Reduction of the Rates of Import Duty on Crude Petroleum Oils and Refined Petroleum Products Under Executive Order 336, Series Of 2004, "Modifying The Rates of Import Duty on Crude Petroleum Oils and Refined Petroleum Products Under Section 104 of The Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended"

Case Overview and Summary

Summary of Executive Order No. 440

Reduction of Import Duty Rates on Crude Petroleum Oils and Refined Petroleum Products

• Pursuant to Section 6 of Republic Act No. 8479 (Downstream Oil Industry Deregulation Act of 1998), the President has the power to reduce the tariff rate of 3% on imported crude oil and refined petroleum products. (Basis: Whereas clause 1)

• Sections 401 and 402 of the Tariff and Customs Code of 1978 empower the President to increase, reduce, or remove existing rates of import duty, as well as to modify the form of duty and the tariff nomenclature under Section 104 of the Code. (Basis: Whereas clause 2)

• The adjustment in import duty per Executive Order No. 336 is an interim revenue measure until Congress enacts new laws on taxes for petroleum products. (Basis: Whereas clause 3)

• The Government has a commitment with the Association of Southeast Asian Nations (ASEAN) Free Trade Area Council to adjust the levels of duty when new laws on taxes for petroleum products are passed. (Basis: Whereas clause 4)

• Republic Act No. 9337 (RA 9337), expanding the base of the value-added tax (VAT), will result in increased Government revenues by imposing VAT on petroleum products. (Basis: Whereas clause 5)

• The implementation of RA 9337 will result in an increase in retail prices of LPG of over P40.00 per 11-kg cylinder and an average of about P1.70/liter for petroleum products despite the rationalization of excise taxes/reduction to zero of the excise tax on socially-sensitive products (kerosene, diesel, and fuel oil). (Basis: Whereas clause 6)

• The articles listed in Annex "A" whose duties were adjusted from 3% to 5% by Executive Order 336 shall be subject to their original rates of import duty [Most-Favored-Nation (MFN) and ASEAN Free Trade Area (AFTA) – Common Effective Preferential Tariff (CEPT)] indicated in Columns 4 and 5 opposite each article. (Basis: Section 1)

• The AFTA-CEPT rates indicated in Annex "A" shall be accorded to imports coming from ASEAN Member States applying CEPT concession to the same product pursuant to Article 4 of the Agreement on the CEPT Scheme for the ASEAN Free Trade Area (CEPT Agreement), signed on 28 January 1992, and its Interpretative Notes. (Basis: Section 2)

• The rates of import duty on tariff headings not enumerated and those listed but represented by the symbol "X X X" shall remain in force and in effect. (Basis: Section 3)

• Upon the effectivity of this Executive Order, all articles listed in Annex "A" which are entered and withdrawn from warehouses in the Philippines for consumption shall be levied the MFN rates of duty therein prescribed. (Basis: Section 4)

• Upon the effectivity of this Executive Order, all articles listed in Annex "A" which are entered and withdrawn from warehouses in the Philippines for consumption shall be imposed the AFTA-CEPT rates of duty therein prescribed, subject to qualification under the Rules of Origin as provided for in the CEPT Agreement. (Basis: Section 5)

• All Presidential issuances, administrative rules and regulations or parts thereof, which are contrary to or inconsistent with this Executive Order, are hereby revoked or modified accordingly. (Basis: Section 6)

• This Executive Order shall be published in two (2) newspapers of general circulation in the Philippines and shall take effect on the date of effectivity of RA 9337 or the VAT Reform Law. (Basis: Section 7)