Department
Order No. 23-07
July 26, 2007
MANDATING THE MARKING OF
IMPORTED KEROSENE AND FUEL OILS WHICH ARE ENTERED TAX AND DUTY FREE TO Prevent THE UNAUTHORIZED DIVERSION
THEREOF INTO THE DOMESTIC MARKET AND FOR OTHER PURPOSES
Pursuant
to Section 7 (4), Chapter 6, Book IV, Title III of Executive Order No. 292,
otherwise known as the “Administrative Code of 1987,” in relation to Section
100 and Section 602 (b) and other pertinent provisions of the Tariff and
Customs Code of the Philippines (tccp),
as amended and the pertinent provisions of the National Internal Revenue Code
of 1987, as amended, the following order is hereby issued:
Section 1.
Rationale. – Substantial revenues are provided by the
taxes and duties collected from the importation of petroleum products,
including kerosene and other fuel oils.
There are reliable intelligence reports that said tax- and duty-free
articles have been subsequently entered into the domestic market illegally
without the payment of the proper duties and/or taxes due thereon, resulting in
huge revenue losses to the government and to legitimate oil companies. Consistent with the declared policy of the
State to intensify its anti-smuggling efforts, there is a need to adopt measures
to ensure the due payment and/or proper collection of duties and taxes and on
all fuel oils which were initially entered into payment and/or proper
collection of duties and taxes on all fuel oils which were initially entered
into the Philippines on an exempt basis and to prevent the unlawful entry and
diversion thereof into the domestic market.
Other countries have successfully employed existing fuel marking
technologies to curtail fuel smuggling activities, by utilizing fuel markers
based on, among others, covert molecular recognition technology.
SEC. 2.
Scope. – This Order shall cover the implementation
of the program of marking of fuel oils imported into the Philippines, and/or
manufactured and/or refined in the Philippines, which under Philippine laws are
exempt from the payment of duties and taxes, whether the same was by reason of
importation or manufacturing in a free zone as proof that these fuel oils were
legitimately entered into Philippine territories and/or manufactured and/or
refined in the Philippines and are, by law, except or not required to pay
duties and taxes.
SEC. 3.
Objectives. – The mandatory fuel marking program covered
by this Order shall have the following objectives:
(a) to
properly identify and track fuel oils entered into the Philippines without the
payment of duties and taxes, whether the same are frequently entered free
and/or exempt from duties and taxes, or illegally entered into the Philippines;
(b) to
plug the leakage and taxes due of fuel oils initially entered into the country
without the payment of duties and taxes which were eventually diverted to the
domestic market or for other use which will subject the fuel oils to duties and
taxes;
(c) to provide the necessary tool and
evidence required for the prosecution of parties who do not pay the proper
duties and taxes for fuel oils introduced into the domestic market.
SEC. 4.
Mandatory Marking of Kerosene and
Fuel Oil Exempted/Free from Duties and Taxes. – The following shall be marked with the
official marking agent designated by the
Department
of Finance (DOF) in accordance with existing rules:
(a) all
kerosene, including dual purpose kerosene (DPK), subject to zero excise tax;
and
(b) all diesel oil imported into the
SEC.
5. Responsibility to Mark. – In
the case of kerosene subject to zero excise tax referred to in Section 4 above,
the person, entity or taxpayer who owns or enters the fuel or to whom the fuel
oil is consigned, or whoever brings the same into the country shall cause the
marking of said exempt kerosene/fuel oil with the official marking agent, and
shall bear the cost of marking the same.
In
the case of diesel oil likewise referred to in Section 4 hereof, the person,
entity or taxpayer who imports, manufactures, and/or refines said diesel oil
shall cause the marking thereof with the official marking agent and shall bear
the cost of marking the same.
The
failure or refusal of the person, entity or taxpayer responsible for the
marking of the fuel oils as herein required within fifteen (15) days from due
notice shall subject such owner, consignee or importer and the articles to such
sanctions as may be imposed in accordance with the Tariff and Customs Code of
the Philippines, as amended, and other relevant existing laws and rules and
regulations in pursuance of law.
SEC. 6.
Presence of
Marker; Presumption. – In the
event that diesel oil containing the official marker signifying exemption is
found in the domestic market or in possession of anyone or under any situation
where said diesel oil is subject to duties and taxes, it shall be presumed that
the same was imported or withdrawn with the intention to evade the payment of
the duties and taxes due thereon, and shall be proceeded against pursuant to
law, unless the contrary be proven through the presentation of valid documents
and/or other evidence to the contrary.
The
same presumption shall apply in the event that kerosene subject to zero excise
tax containing the official marker is found being used, transported, stored or
otherwise labeled as aviation fuel in domestic markets, or in possession of
anyone or under any situation were said kerosene is subject to duties and
taxes.
SEC. 7.
Pilot
Implementation. – The
mandatory marking herein prescribed shall be implemented by the
Bureau of Customs (BOC) on a pilot basis at
the
Subic Bay Free Port and the
Clark Special Economic Zone and likewise at
the
SEC. 8.
Program
Implementation Office (PIO).
– A PIO, headed by a
DOF Senior
Officer to be designated by the
Secretary of
Finance, and with the
Commissioners of
Customs and the
Commissioner of Internal
Revenue—or their duly authorized representatives with the rank of Deputy
Commissioner—as members shall directly coordinate and supervise the proper and
effective implementation of this Order.
The PIO shall be supported by personnel of the
DOF, as well as those assigned or seconded
from agencies attached to the
DOF.
SEC. 9.
Responsibility
of the PIO. – The PIO, which
is hereby authorized to call on any official of the
DOF, and its attached
agencies for such assistance as may be necessary, as well as to require the
participation of experts to help achieve the objectives of the Order, shall
have the following duties and responsibilities:
(a) To
commence the pilot implementation at the
Subic
Bay Free Port, the
Clark Special
Economic Zone and the Port of Batangas on or before August 15, 2007;
(b) To
ensure that all operational and technical written instructions are in place and
properly disseminated to all concerned;
(c) To
issue the Terms of Reference and Engagement of the pilot test marking provider;
(d) To
identify and resolve operational and technical difficulties identified in the
course of pilot implementation;
(e) Complete
the pilot test within three (3) months form commencement and submit
recommendation on the nationwide roll-out within the pilot test period;
(f) Submit
monthly progress report to the Secretary of Finance on the pilot
implementation.
SEC. 10.
Nationwide
Roll-out. – The PIO, in
recommending the nationwide roll-out of the program, in consultations with the
BOC and the
Bureau
of Internal Revenue (BIR), shall submit, among others, the following: (a) specifications of the national marker;
(b) the marker to be used and the marking service provider; (c) Terms of
Reference and Engagement of the Provider; (d) Performance Measures of the
Program; (e) Ports/Places where Program will be rolled-out.
SEC. 11.
Implementing
Rules and Regulations. –
Except on matters falling within the competence and jurisdiction of the PIO,
the
BOC and the
BIR shall issue the relevant orders and
administrative issuances necessary for the proper implementation and
enforcement of this Order.
SEC. 12.
Separability
Clause. – If for any reason,
any provision of this Order is declared unconstitutional or invalid,
such parts thereof not affected shall remain in full force and effect.
SEC. 13.
Repealing
Clause. – All orders,
circulars, memoranda, and other issuances, or parts thereof, which are
inconsistent with this Department Order, are hereby repealed or modified
accordingly.
SEC. 14.
Effectivity. – This Department Order shall take effect
immediately after its publication in a newspaper of general circulation.
MARGARITO B. TEVES
Secretary
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