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Arbitrary customs duties negate WTO rules, threaten auto industry

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Auto dealers parking lot in Apapa, Lagos. PHOTO:SUNDAY AKINLOLU

The recent closure of vehicle dealerships across Nigeria has unearthed disturbing information that the Nigeria Customs Service may have contrived its own import trade Duties outside the rules established by the World Trade Organisation (WTO) that are binding on the country.

On September 29 this year, members of the Comptroller-General of the Nigeria Customs Service’s strike force and officers attached to the Federal Operations Unit (FOU), Zone ‘A’, Ikeja, Lagos stormed the popular Berger auto market along Apapa-Oshodi Express Road, and other major car dealers’ premises across Lagos in search of what the Customs Public Relations Officer, Joseph Attah told Nigerians and the international community was “based on credible information that there were smuggled vehicles in these car marts, but the sealing is just temporary. As from this week we will assess the situation and advised them accordingly as to what they should do.”

All dealerships have remained shut since then, regardless of Attah’s claim that “those not involved in any bad business were not shutdown. But I can confirm that some numbers have been shutdown. Within the week, customs will take a look at the records of each vehicle in these car marts and appropriate actions will be taken.”

Custom’s subsequent meeting with the dealerships revealed that the government’s agency had a system of documentation and two regimes of Duties that create a fertile environment for corruption to thrive within its fold to the distress of buyers of new vehicles in the country.

The Customs Service’s Duties system is whimsical because it is not based on any known indices and certainly not based on the World Trade Oganisation’s, which applies only duties determined as Freight on Board (FOB). This means the amount the manufacturer sold the product to the Nigerian or any other country’s importer, less the cost of shipment/transportation.

This cost, recognised as FOB, is universal to every buyer of goods from the same manufacturer and so could be calculated for the sake of local Duties in the destination country, for instance, Nigeria or Ghana. If the cost of FOB is different, then it must be on account of accessories in the vehicles and these can be calculated to arrive at the final costs on which FOB/Duties are based.

The cost of freight is usually determined by charges from the country of origin of the product to its destination. For instance, there would be different freight costs for vehicles shipped to Nigeria from Dubai, which usually handles the Middle East and Africa markets and for those coming into Nigeria from South Africa, which is responsible for sub-Saharan Africa markets.

Regardless, the FOB for the same products from either Dubai or South Africa remains the same, so also should the Duties. This system is used by Nigeria’s neighbour Ghana where dealers employ the FOB, which is online, to calculate their Duties, which is universal, as it is known to the manufacturers, importers, and buyers of new vehicles and this Duty is paid online to their Customs Service to the benefit of all parties. The payment of this Duty can be verified at the swipe of a card by whoever cares to know and will eliminate the setting up of road blocks by Customs, which obviously is misusing its manpower.

Besides, all embassies in Nigeria that have motor vehicle manufacturing companies servicing the nation’s auto market have the FOB costs of their products, which is universal and can be verified in Nigeria by the Customs.

Regrettably in Nigeria, the dealers who met with Customs officials after the September 29 shutdown were stunned to find that there are two sets of FOB in two different documents, according to sources that are well-informed about the meeting.

One of the documents, titled ‘NATIONAL VALUATION DATABASE FOR IMPORTED MOTOR VEHICLES 2014-2019’ is believed to be baseless, as the sources are certain it was contrived based on the whim and caprice of the Nigeria Customs Service.

Those who saw this document described the FOB therein as outrageously high, more than 100 per cent higher than FOB in another document that surfaced during the dealers’ meeting with Customs that bore FOB ‘PRICES FOR 2019’ from a particular manufacturer.

The letter, bearing the updated cost and freight for all models of the manufacturer’s vehicles for 2019, based on which the local dealership pays to the parent company through the Central Bank of Nigeria, was addressed to the Comptroller-General of Customs and was approved in July 2018.

As things stand, the local motor dealerships pay their Duties based on the approved FOB from the manufacturers that the Customs are aware of and if not, could easily obtain it from each countries Embassies or High Commission.

Obviously, this is not done, because after the dealerships get Customs clearance of their vehicles at the Ports using the approved Duties, on the highways, unsuspecting buyers who just drove out of their showrooms are ambushed by Customs officials who brandish the so called ‘NATIONAL VALUATION DATABASE FOR IMPORTED VEHICLES’ that they know should not be in use, as it is illegal. Only those who have had to go through this ordeal can tell of their harrowing experience in the hands of these people.

Also interesting to note is that on October 9, 2019, the Nigeria Customs Service Tariff and Trade, Valuation Unit notified of the revocation of all approved pricelists. That the Headquarter approved FOB prices issued to companies had been revoked indefinitely.

This measure of lack of coordination is puzzling because it gives a bad image to the government as it creates room for corruption to fester. It should be checked by the President Muhammadu Buhari’s administration that professes to be hallow, and which does not mince words on its aversion to depravity in any likeness.

There must be a level playing ground for Duty payment that is based on FOB, as it is done all over the world, meaning importers of a particular item must pay the same Duty and this information should be made public and put online for the sake of transparency and should not be made secret, in-line with President Buhari’s anti-corruption mantra that brought him to power.

SIGNED
Ademola Moshood
Secretary, Automobile Association


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