South Korea Intensifies Crackdown on Illegal Vehicle Exports to Russia via China
South Korea's customs authorities are significantly escalating their efforts to combat a sharp rise in illegal vehicle shipments destined for Russia, which are being routed through intermediary nations including China, Kazakhstan, and Kyrgyzstan. This decisive action comes in response to a dramatic increase in such exports, with the Korea Customs Service reporting a more than five-fold jump in illegal vehicle exports last year, reaching a staggering 149.2 billion won, equivalent to approximately $100.78 million. This substantial rise has occurred since Seoul implemented stringent export restrictions following Russia's full-scale invasion of Ukraine.
Deceptive Export Tactics Uncovered
Investigations have uncovered that some traders are engaging in deceptive practices by falsely declaring the final destination of vehicles. They list neighbouring countries such as Kazakhstan and Kyrgyzstan on export documents, while the true endpoint is Russia. Additional tactics involve purchasing new vehicles and then disguising them as used cars to facilitate onward shipment to Russia through these same intermediary nations. A customs official confirmed that many of these illicitly exported vehicles were German premium brands that were initially imported into South Korea.
Authorities have pledged to ramp up their crackdown on these circumvention schemes, which undermine international sanctions. Since 2024, Seoul has required vehicles with an engine capacity exceeding 2.0 litres to obtain a permit for export to Russia. Those who violate these laws face severe penalties, including a prison term of up to seven years or a fine of up to five times the value of the goods.
Grey-Market Schemes from China to Russia
Parallel to South Korea's efforts, tens of thousands of cars are being exported from China to Russia under grey-market schemes that often circumvent Western and Asian government sanctions, as well as automakers' commitments to exit the Russian market. An investigation by Reuters in February revealed a thriving trade in these vehicles, ranging from Toyotas and Mazdas to German luxury models.
This trade continues partly through informal networks that enable Russian dealers to order vehicles through Chinese intermediaries, according to interviews and data from Russian research firm Autostat. Most of these vehicles are manufactured in China, where many international brands build cars with local partners, or are shipped through China after being produced elsewhere.
A growing number are zero-mileage used vehicles, which are new cars registered as sold in China by dealers or traders. These are then reclassified as used and exported, a practice highlighted by Reuters last year. This method is a symptom of China's highly subsidised and hypercompetitive car market, allowing automakers and dealers to inflate sales figures, collect subsidies, and export surplus vehicles.
Zhang Ai Jun, a former exporter at a Sichuan-based car trader, explained that traders moving European, Japanese, and South Korean brand cars from China to Russia classify new cars as used to eliminate the need for automaker approval for Russia sales. This way is to export more easily, she said, highlighting the loopholes exploited in these grey-market operations.
