Customs threatens to hold Shell imports

MANILA, Philippines - The Bureau of Customs has threatened not to release Pilipinas Shell Petroleum Corp.’s incoming importation of unleaded gasoline declared as catalytic cracked gasoline (CCG) unless the giant oil firm pays more than P7.34 billion in back excise and value-added taxes from 2004 to October this year.

Customs commissioner Napoleon Morales demanded the prompt payment of the back taxes in a letter to Nigel Avila, Shell country tax manager, dated Nov.11. The back taxes were for CCG shipments at the Port of Batangas.

“You are hereby ordered to pay, within 10 days from your receipt hereof, the P7,348,767,933 principal liability for your shipments covered by the import entries cited in the demand letters of the district collector… under the threat of application of Section 1508 of the Tariff and Customs Code (TCC) of the Philippines,” Morales said.

Section 1508 of the TCC authorizes Customs to hold the delivery or release of imported articles.

The BOC issued the order after rejecting for lack of merit Shell’s appeal for reconsideration of the demand of the district director of the Port of Batangas for the payment of the back taxes. The demand was contained in letters dated Jan. 30 and Sept. 14, 2009.

In his letter, however, Morales was confident that Shell would eventually follow the order to avoid incurring additional expenses for interest, surcharges/penalties and possible court action.

Earlier, BOC’s Assessment and Operations Coordinating Group led by Deputy Commissioner Reynaldo Nicolas denied Shell’s appeal that it not be taxed for its CCG imports, saying it’s not unleaded gasoline.

The BOC, however, insisted that excise taxes apply to all importation.

BOC said Shell was paying the corresponding excise tax for unleaded gasoline in its previous importation of CCG.

The bureau said Shell had even admitted that CCG was the same as unleaded gasoline.

The BOC ruled that under the law, excise tax is imposed on regular gasoline and unleaded gasoline. The law does not distinguish between gasoline imported for use as raw material or as blending component for the production of a finished product.

But the law grants zero-tariff for naphtha if it is intended as raw material for the production of other petrochemical products.

“Gasoline whenever imported shall be subject to excise tax and VAT based on the landed cost, whatever is the intention of the importer to the use thereof,” a BOC memorandum read.

Bureau officials said that all the other oil companies have been paying the excise tax for the importation of unleaded gas.