By Adam J. Ang

PRESIDENT Rodrigo R. Duterte on Monday ordered the temporary increase in tariffs on imported crude oil and refined petroleum products, in order to fund the government’s coronavirus disease 2019 (COVID-19) relief measures.

Under Executive Order No. 113 signed on May 2, Mr. Duterte imposed 10% additional tariff on imported crude oil and refined petroleum products.

“There is an urgent need to augment the government’s resources to sufficiently finance the programs and measures to mitigate the effects of the COVID-19 situation and launch the country toward recovery and rehabilitation,” the order stated.

The higher tariffs, which were recommended by the National Economic and Development Authority (NEDA) Board on April 8, will be imposed on top of the existing Most Favored Nation (MFN) and preferential import duties on imported fuel products.

Proceeds from additional tariffs would “fund measures that address and respond to the effects of the COVID-19 situation, including social amelioration programs and such other forms of assistance for all those affected.”

Rino E. Abad, director of the Department of Energy’s (DoE) Oil Industry Management Bureau (OIMB), told BusinessWorld that the higher tariffs are not expected to affect volumes of oil imports this May as prices are already low.

Mababa ang [oil] price ngayon at nasa 10% lang [ang] tariff of landed import cost… “compared sa binaba na ng (year-to-date) price at around P15 per liter (/L) to P16/L, napakaliit [ng] effect nito (The oil price is low and the tariff is only 10% of the landed import cost…The additional import duty has a minimal effect on gasoline prices, compared to the year-to-date price decrease at around P15/L-P16/L.),” he said in a text message.

The higher import duty may provide a “substantial revenue” for the government despite the low demand for petroleum products, according to Bureau of Customs (BoC) Assistant Commissioner Vincent Philip C. Maronilla.

“I think there is [a] basis to expect that despite the low demand [for oil], a positive duty rate applied against the projected [oil import] volume for the succeeding months will result in substantial revenue for the government,” the BoC spokesperson said in a Viber message.

The DoE-OIMB reported that oil import volumes in the first quarter of 2020 fell by as much as 460 million liters to 3.3 billion liters, compared to 3.7 billion liters recorded in the same period in 2019.

Demand for oil, along with prices, in the world market has plunged as many countries have been placed under lockdown due to the pandemic.

The modified rates of import duty will only cease to be applied once the DoE noted a breach in the trigger price following a rise in oil prices in the world market.

Republic Act No. 10863, or the Customs Modernization and Tariff Act, empowers the President to raise existing import duty rates in the interest of general welfare and national security.