Saturday , January 20 2018
Breaking News
Home / International Customs / Korean refineries disapprove new customs duty
Korean refineries disapprove new customs duty

Korean refineries disapprove new customs duty

SEOUL: Following a 3 percent increase in customs duty on crude oil imports by the government, Refineries have joined hands in rejecting the government’s plan. However the government is giving the reason of boosting revenue in this way.

The government has exempted customs duty on crude oil imported for naphtha production, although it imposes a 3 percent customs duty on crude oil imports.

However, the Ministry of Strategy and Finance plans to impose customs duty on crude oil imports even if they are to produce naphtha, the raw material used for various petrochemical products, beginning next year.

The refineries claim the customs duty will further undermine their bottom lines and weaken price competitiveness of naphtha compared to overseas rivals.

The customs duty rate will reportedly be 1-3 percent. The government says it has yet to fix the exact rate.

Naphtha is the secondary product made after distillation of petro ingredients such as petroleum and coal. The nation’s four major refineries produce nearly 50 percent of naphtha used in Korea, with the other half imported.

The government has imposed no tariffs on naphtha imports.

Korean refineries claim it is unfair to impose duties only on Korean firms.

“It is not fair to impose a customs duty burden on Korean naphtha producers only,” ” said an official from a major oil refinery, declining to be named.

“If the government decides to levy the duties we will lose price competitiveness from the start. We will continue to lose market share if the government carries out this plan.”

Last year, the four major refineries ― SK Energy, GS Caltex, S-Oil and Hyundai Oilbank ― imported 138 barrels of crude oil to make naphtha. If the government imposes a 3 percent duty on the oil, it will cost them 330 billion won.

It will be a huge burden on the refineries, which are expected to post record losses this year due to falling oil prices. Combined losses are expected to top 1 trillion won this year for the first time.