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The Bureau of Customs is finalizing rules on the establishment of bonded facilities for Jet A-1 fuel imports for use in international transport operations
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Once the customs administrative order on such regulation is out, BOC will also work “soonest on the exemption of bunker fuel for international shipping lines”
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Under the CREATE MORE Act, importation of fuel, goods, and supplies used for international shipping or air transport operations are exempt from value-added tax
The Bureau of Customs (BOC) is finalizing rules on the establishment of bonded facilities for Jet A-1 fuel imports for use in international air transport operations and will also soon work on the tax relief for bunker fuel for international shipping.
BOC Assessment and Operations Coordinating Group Deputy Commissioner Atty. Agaton Teodoro Uvero said at a recent Kapihan Forum hosted by the Philippine Interisland Shipping Association that once the customs administrative order (CAO) on bonded Jet A-1 fuel facilities (JAFF) is issued, the bureau will move “soonest” on the exemption of bunker fuel for international shipping lines.
Under Republic Act (RA) No. 12066, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy or CREATE MORE Act, importation of fuel, goods, and supplies used for international shipping or air transport operations are exempted from VAT.
Moreover, international carriers of Philippines or foreign registry directly importing petroleum products, on their use or consumption outside the Philippines, are exempt from excise tax – on condition that the petroleum products sold to these international carriers will be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Customs commissioner.
BOC released a draft CAO in March to gather stakeholder position papers. The draft aims to qualify the scope and application of bonded facility for Jet A-1 fuel importations pursuant to Sections 109(U) and 135 of the National Internal Revenue Code of 1997, as amended by the CREATE MORE Act.
READ: BOC calls for comments on draft Jet A-1 fuel facility rules
Based on the draft CAO, a bonded JAFF is a type of non-manufacturing facility for the storage, handling, and management of imports intended exclusively for use in international air transport operations.
The importation involves finished goods not intended for manufacturing or further processing, and should be imported for the direct supply or sale to entities engaged in international air transport operations.
Jet A-1 fuel imported by the suppliers for sale to international air transport operators will be exempt from the imposition of VAT, but subject to payment of excise tax.
A refund of excise tax previously paid on such importation may be granted, or the corresponding VAT exemption may be confirmed and validated, upon presentation of sufficient proof that the Jet A-1 fuel was sold to international carriers, whether of Philippine or foreign registry, and was actually used or consumed outside the Philippines.
Customs duties, if applicable, should be paid upon importation. However, the direct importer or supplier may be entitled to a refund of such duties in accordance with the RA No. 10863, or the Customs Modernization and Tariff Act (CMTA).
BOC’s existing rules and regulations governing the grant of authority to operate customs bonded warehouses will apply to the processing of applications by international carriers and suppliers for the operation of JAFF.
All bonded JAFF operators accredited under the proposed CAO will be required to post the following bonds:
- A P10 million performance bond to answer for any penalties arising from violations of the proposed CAO, the CMTA, and other applicable laws, rules, and regulations.
- A security bond that will cover the VAT and excise tax on the imported Jet A-1 fuel for the direct importers, or a security bond that will cover the VAT on the imported Jet A-1 fuel for suppliers.
- A general transport security bond that will guarantee the complete and immediate delivery of goods, as well as the payment of all pertinent customs duties, charges, expenses, and other transfer-related costs.
Transfers of Jet A-1 fuel from the port of discharge to the client or end-user, or to an extension bonded JAFF located at the airport, will be subject to continuous underguarding by BOC. Underguarding may not be required where the transfer is capable of being effectively monitored through BOC’s Electronic Tracking of Containerized Cargo System, in which case BOC will prescribe and implement separate parameters for.— Roumina Pablo
