9 September 2012

Nigeria: Need for Control of Arbitrary Port Charges

Nigerian importers are bitter over unregulated numerous revenue charges on their imported goods at the nation's ports. Attributing the high cost of goods in the country to this trend, SAMSON ECHENIM writes that establishing an economic regulator for the port appears to be the way forward.

Shipping and port related charges have generated protracted dispute amongst port operators and users of shipping and port related services over the years, leading to the setting up of a special committee by the Federal Ministry of Transport in 1997, which stipulated local shipping costs that should be charged.

Some of the charges approved then included terminal handling charges, container cleaning charges, manifest amendment upon request by an importer, container deposit (refundable) and container demurrage. However, with the leasing out of the nation's ports in various concession terms to private port terminal operators in 2006, shipping and related charges have taken a bitter dimension.

Currently, importers pay charges ranging from scanning fees, logistics for scanning to Customs examinations fees, labour charge, terminal handling charge, import delivery, shipping agency fee to documentation fees. A horrible dimension to the charges is that the amounts charged for these services differ, depending on the terminal from which a consignment is being cleared.

The president of the National Association of Government Approved Freight Forwarders, Mr. Eugene Nweke, said prior to the concession era, importers paid seven per cent port levy supposedly earmarked for development of port infrastructure. He, however, noted that in the post concession era, the levy had continued to be collected by the Nigeria Ports Authority without any significant development in port infrastructure.

Nweke said: "Importers and freight forwarders pay value added tax (VAT) to Nigerian Customs Service, shipping companies, banks to mention but a few, whereas all these costs should be streamlined and paid once and for all so as to reduce cost of shipping in the country.

"To make matters worse, freight forwarders and importers are compelled to pay demurrage on containers for the numbers of days containers remain at the port, even when there is system breakdown caused by the service providers."

He, therefore, stressed that the Federal Government should establish a regulatory agency, such as the telecommunication sector's National Communication Commission (NCC) to regulate activities of terminal operators.

At a recent seminar organised by the Nigerian Shippers' Council, the Executive Secretary of the Council, Capt. Adamu Biu observed that factors that led to review of local shipping charges in 1997 still persist.

According to Biu, port concessionaires had introduced new tariff headings outside the officially approved nomenclatures, and said the council has received complaints from shippers and freight forwarders on excessive charges by service providers.

"This calls for thorough investigative study of the system to ascertain various cost structures unit in terms of tariff bands and charges under the concession regime," said Biu, who was represented by the director, commercial shipping services, Mrs. Shal Holma, adding that "the outcome of the discuss will guide NSC in future to review local shipping charges with a view to arriving at harmonised tariff regime."

More costs for importers

Just as importers and clearing agents are lamenting over what they called arbitrary charges by terminal operators, the Federal Government has approved for the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN) rights to collect transaction fees at ports.

Eager to make some good money reaching over N1 billion from all cargoes at the nation's seaports, airports and land borders, the council has since despatched hurriedly trained officers to the Apapa, Tin Can Island and Lily Pond ports in Lagos to begin to effect payments of the new charges by importers and the agents.

The approval was contained in a letter addressed to Managing Director of the Nigerian Ports Authority (NPA) and signed by the Deputy Director, SDM, D. M. Dauda for the Minister of Transport.

Titled, "Re: Report on the Stakeholders Meetings on the Annual Subscription and Other Fees to be Collected by the Council for the Regulation of Freight Forwarding in Nigeria," the federal government approved for collection by CRFFN N1.5 kobo per kilo for air cargoes, N1,000 and N2,000 for 20ft equivalent units (TEUs) and 40ft equivalent unit (FEUs) of containers respectively. The rates also include cars/ jeeps, N500; trucks or a 20ft container, N1,000; trucks or a 40ft container, N2,000; general cargo, N3.50k per ton; and dry bulk cargo, N1 per ton.

The newly approved charges add to the much criticised arbitrary charges at the nation's ports, which have made Nigerian ports one of the costliest around the world.

The council could garner about N817.2 million and even more annually with the expected cargo increases at the seaports this year, as container throughput at the seaports alone in the country in 2011, stood at 817, 246 TEUs. At N500 per vehicle, the CRFFN is also expected to generate about N115.7 million annually on vehicular transaction fees going by the country's vehicular imports that stood at 231,423 last year.

Available statistics further revealed that general and dry bulk cargoes were expected to generate into the council's coffers the sums of N46.5 million and N12.9 million going by this year's trend of traffic at the ports.

"Only registered and inducted freight forwarders and accredited institutions are allowed to practice forthwith, or else, the hands of the law will grip and prosecute offenders," chief executive officer of CRFFN, Mike Jukwe warned, while inaugurating the enforcement team at the Council's headquarters in Apapa, Lagos.

To ensure compliance, the ministry of transport has directed the Central Office Planning and Information (COPI) of the NPA to "henceforth forward copies of all cargo manifests received to the CRFFN."

How absence of regulator contributes to high cost of goods

It is a wide practice among Nigerian small scale importers to bring in goods, such as frozen chicken, rice, cloths and cars through the land bothers. The trend comes with the ugly and unpatriotic tendency of smuggling. Many goods come into the country without necessary tariffs paid. Experts say this grew out of the fact that neighbouring ports such as the port in Cotonou present a much cheaper alternative for Nigerian importers.

Experts believe that this is another dimension to the negative impact of not having a commercial regulator at Nigerian ports.

According to the chairman, Nigerian Ports Consultative Council, Otunba Kunle Folarin, Nigerian ports "absolutely need a commercial regulator."

He said, "Again, this is why the cost of goods and services are so high in this country, because up to 90 per cent of what we consume come through the port and is coming through a sector that is unregulated. One of the major objectives of concessioning the ports is that of achieving maximum productivity while reducing the cost of doing business.

"One of the major issues that will face the commercial regulator is the issue of port charges. In a single invoice you find 20 activities listed and charged-discharging and offloading; offloading and loading; equipment charge; labour positioning for Customs examination; so many administrative charges; whereas all these charges can be articulated, they are related to a function.

"We need a body to determine the level of charges for the various types of operation, whereby a terminal operator may decide to charge if it so wants. We need a regulator just like the National Communication Commission (NCC) is the commercial regulator in the telecoms. The NCC makes it impossible for operators to charge above a recommended cost of services. Telecoms operator can charge below that recommended cost; if any of them likes it can charge as low as N1-and that' what's happening now- otherwise, they could have been charging up to N500 per minute now if there was no commercial regulator.

"In Nigerian port, a terminal operator can charge N1 million for one container, he can charge anything he likes. There's no control over port charges. So, if the government wants the benefit of concessioning to be fully realised, there must be commercial regulation; there must be at least, some kind of arrangement whereby an importer can predict the cost of his consignment, not somebody surprising him with big costs such as N100,000 or N200,000."

While noting that the NPA has power for technical regulation, such as harbour services and pilotage, the maritime economist and adviser said the commercial regulator, in addition to regulating costs, is also expected to give licences and permits for players in the industry.

"Here now, everybody just assume whatever he wants to be, but it's not supposed to be so. Your nature of operation at the port must be specified," he added.

Otunba Folarin further stated that overtime the issue of charges have heightened as all the shipping lines put surcharges on Nigerian cargoes.

"The freight charge may be $100 and the surcharge $150. Because they now surcharge based on a variety of issues-if there is a report of congestion at the port, the shipping companies increase container surcharge by 30 per cent. Tomorrow, they hear there is a fight in the Niger Delta, they add another 30 per cent surcharge without considering whether such affects Lagos where the cargo is coming. They will call it warring surcharge. The NSC is supposed to be in continuous negotiation the shipping lines on their charges," he explained.

Suitability of NSC as port's commercial regulator

As the issue of having a commercial regulator for the seaport continues to occupy centre stage in the maritime sector, industry stakeholders, including agents and local ship owners; a presidential sub-committee on maritime cabotage and local content; the Bureau for Public Enterprises (BPE) and the Nigerian Ports Consultative Council (NPCC) have differed on whether or not the Nigerian Shippers' Council (NSC) should be made to take up the responsibility.

While the committee and clearing agents' associations favour the NSC for the role, which is deemed indispensable in the nation's international trade development, the BPE and the NPCC recommend that a fresh agency be established to become the port commercial regulator.

The 15-man Committee was set up by the presidency recently after the presidential retreat on maritime was concluded in Abuja. Mr. Isaac Jolapamo, the chairman of Nigerian Ship Owners Association (ISAN), chaired its sub-committee, which favoured the NSC as a commercial regulator for the sector.

The committee's recommendation was at variance with the proposed bill by the BPE, which is said to be in favour of a new body to be established by the government for the crucial role of economic regulator.

But whether the shippers' council will play the role or not all the members of the presidential main committee, the BPE, the NPCC and other stakeholders agreed on the need for a commercial regulator in the industry to protect importers and consumers of imported goods and services.

The sub-committee, which recommended the NSC for the commercial regulatory role said that it was the agency that was presently performing similar role within the sector, adding that it could be empowered to perform the same role extensively as required presently in the industry.

Hitherto, the Nigerian Shippers Council is the only agency with the statutory role to protect the interest of cargo owners in Nigeria and it has been in existence for many years to create a balance of interest between providers and consumers of shipping and other related services at ports.

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