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By: Mark Anthony P. Tamayo on August 29, 2019

Under Republic Act 10963, or the Tax Reform for Acceleration and Inclusion Act (Train), the excise tax rates (which went up from last year’s rates) on diesel, bunker fuel and gasoline will further increase in 2020. A likely consequence of an excise tax hike is the possible surge in fuel smuggling.

To address this, Joint Circular (JC) 001-2019 dated July 5, 2019 was, pursuant to Train, conjointly issued by the Department of Finance (DOF), Bureau of Internal Revenue (BIR), and the Bureau of Customs (BOC), to serve as the guideline in the implementation of the Fuel Marking Program (Program) which will be in full swing by the last quarter of this year.

The JC seeks to implement the mandatory marking (requiring the use of an official fuel marker) of petroleum products (products) that are refined, manufactured, or impororted into the Philippines (such as, but not limited to, unleaded premium gasoline, diesel and kerosene), including those withdrawn from free zones, after the corresponding taxes and duties have been paid.

It requires the conduct of random field testing and confirmatory on petroleum products required to be marked to check compliance with the mandatory marking requirement.

Accountable government agencies

The BIR and BOC are the accountable government agencies in the implementation of the program.

The BIR is tasked to ensure that local manufactured or refined products are properly marked with the Official Fuel Marker before the same are removed from the place of manufacture or refinery into the owner’s taxpaid storage facilities/depots for distribution into the domestic market.

The fuel marking fees shall be collected by the BIR at the same time the internal revenue taxes on said petroleum products are collected.

The BoC, on the other hand, shall ensure that imported petroleum products brought into ports/sub ports of entry are properly marked with the OFM before the same are released from BOC or are removed from tax-paid storage facilities/depots for distribution into the domestic market.

The BoC is tasked to collect the marking fees for imported petroleum products.

Fuel marking program

Under the JC, only petroleum products for domestic consumption with proof of payment of taxes will be subject to marking. In such case, it is the responsibility of the entity or taxpayer who owns, imports, manufactures and/refines said products to cause and accommodate their marking.

The field testing shall be conducted by a composite team of the Fuel Marker Provider (the joint venture between SGS Philippines, Inc. and Swiss-based SICPA SA), together with a BIR or BoC Officer(s), as the case may be. For this purpose, a mission order shall be issued to the concerned BIR or BoC Officer(s) authorizing the taking of samples to determine compliance with the required level of marking.

For refineries and attached depots, gasoline stations, and other retail outlets, the testing shall be supervised by the BIR.

The BoC, on the other hand, will supervise the field testing in all other areas, such as vessels, depots, warehouses, tank trucks or similar fuel transporting vehicle.

As may be necessary, the BIR and BoC officers (who will be assigned as members of the field inspection teams) may be authorized to conduct the testing in other areas. A joint special task force may further be established by the BIR and BoC for the purpose of the field testing.

Upon completion of the marking, a certificate of marking shall be issued by the FMP.

Products duly marked shall not be allowed for export, but shall only be used for domestic consumption or distribution in the Philippines. Also, they shall not be allowed to be comingled with unmarked fuel products.

Unmarked, adulterated or diluted petroleum products

During field testing, a marker or special dye will be used to blend with petroleum products for the purpose of ensuring that the shipments went through legal import channels and payment of the required taxes. The absence of this marker or dye will be a prima facie evidence of non-compliance.

Unmarked products as well as those with markers but below the required level shall be presumed to have been withdrawn or imported with the intention to evade the payment of duties and taxes. In such case, the appropriate excise tax shall be assessed and collected, inclusive of the appropriate penalties.

These petroleum products may likewise be subject to confiscation and forfeiture as well as filing of the appropriate criminal charges.
Pending assessment and payment of the excise tax and penalty due, the unmarked petroleum products shall be impounded.

Upon reasonable cause or verified information received, the concerned BoC or BIR officer may stop and search the vessel, tank trucks or similar fuel transporting vehicle carrying any unmarked, adulterated, or diluted petroleum products. This authority is granted under Section 171 of the NIRC and Section 222 of the CMTA.

In the same manner, the concerned BIR or BoC officer may enter and search a fuel manufacturing or refining facility, gasoline stations and other retail outlets, depots, warehouses, buildings or place whenever there is sufficient basis to conclude that adulterated or diluted products are being produced or stored therein.

In all instance, the FMP must immediately conduct the testing of the petroleum product suspected to be unmarked, adulterated, or diluted. Proper documentation of the process must at all times be observed.

Full support needed

The program primarily aims to plug the duty and tax leakage on petroleum products. It likewise serves as a safeguard from contaminated and diluted fuel that could result to harsh consequences, including air pollution, which seriously impacts climate change by adding to the atmospheric greenhouse gasses that create the global warming effect.

Although it is not an entirely new concept in the Philippines, it is one of the tax measures provided under the TRAIN Law to seriously counter any form of illegal trade and adulteration of petroleum products in the country. It provides fair competition among oil operators and assures them of reasonable return of investment.

For the successful implementation of the program, it, therefore, needs the full support of the oil industry.

Contact Information

Our office address:

15/f Unit A. ACT Tower, H.V. Dela Costa St.
Salcedo Village, Makati City 1227 Philippines

Telefax: +632 831-1297

Telephone: +632 808-5375 • +632 815-0069



Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco