Liberia: Govt, APM Terminals At Odds Over U.S.$29 Million 'Remittances'

APM Terminals holds the concession to operate the Free Port of Monrovia for 25 years.

The Daily Observer has reliably learned that the Government of Liberia may pursue legal remedy against the management of APM Terminals Liberia for allegedly defrauding it of millions in United States dollars for auxiliary service fees collected between the period February 2011 to July 2019.

According to our source, the Government of Liberia, through the Internal Audit Agency (IAA), recently completed a reconciliation audit of the National Port Authority (NPA) and APM Terminals on fees collected by APM Terminals, as well as royalties remitted to NPA management, considering the quantity of items handled or services performed.

According to the audit report, APM Terminals received an aggregate collected revenue value of US$29,607,017.48 that should have been remitted to the National Port Authority (NPA).

"We performed a reconciliation of fees collected by APM Terminals Liberia Ltd, alongside royalties remitted to NPA, taking into account quantity of items handled or services performed during the period, February 2011 to July 2019. We identified revenue lines, including Container Throughput Handling, General Cargo Handling, Marine Services, Weigh Bridge and Auxiliary Services fees; established annual fees collected with royalties remitted, and tested the accuracy of amounts remitted based on the approved tariffs," the audit report stated.

"We requested for monthly bills that were issued to APMT, copies of receipts, copies of returned cheques and bank statements associated with remitted royalties. Except for monthly bills, which were incomplete, NPA did not provide us the rest of the documents mentioned above," the report said, highlighting the serious deficiencies in the NPA's own record keeping processes.

The report continued: "The exercise largely relied on documents provided by the Concessionaire (APM Terminals Liberia Ltd). Based on Royalty Reports submitted by APM Terminals, total fees collected on various revenue lines for the period (February 2011 to July 2019) valued US$341,988,669.56 while US$57,622,569.38 was remitted."

However, the report further stated that APM Terminals Liberia collected Auxiliary Service fees, with rates that are not mentioned in the approved concession rate (Appendix 10). The Tariff Report indicates collections for auxiliary service fees at an aggregate collected revenue valued US$29,607,017.49 without remittance to National Port Authority (NPA).

To the contrary, according to the report, a revenue line created by APM Terminals, referred to as 'Auxiliary Revenue, comprises services that are directly identified under Container Throughput Handling as referenced in appendix 10 of the concession agreement.

Importantly, some of the services identified under Container Throughput Handling, which have been deliberately shifted to Auxiliary revenue by APM Terminals, include 40' Import Reefer Full, 40' Export Reefer Full, 40' Import/Export reefer Empty, 20' Transshipment Reefer Full, 20' Transshipment Reefer Empty, 40' Transshipment Reefer Full, 40' Transshipment Reefer Empty, among others.

APM Terminals refrigerated container rack. At the time of this photo there are no refrigerated containers on service.

The term "Reefer" is an abbreviation for refrigerated containers, which APM Terminals says it developed its capacity to support, realizing the need after the concession agreement was signed. According to George Adjei, Managing Director of APM Terminals Liberia, the company decided to offer refrigerated container storage services to support importers and exporters of perishable goods, such as supermarkets, local farmers, among others.

The refrigerated container storage is a set of racks connected to power generators working to keep refrigerated items fresh by cooling until ready for release by customers outside of the port or ready for shipment.

The sources furthered that, like in the case of Storage fees, there is no Concession rate mentioned for remittance of Auxiliary revenues; however, APM Terminals has been using Concession rates stipulated for Container Throughput Handling of 22.8% and General Cargo handling of 18.8% to remit on Storage fees.

Therefore, our sources have hinted that the government of Liberia has detested APM Terminals' justification on grounds that remittance of royalties, in accordance with the Concession fees, is subject to income generated on Services Rates. That remittances are made on Containers Throughput Handling, General Cargo Handling, Marine Services and Weigh Bridge, the government says, provides sufficient reasons for remitting on auxiliary revenue.

Amidst the tight financial and economic space in the country, should this legal action be perfected against the APM Terminals, sources in government circles are hopeful of GoL retrieving the more than Twenty-nine million United States dollars in remittances on auxiliary fees allegedly denied it for the last eight years.

In response to a Daily Observer inquiry on the matter, APM Terminals Managing Director, George G. Adjei, in an interview last week, said the company has not violated the concession agreement.

He made reference to Section 7.07 (a) and (b) of the Concession Agreement between APM Terminals and the Government of Liberia, which outlines general and specific parameters, respectively, for Service Rates.

The clause concerning General Parameters states that: "(a) The Concessionaire shall ensure that the Services Rates shall be in accordance with Applicable Law and competitive with other ports of comparable cargo throughput and scope of activities in West Africa."

For Specific Parameters it says: "(b) For services that are listed in Appendix 10, the Concessionaire shall charge rates for its Operations (the Services Rates) which are equal to the rates set forth in Appendix 10 in accordance with the terms and conditions included therein. For services which are not listed in Appendix 10, the Concessionaire shall charge rates in accordance with 7.07 (a) and any other applicable provisions of this Agreement. Value added taxes and other taxes shall be added as required to the accounts rendered to the Concessionaire's Customers. Income generated from charging the Service Rates shall accrue directly to the Concessionaire without any collection, deduction or set off by the Concession Entity."

In Appendix 10 of the concession agreement, Services Rates are set forth in tables per the following sub-items: Container and General Cargo Quay Handling; Container Storage; General Cargo Storage; and Marine Services. The Services Rates shall be adjusted on an annual basis in accordance with the Inflation Index.

Thus, Mr. Adjei reasons, the concession agreement allows APM Terminals to provide additional services, outside of Appendix 10 of the concession agreement, without being required paying royalties, an issue he said was raised by the auditors that amounted to US$29 million as "defrauding the national government."

'Revenue Suppression'

The IAA audit report also accuses APM Terminals of revenue suppression -- reporting royalties and fees collected from February 2011 to July 2019.

According to the audit report, total royalties reported by APM Terminals were valued US$23,245,682.38, while the recast amount from the reconciliation audit is US$25,737,788.13, which resulted to an unreported variance of US$3,240,834.61.

Expert sources have hinted that the variance of US$3,240,834.61, if not properly explained with adequate evidence, could mean that APM Terminals reported an understated revenue, which subsequently means royalties for the mentioned period were also understated and suppressed at the disadvantage of the government and people of Liberia.

Mr. Adjei further said that he could not publicly address the audit report beyond his earlier references to Section 7.07 (a) and (b) of the concession agreement, because the audit report calls for mutual agreement between the two parties, including the National Port Authority (NPA) and the APM Terminals, until final conclusion is reached.

"We agreed for the audit to be conducted by the NPA through the Internal Audit Agency (IAA), which is in agreement with the concession agreement. Again, we also responded to the findings. We agreed with NPA that until the matter is resolved or concluded, we should to go to the media and still want to respect the agreement," Mr. Adjei told Daily Observer.

Mr. Adjei said since the inception of the concession agreement in 2011, APM Terminals continues to comply with the agreement by meeting all of its requirements.

Mr. Adjei said the mutual agreement for the withholding of the audit results was agreed upon prior to the conduct of the audit, indicating that there was no time frame set for the conclusion of the discussions between the parties over the audit report.

He said the company would respond to any calls from the court if called upon, as indicated by the Government of Liberia to invite or take APM terminals to court.

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