DOF to address oil smuggling

The Department of Finance (DOF) is set to implement  a department order aimed at addressing the problem of smuggling of petroleum products.

The DOF said it is now reviewing the draft implementing rules and regulations (IRR) and this is set to be issued before the end of the year,’ Finance Undersecretary Gaudencio Mendoza Jr. told reporters yesterday.

Rampant smuggling of fuel products has been blamed for millions of losses for oil firms and the government.

According to DOF Department Order 23-07, the Bureau of Customs (BOC) is now required to mark imported kerosene and fuel oil products which enter the country duty free using a liquid chemical substance.

The move is to differentiate the imported products and prevent the unauthorized diversion of these into the domestic market. 

Data from the DOF showed that the government lost P1 billion in revenues from import duties due to rampant smuggling.

According to the department order dated July 26, there was a need to adopt measures to ensure the due payment and proper collection of duties and taxes on all fuel oils which were initially entered into the Philippines on an exempt basis and to prevent diversion of these products into the domestic market.

The new regulation shall cover all kerosene, including dual purpose kerosene that enter the Philippines and are subject to zero excise tax. It also covers all diesel oil imported into the Philippines for which exemption from the payment of duties and taxes is claimed.

The mandatory marking shall be implemented by the BOC on a pilot basis at the Subic Bay Freeport Zone, Clark Special Economic Zone and the Port of Batangas for imported kerosene.

 “The BOC shall provide a monthly report and evaluation to the DOF on the progress of the pilot program with the end in view of having the marking program implemented on a nationwide basis,” Finance Secretary Margarito Teves said in the order.

The pilot implementation was supposed to start on August 15 but Mendoza said this has been delayed because the IRR has not been completed.

A Program Implementation Office, headed by the DOF and composed of the heads of the BIR and BOC, shall supervise the proper and effective implementation of the order.

The DOF hopes the measure would be effective in curbing smuggling as it aims to raise more revenues to help the government wipe out its budget deficit. The budget gap stood at P41 billion in the first half of the year or P9 billion higher than the P31 billion that was programmed.

The government hopes to trim the deficit to P63 billion this year and totally wipe it out by the end of next year.

Mendoza believes the order would help address the problem of smuggling in the country as it would identify petroleum products that are exempted.