The Acting Commissioner of Customs

1.    Crude oil imported by any local oil company, which has a contract with PAL for supply of petroleum products for use in its domestic flights, may be entered into the Philippines by such local company, without previous payment of customs duties including the ten percent (10%) ad valorem duty under E.O. 955, provided such imported crude oil shall be used for refining into petroleum products which shall be sold to PAL net of customs duty for its domestic operations under said supply contract.

2.    The deduction of the customs duty on imported crude oil shall be undertaken through the following procedure:

(a)    PAL shall furnish the local oil company with a certificate under oath by an authorized corporate official attesting to its projected schedule of product requirements or corresponding volumes, per month, to be used for its domestic operations;

(b)    The Import Entry Declaration , as required under P.D. 1853 and implementing regulation, shall be filed by the local oil company and shall include a copy of the certificate of product requirement issued by PAL;

(c)    The local oil company, upon receipt of the abovementioned certificate and any written confirmation submitted by PAL in compliance with paragraph 2 (d) hereof, shall attach such documents to the Import Entry and Internal Revenue Declaration filed by such company for incoming oil cargo. The oil company shall indicate in the Declaration that the customs duty due on a designated number of barrels of crude oil in the incoming shipment of crude oil covered by the said Declaration is to be utilized to service the requirements of PAL and is exempt under Sec. 13(b) of R.A. 4271, as amended.

The designated number of barrels of duty-exempt crude oil shall be equivalent to the volume of products (on a one-barrel-of-crude-oil-for-one-barrel-of-finished-product basis), as established in the 1:1 ratio formula and certified as a requirement of PAL for use in its domestic operations.

Shipments of imported crude oil for processing and subsequent sale of refined-oil products to PAL for its domestic operations shall be covered by separate commercial invoices and bills of lading.

Imported crude oil, as well as the resulting finished oil products for delivery to PAL, may be commingled with other imported crude oil and finished- oil products intended for domestic consumption, or for export, provided that recording procedures are adopted and that other control measures are instituted for the purpose.

(d)    PAL shall give written confirmation to the local oil company of the scheduled volumes of petroleum-product requirements for the following month. The local oil company shall then submit such written confirmation to the Collector of Customs, together with the Import Entry and Internal Revenue Declaration and the certificate required in paragraph 2(a) hereof. The Declaration shall indicate the volume of crude oil entered free from customs duty, adjusted in accordance with the written confirmation.

(e)    The Collector of Customs concerned, or his authorized representatives, shall verify on a monthly basis the data supporting duty-free entry of crude oil and the equivalent products sold to PAL by examining invoices and other similar documents evidencing actual volume of products delivered to PAL by the local oil company.

If the volumes of products actually delivered for the month fall short of, or exceed, the confirmed volumes advised by PAL for the month, the local oil company shall make corresponding adjustments in its duty payments for forthcoming crude-oil shipments.

(f)    Import entries of shipments subject of this Order shall be placed under Tentative Liquidation until verification has been made of the sales and delivery to PAL of the oil supplies under the contract and upon determination as correct the amount of customs duty rebated in relation to the quantity of oil products sold to PAL.  

3.    This Letter of Instructions shall take effect immediately.

Since 19.07.98.