* EU had planned 4.7 pct tariff on imports from Mideast,
* Aviation agreements override plans to impose duty
* Shift follows lobbying by aviation industry
By Ron Bousso and Barbara Lewis
LONDON/BRUSSELS, Aug 1 The European Union
backtracked from plans to levy a 4.7 percent duty on jet fuel
imports from the Middle East and India after a round of internal
consultations and discussions with the aviation industry.
The EU's June decision to impose the tariff following a
broad review of its preferential trade agreements sparked
concern it would weaken the region's struggling airlines and
lead to higher flight fares.
In June, the European Union said it would impose the duty on
imports from Gulf Cooperation Council (GCC) states starting Jan.
1, 2014 after removing the group from the generalised scheme of
preferences (GSP), which offers trade advantages to developing
Jet fuel imports from India would also pay duty even though
the country was included in the new GSP scheme, as India's
refining industry was seen as sufficiently competitive in global
But following a round of internal talks in the European
Commission, it was agreed that hundreds of bilateral aviation
agreements were in place that override the duty.
"The tariff would technically still be imposed under the
changes of the GSP but after an inter-departmental review it was
concluded that the duty can be waived under the air services
agreements that exist between individual EU member states and
third countries outside the EU," an EU official told Reuters.
"As a result, jet fuel will be exempt of duty regardless of
its origin," the official said.
Airline representatives have made their case against the
duty in recent weeks, while refiners in the Middle East and
India oil traders struggled to assess its impact on trade next
"There has been dialogue and assessment with the aviation
industry on the impact the duty could have, but it is now clear
that it can be waived," he added.
In one case, Abu Dhabi National Oil Company (ADNOC) inserted
clauses in its jet fuel term sale agreements with European
buyers allowing the review of prices at the end of 2013 should
the duty kick in, traders said.
"Some 1,500 binding air transport agreements exist between EU
Member States and third countries... These agreements include
provisions exempting jet fuel from duties and taxes,
disregarding its origin," Commission spokesman for trade policy
John Clancy told Reuters by email on Wednesday.
"Hence, jet fuel imports from the Gulf countries are exempt
from paying duties."
Jet fuel is the largest component of airline operating costs
in Europe, representing almost 35 percent, compared with 25
percent a decade ago, according to the Association of European
European demand for jet fuel amounted to 1.2 million barrels
per day (bpd) last year, of which one third was imported, most
of that from the Middle East, according to the International
Energy Agency (IEA) and traders.
India exported an average of 57,500 barrels per day (bpd) of
jet fuel per month to the EU in 2012, according to traders.
The third-largest exporter of jet fuel to Europe is South
Korea, which could benefit the most from the changes in the duty
system, according to traders.
(Additional reporting by Barbara Lewis in Brussels; editing by