Tariff body bats for duty-free oil imports

MANILA, Philippines - The Tariff Commission (TC) has recommended a reduction in the most favored nation (MFN) rate of duty on crude oil, refined petroleum products and asphalt to zero from three percent, in order to help ensure the supply of petroleum products in the domestic market.

Petron Corp., the largest oil refining and marketing company in the country, has asked the government to remove the MFN rate of duty in order to help level the playing field and keep local refiners competitive with importers.

Another local refiner, Shell Philippines supported the petition while Unioil, Pryce Gases Inc. and Seaoil Philippines Inc. opposed the petition.

The TC said removing the tariff will help ensure the existence of local refineries to produce the Philippines’ own environmentally-compliant refined fuels and provide security of fuel supply in the country.

In the Committee on Tariff and Related Materials (CTRM) meeting in February, the Board of Investments (BOI), the Department of Energy (DOE) supported the position of the TC while the Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP) and the Department of Budget and Management (DBM) expressed strong reservations on the matter.

An interagency working group was formed to consider three scenarios. The first option is to maintain the three percent rate. The second is to remove the MFN rate while the third is to increase the CEPT rate on crude and refined petroleum products to three percent from zero and maintain the MFN rate at three percent.

The BOI said they support the second option because the local refineries source their crude oil from non ASEAN countries that is why they pay the three percent MFN rate. On the other hand, the other players get their refined petroleum products from ASEAN that is why their CEPT (Common Effective Preferential Tariff) rate is zero percent.

The second option will help support the continued operation and upgrading of local refinery facilities to meet Euro4 emission standards. Likewise, this will help encourage additional investments in the form of refinery plants and oil depots.

Also, the second option will have a positive employment impact on other sectors especially those that are highly dependent on oil. There would be less or no pressure for wage increases as lower pump prices would mean stable prices of goods and services as well as transportation cost.