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Introduction
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The use of illicit
fuel is a menace to our society and has attracted
much public attention. Apart from the loss of
revenue, the problem has also led to air pollution
concerns and fire hazards. This paper provides
background information on illicit fuel abuse and
the achievements made by the Customs and Excise
Department in clamping down on the misuse of diesel
oil in Hong Kong. It is our hope that this presentation
will provide the general public with a better
appreciation of the current situation. We shall
update the relevant statistics from time to time
and we would welcome your comments. |
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Highlights
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We are determined to eradicate the illicit
fuel problem |
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We have
seized 1.58 million litres of diesel
oil and arrested 566 persons in 2002
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made good progress with sustained enforcement
efforts and effective administrative
measures.We will continue with our vigorous
enforcement efforts to combat the illicit
fuel activities and will continue to
educate the public of the consequences
of using and dealing in illicit fuel
through mass media. |
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Background
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The use of illicit
diesel oil by vehicles is a serious problem that
leads not only to revenue loss, but also causes
environmental pollution and fire hazards. The Customs
and Excise Department is taking a zero tolerance
approach to eradicating the supply and use of illicit
diesel oil in our community.
The price differential has been the main selling
point of illicit diesel oil. Currently, the legal
retail price of ultra low sulphur diesel is HK$5.99-HK$6.00
per litre. The illicit light diesel oil sold in
the black market is about HK$3.8 per litre.
There are three types of illicit diesel oil being
abused by vehicle drivers in Hong Kong. They are
dutiable light diesel oil, marked oil, and detreated
oil. |
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Dutiable light diesel
oil
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Dutiable light diesel
oil is diesel oil of which the full duty prescribed
by law (HK$2.89 per litre for ordinary diesel oil
or HK$1.11 per litre for ultra low sulphur diesel
oil) has not been paid. The major sources of illicit
light diesel oil are dutiable light diesel oil smuggled
into Hong Kong from the Mainland. Smugglers usually
conceal illicit diesel oil in containers with built-in
metal tanks or inside ballast tanks of river trade
vessels.
Cross boundary vehicles are allowed to bring in
duty exempt light diesel oil under Regulation 12(1)(pa)
of the Dutiable Commodities Regulations, Cap 109,
Laws of Hong Kong. They are allowed to bring in
hydrocarbon oil in quantity as follows:-
fuel in the tank of a goods vehicle arriving from
the Mainland shall be exempted from duty in accordance
with the rates stipulated below -
| Cylinder Capacity of Goods
Vehicle |
Fuel Exemption |
| below 3,000 c.c. |
100L |
| 3,000-10,000 c.c. |
200L |
| over 10,000 c.c. |
300L |
Some unscrupulous cross-boundary drivers would also
take advantage of the legitimate duty exemption
accorded to their vehicles and transfer illegally
the duty exempt diesel oil they brought in from
the Mainland for use by other vehicles. The diesel
oil brought into Hong Kong by these vehicles is
legitimate as long as the oil remains in their fuel
tanks for their own use. It is illegal when the
oil is transferred to other vehicles. The problem
of transfer of duty exempt diesel oil has ben contained.
This is a result of the legislative amendments on
dutiable presumptions on fuel under transaction
at premises not licensed for storage and light diesel
oil with excessive sulphur content in 2001.
Consequently, the demand for duty exempt diesel
oil brought in from the Mainland has decreased as
the sulphur content of such diesel oil is in excess
of that as prescribed under the law. |
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Marked oil
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Marked oil, commonly
called "red" oil, is light diesel oil
to which a prescribed marker (a specified chemical)
and colouring substance have been added. It is red
in colour and is designated for industrial and marine
use. It is duty exempt and is not allowed for use
as fuel in motor vehicles and pleasure vessels.
It has a wide range of legitimate uses, ranging
from fuel for vessels, boilers and machinery used
in construction sites, hotels and hospitals to cranes
and portable electricity generators. The existence
of the colouring substance and the prescribed marker
provides ready identification aids and facilitates
Customs officers in detecting the illegal use of
marked oil as fuel for road vehicles. |
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Detreated oil
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Detreated oil is marked
oil with its red colour or marker illegally detreated
through a filtering process to avoid the detection
by law enforcement officers. Marked oil and detreated
oil produced by marked oil detreating plants has
become a dominant source of illicit light diesel
oil used by vehicles as marked oil can be obtained
easily in the market. |
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Administrative
Control Measures
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We have also taken
stringent administrative measures to reinforcing
enforcement operations and tightening control over
the export of hydrocarbon oil. Starting from November
1999, we are issuing permits for light diesel oil
shipments to be exported to the Mainland only on
productions of Import Authorizations issued by the
Mainland Customs. We are imposing also additional
conditions on exports permits for suspicious export
shipments, including the requirements for security
deposit and subsequent production of landing certificates
issued by proper authorities in the port of destination.
We are also maintaining very close liaison with
neighbouring enforcement agencies, in particular
those of the Mainland and Macau, in enhancing the exchange
of intelligence. |
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Legislative amendments
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Legislative amendments
introduced in 2000 and 2001 have strengthened our
fight against illicit fuel. These include:-
- increasing fine from HK$200,000 to HK$1,000,000
for offences relating to the marked oil;
- imposing driving licence disqualification
provision for repeated offenders;.
- expanding the presumption provision for fuel
transferred to or from a vehicle's fuel tank
at any location other than those licensed under
the Dangerous Goods Ordinance is presumed dutiable;
and
- adding a presumption clause that LDO,if found
in the fuel tank of a motor vehicle with a sulphur
content in excess of statutory limit under the
Air Pollution Control (Motor Vehicle Fuel) Regulations,
is presumed dutiable.
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Enforcement Action
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The Customs and Excise
Department is the enforcement agency of the Dutiable
Commodities Ordinance, Chapter 109. We are determined
to eradicate the illicit fuel problem to protect
Government revenue and safeguard the welfare of
our society.
We have devised a multi-pronged approach to tackle
the problem. The Diesel Oil Enforcement Division
conducts in-depth investigation and surveillance
on syndicates involved in the smuggling and supply
of illicit fuel. Officers of other major formations
undertake the principal day-to-day operational work.
Their duties include the raiding of illicit fuel
refilling stations, checking road vehicles for illicit
fuel and mounting surveillance at coastal areas,
waterfronts and black spots to detect smuggling
activities.
Furthermore, officers of different units in the
Customs and Excise Department would be mobilized
from time to time to conduct large-scale operations
to suppress the supply and use of illicit fuel.
The Special Task Force, which was established
in June 1999 with a current complement of 147 officers,
is the flexibly deployed elite unit that serves
to reinforce the enforcement operations against
various illicit activities including illicit fuel.
We are also working closely together with the Environment,
Transport and Works Bureau, the Fire Services Department,
the Hong Kong Police Force and the Lands Department
in dealing with the problems arising from the use,
sale and storage of illicit fuel. |
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Enforcement results
and penalty
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In 2002, 671 cases
were effected with seizures of 1.58 million litres
of diesel oil and arrest of 566 persons denoting
a increase of 16.7% in the number of cases as compared
with 2001.
In 2002, the penalties for illicit fuel offences
imposed by the courts included fines ranging from
HK$500 to HK$10,000 and imprisonment terms ranging from
7 days to 8 months. 7 persons were disqualified
from holding driving licence by the court for period
ranging from 6 to 15 months.
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Conclusion
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The legislative amendments
have enhanced the enforcement capacity to a great
extent. The disqualification penalty to repeated
offenders has a significant deterrent effect to
those die-hard drivers forbidding them to continue
to use illicit fuel. The trend of smuggling diesel
oil from the Mainland to Hong Kong has declined
as a result of the legislative amendment on statutory
limit of the sulphur content of light diesel oil.
The concerted inter-departmental efforts have greatly
contained the problem of illegal filling stations
in the territory. Diesel oil is highly flammable
which poses fire hazard to residents nearby especially
in residential area. It is a matter of serious concern
and we will spare no effort in clamping down the
illicit trade. In 2002, the Department smashed 705
illegal filling stations. The number of black spots
for illicit fuel activities dropped drastically
from around 110 in 2000 to about 27 in December
2002.
The illicit fuel business has posed a serious threat
to the safety of the public. We do not allow any
room for the illicit trade to continue to exist.
We are making every effort in ridding the supply
and use of any illicit fuel in our community. We
are stepping up publicity on the adverse consequences
and danger of using illicit fuel and have encouraged
members of the public through the media to report
to us the locations of those illicit fuel refilling
stations. Our hotline number is 2545 6182. |
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Office of the Dutiable
Commodities Administration
Customs & Excise Department
March 2003 |
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