EU scraps plan to levy duty on jet fuel imports

The European Union backtracked from plans to levy a 4.7% duty on jet fuel imports from the Middle East and India after a round of internal consultations and discussions with the aviation industry.
The EU’s June 2013 decision to impose the tariff followed a broad review of its preferential trade agreements. The decision sparked concern that it would weaken the region’s struggling airlines and lead to higher airfares.
The European Union said it would impose the duty on imports from Gulf Cooperation Council (GCC) states starting January 1, 2014 after removing the group from the generalized scheme of preferences (GSP), which offers trade advantages to developing economies.
In addition, jet fuel imports from India would also be subject to the duty even though the country was included in the new GSP scheme, as India’s refining industry was seen as sufficiently competitive in global markets.
But following a round of internal talks in the European Commission and lobbying by the aviation industry, it was agreed that hundreds of bilateral aviation agreements were in place that override the duty.
“The tariff would technically still be imposed under the changes of the GSP but after an inter-departmental review it was concluded that the duty can be waived under the air services agreements that exist between individual EU member states and third countries outside the EU,” an EU official said. “As a result, jet fuel will be exempt of duty regardless of its origin,” the official said.
Jet fuel is the largest component of airline operating costs in Europe, representing almost 35%, compared with 25% a decade ago, according to the Association of European Airlines.
European demand for jet fuel amounted to 1.2 million barrels per day (bpd) last year, of which one third was imported, most of that from the Middle East, according to the International Energy Agency (IEA).
India exported an average of 57,500 barrels per day (bpd) of jet fuel per month to the EU in 2012, according to traders.
The third-largest exporter of jet fuel to Europe is South Korea, which could benefit the most from the changes in the duty system, according to traders.
(August 1, 2013)