PETRON Corp. is confident the government will rule favorably on its petition to correct the tariff distortion that will be created by the elimination of duties on refined-petroleum products coming from Southeast Asian countries beginning January 2010 consistent with the Asean Trade in Goods Agreement (Atiga).

This is because the oil-deregulation law is clear that there should always be a uniform and single tariff for both refined and crude oil, Gilbert R.T. Reyes, external counsel of Petron Corp., said.

With this, he said, the government cannot allow a scenario in which the crude oil imported from outside the Asean will have 3-percent tariff, while the refined and crude oil coming from Southeast countries will have zero duties.

Instead of eliminating only the tariffs on petroleum products from Asean member-states starting
January 1, Petron is asking the government in its petition to also remove the 3-percent duty being imposed on imported crude oil from the Middle East, in order to level the playing field.

If this cannot be done, Petron is seeking the removal of petroleum products from the list of products that will have zero tariffs for intraregional trade starting January 1 under the Atiga.

“We are confident that our petition will be granted because it is clearly provided in the oil-deregulation law. We just want the government to act on it before January to avoid problems in the Bureau of Customs,” Reyes said.

But Tariff Commission chief Edgardo Abon said the same law could prevent the government’s Committee on Tariff and Related Matters from acting on Petron’s petition, as this may require a court interpretation on the provision mandating a single and uniform tariff for both crude and refined oil.

“We may not act on it because it is a legal question, so Petron may have to go to court to interpret the law,” Abon told the BusinessMirror at the sidelines of the public hearing conducted by the commission on Petron’s petition on Wednesday.

Besides this, Abon said removing the 3-percent MFN tariff on crude oil would mean huge revenue losses as more than 90 percent of the country’s crude-oil importation comes from the Middle East.

Abon said the commission will consider three options in dealing with the Petron petition. One is to bring to zero the tariff on crude oil coming from countries outside of the Asean.

The second is to remove petroleum products from the list of products that will have zero tariffs starting January 2010. This, however, is the least likely to happen since the Philippines has already ratified the Atiga, Abon said.

The third option is for the Tariff Commission to just declare a status quo, which means Petron will have to resort to a court action.

If the tariff distortion is allowed, Petron will be giving away P0.62 per liter in price differential versus the importers of refined oil from Asean countries.

Reyes said Petron cannot rely on the crude oil coming from Brunei and Malaysia since this type of crude is incompatible with its refinery plant. Petron will spend much for retooling to accommodate the crude oil from the Asean countries.

Besides the tariff distortion, the viability of the petrochemical industry—which relies on the byproducts of crude oil as raw materials—will also be put at risk.