VLSFO blending raises questions over transit, manufacturing at Tanjung Langsat

Questions over the handling of petroleum cargo at Malaysia's Tanjung Langsat port have expanded to encompass the blending of petroleum streams to create Very Low Sulphur Fuel Oil (VLSFO). Datuk Seri R. Jeyenderan has called for a review of existing customs rules to ensure clear distinctions between storage, transit, and transformation processes.

The CEO of Maritime Network Sdn Bhd asked whether petroleum entering a customs-controlled facility, subsequently blended into VLSFO, should still be considered storage or transformed into a new product. Jeyenderan questioned whether the original K8 declaration remains valid after blending or if the resulting product should undergo a separate declaration process.

He also inquired about the treatment of duties and taxes when petroleum entering Malaysia under customs-controlled arrangements is blended into VLSFO before export. Another concern is traceability, particularly when shore tanks already contain petroleum inventory before a new cargo is discharged. Jeyenderan emphasized the need for a proper mass-balance system to reconcile quantities and establish the movement and treatment of individual petroleum cargoes, especially when different streams are mixed.

He questioned whether the current framework might allow companies to benefit from transit or storage treatment while engaging in value-adding blending operations. Jeyenderan stressed that the issue is about the consistent application of existing customs, free-zone, bonded-storage, and petroleum rules when petroleum is transformed, rather than the imposition of new taxes.

These concerns are particularly pertinent to the ongoing controversy involving nearly 77,000 tonnes of K8-declared petroleum cargo at Tanjung Langsat, where questions have arisen regarding cargo recording and traceability after discharge into tanks already holding existing inventories.