On average, container traffic at the Nigeria’s seaports stands at 822,868 annually. With N7.5 million required to clear and transport a 20-foot container, shippers pay a whopping N5.1 trillion to have their cargoes yearly. The revelation that Chinese shipping lines and their agents in Nigeria have introduced double charges on the handling of groupage containers means that the country’s ports have become prohibitively expensive. Eromosele Abiodun writes
While it is a well-established fact that international shipping is quite complex and intricate, managers of the Nigerian maritime industry have made the task even more complicated, leaving stakeholders wondering whose interest is being served.
The issue of shipping charges readily comes to mind. For several years now, operators and shipping companies have engaged in a battle of wits on what operators see as the arbitrary and exorbitant cost of clearing goods from the nation’s seaports.
Last year, customs brokers operating at the Lagos ports declared war on terminal operators and shipping companies over the N4 billion demurrage that accrued as a result of a shelved industrial action by truck drivers. Also, early last year, truckers shunned the lifting of cargoes at the ports in protest over alleged extortion by security agencies, the result being the accumulation of over N4 billion as demurrages and storage charges that importers had to offset.
THISDAY investigations revealed that N668 million in demurrage was incurred daily through the duration of the industrial action, which translated to N4 billion. The humongous amount resulted in a running battle between clearing agents and importers, on one hand, and the service providers, on the other. While the clearing agents were calling for waivers over the strike period, the terminal operators remained indifferent. According to a manager in one of the container terminals in Lagos, the terminal operators eventually collected the demurrage that accrued during the period.
The cost of doing business in Nigerian ports ranks amongst the highest in the world. Indeed, the country’s ports are notorious for high demurrage charges resulting from delays in the cargo clearing process; high insurance premium of vessels coming to Nigeria and trucks conveying containers to and from the ports, and higher shipping and terminal charges.
This is aside the total freight cost estimated at between $5 billion and $6 billion annually, according to the Ministry of Transportation.
According to the World Bank in its 2017 Annual Ease of Doing Business Report, Nigeria was ranked 145 among 185 countries, while Mauritius, at 32, was ranked the best in Africa. From the report, Trading Across borders, an indicator for measuring a country’s ports’ effectiveness ranked Nigeria very low at 183 out of 185 countries.
Also, figures released by the Nigerian Ports Authority (NPA) showed that averagely, container traffic at the nation’s seaports, comprising of Lagos Port Complex, Tincan Island Port, Delta Port, Onne Port, Rivers Port and Calabar Port, stands at 822,868 annually.
THISDAY findings from customs agents revealed that it takes about N7.5 million to clear and transport a 20-foot container laden with cargo worth N41.11 million ($100,000) imported into Nigeria from China.
Of this amount, about N6.3 million, representing 82.1 per cent, is paid to the Nigeria Customs Service (NCS) as Import Duty, Comprehensive Import Supervision Scheme (CISS), ECOWAS Trade Liberalisation Scheme (ETLS), Port Development Surcharge and Value Added Tax (VAT). Shipping companies are responsible for 13.8 per cent of the port cost (N997,000); terminal operators 1.8 per cent (N217,000); transporters 1.1 per cent (N91,500) and clearing agents (N88,000).
This means that about N6.11 trillion is required to clear the 822,868 containers annually, while the shipping companies’ charges stands at N838.112 billion annually.
Chinese Invasion
An evolving development, which clearly shows that things are not about to get better, is the emergence of Chinese Shipping Lines and their agents operating in Nigerian ports. Inquiries revealed that they are taking advantage of the chaos in the sector to rip off Nigerian shippers through collection of double charges on handling of groupage containers, while also causing unnecessary delays in cargo delivery.
A groupage container is a situation whereby two or three consignees come together and put their cargoes into a single container as a full container load.
Two days ago, Nigerian shippers raised the alarm that local shipping agents have added a lot of charges against the consignees, which was far and above the cost of the cargo itself.
Recently, the Nigerian Shippers Council (NSC), through the Port Standing Task Team (PSTT), the operational arm of the Nigeria Port Process Manual (NPPM) domiciled under the Council, secured the released of three consignments detained by a Chinese Shipping Company, COSCO Shipping Limited, after one year of delay. The company to the consignee reportedly waived storage charges worth N1.9 million.
The President of Shippers Association Lagos State, Rev Jonathan Nicole lamented that it takes three months to move groupage containers from the ports for unstuffing at the warehouse, and yet, nobody pays the importers for delays not caused by them.
In a statement, Nicole also raised alarm about the threat of capital flight, saying that most of the Chinese shipping agencies carry out clearance of groupage containers with additional cost to be paid in foreign currency.
Nicole said, “It is confirmed that one aspect of ripping off Shippers and Importers in Nigeria is through groupage shipments. Freight charges are paid fully from Port of Loading to Port of Destination in foreign currency. No hidden charges are transferred to the Consignee whether or not there is trans-shipment from another port during transit.
“On arrival, the Shipping Lines Agents notifies the consignees who have the Original House Bill Ladings indicating their own cargo to come and pick up their cargo after unstuffing. In some cases, the local receiving Agency delays in receiving the Containers for up to 1 or 2 months.
“After receiving the containers and unstuffing at their warehouse, the consignees are informed to come and pick their cargo. Within this period, the local agent puts in a lot of charges against the consignees far and above the cost of the cargo. It is even cheaper to clear the container direct if all the consignees agree.”
He added, “The Master Bill Lading is normally consigned to the ship’s local agent while the House Bill Ladings shows owners of each cargo in the Container. We have more Groupage issues mainly from the Chinese shipping agencies handling groupage Containers in Nigeria.”
The SALS boss noted that most successful big importers in Nigeria today started with groupage shipments.
According to him, back in the days, the Nigerian Ports Authority had warehouses inside the ports and containers are moved directly from the ship or stacking areas to the warehouses for unstuffing.
“We really do not understand why it takes 3-months to move groupage Containers from the Ports for unstuffing and nobody pays the Importers for delays. There is no aspect of clearance of groupage containers to attract additional cost to be paid in foreign currency. It should stop.
“On storage charges, the bills must be commensurate with the number of days the cargo was stuffed in the warehouse and not the arrival date of the vessel. The consignee should not be subjected to excessive transfer charges from the designated Port to the receiving warehouses,” he said.
“All charges relating to the shipment of the cargo were paid upfront before shipment. It is like someone travelling to England via Lufthansa Airlines. All freight paid and passengers luggage marked London. The transshipment therefore is Frankfurt. Luggages meant for final destination are loaded into the aircraft for final the destination.
“The owners of cargo are not expected to pay additional cost for handling. It is the same thing with Groupage cargo. In considering the difficulties in the Nigerian clearing systems, simplified methods must be put in place to curtail excessive charges on shippers.
“Alternatively, Importers should be paying Freight charges in Nigeria Currency to Ship owners. We have a right to protect our sovereignty. Afterall, we are one big family,” Nicole said.
Also speaking, the NSC Coordinator of NPPM, Mr. Moses Fadipe, said COSCO Shipping Limited held three containers belonging to a Nigerian shipper from March 2020 and was only released in June 2021 after the Council intervened.
He described the dispute between COSCO Shipping and the consignee as an impediment to cargo clearance processes, which NPPM frowns at.
Fadipe said “We found out that they acted arbitrarily being the stronger party in the transaction and this made them liable for all storage and demurrage charges during the period in question. The intervention by the officials of PSTT yielded positive results for the consignee to take delivery of his consignments after a long period.”
According to him, the shipping company should have deviced a means to recover the debts owed initially by the consignee rather to place lien on the consignments for a longer period.
Shippers Council’s Crusade
In a bid to put an end to the persistent wrangling between customs agents, importers and the negative impact excessive charges is having on the economy, the NSC embarked on a mission to get the shipping companies to cut down charges.
Initially, the move yielded results as the NSC and shipping companies in late 2020 agreed to sign a landmark agreement to reduce charges. However, the agreement was never signed.
Analysts and stakeholders had applauded the effort, positing that the Nigerian economy will be the ultimate beneficiary.
The former Executive Secretary/Chief Executive Officer of the NSC, Hassan Bello, early last year told THISDAY that he was hopeful the agreement will be signed.
According to him, “You know in negotiation you can only be hopeful. We have been negotiating for one and half years. We have a small knotty problem, which we hope to resolve by next week. So, I am hopeful we will conclude with the shipping companies.
“However, we will run the agreed MOU by the Ministry of Transportation, major stakeholders such as shippers, freight forwarders, Manufacturers Association of Nigeria (MAN) and Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA). This will take four days, then we will sign the MOU.
“Further, the total reduction would be 35 per cent reduction but the most important thing is we have come up with sustainable mechanism of settling dispute, which means no arbitrary or unilateral fixing of cost at the ports.”
Besides the reduction of port charges, he said the Council has also abolished the container-cleaning fee hitherto being collected by shipping companies, just as fifteen other port charges were removed from the list of charges.
Bello also said that the moment the MoU comes into effect, the implementation also becomes inevitable.
In his reaction, National President, of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero, praised the federal government for the effort, adding however that 35 per cent reduction is not enough.
According to him, “The most important charge by the shipping companies is the demurrage and their charges are higher than the terminal operators, which is not supposed to be so. The shipping companies don’t have the right to be collecting the charges. In other countries of the world most of those charges are not applicable because they don’t provide services for the charges.
“What they have is just the container and that has been charged to the freight cost already. There charges are contestable and it is a very serious issue. The shipping companies are doing what they are doing because Nigerians don’t go to court, if Nigerians can go to court they will find out that the charges by the shipping companies are illegal.”
Customs Agents Petition FG
Customs agents had in a bid to get government’s attention over the mater written a petition to Vice President Yemi Osinbajo and alleged that the shipping companies and terminal operators’ charges on storage contravene Sections 20, 31 and 97 of the Customs and Excise Management Act which limits the days for rent charges and conferred authority to the Nigeria Custom to charge rent after specific days by the board.
The agents, in the petition signed by National President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, stated that duplication of charges, such as terminal delivery charges/terminal handling charges, deposit repayment delays and process procedure that lack regulation of the economic interest in the port.
They stressed that there is the need for the federal government to intervene to address these issues through a total review of the procedure, process and cost in the ease of doing business.
The Presidential Enabling Business Environment Council (PEBEC), they added, should urgently address the following short falls, which is militating against our import and export trade that resulted to massive diversion of goods to neighbouring ports.
Also, the agents called on the federal government to use part of the seven per cent port development levy for the development of port access roads, trailer parks.
According to Amiwero, “The condition of the Tincan Island Port Axis of ApapaOshodi express road leading to the ports is a death trap, big potholes and gridlocks resulting in loss of lives and continued destruction of loaded goods that always fall on cars, trailers and sometime persons.
“It is a complete setback to trading across borders (TAB) for ease of doing business on trucks that spend weeks to access and exit the ports which result to delay and rejection on most of the fragile export products in international market and high cost in import clearance.
“The Nigeria Ports Authority (NPA) is no more in port operation, the percentage collected from the seven per cent Port Development Levy should be used for the development of the trailer parks and port access roads.”
On the increase of revenue collection on the recovery of short levied duties on discrepant cargo as provided under Section 142 of Customs and Excise Management Act, he said: “The discrepant cargo, as covered under Section 142 of the Customs and Excise Management Act and the Import guideline paragraph J are non contraband goods with discrepancy, which is allowable for treatment and issued with demand notice (DN) Section 142-(2).
“Recovery of Duties states: Where any duty has been short levied or erroneously repaid, then the person who should have paid the amount short levied or to whom the repayment, has erroneously been made, shall on demand by the proper officer, pay the amount short levied or repay the amount erroneously repaid as the case may be. Any such amount may be recovered as if it were duty to which the goods in relation to which the amount was so short levied or erroneously repaid were liable.”
Amiwero also called on the government to address multiple checks and delays of clearance by NCS.
He said: “The process of clearance is associated with multiple interventions of various alerts headquarters Abuja, CIU, Valuation Gate etc that takes days and increase the cost and time in contravention of WCO Kyoto convention on simplification and harmonisation of Customs procedures. “The Customs procedure should comply with WCO Kyoto convention and (FAL) Convention of (IMO) for Minimisation, harmonisation and simplification of Customs procedure with regards to various checks after release from the Port, (FOU), CG Squad in line with international best practice of One-Stop-Shop process.”
Vice President Yemi Osinbajo had in a bid to boost business activities in the country earlier last year signed the ease of doing business executive order. The effort was in the attempt to lift the country out of recession, stimulate economic activities and generally improve the business environment in Nigeria through promotion of transparency and efficiency.
Federal ministries, departments and agencies have since gone into frenzied activities in the bid to carry out the Executive Orders and exhibit compliance with a view to achieving the objectives of the orders. One of the fall outs of the Executive Orders is on port operations and this brings to mind the challenge of ensuring ease of doing business at the entry points, vis a vis the subsisting issue of the influx of sub-standard and harmful products of very low quality into Nigeria.