Hydrocarbon oils
Information on hydrocarbon oils that can be imported under authorised use.
Certain oils within UK Tariff Chapter 27 can be imported under authorised use if they are either:
- imported for specific process
- to undergo a chemical transformation other than a specific process
Some goods within Chapter 27 allow for suspension under ship-work authorised use only. If the authorisation holder is importing hydrocarbon oils to be put to use on a ship or vessel, read Ship-work for more information.
Authorised use does not apply to excise duty on imported hydrocarbon oils.
The primary law is Section 9 of the Hydrocarbon Oil Duties Act 1979 on the basis of which the Commissioners of HMRC made secondary regulations. The Hydrocarbon Oil (Industrial Relief) Regulations 2002 came into force in July and September 2002.
Excise Notice 184A explains how HMRC interprets the law.
In order to qualify, the oil must be entered to the authorised use procedure either:
- at importation
- on delivery from a Customs or Excise warehouse
- on delivery to approved premises (for example, refinery)
When relief from customs duty is claimed at importation, the declaration is to be coded for warehousing both for customs duty and excise duty purposes, and the declaration must be fully completed as a claim for authorised use procedure.
The import customs declaration for mineral oil chargeable with customs duty is to be completed to show that the oil is for delivery either:
- for home use
- to a Customs or Excise warehouse
- to a producer’s premises
If the oil is intended to be warehoused and the importer elects or is required to account for customs duty on importation, the declaration must be completed with the appropriate Customs Declaration Service (CDS) procedure code.
Read Requested and Previous Procedure Codes: Introduction and index list’ for more information on CDS procedure codes.
Eligible goods can be identified in chapter 27 of Authorised use: Eligible goods and authorised uses.
Specific processes
Authorised use is available on certain oils which undergo a specific process. Some examples of processes include:
- vacuum distillation
- redistillation by a very thorough fractionation process
- cracking
- reforming
- isomerisation
Read Additional Note 5 of Chapter 27 for more detailed information and a list of the specific processes.
Chemical transformation
Certain oils imported to undergo a chemical transformation other than the specific processes are eligible under authorised use. This is known as ‘chemical transformation relief’.
If goods are produced as a result of either the chemical transformation or of a specific process, duty may be charged. The rate and value will be those in force at the time the oil was put into process.
By-products that fall under headings 2710 and 2712 can be relieved of duty as long as they undergo a specific process or further chemical transformation within 6 months of import. If the process is to be performed elsewhere, the goods may be allowed to be transferred between premises.
Commodity codes covering chargeable by-products are:
- 2707100010
- 2707200010
- 2707300010
- 2707500080
- 2710
- 2711
- 271210
- 271220
- 27129031 to 27129090
- 271390
- 29011010
Generally, eligible processes are likely to involve changes in the molecular structure of the oil and to result in products having different chemical characteristics.
It is important to note that many of the defined ‘specific processes’ (for example, cracking, reforming) involve chemical transformation, but are treated as ‘specific process’ goods and are not eligible for chemical transformation relief.
Read Oils Technical Manual for more information on hydrocarbon oil.
Hydrocarbon oils may be warehoused on removal from the processing plant. The stock account must indicate the uncollected duty. If they are intended for export, they may be warehoused without payment of customs duty. However, if they are delivered for home use, the customs duty must be paid, and the declaration will be presented to the warehouse keeper.
Authorised use oils can be stored with other oils of the same commercial quality, technical characteristics and the same 8-digit tariff code. The authorisation holder may also be allowed to store authorised use oils in a mixture with:
- other petroleum products
- crude petroleum oils of tariff sub-heading 2709 00
The authorisation holder may keep common stock accounts, provided that the whole mixture is to undergo a specific process or chemical transformation.
Where the oils do not share the same commercial quality, technical characteristics and same 8-digit tariff code, common storage may be allowed where the whole mixture is to undergo one of the specific processes.
Customs warehousing
When storing hydrocarbon oil in a customs and excise warehouse, the authorisation holder must adhere to the Hydrocarbon Oils Strategy (HCOS) regarding storage, stock accounts and payments of customs duty.
When goods are transferred within the UK, a copy of the commercial invoice will suffice.
In general, authorised use should be considered complete when oil has either been put to the prescribed use.
When oil has been packed in closed containers, each containing not more than 25 litres and there is no reason to believe that the oil is to be used for power or heating purposes, authorised use is to be considered complete and no further control is necessary. These oils may be used as lubricants within the terms of authorised use.
Goods may be exported at the authorisation holder’s request. authorised use will be considered complete upon production of the necessary export documentation. Refunds (also known as drawback) of any excise duty paid at importation or subsequently may be claimed in accordance with Excise duty drawback (Excise Notice 207). However, for mixtures of unlike oils put into common stock the authorisation holder must arrange for the whole mixture to be either:
- exported
- destroyed under Customs’ supervision (any products resulting from destruction may be dutiable)
Read completion of authorised use and discharging liability for more information on completing authorised use.
In most cases the time limit for completion of authorised use is twelve months from the date of import or from the date of transfer.
However, there are two main exceptions to this where goods must be put to the prescribed authorised use within 6 months of production. The exceptions are:
- products resulting from atmospheric distillation
- products obtained by chemical transformation
An authorisation holder must satisfy these conditions to claim the relief:
- show the quantity
- value of oil taken into chemical transformation on each occasion as a delivery in the stock accounts
A separate record should be completed at the time of delivery showing which oil is being put to prescribed use. The format of the record must be approved by HMRC and should show the nature of the process, the quantity, description, value and tariff code of the oil and the dates of its delivery into process. Any oils entered for delivery into process but remaining unprocessed or carried forward from one process batch to another, must be accounted for.
Stock accounts and supplementary declarations
Refiners must show in their stock accounts the quantities and values of oil delivered for processes eligible for authorised use and of products re-warehoused after eligible processes.
Hydrocarbon oil waste may be disposed of without duty charge in accordance with Excise Notice 179, paragraph 7.13. A record of destructions must be kept in a format agreed with HMRC.
The record should contain:
- details of the type and quantity of oil destroyed
- the method of destruction
Where destruction takes place outside the warehouse, the record should include the:
- name of the contractor
- address of the premises involved
- date of removal