Analysis: Why clearing agents protest duties on vehicles

On Monday, February 20, 2022, freight forwarders under the auspices of the five registered freight forwarding associations crippled business activities at the Roll-on Roll-off (RoRo) terminals at the Tin-Can Island Ports in protest of the newly introduced Vehicle Identification Number (VIN) Valuation System of the Nigeria Customs Service (NCS).

To them, the new valuation system has been generating wrong and outrageous values for imported cars, thereby imposing high costs on auto dealers.

With the protest, auto dealers were compelled to pay millions of naira as storage charges for not taking delivery of their cars as and when due. This is as RoRo terminals’ storage charge ranges from N5,000 daily after the first five days; N10,000 from six to 10 days, and N15,000 from 11 days and above.

According to freight forwarders, VIN policy increased the value of imported cars by 300 percent.

Citing an example, they said a 2012 model of car, which is not more than N4 million in market value, now has about N12 million value with the new valuation system of the Customs, considered to be outrageous.

Before embarking on strike, the freight forwarders raised the alarm that the new VIN system shut out many car dealers by refusing them access into the NCS portal to request for duty payable on vehicles, while many given access to the portal were given outrageous duties to pay.

This development first took the freight forwarders to the Customs headquarters in Abuja, where they pleaded with the NCS authority to reverse the manual system of valuation to enable people whose cars were already at the port to clear them pending when all the issues with the new VIN were resolved.

Given insight into the situation, Abdullazeez Babatunde, national secretary, Association of Nigeria Licensed Customs Agents (ANLCA), said in a meeting with the Nigerian Shippers Council (NSC) at the weekend that after their visit to Abuja that Customs management promised to direct the area commands to use their discretion in clearing vehicles at the interim, but that never happened.

He said the Customs designed and started the implementation of the vehicle valuation modernisation policy without deeming it fit to dialogue or carry the freight forwarders along, showing that the Service intends to shove the new policy down the throat of everyone.

Babatunde, noting that Tin-Can Island and PTML are the RoRo terminals where about 90 percent of the imported vehicles go through, said there was a legal notice No 30, which states that the wear and tear of a used vehicle must be considered before arriving at the value of the vehicle.

According to Babatunde, there is an international convention that states that vehicles or machineries have depression value on a yearly basis and that after 10 years, the vehicle would seem as if it is dented technically due to the annual depression value.

“The introduction of the VIN system is a modernisation policy, which means there would not be human contact and no stoppage of vehicles after exiting from the port, but Customs needs to get it done properly so that the economy will not suffer in the long run. We observed that Customs is imputing internet value into the system and they are finding it difficult to own up to it,” he explained.

On his part, Segun Musa, the deputy national president, National Association of Government Approved Freight Forwarders (NAGAFF), noted that the freight forwarders were not against the introduction of the VIN policy but the methodology of its implementation.

According to Musa, freight forwarders have been calling for automation, particularly a system where cargo owners and their agents can clear their goods at the comfort of their offices without having to have physical contact at the port.

“We need a system that would enable freight forwarders to make duty payment online, and a code would be given to them that would serve as the Terminal Delivery Order (TDO) for the release of the goods,” Musa said.

Musa, noting that the new clearing procedure is frustrating people who are ready to pass through due process, further said if freight forwarders fail to address the problem now, they would lose jobs, and smuggling would increase, thereby forcing the government to channel the nation’s limited resources into buying arms and ammunition to confront smuggling.

“The Nigeria Customs still upholds revenue generation above trade facilitation when Customs has advanced globally to trade facilitation rather than revenue generation. If we do not address this, Customs will transfer this to general cargo, forgetting that Nigerians are still the end-users of these products and that we are doing more harm to ourselves than good,” he said.

Meanwhile, the new system, according to the NCS, automatically determines the value of import duty that an importer is expected to pay on any imported car immediately after the vehicle passes through a dedicated scanning machine.

It is an automated system that would aid the valuation of imported vehicles entering into the country through all Nigeria’s approved entering points, Saidu Galadima, assistant comptroller general of Customs, ICT/Modernisation, said at the start of the system.

He said the idea behind the VIN, which uses artificial intelligence to allocate value and taxes to vehicles, was to address the agitation of clearing agents and other port users who have been calling for a standardised valuation system in the country.

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On his part, Akintoye Ojo Peter, a member of the ANLCA, said freight forwarders were not against the automation of Customs processes, but rather the automation should be done in a way acceptable to the agents and their principals.

Listing some of the acceptable valuation processes in the world, Francis Omotosho, registrar of NAGAFF Academy, said there were several valuation methods for determining duty payable on imported cars.

He listed the valuation systems to include transaction value, benchmark value, and the valuation method.

Omotosho, who pointed out that the Customs had the power to benchmark goods, noted that this method must be transparent and that was why freight forwarders were calling for the re-valuation method to be more transparent.

“Benchmarking has a range in the sense that there are different categories of used vehicles, including the one with yearly depression, mileage depression, accidental and damaged depression, and among others. Therefore, used vehicles cannot be the same as new vehicles. Customs is using a valuation method together with a benchmark system, which is why the new policy is giving freight forwarders the value of new vehicles rather than used ones,” he said.