China’s Ministry of Finance and State Taxation Administration recently announced an adjustment to export VAT rebate policies, effective April 1, 2026. According to the official notice, export VAT rebates will be removed for a list of selected products, with batteries and photovoltaic-related items highlighted in the announcement summary.

(Official source: Ministry of Finance & State Taxation Administration of China — Official Notice and Product List)

However, a closer review of the published HS-code-based product lists shows that the actual scope of the policy change is significantly broader than batteries and solar products alone. For companies involved in chemical trading, importing, formulation, and industrial manufacturing, understanding the real coverage and implications of this policy is essential.

This article aims to clarify what is changing, what is not, and why the policy deserves careful attention from global chemical market participants.

Not Only Batteries and Photovoltaic (PV) products: Understanding the True Scope

While batteries and photovoltaic products are explicitly mentioned in the policy communication, the official annexed product lists are defined strictly by HS codes, not by industry categories. As a result, the scope extends well beyond what many overseas readers might initially assume.

• Battery Products Subject to Export VAT Rebate Removal

(Effective from April 1, 2026)

The above batter products lists covers major battery products and parts including lithium ion battery,Mercury free fuel cell, Manganese dioxide cell etc.

• Photovoltaic (PV) Products Subject to Export VAT Rebate Removal

The above is a part of total listed 249 items, in addition to photovoltaic modules and parts and related chemicals, the lists include a wide range of products across multiple HS chapters, such as:

• Basic chemicals like methanol,ethylene glycol, 1,4-BDO,Trichloroethylene etc.

• Organophosphorus pesticides

• Selected phosphates esters and salts,phosphites.

• Lithium compounds like LiPF6,Lithium manganate,Lithium cobaltate etc.

• Polymers(PVC, primary forms of polyether polyol,polysiloxane)

• Flame retartands:TCPP

This means that products not commonly associated with the battery or solar value chain may still fall within the affected scope, depending entirely on their HS classification. Product names, application fields, or end-use descriptions alone are not sufficient to determine whether a product is covered.

For international buyers and traders, this distinction is critical: HS code classification is the sole determining factor under this policy.

What the Policy Changes — and What It Does Not

It is equally important to clarify what this policy adjustment represents.

The removal of export VAT rebates is a tax policy change, not an export restriction. It does not involve:

• Export bans or quotas

• Licensing or approval requirements

• Customs clearance limitations

• Compliance controls

Exports of the listed products will continue to proceed normally from a regulatory and customs perspective. The primary impact lies in export cost structures, as the removal of VAT rebates affects how export prices are calculated and how margins are allocated within the supply chain.

In practical terms, this policy may influence:

• Export pricing negotiations

• Long-term supply agreements

• Cost-sharing arrangements between exporters and overseas buyers if applicable.

But it does not signal any disruption to physical supply or market access.

Who May Be Affected — and How

The commercial implications of this policy may vary depending on a company’s position in the value chain.

• Chinese Chemical producers and exporters may experience the most direct impact, as VAT rebates have historically been an important element in pricing for certain product categories,considering that tax rebate rate for most of products are 13% which is a significant change in cost-structure.

The removal of a 13% export VAT rebate effectively raises the average ex-works cost of affected Chinese exports by approximately 13%, assuming raw material prices and other production costs remain unchanged. To preserve the same gross margin, export prices would therefore need to increase by a similar magnitude.

Whether this cost increase can be successfully passed on depends largely on relative global competitiveness. In product segments where Chinese suppliers maintain a structural cost or efficiency advantage, the additional tax burden is more likely to be transferred downstream to overseas buyers. However, in markets where cost parity with foreign alternatives already exists—or where domestic supply exceeds demand—the loss of the rebate can intensify price-based competition among Chinese producers, increasing margin pressure and, in some cases, the risk of operating losses.

Beyond the immediate impact on margins, the removal of a 13% export VAT rebate can have structural consequences in sectors already characterised by oversupply. As price competition intensifies and margins compress, weaker or less efficient producers may be forced to scale back operations or exit the market altogether. This process can accelerate industry consolidation and competitive reshuffling, altering the existing supply landscape.

In the medium to long term, such adjustments may introduce greater uncertainty into upstream and downstream supply chains, including fluctuations in available capacity, delivery reliability, and supplier continuity. For international buyers, the impact is therefore not limited to price adjustments, but may also involve changes in supplier stability and market structure, particularly in product categories where excess capacity and intense domestic competition are prevalent.

• Chemicals Importers and distributors and end users may see also direct effects through pricing adjustments, especially for contracts extending beyond April 2026 or for products operating in competitive margin environments,there may be temporary chaos to the existing supply chain.

For overseas importers, expectations of higher export prices can trigger front-loaded purchasing behaviour ahead of the policy’s effective date. This effect is particularly pronounced in product categories where China represents the dominant—or near-exclusive—source of supply. In the short term, such demand acceleration may lead to temporary supply tightness, pushing up not only finished product prices but also prices of upstream raw materials.

A recent example can already be observed in the polyether polyols market. As orders for polyether polyols surged in anticipation of pricing adjustments, demand for propylene oxide, one of the key feedstocks, increased sharply. This sudden demand shift has driven propylene oxide prices steadily higher, reaching their highest level in nearly a year. The case illustrates how policy-driven expectations, rather than changes in underlying production capacity, can quickly propagate through the value chain and amplify short-term price volatility.

In short, the policy does not change whether products can be exported—but it materially changes how export prices, margins, and supply relationships are negotiated.

Why Is China Adjusting VAT Rebates in These Categories?

Export VAT rebate policies in China have long been used as a fiscal and industrial policy tool, rather than as a trade control mechanism. Adjustments typically reflect a combination of factors, including:

• Encouraging higher value-added manufacturing and export quality upgrades

• Easing external trade frictions and reducing price-driven export pressure

• Driving domestic industrial restructuring and capacity rationalisation

• Managing fiscal constraints during economic transition

Such policy tools are not unique to China; many economies use tax credits, subsidies, or rebate mechanisms to guide industrial development. In this context, the current adjustment should be viewed as part of a broader policy recalibration rather than a targeted action against specific overseas markets.

Why Accurate HS Classification Matters More Than Ever

One key takeaway from this policy update is the growing importance of precise HS code classification. In several cases, products sharing similar chemical names or applications may fall under different 8-digit or 10-digit HS codes, with very different tax treatment outcomes.

For global chemical businesses, relying on general product descriptions or historical assumptions can lead to misunderstandings. Accurate, up-to-date HS classification — especially at the 10-digit level — is increasingly essential for compliance, pricing, and risk management.

Looking Ahead

With the policy scheduled to take effect in April 2026, companies still have time to review their product portfolios, supply contracts, and pricing frameworks in a structured and rational manner. The key is not to overreact, but also not to underestimate the importance of early understanding.

As always, clarity and preparation are the best tools in navigating regulatory and policy changes in global trade.

About FORU CHEMTECH

FORU CHEMTECH is a specialty chemical company devoted to Research and development,production activity,distribution and export service. Our portfolio serves industries including coatings, pharmaceuticals, agrochemicals, cosmetics and personal care etc.

With extensive experience in Chinese chemicals market and our specialty expertise in chemistry,we work closely with global partners to ensure our customers professionalism and long-term reliability.

As part of our ongoing commitment to hassle-free sourcing solutions, we continuously monitor policy developments such as China export VAT rebate adjustments, assess their potential impact at the HS-code level, and support our customers with timely, product-specific insights.

For questions related to chemical HS codes, China export tax policies, or the potential impact of regulatory changes on specific chemical products, our team is available for case-by-case discussion and consultancy.