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North Korean and Chinese traders explore new smuggling routes amid rising costs and sanctions

North Korean and Chinese traders operating in Sinuiju and Dandong are working to open a new sea-based smuggling route to circumvent international sanctions and cope with rising logistics costs.

Speaking on condition of anonymity, a source in North Pyongan Province told Daily NK on Friday that the rising cost of logistics via the overland route between Sinuiju and Dandong has prompted the traders to open the new route between Junggang County in Chagang Province and Linjiang City in Jilin Province.

The traders plan to avoid the cost of overland smuggling by opening ship smuggling routes to export and import profitable items prohibited by international sanctions.

Current logistics costs are prohibitively high

Traders in Sinuiju and Dandong currently import and export manufactured goods, commodities, food, light industrial products, and pharmaceuticals to and from North Korea via Chinese transporters.

However, the logistical costs of this process are considerable. Chinese traders send raw materials to North Korea, where North Korean traders receive and process them into finished goods. These processed items are then shipped back to China. The cost paid to transporters for this entire process averages about RMB 40 (about USD 5.50) per kilogram. The financial burden of these transportation fees is shared: Chinese traders pay 60% of the cost, while their North Korean counterparts pay the remaining 40%.

To put this in perspective, shipping just one ton of goods would incur logistics costs of RMB 40,000 (approximately USD 5,504).

“Logistics costs have increased significantly since the outbreak of COVID-19, almost doubling from pre-COVID levels,” the source said. “As a result, traders on both sides are complaining of significant financial burdens.”

Both North Korean and Chinese traders are interested in exporting and importing profitable items such as minerals, electronic products, and luxury goods. However, it is not easy to officially export and import these items through the Sinuiju-Dandong land route because they are subject to sanctions against North Korea. Chinese customs strictly inspect these items, mindful of international scrutiny.

An official at a trading company in Sinuiju told Daily NK, “It’s difficult to make money just by exporting processed goods that cost 13 jeon each, so we sometimes secretly mix in profitable items. But if we get caught at customs, we have to pay additional duties or fines, so it’s much better to smuggle without going through customs.”

The source said that Chinese traders also want to import North Korea’s cheap mineral resources, but if they import through official channels, there is a high possibility of being caught by customs due to sanctions. Therefore, they prefer to smuggle through unofficial routes.

Traders join hands to open new sea-based smuggling route

North Korean and Chinese traders in Sinuiju and Dandong have been working since early March to establish a ship smuggling route between Junggang County and Linjiang City. This area has been known as a major smuggling route for timber, agricultural products and concentrates since the 1990s.

Currently, several North Korean foreign exchange earning institutions are located in the area. However, territorial disputes between different agencies are so severe that it is difficult for new trading companies or traders to move in.

“Traders expect that if efforts to open the smuggling route are successful, they will be able to reduce logistics costs by 50 percent compared to overland shipment, which will greatly reduce their financial burden,” the source said. “This will also greatly solve the problem of trading sanctioned items, leading to a significant increase in foreign currency earnings.”

Daily NK works with a network of sources living in North Korea, China, and elsewhere. Their identities remain anonymous for security reasons. 

Please send any comments or questions about this article to dailynkenglish@uni-media.net.

Read in Korean

July 08, 2024 at 06:49AM

by DailyNK(North Korean Media)

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