31 December 2012

Nigeria: As Customs Ends Contract Outsourcing


Today marks the end of service provider contracts for core customs responsibilities in Nigeria.

Over the years, through contracts with the federal government, core Customs services had been outsourced to private companies that conduct Pre-shipment Inspection (PSI) or Destination Inspection (DI) activities.

PSI activities are conducted in exporting countries in order to verify the quality, quantity, price and classification of exported goods, while DI activities are done in combination with scanning technology on imported goods in importing countries. The concept is normally introduced to enhance Customs functions as a stop-gap measure while waiting for Customs reforms and modernisation.

The World Customs Organisation (WCO) observed that this option is more cost effective than in-house operations for many reasons, including the stimulation provided by competition in the private sector. And apart from being more cost effective, lot of defects have been identified with this option in the Nigerian environment.

First, the contract was found not to have been based on Nigeria Customs Service (NCS) business requirement and also not in line with international best practices on Customs reforms and modernisation as specified in Kyoto Convention on harmonisation and simplification of trade. As of today, the activities of service providers has been rested in the developed nations, which is why President Goodluck Jonathan has been firm that the era of service providers in Nigeria must end, effective today.

Over the years, Customs administrations have evolved from mere revenue collection to a variety of complex function, including protection of industry and citizens, trade facilitation and trade security and environmental issues.

The WCO's stand that "if any country must rely on contracting core Customs services to private companies, then such a country should as well disband its Customs administration," is not farfetched if the defects associated with the service provider's contract and their service delivery in Nigeria are anything to go by. For example, there have been cases of duplication and multiple issuances of Risk Assessment Reports (RAR) on high FOB imports with intension to defraud the federal government to the extent that between February and July 2012, 414 RARs with a value of N5.5 billion were duplicated. One particular RAR with FOB value N229 billion was found to have been duplicated by a service provider for the same consignment, thereby drawing double payment for single import.

Incidents like these further justify arguments that some of these core Customs services, contracted to the private sector, are usually treated by benefiting firms as mere business ventures.

Such practice, according to WCO, usually harms Customs frontline and post clearance capability. This has prompted the Organisation to develop several diagnostic studies and programmes aimed at championing broader international Customs capability with high benefits to governments of its member countries.

More so, there is also the related issue of national security with the service provider's operating system. This has to do with the vulnerability of national data on security arising from Scanning Service Providers (SSPs) hosting of data base abroad.

There was also the issue of the absence of a harmonised risk management system among the three service providers resulting in non-uniformity in the cargo clearance procedure and inefficiency, leading to frustration of trade facilitation effort of the government.

The NCS began internal capacity building intervention with a view to taking over these services since 2009.

The need for that move cannot be overstated, including that the contract has a-no-penalty clause, which gives no room for sanction in cases of delays and non-fulfilment of contractual obligations. This has given room for gross misconducts in the system with no punishments whatsoever.

There have been cases of misclassification and gross under valuation of imports resulting in large volume of demand notice and interventions by Customs officers. For instance, in March 2012 alone, N633 million was recovered on ceramic tiles alone from 304 RARs issued by the service providers.

Mrs Suleiman wrote from Lome Crescent, Wuse, Abuja.

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