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A two-party exchange is a deal where two fuel companies trade product at the terminal so each can lift fuel close to home instead of hauling it across the country.
Suppose one company owns fuel at a terminal far from its customers, and a second company owns fuel near them but sells where the first company operates. Rather than each haul fuel the long way, they swap. Each lifts the other’s fuel from the nearby terminal, and they settle the difference between them. That swap is a two-party exchange.
It saves freight and makes the whole system run more efficiently, because fuel gets lifted from wherever it already sits closest to where it is needed. This is one reason a branded station may run fuel that came out of a competitor’s terminal.
In tax terms the exchange gets special treatment. When both parties are registered, the swap is in a written contract, and the terminal records the receiving party as the one lifting the fuel, federal law makes that receiving party liable for the tax when the fuel crosses the rack. The delivering party is released from it. Getting that right is why the term has a precise meaning.
In useTwo suppliers run a two-party exchange so each lifts from the terminal near its own customers, and each owes the tax on the fuel it receives and lifts.
See also Exchange agreement, Position holder, Above the rack