The Royal Malaysian Customs Department (RMCD) has been urged to provide a detailed explanation on how petroleum cargo undergoing blending to produce Very Low Sulphur Fuel Oil (VLSFO) is regulated at customs-controlled facilities.
Maritime industry player Datuk Seri R Jeyenderan said clarification was needed to determine whether petroleum imported under the K8 procedure could still be classified as cargo for storage or transit purposes after being mixed with other petroleum streams.
“The key question arises when petroleum stored in tanks is subsequently blended with other petroleum products, resulting in a different commercial product.
“If different petroleum products are mixed in the same tank to produce VLSFO, can the cargo still be considered as being stored or in transit, or has it effectively become a new product?” he said in a statement on Monday.
The issue comes after Tebrau MP Jimmy Puah Wee Tse reportedly said he would raise concerns in Parliament over uncertainty surrounding the taxation of blended oil cargo stored in onshore tanks at the Tanjung Langsat Port.
Puah, who is also a member of the Parliamentary Special Select Committee on Economy and Finance, said the committee should call the relevant parties to provide clarification and discuss possible solutions to the issue.
Transport Minister Anthony Loke Siew Fook had also said on August 13 that his ministry would seek clarification from the Finance Ministry over concerns surrounding the tax treatment of blended oil cargo.
Loke said at the time that his ministry had not been informed of any new tax imposed on such cargo, adding that the matter fell under the jurisdiction of RMCD and the Finance Ministry.
Jeyenderan, who is also chief executive officer of Maritime Network Sdn Bhd, said RMCD should clarify whether the original K8 declaration remains valid after petroleum undergoes blending, or whether the resulting product must be declared separately.
He said the matter could also have implications for duties and taxes if petroleum brought into Malaysia under customs-controlled arrangements is blended into VLSFO before being exported or removed from the facility.
“This is not simply a question of whether the government should introduce a new tax. The issue is whether existing customs, free zone, licensed warehouse and petroleum regulations are being applied consistently when there is a physical or commercial change to the cargo,” he said.
Jeyenderan also highlighted the importance of cargo traceability, particularly when an onshore storage tank already contains petroleum inventory before new cargo is discharged.
He said terminal operators should be able to account for the volume of petroleum entering a tank, existing inventory, the quantity used in the blending process and the amount of finished product eventually removed.
“With a clear mass balance system, RMCD can verify and reconcile cargo volumes while determining the movement and handling of each petroleum shipment, particularly when multiple petroleum streams are blended in the same tank,” he said.
Jeyenderan also questioned whether the existing regulatory framework could potentially allow companies to benefit from arrangements intended for transit or storage activities while simultaneously carrying out blending operations that increase the commercial value of petroleum products.
The question has become more significant following controversy involving nearly 77,000 tonnes of petroleum cargo declared under K8 at Tanjung Langsat, Johor.
“When cargo is discharged into a tank that already contains existing inventory, the question is how the records and traceability of the original cargo can be accurately maintained,” he said.
He stressed that clear regulatory guidance was essential to ensure every petroleum shipment could be properly traced and that the customs treatment applied remained consistent with the actual activities being carried out at the terminal.
