Press Release



LC: Dutiable Commodities (Amendment) Bill 1999


Following is the speech by the Secretary for the Treasury, Miss Denise Yue , in the Legislative Council today (June 26):


I would first like to thank the Chairman, the Honourable James To, and Members of the Bills Committee for their efficient and thorough examination of, as well as support for, the Bill. Since illicit fuel not only affects public revenue but also increases air pollution and fire risks, the Bills Committee have shown their strong support for the cause of combating the problem of supply and use of illicit fuel, which is a main object pursued by the Bill. The Bills Committee have also called for the introduction of penalties with greater deterrent effect for the relevant offences. On the other hand, the Bills Committee have stressed that any additional measures to tackle the problem should not unduly affect the smooth operation of the legitimate transport trade. The principles underlying these views have been taken on board by the Administration. The Committee Stage Amendments which I shall introduce later on reflect the understanding that we have reached with Members at the Bills Committee.

Under the existing Dutiable Commodities Ordinance, the supply and use of duty-not-paid fuel, or illicit fuel as it is commonly called, is already an offence. The Bill does not seek to create any new offence. Its main objective is to facilitate the enforcement and prosecution work of Customs officers in tackling the problem of supply and use of illicit fuel. It seeks to do so by adding two presumption provisions to the Dutiable Commodities Ordinance.

The first proposed presumption sets out that light diesel oil and petrol are presumed to be dutiable if the sale, supply, purchase and receipt of, and any other dealings in, the fuel take place in any location not licensed for storage of diesel oil and petrol under the Dangerous Goods (General) Regulations. This in essence means that light diesel oil and petrol traded at unlicensed premises are presumed to be dutiable and it is up to the person in question to prove otherwise. The proposed presumption aims at facilitating enforcement and prosecution action by Customs officers against the sale of illicit fuel at unlicensed premises, that does not involve direct transfer of fuel into the fuel tanks of vehicles on the spot, for example, the sale of illicit fuel by takeaway cans. The proposed presumption is needed because the activity of sale of illicit fuel per se currently falls outside the scope of the existing presumption provisions in the Ordinance. The existing presumption provisions can be invoked only when fuel is actually being transferred to or from the fuel tanks of vehicles. This makes it difficult for Customs officers to invoke the presumption to support prosecution against an illicit fuel supply station as transfer of fuel from or into the fuel tanks of vehicles does not always take place at these places. The presumption we now propose seeks to address this problem.

The proposed second presumption provision stipulates that light diesel oil found in the fuel tank of a motor vehicle with a sulphur content in excess of the maximum level prescribed under the Air Pollution Control (Motor Vehicle Fuel) Regulations, currently at 0.05% by weight, is presumed to be dutiable. This proposal means that a driver has to prove whether or not the oil in his fuel tank is duty-paid if its sulphur content is found to be higher than 0.05%. This proposed presumption is needed as it assists Customs officers to take enforcement action against the use of dutiable diesel oil and detreated oil, i.e. marked oil with the marker illegally removed. These two kinds of fuel are no different in appearance from duty-paid fuel but their high sulphur content is a distinguishing feature. The logic of this presumption is based on the fact that the sale of light diesel oil with a sulphur content higher than 0.05% for vehicular use is prohibited in Hong Kong, whereas illicit fuels generally have a higher sulphur content. It follows that light diesel oil used by vehicles with a sulphur content higher than 0.05% is very likely to be illicit oil.

The Bills Committee generally appreciate the need for both proposed presumptions under the Bill to enhance the effectiveness of the enforcement and prosecution work of Customs. They have, however, expressed concerns on the impact of the second presumption concerning the dutiability of fuel in the fuel tanks of vehicles driven by professional drivers. Their concern is that professional drivers who work on shifts and "inherit" the fuel in the vehicle tank from previous shifts may have no knowledge about the source of fuel in their fuel tanks. It would be unfair to them if they are charged for an offence committed by someone else. The Bills Committee have asked the Administration to consult the transport trade on the presumption and to work out a record-keeping system with the trade which can help drivers demonstrate the extent of their knowledge about the source of illicit fuel, before introducing the legislative proposal on the presumption into this Council.

As I pointed out earlier on, the proposed presumption does not by itself establish a new offence for using illicit fuel. With or without the presumption, it is already an offence for a person to use illicit fuel. What the presumption does is to facilitate the proving of an offence by shifting the evidential burden to the suspect and requiring him to provide evidence that duty has been paid in respect of fuel found in his vehicle which has a sulphur content higher than 0.05%. It does not prevent the suspect from stating his knowledge and involvement in the using of illicit fuel. A professional driver caught for use of illicit fuel, for example, may claim that the fuel was "inherited" from the earlier shift and that he has no reason to suspect that the fuel is duty-not-paid. And as is already being done, Customs officers will investigate to verify his claim. Depending on the result of the investigation, the driver caught may not be prosecuted. In the event of prosecution, the Court will decide whether or not the driver should be convicted after taking into account all factors. We do not, therefore, believe that the introduction of the presumption will lead to unfair prosecution and conviction.

Notwithstanding this, we agree with Members that the transport trade should be consulted on the proposed presumption and that a proper record-keeping system should be worked out with the trade before the presumption is to be included in law. As such consultation takes time, we do not consider it practicable to complete the exercise in time for the legislation to be enacted before the end of the current legislative session. We, therefore, propose to defer the introduction of the legislative provision on the proposed presumption relating to the dutiability of fuel based on its sulphur content, pending the completion of consultation with the trade. To this end, I shall introduce a Committee Stage Amendment (CSA) later on to delete the presumption from the Bill. I would like to put on record that the deletion does not mean that we are abandoning the proposed presumption. Our intention is to re-introduce the presumption provision in the next legislative session, once consultation with the trade is completed.

Another important CSA which I will move today is an amendment seeking to add a penalty provision to empower the court to disqualify repeated offenders convicted of illicit fuel offences from holding their driving licences. This proposal is in response to Members' concern that the existing penalties for offences relating to the supply and use of illicit fuel under the Ordinance does not have adequate deterrent effect. Even with the proposal already included in the Bill to increase the current maximum fine of $200,000 for offences relating to marked oil and detreated oil to the same level as provided for offences relating to dutiable oil, namely $1,000,000, Members are worried that the deterrent effect may still be not sufficient. This is because the actual amounts of fine imposed by the court in the past tend to be considerably below the statutory maximum. I shall elaborate more on the disqualification proposal at the Committee Stage. In a gist, our proposal is that if a person is convicted of a specified offence relating to illicit fuel for the second time and that a vehicle was involved in the commission of the offence, he shall be disqualified from holding a driving licence for six months. If it is his third or subsequent conviction, the disqualification shall be for not less than six months. In either case, if the court is satisfied that there are special reasons, it may order that the person be disqualified for a period shorter than six months or that he not be disqualified at all. This amendment has the support of the Bills Committee.

The amendments I have mentioned so far all relate to our objective of tackling the problem of supply and use of illicit fuel. But the Bill also contains amendments serving two other objectives. First, it seeks to relax the controls over home-brewed alcoholic liquors by exempting them from both duty payment and licensing control, provided that they comply with certain conditions. This is to bring our legislation on home brewing more into line with international practice. Secondly, it seeks to improve the structure of certain provisions of the Ordinance. The Bills Committee support these parts of the Bill. They have made some comments on the amendments as well as other related technical details. In this regard, I will move a number of CSAs later on to reflect the understanding that we have reached with the Bills Committee. These CSAs are supported by the Committee.

With these remarks, I hope Members would give support to the Dutiable Commodities (Amendment) Bill 1999 and the CSAs which I will introduce later on at the Committee Stage.

Thank you President.

End/Monday, June 26, 2000