China's Final Crackdown on Illegal Steel Exports: A New Era of Supply Chain Risk

If you're purchasing steel from China, you've recently felt the tension and uncertainty in the market. The rumor that China's customs and tax authorities are cracking down on " export without VAT" ("pay-for-export") has gone from rumor to reality. The recent "Announcement No. 17" jointly issued by several Chinese ministries and commissions, as well as enforcement actions by the tax department (e.g., a Chinese company was fined more than 10 million yuan for "export without VAT"), mark the final consolidation of this gray operation.

This is not just an ordinary market rectification, but from the underlying logic, the end of the entire gray industry chain in the past.

In the past, the core of "export without VAT" was to "cut off" the flow of goods, funds and invoices, making it difficult for the regulator to trace the real owner of goods. However, the latest policy with a combination of technology and systems, this broken chain completely blocked. The core of the policy lies in two major mechanisms:

1. Compulsory "owner penetration management":
   Under the new regulations, any agent export must fill in the "agent export information form", the back of the producer, the real owner of the goods, the value of the goods and other information unreservedly declared to the China Taxation Bureau. From now on, every container can find its real owner, and anonymous or borrowed qualification export is no longer feasible. It is no longer possible.
2. Full chain accountability of "whoever declares, whoever covers":
   The new policy extends the responsibility to the whole export chain, including logistics companies and customs brokers. If they are unable to provide true information about the owner of the goods, then they must take full responsibility for the tax problems of the goods. This forces all participants in the entire chain to look upstream for compliant, invoicing partners.

For global buyers who rely on non-compliant suppliers, this is no longer a distant policy change, but a looming business risk. You may face:

Once your supplier is identified, the Chinese tax authorities have the right to trace back at least three years of their export records and impose significant fines. This could lead to cash flow disruption or even business closure. At that time, the production of your orders will immediately come to a standstill and the promised delivery time will be in vain, which will have a disastrous impact on your production schedule.

This is the most immediate financial threat. In the event of an existential crisis at your supplier, your advance payment will be diverted to pay back taxes and penalties, or it may even disappear as the company is written off. You need to consider whether the money you have invested is being used to purchase the goods you need, or whether it is ending up in the Chinese government's tax coffers.

Suppliers who have long relied on "buy-to-export" pricing systems that are based on illegal 13% tax evasion. When this road is blocked, they are forced to raise prices, but this will also cause them to lose their only "competitiveness", and they may ultimately choose to take the risk or just give up the business, resulting in the sudden interruption of your supply chain partnership.