Philippines imposes additional 10% import duty on crude oil and petroleum products to fund Covid-19 response efforts

The Phillipine government announced an additional 10% duty on crude petroleum oil and refined petroleum products to raise funds for its coronavirus response efforts. The modification of import duties on crude petroleum oil and refined petroleum products is contained in Executive Order No. 113. The executive order comes at a time when global crude oil prices reached record lows as the global Covid-19 pandemic forced many economies to lock down in an attempt to “flatten the curve.”

Under the Customs Modernization and Tariff Act, the president, upon the recommendation of the National Economic and Development Authority (NEDA), may increase, reduce, or remove existing rates of import duty including any necessary change in classification. The power delegated to the president shall be exercised only when Congress is not in session. The Philippine President Rodrigo Duterte signed the order on the 2nd of May, two days before Congress resumed session.

The executive order was in line with the Bayanihan Act, which cited the urgent need to undertake a program for recovery and rehabilitation, provide safety nets to all affected sectors, and provide the funds to implement them.

“There is an urgent need to augment the government’s resources to sufficiently finance the programs and measures to mitigate the effects of the COVID-19 situation, and launch the country towards recovery and rehabilitation,” according to the executive order.

In advance of the signing of the executive order by the president, the NEDA Board approved the temporary imposition of the additional 10%duty on imported crude oil and refined petroleum products on the 8th of April. The additional import duty of 10% shall be imposed on top of the existing Most Favored Nation and preferential import duties.

The additional 10% duty shall revert to zero percent when international oil prices increase based on trigger prices indexed to oil prices in the world market and upon certification by the Department of Energy that a trigger price has been reached.

The articles subject to the 10% additional duty include petroleum oils and oils obtained from bituminous minerals, namely crude petroleum oils and condensates; petroleum oils and oils obtained from bituminous minerals other than crude; preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; and, waste oils.

Petroleum products subject to the 10% additional duty are light oils and preparations including leaded motor spirit of RON 97 and above; RON 90 and above but below RON 97, and other RON; unleaded motor spirit of RON 97 and above that are unblended, blended with ethanol, and others; unleaded motor spirits of RON 90 and above but below RON 97 that are unblended, blended with ethanol and others; and unleaded motor spirit of other RON that are unblended, blended with ethanol and others.

Also covered by the order are naphtha, reformates and other preparations of a kind used for blending into motor spirits, alpha olefins, other petroleum spirit having a flashpoint of less than  23 degrees Celsius; lubricating oil feedstock (base oil), lubricating oils for aircraft engines, other lubricating oils and lubricating greases; automotive diesel fuel, other diesel fuels, fuel oils, jet fuel having a flash point of 23 degrees Celsius or more, jet fuel having a flashpoint of less than 23 degrees Celsius; other kerosene, and other medium oils and preparations.

Other products subject to the additional 10% import duty are petroleum oils and oils obtained from bituminous minerals other than crude and preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, containing biodiesel other than waste oils; petroleum gases and other gaseous hydrocarbons namely liquefied natural gas, propane, butane, ethylene, propylene, butylene and butadiene; natural gas in gaseous state used as a motor fuel and other types.

The energy department, in coordination with the finance and trade departments, NEDA, and customs bureau will promulgate the implementing guidelines of the order.