Oil purchases by some refiners in the world’s biggest crude importer are being constrained as the firms assess the potential impact of a new tax system in China.

A revamped tax rule that’ll be implemented in March is spurring concern among the nation’s independent processors, known as teapots, that it would erode margins, according to Shanghai-based commodities researcher ICIS-China. The new regulation is seen as a government effort to close a loophole that allowed oil traders to profit from beefing up more expensive fuels by blending it with cheaper chemicals.

The refiners—which have risen to prominence in the oil market over the past two years as they helped lift Chinese crude imports past the U.S.—are now holding back as uncertainty swirls over the fallout from the complicated new levy system, according to Li Li, an analyst with ICIS-China. That may drag down import volumes in the first quarter, though double-digit growth is still expected for the full-year period, Li said.

At least four of the teapots clustered in the eastern province of Shandong and southern region of Guangdong haven’t issued letters of credit for financing their purchases since the start of this year, according to officials from five buyers and suppliers. The cargoes were originally scheduled to be delivered in the first quarter, they said, asking not to be identified. Apart from the new tax system, they also cited volatile global benchmark prices for stalling purchases.

“There are some purchase agreements being paused from the buyer side after prices and volumes were preliminarily settled,” ICIS-China’s Li said, citing her discussions with the refiners. “We might have a clear picture after March when the new taxation system starts operation.”

Import Growth

Still, crude shipments from overseas into China in 2018 will probably be higher than last year’s levels as more refining capacity is added, she said. Purchases are seen growing 10 percent, backed by more imports to replace falling domestic output and build strategic storage, according to BMI Research.

Russia and Angola last month topped the list of crude suppliers to China, the world’s second-biggest oil consumer. Total imports increased almost 20 percent from a year earlier to 40.64 million metric tons.

The independent refiners have received government approval to use 142.42 million tons of crude—higher than in 2017—of imported supplies in a first batch of allocations for 2018. They will need to use the quotas or risk received smaller or no volumes in the next batch, according to the officials from the firms.

The processors may also benefit from Shanghai’s upcoming yuan crude-futures contract as it allows traders to take delivery of prompt-loading, small volumes of oil from domestic storage and offer them to the firms, Nevyn Nah, an analyst at industry consultant Energy Aspects Ltd., said this month.