Hydrocarbon Oils: Customs Duty

Foreword

This notice cancels and replaces Notice 171 (January 1978). It includes changes in customs procedures effective from 1 January 1988

It gives guidance about:

• the liability of hydrocarbon oil to customs duty, and
• how to pay nay duty due.

I General

1 What is this notice about?

It explains how customs duty is applied to hydrocarbon oil brought into the Community from non-member states.

When we refer to “duty” in this notice, we mean “customs duty” unless we say otherwise.

The excise duty on hydrocarbon oil is:

• covered in our Notice 179 (Hydrocarbon Oils: Duty and VAT: Warehousing and related procedures); and
• chargeable under the Hydrocarbon Oil Duties Act 1979, section 6.

2 Who should read this notice?

It will be of particular interest to:

• importers of hydrocarbon oil
• warehousekeepers
• refiners.

3 Rates of duty

Hydrocarbon oil is generally classified in Chapters 27, 29, 38 or 39 of the Tariff, according to type. The rate of customs duty can be found by reference to the appropriate Tariff commodity code.

It should be noted that the definitions of certain hydrocarbon oils for the purposes of excise duty (Volume 1, Part 12 of the Tariff) are different from those for customs duty. The tariff classification remains that at importation, except if the goods are removed from the warehouse on claim to end-use relief (see paragraph 6(b)) when the appropriate end-use coding is to be used. Enquiries on tariff classification can be made to the local Custom House (Entry Processing Unit).

4 Paying customs duty

Any duty due is payable on importation except when the oil:

• is entered for warehousing (see paragraph 9); or
• is cleared on remission of duty under a specified relief regime (see paragraph 6).

5 VAT

Value added tax is chargeable on imported oil whether or not any duty is chargeable or relieved. The import VAT becomes payable either on the import entry or when oil is removed from warehouse for use in the UK, but payment may be deferred as explained in our Notice 101. More details are in Notices 179 and 702 (VAT: Imports and warehoused goods), and in the VAT Leaflet “Fuel and Power” (701/19/-).

6 Reliefs

(a) Preference and tariff quotas
Reduced or nil rates of duty may be claimed on oil imported from certain countries and entered to free circulation. These beneficial rates are subject to origin, consignment, and documentary requirements under EC preferential trade arrangements. Further details are given in Notice 826 (European Community Preferences: Imports). However, for some countries, the beneficial rates may be subject to quantity limits called tariff quotas. These are described in Notice 375 (Tariff Quotas). Information about reduced or nil duty rates and the countries concerned can be found in the Tariff.

(b) End-use relief
Some commodity codes of Chapters 27 and 29 of the Tariff provide for reduced or nil rates of duty on hydrocarbon oils on condition that they are used for prescribed purposes. This is known as end-use relief. Because the oil is liable to excise duty, many of the qualifying uses may be carried out only in the approved premises of bonded users or refiners. Further information on end-use relief is given in Notice 770.

(c) Oil for processing
Relief from duty is allowed in certain circumstances on oil intended for processing where the end product or products remain in free circulation in the EC. Notice 237 (Processed goods duty relief under PFC) gives details of this relief.

(d) Inward processing relief
Relief from duty is allowed in certain circumstances on oil intended to be exported after process. Notice 221 (Import duty relief for exports) gives details of this relief.

(e) Goods for testing
Relief from duty may be allowed on oil imported or delivered from warehouse:

• for testing to determine its quality, composition or other technical characteristics, or
• to ascertain if it can be worked or processed by Community equipment.

Details are given in Notice 374 (Goods for Testing free of duty and tax).

7 Warehousing of oil

We approve oil warehouses to store oil free of both customs and excise duty.

So long as you keep satisfactory records, we do not insist that you physically segregate oil chargeable with duty from:

• oil not so chargeable; or
• oil on which customs duty has already been paid.

Your records must include details of receipts and deliveries of all oil forming a common stock (see also paragraph 13). You must keep separate stock accounts of all oil stored free of duty, following the procedure in Sections III and IV. Remote marking premises (see Notice 179, paragraph 18) count as non-bonded installations for duty purposes.

Refineries are approved as warehouses. Except where you can get relief under paragraph 6, you must pay duty before any dutiable oil is taken into use, or put into any process not allowed to be carried out in a warehouse.

The only operations you can conduct in warehouse on oil liable to duty are:

(a) blending or mixing, provided that light oil is not mixed with other oil to produce an oil which is not light oil;

(b) filling into drums, cans or other receptacles;

(c) cleaning by straining or any other means (eg heat treatment or chilling) which does not change the liability of the oil to duty or its entitlement to rebate; and

(d) marking, dyeing or mixing with additive substances, subject to the Commissioners’ approval or authority.

Other treatment of oils is not normally allowed in warehouse and may not be carried out without the Commissioners’ authority (but see Notice 232 (Customs Warehousing) Appendix D).

We cannot give credit of duty for:

• unused contaminated oil brought into warehouse; or
• oil brought into refineries approved under the arrangements explained in Notice 179, paragraph 32(h).

II Importation into the EC from non-member States

8 Oil for admission to free circulation ex-ship

Hydrocarbon oil which is:

• chargeable with duty and
• intended for admission to free circulation ex ship at the UK port of importation on payment or deferment of duty,

is to be entered as directed in the Tariff (Volume 3) and Notice 702 (VAT: Imports and warehoused goods). You may be able to defer payment of customs import duties under the duty deferment scheme. See Notice 101 (Deferring duty, VAT and other charges) for further information.

9 Oil to be warehoused

Oil liable to both customs and excise duties and intended for warehousing:

• at a bonded warehouse,
• at an approved oil-to-oil refinery or synthesis refinery, or
• at a producer’s premises,

must be entered for both duties on Form C 88 with a Customs Procedure Code for warehousing (see Tariff, Volume 3, paragraph 3.5). When oil is to be warehoused without payment of the customs duty, you must enter the value of the oil in accordance with the Tariff, Volume 1, Part 14.

10 Oil delivered to a producer’s entered premises

Any duty due on oil must normally be paid before it is delivered into a producer’s entered premises. However, producers who were allowed before 1976 to warehouse imported oil without paying duty may continue to warehouse such oil without payment of either customs duty and excise duty, so long as:

• proper stock accounts are maintained (see paragraph 13) and
• the Customs duty is paid before the oil is used (see paragraph 15).

11 Imports of “tied” and “free” oil

Any duty chargeable on “tied” or “free” oil (as defined in Notice 184A (Hydrocarbon oils used in certain industrial processes: excise duty relief)) is payable at the time of importation unless the oil is entered for:

• warehousing; or
• the relief provisions of paragraph 6.

12 Claims for relief

Make claims for customs relief at import (see paragraph 6) by using the appropriate Customs Procedure Code (Tariff, Volume 3) in box 37 of Form C 88.

III Procedures at warehouses

13 Stock accounts

The following explains how you, as the warehousekeeper, must keep stock accounts for any duty due on oils deposited in a warehouse. When oil chargeable with duty is not segregated from oil:

• not chargeable with duty, or
• which is duty paid,

the account must include details of all oil forming the commingled stock.

Deliveries from the account must be related to receipts:

• on a layer basis (eg first in, first out),
• proportionately, or
• on such other basis as our local officer may allow.

(a) Keep either:

• a separate stock account for each consignment received; or
• a continuing account for oil of the same commercial description.

(b) Show for each account the complete Tariff coding and commercial description of the oil included. For each consignment received, state the value for duty purposes (see Notice 252), and any other details our local officer may require.

(c) Enter receipts and deliveries either:

• transaction by transaction from basic documents; or
• in the totals for transactions which are scheduled in other records.

The date of each transaction must be shown or be easily determined. Separately distinguish deliveries for home use, direct shipment from the UK, shipment as stores, removal to another warehouse, end-use relief, testing, or on remission of duty for eventual removal from the UK.

When duty is paid on oil without physical delivery from warehouse, treat it as a delivery into free circulation for stock accounting purposes.

(d) For oil admitted to free circulation (either at entry to the UK or in warehouse or elsewhere in the Community) show in the stock account either particulars of the UK payment date and document or details of the Community Transit documents or commercial evidence presented substantiating free circulation (T2 status) where these are required.

(e) If dutiable oil is blended or mixed, the stock accounts must enable the proper charge of duty on the resulting mixture to be determined.

(f) The stock accounts are to form part of the installation accounts, and are to be produced to an officer on demand. They are to be balanced monthly against the physical stock or whenever our officer requires.

14 Losses during storage

Duty will not be charged on losses of oil arising during storage in warehouse so long as we are satisfied they resulted from natural waste or other legitimate cause. However, storage losses in commingled stocks (see paragraph 13) are to be apportioned to stocks liable and not liable to duty, in a manner our officer approves.

15 Deliveries into free circulation in the UK from the Customs warehousing regime

(a) Entry and payment of duty

(i) Use of Form C 88A
Form C 88A is to be used for payment of the duty. This is a warrant in 4 parts; see Tariff (Volume 3 Part 4). It may not be evident from the warrant how the duty paid relates to the stock account kept under paragraph 13. In that case, provide a work sheet with the Form C 88A detailing the stock account items covered by the entered amount.

(ii) Methods of duty payment

- Before the oil is delivered or used, the warrant Form C 88A (with any supporting documents) and remittance must be presented to the Collector; or

- before the oil is delivered or used, present to the local Collector of Customs and Excise the warrant Form C 88A completed for deferment, together with any supporting documents.

- If the excise duty is paid on a special warrant for home use (Form W 50) and customs duty is also payable, prepare a warrant Form C 88A and present it with the Form W 50.

(b) Value
here the goods have a value above £2000, complete a declaration of current value on Form C 105A or C 105B, and present it with Form C 88A. To cover a series of transactions you can instead lodge a general valuation statement on Form C 109A or C109B (see Notice 252).

(c) Relief
If you claim a relief which allows a reduced or nil rate of duty, follow the directions in our relevant notice. Except where our local officer approves other arrangements, you must present a separate Form C 88A to the Collector before delivery of any oil for which you claim relief.

Oil eligible for relief may be stored with oil of the same kind which is not entitled to relief. As the warehousekeeper, you may write off in your stock account deliveries for UK use as being from the portion of the common stock which is eligible for relief, so long as the balance in hand is sufficient and our local officer approves the arrangements for relating deliveries to receipts. (See paragraph 13).

16 Oil admitted to free circulation without delivery from warehouse

As explained in paragraph 9, the owner of oil in a warehouse may wish to pay any customs duty to which it is liable, thereby admitting it to free circulation, while the oil continues to remain in warehouse free of excise duty. Duty payment is to be made under the procedure in paragraph 15.

17 Oil removed to another bonded installation in the UK

When oil liable to duty (or a mixture containing such oil) is delivered under bond for removal to refinery or producer’s premises, all copies of the delivery note are to be prominently marked “THIS OIL IS LIABLE TO BOTH CUSTOMS DUTY AND EXCISE DUTY”. Each copy of the delivery note or a document accompanying it is to include:

either

(i) full particulars of the Tariff commodity code, a statement of any entitlement to preferential duty rates, quantity and value for duty purposes of the oil chargeable with customs duty;

or

(ii) in the case of chargeable oil resulting from a process carried out in the UK, the details obtained from the stock accounts specified in sub paragraph 25(a)(ii),

to enable the receiving warehousekeeper, refiner or producer to make proper entry in their stock account. Liability to customs duty on losses of oil while in transit under bond will be treated in the same way as excise duty liability.

Consignments of oil liable to duty received or delivered under bond are to be separately distinguished on Forms HO 13 and HO 14 or equivalent commercial record by showing “Customs duty” or “CD” in the column headed “description of oil” in addition to any other details required in the column.

18 Deliveries on relief from duty

Make deliveries on relief from duty (see paragraph 6) as directed in our relevant notice, using Form C 88A.

19 Removals from warehouse to places outside the UK

(a) General

Oil liable to customs duty delivered ex-warehouse directly for shipment from the UK or shipment as stores on foreign-going vessels (Notice 179) needs no special official documentation beyond what is needed for excise duty. For each such delivery of oil, show the quantities and values in the warehouse stock accounts (paragraph 13). Also note “Customs duty” or “CD” in the description of oil column on Form HO 16 or equivalent commercial record against the related item.

(b) Removals to other member states of the EC

To qualify goods for free circulation status (see Notice 750), the exporter may elect to pay the duty. Pay such duty as directed in paragraph 15. The internal market arrangements as described in Notice 202 are to be followed for such removals.

(c) Removals to non-community countries

The exporter must complete the export declaration form C88 in accordance with the Tariff (Volume 3 Part 2).

Sometimes goods exported to non-community countries travel through other Member States on their way from the UK. If they are not travelling under a transit procedure (Tariff, Volume 3 paragraph 2.4), the community leg of the movement will fall within the internal market arrangements described in Notice 202.

IV Procedures at refineries

20 Oil delivered without undergoing a refinery process

If dutiable non-EEC oil is delivered from a refinery without undergoing any operation, except one listed in paragraph 7, carefully follow the accounting and control procedures described in Section III.

21 Oil used for producing energy and for other purposes

Oil liable to duty may be taken

• for chargeable use or consumption in a refinery (eg to produce heat, light or power) or
• for a purpose not eligible for relief from duty.

Duty is charged at the time the oil is taken for such use or consumption.

Enter the oil on Form C 88A under the procedure in paragraph 15.

22 Oil regarded as taken into refinery use or process

You must agree with our local officer the point at which oil is regarded as being taken into refinery use or process. Depending on local conditions, this may be when the oil:

• is received into a designated tank, or
• is delivered from a designated tank, or
• passes a designated meter.

The arrangements for taking account of oil taken into use or process must be agreed with our local officer as suitable and adequate.

23 Relief within approved premises (including refineries)

Customs duty relief can apply to certain oil used in specified processes which may be carried out only in approved premises (including refineries). When oil is delivered free of duty at premises approved for such processes, follow the procedures of Notices 237 (Processed goods: duty relief under PFC) and 770 (The European Community: imported goods: end-use relief).

24 Export relief for refinery products

Most exports to non-EEC countries from refineries get relief from duty under the end-use processes described in Notice 770. However, there may be some exports of products which result from processes which do not come within the terms of tariff end-use arrangements. Relief for these exports is under Notice 221 (Import duty relief for exports (inward processing relief)) procedures.

25 Refinery stock accounts

Refiners must keep stock accounts as described in paragraph 13. In addition to the particulars required by that paragraph the refinery stock accounts must show the quantities and value of:

(a) oil delivered:

(i) for use or consumption in the refinery (see paragraph 21),

(ii) for use in processes in the refinery conveying a title to end-use relief (see paragraph 23),

(iii) for use in other processes in the refinery distinguishing between:
- oil intended for producing goods for export on which remission is claimed (see paragraph 23), and
- oil, the products of which are to be delivered on duty payment.

(b) products rewarehoused after an end-use process (see paragraph 22)

In setting up the required stock accounts, refiners are advised to consult the local officer at an early stage.

26 Advising duty liability to other traders

Proceed as follows when advising recipients of oil or products made from dutiable oil about any liability. Doing this allows them to raise an appropriate duty charge should this become necessary, eg on diversion to home use; failure to comply with end-use requirements.

(a) When delivering oil from bonded premises without payment of duty to a person who claims end-use or export relief, calculate the potential duty on the value (and at the rate applicable) at the time of delivery from the bonded premises. Advise this to the recipient as one sum or, if more convenient, as a calculated amount per unit of quantity, expressed to the degree of accuracy desired by the recipient; however, we cannot accept rounding down.

(b) The product of a process covered by paragraph 23 may be an oil which is delivered:

• to other bonded premises, or
• without payment of duty, to a person claiming export relief.

Calculate the potential duty on the quantity of oil from which the product was derived at the rate (and on the value) applicable to the original oil at the time of its delivery into process in the refinery.

Advise this to the warehousekeeper or relief claimant either as one sum or as a calculated amount per unit of product, expressed to the degree of accuracy desired by the recipient. However, we cannot accept rounding down.

(c) When the product of a paragraph 23 process:

• is not an oil, and
• is delivered without payment of duty to a person claiming export relief,

calculate and advise the potential duty as in (b).

27 Removals from refineries to places outside the UK

Deal with removals from refineries to places outside the UK under paragraph 19’s directions.

Further help and advice

If you need further help or advice or more copies of Customs and Excise Notices, please contact the National Advice Service. Our notices and other information are available on the Internet (http://www.hmce.gov.uk)

For VAT-registered businesses The VAT Enquiries Guide (Notice 700/51) explains what sort of information and advice services we provide.

If you have a complaint

If you have a complaint which the staff at your local office or at the port or airport cannot resolve you should contact the Regional Head for the region. Your local office will tell you how to contact the Regional Head. Ask for a copy of our code of practice on complaints (Notice 1000). If the Regional Head does not settle your complaint to your satisfaction, you can then ask the Adjudicator to look into it.

The Adjudicator, whose services are free, is an impartial referee whose recommendations are independent.

The address is:

The Adjudicator's Office
Haymarket House
28 Haymarket
LONDON
SW1Y 4SP

Tel: (020) 7930 2292
Fax: (020) 7930 2298
E-mail: adjudicators@gtnet.gov.uk
Internet: http://www.adjudicatorsoffice.gov.uk

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