BIR Ruling

August 17, 1966 2nd Indorsement Respectfully returned to the Commissioner of Customs, Manila, the papers bearing on the request of Mobil Oil Philippines, Inc. for opinion as to whether its within proposed importation of diesel fuel could be exempted from the payment of customs duties. prcd It appears from the attached letter of Mobil Oil Philippines, Inc. that it entered into a contract with the U.S. Military authorities to supply the latter's unit in Clark Field, Angeles, Pampanga, and Subic Bay, Olongapo, Zambales, forty to forty-five thousand barrels of DR2/IDO each month. Due to its limited supply of said products from Bataan Refining Corporation, Mobil Oil has to import the aforementioned quantity of diesel fuel in order to meet the requirements of its contract with the U.S. Armed Forces as well as maintain its deliveries to its existing civilian customers. However, on account of lack of storage facilities in the Luzon Area, Mobil Oil cannot directly furnish the aforementioned U.S. Military base units with imported diesel fuel. To remedy the situation, the corporation contemplates to deliver to the U.S. Armed Forces diesel fuel from its bonded stocks and to supply its civilian customers from the imported products, which importation is being requested to be free from customs duties. In a recent ruling of the Department of Foreign Affairs dated March 17, 1966, it was held in effect that replacement items should not be exempted from customs duties and taxes under the Military Bases Agreement; and that the privilege of tax exemptions under Article V of the Military Bases Agreement may only be granted to the United States military bases in the Philippines and its contractors on their direct importations and not on local purchases. Therefore, the said fuel which may be imported by Mobil Oil Philippines, Inc. are replacements of the diesel oil taken from its bonded stocks and delivered to the U.S. Armed Forces in the Philippines is subject to the payment of customs duties and taxes. In view of the foregoing, the importation of Mobil Oil Philippines, Inc. of diesel fuel to be sold to civilian customers as replacement of what has been supplied to the U.S. Military Bases out of the stock earmarked for the former cannot be exempted from the payment of customs duties and taxes under the Military Bases Agreement. cdpr (SGD.) EDUARDO Z. ROMUALDEZ Secretary