To address the production and operational needs of crude oil refining enterprises and to foster the healthy and sustainable development of the crude oil processing trade, the GACC recently released and implemented the "Announcement on Optimizing the Management of Unit Consumption in Processing Trade of Crude Oil Refining Products". The announcement optimizes and refines the unit consumption management measures for processing trade of crude oil refining products, and officially releases the "Unit Consumption Parameters for Processing Trade of Crude Oil Refining Products"(hereinafter referred to as the "Parameters").
I. Policy Background
Crude oil is a strategically important commodity vital to the national economy and public welfare. The state enforces qualification management for enterprises and export licensing control over the processing trade of crude oil refining. In 2003, the former State Economic and Trade Commission, together with the General Administration of Customs and relevant industry associations collaboratively established and promulgated the "National Unit Consumption Standards for Processing Trade of Crude Oil Refining Products"(hereinafter referred to as the "Standard"). Enterprises were required to conduct processing trade filing and declare unit consumption based on the specified range of export products and the "re-export yield" model specified in the "Standard". Customs authorities implemented strict regulatory oversight, verifying declarations in accordance with the rigid provisions of the "Standard" and based on the re-export yield. Over years of development, the rigid management measures outlined in the "Standard" no longer align with the actual production and operational conditions of enterprises, making it difficult to meet their current needs. Based on extensive research and consultations, and with support from industry associations, the General Administration of Customs—after seeking input from the National Development and Reform Commission and relevant enterprises—has optimized and adjusted the unit consumption management measures for the processing trade of crude oil refining products, and formulated the "Parameters".
II. Basic Concepts
The crude oil referenced in the announcement pertains to commodities classified under Heading No. 2709 in the "Customs Import and Export Tariff of the People's Republic of China". Crude oil refining products include gasoline (commodity number: 27101210), kerosene (commodity numbers: 27101911, 27101912, 27101919), diesel (commodity number: 27101923), and other products genuinely generated within the refining sector, excluding downstream chemical products derived from integrated refining and chemical enterprises.
The term "comprehensive product yield" refers to the ratio, expressed as a percentage, of the total quantity (in kilograms) of gasoline, kerosene, diesel, and other products actually produced in the refining process by crude oil processing trade enterprises under normal processing conditions, to the quantity (in kilograms) of crude oil consumed. The yield of an individual product refers to the ratio, also expressed as a percentage, of the output quantity (in kilograms) of that specific product to the crude oil consumed (in kilograms).
Unit consumption refers to the "comprehensive product yield" of crude oil refining products.
III. Key Provisions
(I) Implementation of Parameter-Based Unit Consumption Management for Crude Oil Refining Products. The unit consumption for the processing trade of crude oil refining products will shift from rigid compliance with the "Standard" to a more flexible, parameter-based management model. The parameter values are established based on the actual comprehensive product yield of the refining sector across key crude oil processing and trade enterprises nationwide. The parameter ranges for kerosene and diesel yields, as well as the combined yield of gasoline, diesel, and kerosene, are also determined (comprehensive product yield parameter range: 93-97%; kerosene yield range: 0-30%; diesel yield range: 5-30%; and the combined yield of gasoline, diesel, and kerosene not lower than 35%). These values reflect the capabilities of most refining units and processes, while also taking into account the operational reality of some integrated refining and chemical enterprises, which reduce the output of gasoline, diesel, and kerosene in order to increase the production of light oil fractions used in downstream chemical processes. Customs authorities will use these parameters as a reference for supervision and will manage and verify unit consumption declarations based on the enterprise-reported actual comprehensive product yield.
(II) Adjustment to the Calculation Method for Unit Consumption of Crude Oil Refining Products. The unit consumption calculation for crude oil refining products in processing trade will be changed from the "re-export yield" method to the "comprehensive product yield" method. Enterprises are required to truthfully declare the comprehensive product yield of crude oil refining products within the validity period of the processing trade manual or the verification cycle of the electronic account book. The new calculation method emphasizes the primary responsibility of enterprises to provide accurate and truthful declarations.
(III) Optimization of the Scope of Re-exportable Products in Crude Oil Processing Trade. The original "Standard" stipulated that the re-exportable product categories included naphtha, gasoline, kerosene, diesel, and 14 other specific products (such as No. 5-7 fuel oil, asphalt, liquefied petroleum gas, and petroleum coke). The "Parameters" no longer impose such restrictions on the range of exportable products. Any crude oil refining product that complies with national policy requirements may be re-exported through processing trade, thereby supporting enterprises in diversifying the export portfolio of their refined products.
(IV) Optimization of the Management Model. In addition to providing parameter reference values, the "Parameters" also establishes detailed operational guidelines for crude oil processing trade business. It offers filing procedures, unit consumption declaration methods, and write-off channels that are tailored to align with the actual production and operational needs of enterprises.
1. Unified Filing Method. The method for filing finished products under processing trade manual (or account book) shall be standardized. Enterprises must include all refining products generated from the crude oil processing phase in the finished product section of the manual (or account book) for filing.
2. Unified Unit Consumption Declaration Model. Enterprises are granted the qualification to declare unit consumption prior to verification. Before initiating verification procedures, enterprises must declare unit consumption based on their actual comprehensive product yield. For each finished product, the unit consumption shall be declared using the model of "net consumption = 1" and "process loss (intangible loss)= 1 minus the comprehensive product yield".
3. Unified Verification Method. During the verification process, enterprises must verify the types and quantities of all crude oil refining products produced during the validity period of the manual or the verification cycle of the account book. Based on the consumption ratio of bonded materials, enterprises shall declare to Customs the types and quantities of finished products as well as the comprehensive product yield. If the enterprise-declared comprehensive product yield, kerosene and diesel yields, or the combined yield of gasoline, diesel, and kerosene falls outside the specified parameter ranges, the enterprise shall provide an explanation to Customs. Upon verification, Customs will conduct write-off procedures based on the enterprise's actual unit consumption. For crude oil refining products that are not exported under the processing trade regime, the quantity of crude oil used shall be back-calculated based on the approved comprehensive product yield, and corresponding procedures such as document supplementation and taxation shall be applied.
IV. FAQs
(I) What Are the Unique Characteristics of Crude Oil Processing Trade?
Crude oil refining is intrinsically linked to the varieties of crude oil, process design, and product structure, characterized by lengthy process flows and a diverse range of products. To ensure operational safety, quality control, and compliance with process requirements, different crude oil categories must simultaneously undergo intricate processes such as catalytic cracking and hydrocracking. As a result, allowing enterprises to commingle and co-refine different crude oil types is a critical feature of Customs supervision in crude oil processing trade. The primary verification method for processing trade write-offs is to calculate the total input and output of crude oil over a given accounting period, conducting unified verification and settlement.
(II) When Filing a Manual (or Account Book), Which Period's Comprehensive Product Yield Should Be Referenced for Unit Consumption?
Enterprises are consistently granted the qualification to declare unit consumption prior to verification. Therefore, it is not required to declare unit consumption at the time of manual (or account book) filing. Instead, enterprises shall accurately verify the comprehensive product yield during the manual validity period or account book verification cycle, and then declare the unit consumption data to Customs.
(III) How Should Crude Oil Refining Products Be Filed?
Enterprises must include all refining products generated from the crude oil processing phase in the finished product section of the manual (or account book) for filing. The "Parameters" provide a reference list of products produced during the crude oil refining phase to assist in product filing. Given the extensive range of crude oil refining products and the variations in product types across different time periods, for products that are non-exported due to excessive complexity and low production volume, appropriate consolidation is permitted under the principle of standardized declaration compliance.
(IV) How Should Non-Exported Crude Oil Refining Products under Processing Trade Be Handled?
For crude oil refining products that are not specified for export in the export contract, or those specified but ultimately not exported, the quantity shall be uniformly converted into crude oil based on the comprehensive product yield. Customs procedures such as document supplementation and taxation shall be carried out accordingly.
(V) How Will Manuals (Account Books) in Use Before the Implementation of This Announcement Be Handled?
Manuals established and account books still within their verification cycles before the implementation date of this Announcement shall continue to follow the relevant provisions under the original unit consumption standards throughout the manual validity period or account book verification cycle.
(Contributed by: Department of Enterprise Management and Audit-Based Control)
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