SOUTH AFRICAN REVENUE SERVICE
MEDIA RELEASE NUMBER 16 OF 1999

7 JULY 1999

CONTROL OVER ILLEGAL SUBSTITUTION OF FUELS USED IN ENGINES

Towards the end of 1999, a chemical "marker" will be introduced by the oil companies into paraffin (also known by various other names, including kerosene and illuminating paraffin) and also to certain solvents with characteristics similar to paraffin.

The objective is to clamp down on the practice of using substitute fuels in Diesel engines and to eliminate the evasion of duties payable on such substitute products.

It is the intention of SARS to submit draft legislation in this regard to Parliament during the current Parliamentary session. The administration of the proposed law will be handled by the Customs and Excise division of SARS, and offenders face very substantial penalties.

Copies of the draft legislation and rules are available form the Government Printers (Gazette no 20279) and are also available on SARS Online at www.sars.gov.za.

The essentials of the proposed new law include a total prohibition upon the use of mixtures containing the marker as substitute fuels in engines, and allow for limited and regulated use of mixtures containing markers in other domestic and industrial applications. In the latter cases registration may be required.

Comprehensive record keeping requirements are being introduced regarding invoicing, the keeping of books, accounts and documents and of storage and stock records.

Procedures are in place to enable customs officers to take and test fuel samples and to pass those samples to an authorised laboratory for further analysis.

Rules regulating the supply of Jet fuel are being formulated at present.

ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA

Notes to Media Release no 16 of 1999

WHAT IS FUEL SUBSTITUTION?

Fuel substitution is the mixing of paraffin or similar solvents with Diesel fuel or lubricity agents such as oils and using the substitute mixture as a fuel in engines. Various duties are payable on fuel used in engines, whereas paraffin is duty free and only attracts VAT. The mixing of paraffin with other substances, including Diesel fuel, for use as a fuel in engines will result in the evading of a part or all of the full duty due.

ARE SUBSTITUTES HARMFUL?

Yes. Experience has proved that the use of substitute fuel can lead to loss of performance, reduced life, and poor reliability in engines.

HOW WILL SUBSTITUTION BE COMBATED?

The addition of Mortrace MP (the marker) to paraffin and similar solvents will provide a means to identifying the presence of these products in fuels used in engines and Customs Officers will take fuel samples form vehicles and other sources for on the spot analysis. Fuels for use in engines, as sold at service stations, should never contain this marker.

WILL THE MARKER HAVE ANY OTHER EFFECTS?

In the case of illegal substitution the marker will not affect the operation of any internal combustion engine.

HOW CAN THE CHEMICAL MARKER BE RECOGNISED?

The marker is invisible. By the addition of a specific reagent the presence of the marker can be detected. Test kits similar to those to be used by Customs officers can be purchased by anyone interested in doing so.

WHAT ARE THE MAIN OFFENCES UNDER THE PROPOSED LEGISLATION?

• Mixing of marked goods with petrol or Diesel and the possession of such mixtures; mixing of marked goods with any lubricity agent for use as fuel in an engine; disposal, purchase, use or possession of marked goods, alone or in mixtures, as a fuel in any engine.
• Mixing of marked goods with any lubricity agent for use in domestic or industrial applications except as prescribed by the law including the compliance with certain registration requirements.
• The removal to territories within the common customs union or the export of marked goods or Jet fuel by anyone who is not registered to do so.
• Failure to keep the required records and documents.

WHAT ARE THE RECORD KEEPING REQUIREMENTS?

• Licensees of Customs and Excise Warehouses are required to keep comprehensive stock records relating to marked and unmarked goods, marker and Jet fuel.
• Anyone disposing of marked goods in any transaction or series of related transactions which exceed 210 litres is required to issue invoices containing comprehensive information including the name and address of the person who disposes of the marked goods; the name and address of person to who the marked goods are sold; a description of the marked goods, including a statement indicating that the goods supplied contain the marker, implications thereof and the quantity of marked goods.
• Anyone other than a Licensee of a Customs and Excise Warehouse who acquires, stores, sells, disposes of, uses or has under his control or possession more than 1,000 litres of marked goods at any one time is required to maintain certain comprehensive records relating to such transactions and the storage thereof, including the capacity and other specified detail regarding each of the storage tanks; a description of the goods stored in each tank; the number and date of each invoice, and quantity of goods received; certain specified details if the marked goods are sold or otherwise disposed of, or are used, and a stock account, balanced monthly, of quantities of goods received, used and indisposed of , including goods lost or destroyed.
• Suppliers and users of Jet fuel are required to keep comprehensive documentation including an invoice or delivery note for each transaction with a statement that the Jet fuel is to be used solely as fuel in aircraft, with the name and address of the licensee or supplier of the Jet fuel, the delivery address and when supplied for fuelling aircraft the registration number of the aircraft and a signed receipt from the pilot for any such supply.
• Generally it is required that all records and documents are kept for a period of three years, and should be available, on demand, for inspection by a Customs Officer.
• Failure to keep the required records and documents will be an offence in terms of the law.

WHAT ARE THE POWERS OF CUSTOMS OFFICERS?

• Customs Officers are empowered to take and analyse samples, to report on the sample taking, and to submit such samples to laboratories for further analysis.
• Any person who is in any way concerned with any marked goods, or any vehicle or mobile apparatus, or any premises where any tank or other container is situated, is required to furnish a Customs Officer on demand with any particulars which he or she is able to provide for the purposes of the report to be prepared by that Customs Officer.

Any comments or reaction to this document or the draft legislation should be received by SARS no later than 26 July 1999.

Contacts:
Mark McLoughlin
Tel: (021) 401 8525
Fax: (021) 421 6263

Andre Joubert
Tel: (012) 422 6921
Fax: (012) 422 6903