Monday, February 4, 2013

Road Haulage Operators May Not be the Only Ones to Evade Fuel Duty

Scams to Cheat the Authorities Can Have an International Flavour
Shipping News Feature

UK – US – CANADA – Fuel is a hot topic these days, particularly when the subjects of tax and duty come up at the same time, and those readers who have knowledge or experience of the subject will often know a little of something surrounding the dark arts which can magically transform diesel rated low on duty as heating or agricultural fuel into the liquid gold of its vastly more expensive road fuel cousin. Now in Britain the Road Haulage Association (RHA) has given a cautious welcome to new measures against hauliers that use diesel that is not fully duty-paid. News from across the Atlantic concerning the merits or otherwise of biofuels however is somewhat more disturbing.

In the UK HMRC has agreed a new protocol with the Traffic Commissioners (TC’s) and the Vehicle and Operators Services Agency (VOSA) that should see offenders reported to the industry regulators, TC’s in respect of GB operators and the Transport Regulation Unit in respect of those from Northern Ireland. Offenders will be reported by HMRC where the haulier should have known that the fuel detected was not subject to full duty payment. HMRC will also report cases where it seizes vehicles used to conceal large quantities of excise goods such as alcohol and tobacco or indeed any other form of excise fraud. RHA chief executive Geoff Dunning confirmed the organisation would continue to monitor enforcement and regulation, saying:

“This new protocol represents a radical and much-needed improvement in the co-ordination of the enforcement and regulatory effort. It should mean a transformation in reporting - and it is vital that is what happens in practice. I am much encouraged by HMRC’s assurance that it shares the RHA’s determination to eliminate non-compliance in respect of fuel duty and the damaging impact that has on legitimate hauliers. HMRC in turn deserves industry support in the work it is doing to combat use of diesel that is not duty-paid.”

The UK however is not the only country to be subject to cases of duty evasion. Some readers will recall the scandals which occasionally surfaced when hauliers in the Irish Republic and those in the North conspired to smuggle fuel with lower duty levels across the border, sometimes simply by travelling through rural property which spanned the divide, sometimes by installing hidden fuel tanks in their trucks holding lower rated fuel. These activities however are nothing to the controversy surrounding biofuel which has recently arisen in Canada and the US where the scramble to be environmentally acceptable it seems is producing a unique set of frauds.

According to a recent report by CBC News in Canada there is a major scam involving the trading of ‘RIN’s’, the identification numbers awarded to renewable energy sources by the US authorities. These numbers, or units, are generated when a company imports an amount of renewable energy fuel, such as biodiesel, into the US. Because the Environmental Protection Agency (EPA) mandates that oil companies must produce for sale an amount of renewable fuel every year the units have a relatively high value as the biofuel is mixed with petrochemicals to produce an environmentally acceptable fuel and allowing the fuel producer to conform to the law.

The RIN’s are obtained when the fuel enters the US and it is alleged that one company at least has loaded freight trains in Canada with tankers full to the brim with biofuel which then passed across the border generating the EPA credits. These RIN’s actually have to emanate from an approved importer within the fuel production industry but in the case which CBC looked at, the trainloads of fuel simply re-crossed the border back into Canada without the tankers even offloading.

In the case of any biofuels being re-exported the RIN’s should be surrendered but it seems this was either not done or RIN’s for another product, ethanol, whose RIN’s are worth a pittance compared to biofuel units, were substituted and subsequently surrendered which presumably means millions of dollars worth of fuel was misdeclared on export leaving someone with a fortune and the ability to simply repeat the trick time and again.

Other accusations include the export of vast amounts of fuel to parts of Europe which have higher rates of duty for American fuel than Canadian and simply lying about the origin to get the preferential rate, all the time whilst some of the perpetrators are believed to be claiming for tens of millions of dollars in Government subsidies for pursuing an environmentally laudable policy.

It would seem that whether large or small amounts are involved, the temptation to evade duty is an industry on its own which is as popular as ever, and perhaps in financially troubled times, even more so.

Photo: A worldwide problem – a Malaysian maritime patrol boat apprehends a small boat laden with subsidised fuel.