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The Bureau of Customs issues rules on the establishment of bonded facilities for Jet A-1 fuel importations catering exclusively to international air transport operations
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Customs Administrative Order No. 03-2026 implements tax exemptions granted under the CREATE MORE Act for fuel used in international shipping and air transport
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A bonded Jet A-1 Fuel Facility may be operated by international carriers acting as direct importers, or by suppliers of Jet A-1 fuel to international carriers
The Bureau of Customs (BOC) has issued rules governing the establishment of bonded facilities for Jet A-1 fuel importations intended exclusively for international air transport operations.
Customs Administrative Order (CAO) No. 03-2026 defines the scope and application of these bonded facilities pursuant to Sections 109(U) and 135 of the National Internal Revenue Code of 1997, as amended by Republic Act (RA) No. 12066, or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act.
Under CREATE MORE, imports of fuel, goods, and supplies used for international shipping or air transport are exempt from value-added tax (VAT). International carriers of Philippine or foreign registry that directly import petroleum products for use or consumption outside the Philippines are also exempt from excise tax, provided the fuel is stored in a bonded storage tank and disposed of according to rules set by the Secretary of Finance, upon recommendation of the Customs commissioner.
Under the new CAO, a bonded Jet A-1 Fuel Facility (JAFF) is a non-manufacturing facility for storing Jet A-1 fuel, operated either by international carriers of Philippine or foreign registry acting as direct importers, or by suppliers of Jet A-1 fuel to international air transport operators. Fuel imported and stored under a JAFF must be used exclusively for international air transport operations and cannot be used for domestic consumption, manufacturing, or further processing.
Tax treatment differs for importers and suppliers
Jet A-1 fuel directly imported, stored, and withdrawn by international carriers for their own use outside the Philippines is exempt from both excise tax and VAT. Fuel imported, stored, and withdrawn by suppliers to international carriers is exempt from VAT but subject to excise tax — though a refund of excise tax already paid, along with confirmation of the VAT exemption, may be granted upon proof that the fuel was sold to international carriers and actually used or consumed outside the country.
Customs duties, where applicable, must be paid upon importation, though importers or suppliers may seek a refund under RA No. 10863, or the Customs Modernization and Tariff Act (CMTA).
BOC’s existing rules on granting authority to operate customs bonded warehouses will apply to processing JAFF applications from international carriers and suppliers. To ensure proper inventory management, monitoring, and liquidation of Jet A-1 fuel, the CAO also sets specific conditions for applicants depending on whether they are direct importers or suppliers eligible for VAT and excise tax exemptions, as well as for other special circumstances.
Bonding requirements
All accredited JAFF operators must post:
- A P10-million performance bond covering penalties for violations of the CAO, the CMTA, and other applicable laws and regulations
- A security bond covering VAT and excise tax on imported Jet A-1 fuel for direct importers, or a security bond covering VAT alone for suppliers
- A general transport security bond guaranteeing complete and immediate delivery of goods, along with payment of customs duties, charges, and other transfer-related costs
Transfers of Jet A-1 fuel from the port of discharge to the client, end-user, or an extension JAFF at the airport will be subject to continuous underguarding by BOC. Underguarding may be waived where the transfer can be effectively monitored through BOC’s Electronic Tracking of Containerized Cargo System, subject to separate parameters BOC will prescribe.
Administrative sanctions may be imposed on direct importers or suppliers, and/or their clients, for violations of CAO No. 03-2026. The order was signed by Customs Commissioner Ariel Nepomuceno on July 31 and by Finance Secretary Frederick Go on September 4, and takes effect 15 days after publication in the Official Gazette or a newspaper of general circulation. – Roumina Pablo
