentioned as
widespread practices in the trading of minerals originating
from China, including bauxite, alumina, graphite, magnesia,
Historical and current trade data from China customs shows
how authorities are often unable to single out the identity of
a large number of exporters behind certain shipments, which
appear listed only as "no company name".
Additionally, a large share of total volumes of some
commodities exported is also listed in customs data simply as
"Shenzhen": this means that these companies are supposedly
operating from the special-status Shenzhen Special Economic
Zone, and are able to hide their identity behind the
zone’s preferential arrangements.
The table below shows the breakdown of exports of Chinese
calcined bauxite from January to March 2018, between companies
that declared their identity ("declared exports"), companies
that were listed as "no company name" and those exploiting the
"Shenzhen" economic zone status.
% share of total
No company name
Source: China customs/Industrial Minerals
The data shows that less than 40% of total exports is
traceable to specific companies; 38% is listed under "no
company name" and 23% as "Shenzhen".
In other words, as much as 115,000 tonnes were exported in
the period without the volumes being linked to specific company
"If you look at this number, you can clearly see that more
than half of the companies do not tell China customs who they
are," one supplier said. "That’s over 50% of the
lot exporting illegally."
Another source added: "Today you can buy Shenzhen paperwork
off the internet in China. That’s how easy it is.
But with these changes, that won’t be possible any
Some market participants reported higher demand for
refractory minerals including bauxite and alumina over the past
couple of weeks, and cited the upcoming change in the customs
system as a factor for this.
"Sellers don’t know what’s going
to happen once the new system comes into force, so they want to
move as much material as possible now," a producer said.
One trader commented: "It makes sense: with all of these
changes, who knows how it’s all going to look. If
I were them, I would ship stuff out now."
He added that, for material being scheduled for shipping in
August, his company had to specify that it could not guarantee
the price would not change in case of unforeseeable issues
related to the customs system change.
Another distributor added: "No one really know what will
happen after August 1. We expect chaos, certainly at the
"It is possible that customs offices may be unable to
process all of the additional paperwork in one go. They would
be extra careful in order to get it right and, in the end, this
may lead to a clog in the whole system."
One viewpoint that was shared by multiple participants is
that the scale of the change brought about will create long
delays for export paperwork to be processed at customs.