Nigeria: Derision of Tariff Reduction

16 April 2021

Eromosele Abiodun writes that the reduction of duties on imported vehicles by the federal government has become a charade as officers of the Nigeria Customs Service now use various charges to extort importers and victimise clearing agents at the ports

In November 2013, the federal government announced the introduction of a new automotive policy, which was geared towards discouraging the importation of wholly assembled automobiles and encouraging local manufacturing.

Specifically, the policy allows local assembly plants to import completely-knocked-down vehicles at zero per cent duty, and semi-knocked-down vehicles at five per cent duty, while importers pay a 70 per cent duty on new and previously-owned vehicles.

The policy's main thrust was to encourage local car production/assembly plants while cutting importation through raising import duties.

However, eight years after, the policies have failed to achieve the desired outcomes, as Nigeria's domestic vehicle production capacity remains under-utilised. The economic slump that the country suffered shortly after the automotive policy was introduced hindered resuscitation of the industry.

At about N160 to the dollar in 2013, and presently almost N500, stakeholders note that the auto sector's woes have been complicated by the slow backward integration exercise.

Following the failure of the policy and pressure from car dealers, customs agents and the Nigerian Customs Service (NCS), who were fed up with the constant battle with car smugglers, the federal government decided to rethink the policy.

On December 31, 2020, President Muhammadu Buhari signed the Finance Bill 2020, into law stipulating downward review of Excise Duty on tractors and motor vehicles. The NCS was then directed to commence implementation of tariff reduction on vehicles before the end of January this year.

In the draft 2020 Finance Bill, the federal government proposed reduction in duties on tractors from 35 to 10 per cent; from 35 to 10 per cent on vehicles for transportation of goods; and 35 to five per cent on vehicles for transportation of persons (cars).

The NCS Comptroller-General, Hameed Ali, made the announcement, who made the announcement, said the commencement of the policy followed the transmission of the directive to the NCS by the Federal Ministry of Finance, Budget and National Planning.

The customs' boss had at a different forum said the NCS was awaiting directives from the Ministry of Finance, Budget and National Planning on the implementation of the Act.

Ali said: "The Act has been transmitted to us. We received the minister's mandate this week, to start working on it, although we have to develop certain regulations and measures on how we intend to implement the law. We have to change our codes to fit into the new law. You know that commercial vehicles levy is the only levy that has been reduced from 35 per cent to five per cent.

"So we have to change the codes to fit into the new law and we hope we will finish that in two days and the minister will have to look at it and agree that yes that is what we should do. I hope not too long from now, by next week or next two weeks, this law will come into effect. We will circulate it to our own commands to begin to operate."

The customs boss noted that the new law would help the country have vehicles meant for transportation with reduced duty for the benefit of Nigerians."

He stated that the high duty paid had also resulted to increased smuggling of vehicles into the country.

Ali disclosed that statistics available to the service showed that about 300,000 to 400,000 vehicles coming into Nigeria first stop in Benin Republic before being smuggled into Nigeria.

Promise of enforcement

In its circular dated February 8, 2021, the NCS directed immediate compliance to the policy.

It said the reduction followed the decision to prune applicable levies and duties on vehicles in order to mitigate the rising transport costs and boost the mass transit industry.

The Deputy Comptroller-General (T&T), T.M. Isa, signed the circular on behalf of the Comptroller General of the NCS.

The essence of the assent, according to the document, was to support implementation of the 2021 budget of economic recovery, which culminated in the changes of the fiscal framework in terms of importation of automotive vehicles into the country.

It reads in part: "Pursuant to the assent by Mr. President to the Finance Act. 2020 to support the implementation of the 2021 Budget of Economic Recovery and Resilience, certain changes to the fiscal framework regarding the importation of specific automotive vehicles into Nigeria have been introduced.

"These reforms are designed to reduce the applicable levies and duties on vehicles, mitigate rising transport costs, and boost road transportation and mass transit industry.

"Arising from the afore stated, Section 38 of the Finance A chief, 2020 modified the First Schedule to the ECOWAS Common External Tariff (CET), Etc (Consolidation) Act by amending applicable duties and levies as follows: reduction of Import Duty on Fully Built (FBU) of Agricultural Tractors (HSHS Headings 8701from 35 per cent to 5 per cent as applicable; reduction of Import Duty of Fully Built Unit of Motor Vehicles for the Transport of persons (cars) (HS Headings 8703 from 35 per cent to five per cent as applicable; reduction of Import Duty of Fully Built Unit (FBU) of Motor Vehicles for the Transport of Goods (HSHS Headings (HSBC Headings 8704) from 35 per cent to 10 per cent as applicable."

It added: "Furthermore, the Act also introduces fiscal incentives for the Aviation Sector. For the avoidance of doubts airlines registered in Nigeria, which provide commercial air transport services by owning or leasing aircraft are to enjoy free importation of aircraft, engines, spare parts and other components. Ensure wide circulation for immediate compliance, please."

Double standard

Meanwhile, contrary to its own directive, the NCS have failed to apply a uniform tariff for imported vehicles.

Customs agents and Nigerians have been at the receiving end of the double standard that recently led to a fracas between officials of the NCS and clearing agents at Tin Can Island Port in Lagos. THISDAY learnt that customs officials apply tariff depending on who imports a particular vehicle.

Speaking to newsmen on the development, the Vice-President of the Association of Nigerian Licensed Customs Agents (ANLCA), Kayode Farinto, accused the officers of the NCS for using various tariffs on imported vehicles to extort importers and victimised clearing agents at the ports.

Farinto, while reflecting on the need to get justice for a young Customs agent, recently shot by an officer of the NCS, said that absence of implementing uniform tariff on imported vehicles fuelling criminal acts and corruption among the officers of Customs at the port.

He alleged that the officers are deliberately frustrating the process of having uniform tariff because of their selfish interests even when the Ali (Rtd), had approved it in a recent meeting with stakeholders.

He added that Customs are sabotaging Ease of Doing Business of the federal government for imposing arbitrary charges on importers and clearing agents.

According to him, all efforts to make NCS to key into Ghana's Customs uniform tariff on imported vehicles have always hit the rock.

"I have on several occasions begged the management of NCS to give us uniform tariff on vehicles. Nigerians need to know for instance, we have 2009 Camry, one at PTML, one at Tin Can Island and one at Apapa Port. These vehicles despite the fact that they have the same year of manufacture, we never pay the same value just because we have arbitrariness of duty," he said.

"We have received many complaints from our members over the arbitrariness of tariff on vehicles and we met with the management of Customs to give us uniform value. Ghana is an example, we even told them this that we are ready to sponsor Customs officers to Ghana and study their uniform tariff.

"In Ghana, what they do is that if you have any vehicles, what you have to do is to input your VIN into the system because with your VIN number, you cannot lie as par year of manufacture. Once you input you VIN number it brings out the history of the vehicle, and then you can now apply for appropriate rate," Farinto said.

He lamented that present management of NCS is paying lips service to the issue of uniform tariff and they didn't want to come out with a uniform value.

"I have it on good authority that the CGC has directed that there should be uniformity of value but this has not been implemented. We are tired of an arbitrary value, we are tired of giving bribes," he said.

However, he chided the National Public Relations Officer of the NCS, Deputy Controller, Joseph Attah, for describing the agents shot by officer of the Service as miscreant, saying that the national PRO goofed for making such statement.

In the beginning

The Federal Executive Council had in 2013 approved a new national automotive policy aimed at encouraging local production and assembling of new vehicles with an imposition of a high import tariff on fully built vehicles. But the new rate was not given then.

A two-page document dated November 14, 2013 and signed by the then Minister of Finance, Dr. Ngozi Okonjo-Iweala, gave the new import tariff on cars as 70 per cent.

The document, with reference number BD/FP/DO/09/189, also stated that fully built commercial vehicles would attract 35 per cent duty but no levy imposed.

Specifically, it stated: "Local assembly plants shall import completely knocked down (vehicles) at zero per cent duty; and semi-knocked down (vehicles) at five per cent duty.

"Local assembly plants shall import fully built unit cars at 35 per cent duty and 20 per cent for commercial vehicles without levy, respectively in numbers equal to twice their CKD/SKD kits.Imported tyres would also cost more as from next year as 20 per cent duty and five per cent value added tax have been placed on tyres of cars, buses and lorries.

"Local tyre manufacturing plants are to import tyres at five per cent duty in numbers equal to twice their production for two years from the date of commencement of production," it stated.

The document also stated that a fully built car would attract a duty of 35 per cent and a levy of another 35 per cent of the cost of the vehicle.

Before the announcement in 2013, importers/dealers paid 20 per cent and two per cent as duty and levy, respectively on new cars. Ten per cent flat rate was also imposed on commercial vehicles.

"The Nigeria Customs Service shall use the value of a new vehicle depreciated by 10 per cent per annum, implying 10 years period of cars and by seven per cent per annum implying 15 year period for commercial vehicles. In either case, depreciation should never be below 30 per cent of the value of the new vehicle equivalent," it said.

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