New Zealand's petrol companies are welcoming a change to 20-year-old customs and excise law but want to make sure they don't get blindsided by the way officials judge whether a blended fuel will attract more duty.

Customs New Zealand has been at loggerheads with fuel companies after a Supreme Court ruling in its favour over whether locally blended butane/motor spirit was another form of manufacturing on top of oil refining, attracting additional duty. That long-running case with Gull New Zealand cost the firm an unpaid bill of $23 million, and general manager David Bodger told Parliament's foreign affairs, defence and trade select committee it led to tens of millions of dollars of additional duty flowing to the Crown from across the industry.

Crown accounts show excise duty charged on petroleum was $1.88 billion in the year ended June 30, 2016, rising 7.9 per cent from a year earlier and maintaining a pace of growth which has accelerated over the past five years. Petrol excise was $1.45b in 2011.

Bodger said the new law tries to clear up the disconnect between Customs' interpretation and the industry's, but he wants it to be "made crystal clear" with some further refinements to the wording, otherwise "you're looking quite literally at hundreds of millions of dollars".


Given the time Gull spent fighting Customs in the courts, Bodger also said certain cases of that magnitude would benefit from bypassing the Customs Authority Appeal and head straight to the courts, suggesting a $5m threshold.

Mobil Oil New Zealand director Cameron Taylor echoed Bodger's warning over the uncertainty around how motor spirit manufacturing was defined, saying it could lead to too much excise being paid, which would ultimately be borne by the end customer.

Z Energy also presented an oral submission today, however general counsel Meredith Ussher said the NZX-listed fuels company was concerned about excise paid on petrol that evaporated during shipping, dubbing it "ghost fuel". About $900,000 of petrol evaporates during the shipping and never reaches a terminal, which Z submits shouldn't attract a duty.

The 391-page piece of legislation is the result of a 2013 review of customs law, which firms said had become overly prescriptive, hard to understand and apply and introduced unnecessary compliance costs as a series of amendments were required to meet new security standards, free trade agreements, and enabling new forms of technology.

During its first reading in Parliament in December, Customs Minister Nicky Wagner described the major change as updating the language and structure of the act to make it simple to understand and use. Much of the debate focused on the increased information sharing provisions within the bill and the powers of intrusion granted to Customs to maintain border security.

Privacy Commissioner John Edwards told the select committee he supported the intention of the legislation, however, aspects of the proposed information sharing were at odds with the Privacy Act and granted unnecessary powers to the agency and its management.

"The bill before you includes a couple of new approaches to information sharing, I suggest to you they are unnecessary and in fact represent over-reach," Edwards said, and that the Privacy Act already provided mechanisms to enable information sharing with appropriate safeguards.

Powers to let the Customs chief executive share information, including personal information, with any other public sector agency for the purposes of their own business was an "unnecessarily extensive power and constituted a disproportion erosion of privacy rights," Edwards said.