Ever-present Unjust Problems on Chinese Ferro-silicon Vicious circle of smugglers and crackdowns are going on

  • Tuesday, October 28, 2014
  • Source:ferro-alloys.com

  • Keywords:FeSi,Ferrosilicon,Smuggler,Crackdown,China
[Fellow]Ever-present Unjust Problems on Chinese Ferro-silicon Vicious circle of smugglers and crackdowns are going on

As to the export of Chinese ferro-silicon to the Asian region, more than half a year has passed since the roundabout products via Vietnam which amounted for more than half of the total decreased dramatically. But, the illegal export from China has continued in a different way, and illegally-exported products distributed in the Asian region in the former half (January to June) of 2014 was 156,270 tons which was almost same as the regularly-exported from China (162,058 tons).

Albeit the Government of China is making efforts to let the Ministry of Finance and the customs strengthen the controls and eradicate unjust actions, the vicious circle among the traders which engage in unjust actions is not likely to go to end.

Unjust activities are to be examined as follows by being classified into 3 main categories.

[1. Unjust activities at the time of production] 

There are products some of which an additional price tax (17%) is not paid to. Mainly, it is a product with Si being 72% which is being distributed in the domestic market. It is understood that the product with Si being 75% also was produced at a rate of several thousand tons per month before this April. 

This is a product which is not registered in the China's production result and a product which previously crossed the border into Vietnam, but as the quantity that can cross the border has decreased drastically since this March, this has got mixed in with the Chinese domestic market as well as the international export market. However, the production volume itself is understood to have decreased since April.

Since this product can't have a customs immigration quarantine (CIQ) as the additional price tax is not paid, the portion mixed in with the export-oriented products also got reduced after the CIQ inspection on export-oriented ferro-silicon restarted on 15 July this year.

[2. Unjust export via special transportation route] 

(1)Roundabout products via Vietnam: This has a big presence as a roundabout export of ferro-silicon in the recent years, and albeit this decreased sharply after this March, it can be imagined that several hundred to one thousand tons of this cargo are coming in every month even after that. This cargo crosses the border to Vietnam without paying an export duty (25%), and although most of them takes the form of smuggling, there is almost no illegal activities in the shipment itself from Vietnam.

(2)Roundabout products via Hong Kong: This is a method of illegal export existing before the roundabout products via Vietnam became a mainstream, and the cargo is to be taken as the export products which are transshipped in Hong Kong. The fact is that, the products are supposed to be shipped via Hong Kong only on paper, and the actual movement is directly to Japan and South Korea from the major or local ports in China. After Hong Kong was returned to China, this is an export route without a tax by using a special preference for customs duties in the past. 

(3)Roundabout products via Taiwan: As is the case in (2), this is an illegal export method existing before the roundabout products via Vietnam became a mainstream, and the products are supposed to be transshipped in Taiwan only on paper. In case there is an import from Taiwan which has no production result in the customs statistics, although this was actually Chinese ferro-silicon, that case was analyzed as the illegal import existing in this route. When the roundabout products via Vietnam enjoyed its best moment, the products purchased by trading firms in Taiwan were resold to Japan and South Korea, many of which passed the customs as the import from Taiwan.

[3. Illegal export as being disguised as another commodity]

(1)To be disguised as no export duty commodity which looks similar: The export documents are to be forged as similar-looking commodities like silicon metal, manganese metal and silicon carbide which are no duty commodities, and the products are to be shipped. It is difficult to detect camouflage by appearance, and as many of them are priced higher than ferro-silicon, the shipping lot is somewhere between several tens of tons and around 400 tons, and therefore this has a drawback that a large-lot export won't be possible. As the export duty on silicon metal and manganese metal was abolished, both are apt to be intended for disguise.

(2)To be disguised as low duty commodity which looks similar: The export duty rate on ferro-silicon is 25%, whereas the main duty rate on other ferroalloys is 20% and many of them look similar, but as these prices are higher than ferro-silicon, these are not suitable for shipment as one large lot as is the case in (1).

(3)To be disguised as large-lot export commodity without duty which looks different: As is the case in silicon metal, the export duty on coke was also abolished from January 2013. Besides, as several hundred to several thousand tons are exported at a time, this is suitable for being disguised in terms of the quantity. However, if the visual contact takes place, this will be easily exposed as crookery since the appearance of the commodity is broadly different. 

(4)To be disguised as low-priced ferro-silicon: This is to disguise ferro-silicon of Si being 75% and specialty ferro-silicon as ferro-silicon of Si being 72%, in case of which even if the duty rate is 25%, the duty to be paid will be less as the price to be used for duty calculation is cheap. Furthermore, also from the point of the minimum floor price (Even in case of the price being lower than this, a fixed rate of export duty will have to be paid) being set at respective export ports, the amount of duty to be paid will be less. The aforementioned cases are known at the moment.

What is called as roundabout products via Vietnam is (1) of 2, and it used to be a mainstream that several thousand tons crossed the border at a time by ship or crossed the bridge between Dongxing, China and MongCai, Vietnam by truck. However, after the relationship between both countries got aggravated due to the territorial problems this May, the route still existing at the moment is the one crossing the border at the shallow riverbed in the upstream of River Kalong by using 2 - 3 trucks, the upper limits for which are understood to be several tens of tons at a time and several hundred to one thousand tons in a month.

The group was busted at the port of Lianyungang this June which was exporting ferro-silicon and magnesium oxide disguised as coke. This is to be categorized as (3) of 3, and it has been reported that 37,000 tons of ferro-silicon and more than 80,000 tons of magnesium oxide were exported illegally before these cases were found out. For a reference, the export duty rate on magnesium oxide is 5 - 10%.

On the other hand, albeit CIQ inspection on ferro-silison was abolished on 15 August 2013 in order to simplify the export procedures, this restarted on July 15 as mentioned above. This is because the illegal activities like falsifying the documents increased, and is one of countermeasures especially against (4) of 3. However, the grace period from notification to restart of inspection was short, and therefore such a case was seen sporadically as the cargo was detained for a few weeks on suspicion of an illegal export at the customs due to defects in the documents during July to August right after the inspection restarted.

  • [Editor:Phillip.Feng]

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