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Dark oil: Loophole lets Russian refiners dodge duties

December 05/2017

MOSCOW (MRC) Two Russian refiners are avoiding export duty on fuel oil and vacuum gas oil by renaming them as an oil product that is exempt from the charge, according to a Reuters analysis of customs and refining data, and four industry sources, said Reuters.

The practice takes advantage of a loophole in customs rules and has this year saved the refiners tens of millions of dollars which would otherwise have gone into the state budget, according to the government data and sources.

Novoshakhtinsky and Mariysky refineries shipped a total of 2 MMt of reclassified fuel in the first nine months of this year, saving about USD170 MM in tax, according to the data and sources. Novoshakhtinsky said in a statement that in producing and selling its products it acted in complete compliance with customs legislation.

Mariyskys owner, New Stream Group, denied the refinery was avoiding customs duties on its oil products and said it was in compliance with customs legislation.

The Federal Customs Service (FCS) did not respond to repeated requests for comment. Russias Association of Oil Refiners and Petrochemists said it had no comment.

Fuel oil and vacuum gas oil are low-value refined oil products known among refiners and exporters as "dark oil" products, and are mostly used either for shipping fuel or as ingredients to make more complex products.

The duty for dark oil products has been USD86.7/t this year on average, and stood at USD96.1 in November, according to publicly available customs data. However there is zero duty on exports of fuel defined as products containing more than 50% aromatic hydrocarbons."

The loophole lies in the fact that fuel oil and vacuum gas oil can be included in that latter definition, and therefore exported without duty under that customs code, according to the sources. The four peoplea customs broker, two commercial executives at refiners and a refining engineerasked not to be named due to the sensitivity of matter.

A fifth source, an FCS manager, also told Reuters that dark oil products were being exported under the zero-duty customs code, but did not identify the refineries involved.
Author:Anna Larionova
Tags:petrochemistry, Crude oil, Russia.
Category:General News
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