In a clandestine move to evade taxes and circumvent Western sanctions, Russian Copper Company (RCC) and Chinese entities have reportedly engaged in trading new copper wire rod disguised as scrap, according to exclusive information obtained by Reuters from three credible sources.
The intricate scheme involved shredding copper wire rod in the remote Xinjiang Uyghur region, transforming it into a form that closely resembled scrap metal. This deceptive practice allowed both exporters and importers to exploit discrepancies in tariffs applied to scrap versus new metal, thereby maximizing profits while evading regulatory scrutiny.
Russia’s export duty on copper rod, set at 7% in December, was lower than the 10% levy imposed on scrap metal. Similarly, Chinese customs imposed a 4% tax on imports of copper rod, contrasting with no duty on Russian scrap imports, creating a lucrative opportunity for illicit trade.
The trade in new metal disguised as scrap, which commenced in December, is reflected in a noticeable disparity between Chinese and Russian trade data. Chinese customs data indicated a significant surge in copper scrap imports from Russia, while Russian figures obtained by Reuters revealed negligible exports of scrap to China.
When questioned about the inconsistency, Russian customs declined to provide data, citing a temporary halt in foreign trade statistics since April 2022. Meanwhile, RCC, subject to Western sanctions, asserted that it exclusively supplies products to Russian entities, refraining from further comment on the matter.
The deceptive practice of shredding newly-made copper wire rod effectively camouflaged the material, making it indistinguishable from genuine scrap metal. This method, coupled with restricted access to the Xinjiang region, facilitated the clandestine trade and hindered detection.
Despite potential legal risks and challenges associated with sanctions, some Chinese companies reportedly established specialized teams to navigate Russian-related business dealings, underscoring the complexity of international trade dynamics.
The revelation of this covert trade underscores the evolving landscape of global commerce, where regulatory loopholes and geopolitical tensions create opportunities for illicit activities. As authorities strive to combat such illicit practices, transparency and vigilance remain crucial in safeguarding the integrity of international trade networks.