On November 15, 2024, the Ministry of Finance (MOF) and State Taxation Administration (STA) announced adjustments to export tax rebates, effective December 1, 2024. The changes include reducing the export tax rebate rate from 13% to 9% for refined oil, photovoltaic products, batteries, and certain non-metallic minerals and terminating rebates for aluminium, copper, and chemically modified oils and fats.
This policy shift reflects efforts to transition key industries towards domestic consumption and reduce reliance on export-driven growth. The adjustments are expected to affect exporters and global supply chains significantly, particularly in sectors reliant on Chinese materials and products.
Changes to Export Tax Rebates
Termination of Export Tax RebatesRebates have been entirely removed for 59 tariff items, including:
Chemically modified oils and fats: Non-edible oils derived from animals, plants, or microorganisms.
Copper products: Items such as rods, wires, plates, and foils.
Aluminium products: Profiles, sheets, and foils.
Other metals and materials: Certain alloys and composite materials.
Reduction of Export Tax RebatesThe rebate rate has been lowered to 9% for 209 tariff items, including:
Refined oil products: Gasoline, diesel, and aviation kerosene.
Photovoltaic products: Solar cells and modules.
Batteries: Various types for industrial and consumer use.
Non-metallic mineral products: Processed materials like graphite and silicon carbide.
Overview of Export Tax Rebates
China's export tax rebate system offsets value-added tax (VAT) and consumption tax (CT) to enhance global competitiveness. Established in 1985, the system has undergone significant reforms, particularly following China’s accession to the WTO in 2001. Simplified processes and rate adjustments have supported exporters, especially during crises like the COVID-19 pandemic.
Recent measures include expanding eligibility, streamlining applications, and eliminating penalties for late filings, making the system more efficient.
Expanded Departure Port Tax Rebate Policy
Effective December 1, 2024, updates to the port of departure rebate policy include:
Eligibility for rail-transported goods from designated departure ports.
Requirements for exporters to hold Grade A or B taxpayer status and be registered with customs.
Streamlined declaration and rebate processes.
New departure and transit ports, such as Wuxi (Jiangyin), have been added to support expanded logistics options.
Short-Term Impacts
Increased Costs: Exporters of aluminum, copper, and biofuel feedstocks face higher production costs and reduced competitiveness. For example, the cancellation of rebates on used cooking oil (UCO) has already increased prices by $150/MT.
Market Disruptions: Reduced exports may tighten global supplies, causing price fluctuations in markets reliant on Chinese products, such as the EU and US.
Sector-Specific Strain: Refiners of clean oil products face slimmer margins, and smaller metal processors may struggle to stay viable without rebates.
Long-Term Impacts
Shift to Higher Value-Added Production: Industries may pivot towards innovation and higher-value products, particularly in photovoltaics and batteries.
Domestic Market Focus: Reduced export incentives could stabilise local supply chains, encouraging sustainable practices.
Global Supply Chain Fragmentation: Increasing trade barriers and reduced Chinese exports may accelerate the regionalisation of supply chains.
Recommendations
To mitigate the impact of these changes, businesses should consider:
Reassessing Pricing and Product Classifications: Align with the new rebate policies to minimise disruptions.
Exploring Supply Chain Optimisation: Investigate alternative sourcing and production strategies, including setting up overseas facilities.
Investing in R&D: Focus on innovation to improve competitiveness and diversify offerings.
Strengthening Market Diversification: Reduce dependency on single markets by expanding to other regions.
Engaging with Policymakers: Maintain dialogue with government agencies and trade associations to stay informed about potential policy updates.
The rebate adjustments highlight the need for businesses to adapt proactively to policy shifts while exploring new opportunities to thrive in a changing global trade environment.
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