OPPOSITION Leader Mark Golding says the Government should pay keen attention to arrangements similar to the one in which West Indies Petroleum (WIP) Limited benefited from — a suspension of the Common External Tariff (CET) on gasoline products — which it purchased from its affiliate West Indies Petroleum (South Terminal).

“It’s an interesting issue and it’s something that I think we have to watch closely because of the potential for revenue leakage in these kinds of arrangements,” Golding stated in the House of Representatives on Tuesday after Finance Minister Dr Nigel Clarke brought answers to questions from the Opposition on the waiver, which was granted to WIP between February 2021 and February 2022.

Dr Clarke stressed that it was WIP, as the importer, that was granted the suspension, not WIP South Terminal, which operates from Port Esquivel, under the Government’s Special Economic Zone arrangement.

“The consignment is a related party sale between the de facto entity that brought the product into Jamaica themselves, through its related party, and that related party transaction is what you’re referring to as the consignment to an importer,” Golding noted.

He also pressed the minister on the uniqueness of the WIP arrangement, questioning whether there were other petroleum marketing companies, which operate in the SEZ, and benefit from tax privileges, while selling to related parties in the domestic market, and are also benefiting from a waiver on duties for those transactions.

“To the best of my knowledge, given the fact that WIP is doing things that other marketing companies aren’t doing, they have a different structure. To the best of my knowledge, I don’t believe that the other marketing companies are structured similarly,” Dr Clarke told the House.

He stressed that an application for CET suspension was neither sought nor granted to WIP South Terminal. “West Indies Petroleum Limited — a separate legal entity — submitted an application to the Government of Jamaica and the Government applied to the [Council for Trade and Economic Development] COTED for authorisation to suspend the CET with respect to gasoline products imported into Jamaica by West Indies Petroleum Limited.

“The authorisation was approved by COTED in 2021, and the Government acted on this authorisation and suspended the CET, with respect to gasoline products imported into Jamaica by West Indies Petroleum,” Clarke told the House.

Under article 83 of the Revised Treaty of Chaguaramas, goods imported from countries outside of the Caribbean Community (Caricom) are subject to the CET, while similar goods from Caricom countries do not attract these import duties. Any changes or suspension of the CET is decided by Caricom’s Council for Trade and Economic Development (COTED), which takes into account factors such as whether the items are produced in Caricom or if the quantity of the produced doesn’t satisfy the demand.

The minister pointed out that WIP South Terminal, in addition to other commercial activities, exports petroleum products from the SEZ to Jamaica to West Indies Petroleum Limited — which makes WIP South Terminal the exporter, while West Indies Petroleum Limited is the exporter and consignee.

“Only the importer of product into the domestic space of Jamaica can benefit from a suspension of the CET, with respect to that product,” he stressed.

Explaining the reason for the suspension, Dr Clarke said prior to November 2018, substantial volumes of gasoline were imported into Jamaica from Trinidad and Tobago, which had the capacity to supply the Caricom market, but then the Trinidadian Government closed the Petroleum Company of Trinidad and Tobago (Petrotrin), and gasoline imports were no longer possible from sources within Caricom.

He said since that time, the CET has been continuously suspended on gasoline products for companies that make applications to the energy ministry, including Petrojam: “All major gasoline marketing companies for suspension of the CET on gasoline imports have been favourably considered,” he said.

Revenues foregone for 2021 on motor spirits from all petroleum marketing companies was approximately $4 billion, but the finance minister emphasised that, “this was not an amount that was being previously collected as the imports were previously originating from Trinidad and Tobago and entering Jamaica without duty, in accordance with the revised Treaty of Chaguaramas”.

The finance minister advised that for the period of the CET suspension for WIP Limited, if the CET on imports were imposed, it would have been $688 million.The company has since applied for, and been granted an extension of the CET waiver, as have all the entities that have applied for renewal of their waivers.

At the same time, Dr Clarke said no concerns were raised with the finance ministry prior to the granting of the waiver to WIP, but that there would have been no reason to object to the application, if those complaints had no bearing on the treaty.

In a September 30 statement after Opposition Spokesman on Finance Julian Robinson tabled the questions in Parliament, senior vice-president of WIP Limited Danville Walker described the enquiry as “curious and misguided”, pointing out that for a protracted period the company was denied the waiver although it was automatically granted to other players in the market.

“We are also compelled to question why are we being victimised and forced to spend our resources to fight for a level playing field in our own country. The fact, is if the CET is reimposed across the board on all importers then the price at the pumps will increase. In addition, all players would be getting the same treatment in the industry,” Walker argued.