More Criticisms Trail Duty Benchmarking on Imported Goods Irrespective of Value by Customs
Hammed Ali, CG, Customs
‘Policy is illegal, anti trade facilitation, compliance’
‘Professionalism now thrown to the wind’
By Francis Ugwoke
An urgent call has gone to the Comptroller General of the Nigeria Customs Service (NCS) Rtd Col Hammed to stop without further delay the policy of duty benchmarking on imported goods to avoid counter economic consequences on Nigerians and the nation.
Under the policy every 20ft or 40ft container pays a uniform duty rate irrespective of the value of the imported goods, a development that has been described as not done anywhere in the world.
This was part of an internal directive issued sometime in September 2021.
The idea is to achieve a multiplier revenue generation for the Customs Service.
But freight forwarders said the measure exposes the Customs Service as towing the line of illegality and unprofessionalism for the sake of more revenue generation without considering the consequences on Nigerians.
Some freight forwarders said this policy throws to the wind professionalism as far as expectations of the officers of the Service were concerned.
Former President of the National Association of Government Approved Freight Forwarders (NAGAFF), Dr. Eugene Nweke while condemning the decision said it will trigger inflations and bring more harm to the ailing economy.
Nweke said the CGC should save Nigerians such hardship and halt the internal directive on the planned duty benchmarking.
In an open letter to the CGC obtained by SHIPPING DAY, Nweke called on Ali and his advisers to “defreeze and relax this internal directive for the sake of integrity of the Service, trade facilitation and economic consequences”.
He added, “ To defreeze and relax this internal directive for the sake of the helpless importers of used items, whose imports are presently trapped in various Lagos ports;
“ To defreeze and relax this internal directive to forestall capital wastages;
“ Since the Service preaches and propagates due process and compliance to the trading public, it behooves management to show and present itself as being compliant I intents and purposes, at all times;
“To help reenact and sustain the culture of flexibility, transparency, reliability and predictability in the Customs imports administration and clearance”.
Part of the Open letter reads: “CGC, Sir, You may recall, that, following the internal directive issued sometime in September 2021, to benchmark goods imported into the country by the management to the PAAR ruling centre ( trade treatment and application hub), Abuja, ranging as follows:
i. #2 million payable surface duty benchmark for a 20feer Container and ii. #3 million as payable surface duty benchmark, excluding other taxes.
Regrettably, this benchmark application is plaintively linked with the PAAR Ruling Centre Administration.
In practice therefore, the memo implies an internal directive in lieu of initial imports documentation prerequisite before the issuance of PAAR certificate. I am concerned that this act now causes documentation stampede in addition to the associated delays in the smooth flow of import clearance process.
This is because the PAAR Certificate issuance is the critical document that drives the clearance processes, as such any policy or directives that distorts this methodology creates avoidable distortion and confusion in the cargo clearance processes and procedures, hence, the import of this open appeal to your good office.
CGC, Sir, by this internal directive, the spirit of trade flexibility/fluidity has been altered by trade highhandedness, subjectivity/rigidity, as the importers and their imports are being stampeded in the Customs ports – terminals, especially so in Lagos ports.
Sir, It may interest you to know that by this coercive directive, the importers now helplessly source for credit lines from their banks amidst double digit interest rates.
Through pains, they accept the obnoxious value application in other to salvage their imports in the face of the exorbitant demurrage and storage charges by both Shipping Lines and the Terminal Operators.
Whereas some other importers who can not access credit facilities had helplessly abandoned their cargo, some other importers now depends on the financial solidity of their agents, as your directive has inflicted unbearable customs trade pains; eliciting official high-handedness and hopelessness.
CGC, I resorted to further fact findings, by visiting the ports, and to compare notes. I can say categorically, that this uncommon and arbitrary internal directive by all standards of import value applications, defiles known universal Customs Valuation application.
Kindly permit me to clarify further, using operational dynamics to provide you with the graphic picture of the abuses and distortions, thus created by the directive under focus, as thus:
a. This internal directive is of a general character, whereby used import items of non determinable import value are as well compelled to pay same benchmark as new items.
b. Last check on the imports prohibition lists, used items (dismantled vehicles parts, electronics, bicycles, sewing machines, etc) are not on the list, making them legitimate ( non offensive) imports to the country.
c. This internal directive defiled the rule of trade engagements, as there was no formal ‘payable import value increment pre-notice or grace period issued to the trading public other than, internal administrative directive issued to the PAAR RULING CENTRE for immediate implementation starting from September, 2021.
d. Take note, Sir, that the said internal directive is not in compliance with the principles of utmost good faith in trade treatments and dealings, and I tell you for free that the directive is generally seen as “trade ambush” on the part of the Service.
This is because, usually, following the conclusion of trade inquiry (proforma invoice), the Importers had already opened their Form Ms and has shipped their imports to the customs ports at destination, only for the same importer to discover that he or she has been ambushed.
Again, like a general rule, changing the rules or changing the goal posts while the game is on speaks volume of unfairness ( talking about official rascality, high handedness, bad faith and unfair practice).
*My CGC, Sir, let the spirit of fairness prevail.*
e. Being a law enforcement arm of the government and not a policy maker, ideally presupposes that, internal directive of this nature requires the consent of the policy arm.
Better said, a trade policy should be subject to ratification by the Board of Customs, where the HMOF is seated as Board Chairman.
Unfortunately, the Board from findings, never sat on this internal decision/directive despite it’s obvious policy nature.
On this note, may I respectfully Sir, revert to the Customs and Excise Management Act, Cap. C45, as thus:
Foremostly, under Part 2, with the title: “Administration”: it capture the subtitle headings, as:
i. Section 3: “Establishment, Constitution, and Proceedings of the Board”:
ii. Section 4: “Powers and Duty Of The Board”:
iii. Section 5: “Board To Be Subject To General Control Of Minister”:
Wherefore, the import and letters of the above sections are unambiguous, and it is clear that this internal directive is not in conformity with the rule of engagements, as envisioned by CEMA.
f. The totality of the economic impact assessments of this internal directive is avoidable inflations and high-cost of doing business in the Customs ports. Majorly, it adds up to the ailing economic hardship in the country, as used items such as vehicle spare parts are categorized under the service parts sector of our economy.
Secondly, two weeks ago, the National Public Relation Officer of the NCS HQ, in responding to a published verbal protests by some freight forwarders, alluded that, Customs HSCode classification tool has no provisions for used items except for new items. Therefore, in justifying this internal directive , it insisted that, used item must be accompanied with SONCAP CERTIFICATE for PAAR Processing.
According to him, the Standards Organization Of Nigeria – SON had imputed/integrated its SOP into the NICIS-2 PORTAL to the effect that, all import into the country must be accompanied with the SONCAP. He successfully diverted the attention of the Freight Forwarders to the SON; wherefore, he further pointed out that, importers without SONCAP should abide by the internal directive ( for detail report, please see link; https://dailytrend.com.ng/2021/12/03/paar-controversy-as-customs-demand-soncap-on-imported-tokunbo-items/).
Unfortunately, the Service image maker, failed to point out to the reading public, especially the trading public that the *SON in its PRODUCT REGULATORY LIST* , clearly did captured on *page 9, item 2 under General Application, equivocally noted that USED ITEMS IMPORTS ARE NOT REGULATED ( MEANING THAT USED ITEM IMPORTS DOES NOT REQUIRE SONCAP).*
Thirdly, I had course to consult the other statutory books of the Service, to see if this internal directives is in line with relevant rules of engagements and provisions.
Base on this, am being guided by the provisions of the *CEMA Cap. C45; FIRST SCHEDULE – “Value Of Imported Goods”.* The schedule provide that , the “Transaction Value of imported goods” remains a unique general principle of application.
For emphasis, it states: “The Customs value of goods bought or imported for use in Nigeria shall be the transaction value of the goods adjusted in accordance with the provisions of paragraph 7 (1) of this schedule, provided that…”. .
However, by application where there is disputes or argument over import value: it provides 6 other methodology or options to follow so as to arrive at agreeable and consistent value of imported goods, and this methodology must be applied in sequential order.
CGC Sir, It is obvious that this internal directive does not only fall short but negates the whole essence of the provisions of this first schedule in its entirety, therefore, it constitutes a major breach to the rule of trade engagements.
In addition, I also had course to revisit the *Common Eternal Tariff – CET* knowing that, the Service is still signatory to this *ECOWAS REGIONAL TARIFF APPLICATION and that, the regime is still an extant regulatory regional trade agreement in the West Africa sub-region.*
Being guided by the provisions of the *ANNEX TO : REGULATION C/REG…/13 Determining The Customs Value Of Products In ECOWAS 2013* . I carefully, went through all the “Notes to the article 1 to 13”, here again, this internal directive falls short of the spirit, letter and intents of the *ECOWAS – CET.*
For emphasis sake, this internal directive on duty increment is in practice akin to *COMPUTED VALUE.* Note to article 9 serves as general rule, and it states that, “… Customs value is determined under this agreement on the basis of information readily available in the country of importation”.
It provides in sequence order to determine the value.
But in this internal directive ( Computed Value) it is not so.
Here again, under paragraph 2 – 2(a) and (b) provide different means of establishing the acceptability of a transaction value.
Item 3 states in partial that:
“Where the Customs administration is unable to accept the transaction value without further inquiry, it should give the importer an opportunity to supply such further detailed information as may be necessary to enable it to examine the circumstances surrounding the sale..”
It further posited that: “As an example of this, if the price had been settled in a manner consistent with the normal pricing practices of the industry in question…”.
It does seems that the management resorted to uphold Note 4 of same paragraph 2 referenced above. The note explains that, where the Customs administration feels it has sufficient information to satisfied itself with and there is no reason for it to require the importer to demonstrate that the test can be met..
*IN THIS INSTANCE, NO PROVISIONS WAS PUT IN PLACE FOR THE IMPORTER TO DEMONSTRATE A TEST* nor a window to defend themselves, moreso, that the system is not interactive nor as robust as possible.
CGC Sir, going by this internal directive by the management, these recommended ideals for fair rule of engagement is *SKEWED AGAINST THE IMPORTERS* .
The normal pricing practices of the industry is that, used imported items do not have a verifiable transaction value other than, that supplied by the importer for the purpose of obtaining the *PAAR CERTIFICATE* and subsequent import clearance obligations.
Furthermore, Note on Article 10 states inter alia :
1. Customs values determined under the provisions of Article 10 should, to the greatest extent possible, be based on previously determined values.
2. The methods of valuation to be employed under Article 10 should be those laid down in Articles 1 through 6 but a reasonable flexibility in the application of such methods would be in conformity with the aims and provisions of Article 10″ – *THESE AND MANY MORE ARE DENIED RULE OF ENGAGEMENT SKEWED AGAINST THE IMPORTERS BY REASON OF THIS INTERNAL ADMINISTRATIVE DIRECTIVE.*
In addition, Note to Article 13 provides the importers with the right to appeal against a Valuation determination made by the Customs administration for the goods being valued.
It further provide a guide to appeal process.
CGC, Sir, by issuing a a value benchmark at PAAR Ruling Centre from the onset of the imports clearance process, is subjective in nature because the system does not grant nor permit the importers to defend themselves on value matters, thereby, this constitutes a breach to rule the of engagement.
CGC Sir, in order not to make my position too lengthy, may I simply remind you of the relevance of following International Conventions and Protocols, hence, knowing that Customs administration is universal:
a. The World Trade Organization – *WTO Trade Liberalization Scheme -* In this context this internal directive tantamounts to creation of ” Red Tape” ( deliberate but avoidable operational bottlenecks).
Equally, this internal directive is a subtle *anti-trade procedures* , if not a *trade discrimination directive* negating the spirit of trade liberalization.
b. The Kyoto convention on trade simplification and harmonization of processes and procedures – the manner with which this internal directive is being implemented is in negation to the character and spirit of this convention.
c.The “Alusha Declaration” centering on “Integrity” of an officer cum custom administration.
This singular act by way of benchmarking the payable surface duty of imported goods, indeed casts serious integrity questions not just on the management but indeed of the PAAR RULING CENTRE PORTAL; making it a mere ‘garbage in garbage out’ sort of thing.
d. The WCO Safe Frame Of Standards canvasses and provides strong tools for modern Customs administration, especially with focus to cargo security and trade facilitation – here again, this unileterral directives also casts question mark on the compliance and conformity of the NCS management to the dynamics of universal customs trade.
e. The essence of the *WTO Trade Facilitation Agreement – TFA* is also defeated by this internal directive, reason being that, over *4,770 Containers of used items are presently trapped in the various Ports and Bonded Terminals in Lagos* .
*MY PRAYERS* :
May l appeal to the CGC to use his good office and attend to the following prayer:
a. To defreeze and relax this internal directive for the sake of integrity of the Service.
b. To defreeze and relax this internal directive for the sake of trade facilitation.
c. To defreeze and relax this internal directive for the sake of curtailing inflations and the ailing economic hardship in the country.
d. To defreeze and relax this internal directive for the sake of the helpless importers of used items, whose imports are presently trapped in various Lagos ports.
e. To defreeze and relax this internal directive to forestall capital wastages.
f. Since the Service preaches and propagates due process and compliance to the trading public, it behooves management to show and present itself as being compliant I intents and purposes, at all times.
g. To help reenact and sustain the culture of flexibility, transparency, reliability and predictability in the Customs imports administration and clearance.
On this note, sir, May l reiterate that l come in peace, and want this open letter to be treated as a friendly advise and as a passionate appeal for the common good of all.
Accept the assurances of my esteemed regards, always.
Yours faithfully,
Dr Eugene Nweke Rff Ksm
*Concerned Stakeholder.*
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