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HMRC internal manual

Customs Special Procedures Manual

Hydrocarbon oils: scope of End-use relief for Hydrocarbon Oils

HCOs and residues defined in the Tariff, Volume 1, Part 12.12 may qualify for End-use relief under certain Tariff sub-headings.

Specific process relief

Certain oils of Tariff Chapter 27, imported for a specific process as listed in Additional Note 4 to the Chapter, are free of Customs duty under End-use relief (see the Combined Nomenclature Explanatory Notes to Additional Note 4).

Generally, these specific processes are those which, in the UK, are required to be performed in an approved refinery. Some of the specific processes, however, may be carried out by approved users or repayment users.

Although oils entered for these processes are free of Customs duty, under End-use relief, certain products resulting from the atmospheric distillation of some fuel oils are dutiable under the terms of Additional Note 4(n), to Chapter 27 of the Combined Nomenclature, unless they are to undergo a further specific process or chemical transformation within six months.

End-use relief from Customs duty on certain oils within Tariff heading 2710, which undergo one of the specific processes listed in Additional Note 4 to Chapter 27, is laid down in the Refinery Control procedure.

Although the eligible processes within additional Note 4 to Chapter 27 of the Tariff include the majority of refinery processes, there are some additional points to consider:

  • the blending of oils with other oils or with other substances is not an eligible process
  • the treatment of oils with selective solvents is an eligible process, but the use of oil as a selective solvent is not
  • fuel oils within Tariff subheadings 271000 71 to 271000 79 which do not fulfil the distillation requirements specified in Additional Note 4(n) to Chapter 27 do not qualify for the specific process relief.

Products obtained during atmospheric distillation and which fall within Tariff subheadings 271000 11 to 271000 39 or 271000 41 to 271000 59 are to be charged with Customs duty at the rate appropriate to the subheading 271000 79. The Customs duty is to be charged according to the kind and value of the products used and based on the net weight of the products obtained.

Where such products are due to undergo a further specific process or a chemical transformation, a further 6 months may be allowed from the date of their production for this process or transformation to be carried out. If the process or transformation is to be carried out at the refinery concerned, you may approve an arrangement which enables the trader to show to your satisfaction that the requisite conditions are fulfilled. If the process is to be performed elsewhere, follow the transfer procedures in Section 5.

Action by trader to fulfil the conditions of the relief

The approved trader must:

  • in the stock accounts, show as a delivery the quantity of oil taken into specific process relief on each occasion
  • keep a separate record of the oil on which End-use relief is being claimed at the time of delivery into process. The record can be agreed with the local Customs officer but should show the nature of the process, the quantity, description, value and tariff subheading of the oil and the date of its delivery into process.

Satisfactorily account for any oils entered for delivery into process but which remain unprocessed or are carried forward from one processing batch to another.

Any chargeable products resulting from the atmospheric distillation of a fuel oil not meeting the conditions of Additional Note 4(n) to Chapter 27 of the Tariff must be accounted for.

Tariff Notes Chapter 27

Chemical transformation relief

Certain oils of Tariff Chapter 27 imported to undergo a chemical transformation other than a specific process under sub-paragraph 18.2.1 are free of Customs duty under a form of End-use relief known as ‘chemical transformation relief’.

Although these oils are normally free of Customs duty under End-use relief, under Additional Note 5 to Chapter 27 of the Tariff, Customs duty may be due if the chemical transformation, or necessary preparatory treatment produces certain specified products. The only exception is that products falling within headings 2710 and 2712 are relieved of this duty if they are to undergo a specific process or further chemical transformation within six months. Below is a list of tariff codes covering chargeable by-products:

  • 270710 10
  • 270720 10
  • 270730 10
  • 270750 10
  • 2710
  • 2711
  • 271210
  • 271220
  • 271290 31 to 271290 90
  • 271390
  • 290110 10
  • 291244 10

Generally, eligible processes are likely to involve changes in the molecular structure of the oil and to result in products having different chemical characteristics. Examples of ‘chemical transformation’ are given in the Explanatory Notes of the Combined Nomenclature. ECSM will advise on areas of doubt or difficulty relating to chemical transformation.

Many of the ‘specific processes’ defined in Chapter 27, Additional Note 4 (for example, cracking, reforming, polymerisation or alkylation) involve chemical transformation, but are treated as ‘specific process’ goods and are not eligible for chemical transformation relief.

In accordance with Additional Note 5 to Chapter 27 products of chemical transformation within specified Tariff headings and subheadings remain liable to Customs duty.

Refinery control procedure

If goods falling within the Tariff headings and subheadings listed above are produced as a result of either the chemical transformation or of a necessary preparatory process, any Customs duty due must be charged in accordance with Additional Note 5 to Tariff Chapter 27. The rate and value will be those in force at the time the oil was put into process. The following points should also be followed:

Goods falling within Tariff headings 2710, 2711 and 2712 may be set aside without payment of Customs duty for use in a specific process or a further chemical transformation process with the agreement of the refinery officer. However, this must take place within 6 months of production. If the process is to be performed elsewhere, the goods may be allowed to be transferred.

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 on Form C88 (SAD).

If the goods are not hydrocarbon oils, the Customs duty must be charged on delivery of the goods from the process and paid on Form C18. However, Customs duty need not be charged on goods which fall within the Tariff headings and sub headings listed above and which are entered to undergo a process entitled to End-use relief.

Action by trader

An approved trader must satisfy the following conditions to claim the relief:

  • show the quantity, and
  • 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 the oil for which End-use relief is claimed. This record may be in any form approved by Customs and should show the nature of the process, the quantity, description, value and Tariff subheading 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 satisfactorily accounted for.

Relief under Tariff headings 27 07, 29 01 and 2902

Certain oils classified under these headings are free of Customs duty under End-use relief provided they are not used as power or heating fuels. These oils are clearly indicated in the Tariff.

Relief under Tariff sub-heading 270799 91

Hydrocarbon oil of this sub-heading imported for the manufacture of products of Tariff heading 2803 is free of Customs duty under End-use relief.

Relief for certain residues

Residues of petroleum oils or oils obtained from bituminous minerals of subheading 27139010, other than petroleum bitumen or petroleum coke, for the manufacture of products of heading 2803, are free of Customs duty under End-use relief.

End-use relief does not apply to excise duty on imported hydrocarbon oils. Many of the uses qualifying for end-use relief from Customs duty may only be carried out at the approved premises of bonded users or refiners.

Hydrocarbon Oils Strategy (HCOS)