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Trends and Challenges of Cross Border Trade
„Experiences From a German Customs Adviser“
Presenter: Frieder MecklenburgDate: 16 February 2017
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Contents of this Presentation
Introduction: GIZ / GIZ in Nigeria / GIZ’s Work on Trade in Nigeria
1. The Institutions
2. The Legal Framework
3. Challenges
4. Outlook & Trends
5. Practical Hints for Dealing with Customs
_______________________________________
Unfortunately Not Covered in this
Presentation is…
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Nigeria
Current GIZ Offices
Future GIZ Field Offices
Introduction
GIZ – Germany’s Development AgencySince 1971 in Nigeria
Business Development Support Unit
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Business volume and personnel 2016(Business vol. 2015+2016; Personnel as of May 2016)
Businessvolume(in Mio. €)
2015 2016 (est.)
Total: 23.2 35.7
BMZ 8.5 18
German public sector clients
0.4 2.4
Co-financing by other donors, incl. EU and Bill & Melinda Gates Foundation
12.7 15.3
GIZ employees
Seconded Personnel40
National Personnel171
Regional Personnel10
CIM- Integrated experts- Returning experts 5
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Areas of Cooperation in Nigeria
• Sustainable Economic Development
• Energy
• Regional Integration
• Health
• Agriculture
• Peace, Reconstruction & Security
• Social Development
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Duration: 2013 - 2018
Client and partners: German Federal Ministry for Economic Cooperation and Development; EU; Federal Ministry of Budget and National Planning
Target states: Sokoto, Niger, Plateau, Cross River and Ogun
Objective: To improve conditions for investment in renewable energy, rural electrification & energy efficiency.
Approach: The programme advises the Nigerian government on how best to provide reliable and sustainable electricity to its people. This is achieved through the promotion of investments in renewable energy, energy efficiency, and rural electrification.
Nigerian Energy Support Programme
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Duration: 2015 - 2017
Client and partner: German Federal Ministry for Economic Cooperation and Development; Federal Ministry of Budget and National Planning
Target states: Ogun and Plateau
Objective: The project supports the Federal Government of Nigeria, and the state and local governments of Ogun and Plateau States, in improving the employability of Nigerian youth and women through demand-oriented vocational qualification.
Approach: The project provides demand-orientated vocational education and training in the agriculture and construction sectors for employment-seeking young persons and women.
Promotion of Demand Oriented Vocational Qualification in Nigeria
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Duration: 2015 - …
Client and partner: German Federal Ministry for Economic Cooperation and Development; Delegation of German Industry and Commerce to Nigeria (DGIC)
Target states: All States of the Federal Republic of Nigeria
Objective: To serve as a point of contact for German and European companies with business operations in Nigeria to promote, prepare, and implement public private development partnerships with European companies operating in Nigeria.
Approach: Using the existing market intelligence of DGIC and GIZ, private sector actors are proactively approached to identify opportunities for PPPs through the GIZ develoPPP concept (www.developpp.de)
Business Development Support Unit
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Make IT Nigeria
Duration: 2017 - …
Client and partners: German Federal Ministry for Economic Cooperation and Development; Digital Africa Initiative
Objective: Better Government performance & more ICT jobs.
Approach: “ Accelerator”
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Duration: 2014 - 2017
Client and partner: German Federal Ministry for Economic Cooperation and Development; European Union (EU); Federal Ministry of Budget and National Planning
Target states: Niger, Ogun and Plateau
Objective: The programme supports the Federal Government of Nigeria and the targets states in improving the framework conditions for MSMEs to increase sustained employment and income generation.
Approach: The programme is pursued via four fields of intervention: financial system development; business enabling environment reforms; trade policy and facilitation; and value chain development.
Pro-poor Growth and Promotion of Employment in Nigeria
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The Trade Unit – Our Partners & Stakeholders
Topics• Capacity Building• ECOWAS CET• ETLS / Export
Promotion• Trade Policy (EPA,
CFTA, National Trade Policy, ECOWAS Trade Policy, ...)
• TRIMS (anti-corruption mobile app)
Implementing Partners• GIZ Germany• UNCTAD• Crown Agents
• USAID• DFID• EU Delegation
Partners / Stakeholders of Implementation• Ministry of Trade (FMITI)• Ministry of Finance (FMF)• Customs (NCS)• Organised Private Sector
(NANTS, MAN, NACCIMA, NEPC, NASME, ...)
• Office of the Vice President
Political Mandate / Donors• Ministry of Budet & National
Planning• BMZ• EU Delegation
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Pol
icy
Mak
er
Federal Ministry of Finance (FMF)
Impl
emen
ter
Nigeria Customs Service (NCS)
Tariff & Customs – Roles & Responsibilities
informs . Beschreib
ung
Tariff Review Technical Committee
Tariff Review Board
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Nigeria Customs Service (NCS) – the Organisation
• Ca. 22,000 Officers, para-military organisation
• Head: Comptroller General Col. Hameed Ibrahim Ali
• Political Management: Deputy & Assistant Comptrollers General
• Operational Management: Customs Area Comptrollers &Comptrollers
• 10 Customs Areas in Zone “A”, 15 spread across the rest of Nigeria
• ~70% of Officers based in & ~90% of customs revenue collected in Zone “A”
• Check out: www.customs.gov.ng
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Federal Ministry of Finance
For Customs relevant Departments are:
• Fiscal Policy Department: defines tariff & fiscal incentives policy
• Tariff Review Technical Committee: consults with stakeholders such as NCS, other MDAs, MAN, other private sector representatives on tariff policy, coordinated by Fiscal Policy Department.
• Tariff Review Board: decides on tariff policy.
• Budget Office of the Federation: revenue collection & granting duty waivers.
• Check out: www.finance.gov.ng (not up to date?)
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The Legal Framework of Customs
ECOWAS Customs CodeCustoms and Excise Management Act (CEMA) ‘old’
CEMA ‘new’
ECOWAS Common External
Tariff (CET)
Import Adjustment Tax
National List
Import Prohibition List
except
Levies
Fiscal Policy Incentives & Duty Waivers
except
except
except
except
Nigeria CET
The
Tar
iff –
a C
ircul
arLe
gal
Bas
is
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The ECOWAS CET
Category ProductsNumber of Tariff
LinesBand 1 Essential Social Goods 85
Band 2Basic necessities, raw materials, capital goods, specific inputs
2146
Band 3 Inputs and intermediate products 1373Band 4 Final Consumer Goods 2165
Band 5Specific Goods for Economic Development
130
Total 5899
Category Duty Rate
Band 1 0
Band 25
Band 3 10
Band 4 20
Band 5 35
1.4%
36.4%
23.3%
36.7%
2.2%
Band 1
Band 2
Band 3
Band 4
Band 5
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The Import Levy Trick
S/N Products CET Total CET* VATImport Levy
1 Cane Sugar 10 11. 5 5 50 66. 5
2 Sugar for Industrial use 10 11. 5 5 60 76. 5
3 Generator set 20 21. 5 5 20 46. 5
4 Brown rice 10 11. 5 - 60 71. 5
5 Broken rice 10 11. 5 - 100 111. 5
6 Table salt 35 36. 5 - 35 71. 5
7 Wheat 35 36. 5 - 65 101. 5
8 Tomato paste 35 36. 5 5 15 56. 5
9 Cigarette 35 36. 5 5 100 141. 5
10 Durum Wheat 5 6.5 5 65 71.5
* Total inclusive of 1% ECOWAS Statistical Tax and 0. 5% ECOWAS Community Levy
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Challenges NCS is FacingWorld Bank Doing Business Report, section trading Across Borders: rank 169 / 182
• Coordinated & wild smuggling , mostly across Benin border.
• Coordinated corruption (‘syndicates’ of NCS officers, clearing agents, banks, importers) & forced/wild corruption.
• High revenue targets (revenue collection & anti-corruption measure).
• Fight against corruption (distrust of leadership, re-posting of officers, retiring of officers, no budget approval for capacity building).
• Fight against fight against corruption (pressure of NCS officers & political / administrative elite against Customs Intelligence Unit).
• Bureaucracy, ITC illiteracy, defective scanners, lack of knowledge
• Work Ethics
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Challenges FMF is Facing
• Revenue collection in times of recession, a declining buying power & a FOREX policy that leads to low imports (-40% imports in 2016).
• Phasing out of import prohibition list, national list, import adjustment tax list, of non-justifiable levies, fiscal policy measures, and duty waivers -without damaging industries.
• Mediation between ECOWAS CET commitments and conflicting policies of other MDAs.
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Outlook
FMF:
• From 2020 onwards, the ECOWAS CET is carved in stone (unless a country opts out).
NCS:
• Young and aspiring NCS officers
• Slow but steady adoption of ITC systems & automation of procedures?
__________________________________________________________
Radical measure: dismantling NCS and merging it with FIRS to a state-of-the-art “Revenue Authority”?
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Trends
• The Economic Partnership Agreement (EPA) uses the ECOWAS CET as baseline, once signed, the CET cannot be changed by ECOWAS anymore.
• The ECOWAS jurisdiction does not cover trade disputes , Nigerian courts do not have the competence for trade & investment disputes –will ECOWAS ever be mandated?
• The ETLS is not functional and the CET alone does not constitute a customs union – will the EPA push for completing the ETLS and will the ECOWAS Customs Code create a ECOWAS customs union?
• And many more…
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Practical Hints for Dealing with Customs I
Letters to NCS HQ:
• Always address: The Comptroller General of Customs
Nigeria Customs Service Headquarters
Abidjan Street, Wuse, P.M.B. 26, Zone 3
Abuja – FCT, Nigeria
Attention: XYZ
• Always bring an acknowledgement copy, get it stamped and store it safely, in case it is necessary to follow-up your letter.
Online Portals:• www.nigeriatradehub.gov.ng (import process portal)
• www.trade.gov.ng (single window portal)
• In development by UNCTAD: Nigeria Trade Information Portal
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Practical Hints for Dealing with Customs II
In case you want to dispute classification or valuation of goods:
• Letter to Comptroller Dispute Resolution & Comptroller Classification (holding both positions), NCS HQ Abuja, Tariff & Trade Department.
• Address letter as described in previous slide. The letter should be as detailed and comprehensive as possible.
In case you suspect corruption, smuggling or any other crime :
• Customs Intelligence Unit
• Not a general ‘Help Desk’ for importers, focus on fighting crime.
• Contact: An email address is provided by NCS to importers in the importation documents an importer receives.
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Practical Hints: How to Get a Duty Waiver
In case you want to apply for a duty waiver:
• Definition: a duty waiver is a temporary waiver of customs duties for a certain project that has been defined as important for industrial development by Nigerian authorities.
• Duty & Import Prohibition: A duty waiver can be granted even for import prohibited products, turning it into an ‘import prohibition waiver’.
• Lifespan: Usually, duty waivers are valid for no longer than one year. This means, an application has to be submitted on a yearly basis, each year with uncertainty about timely treatment of the application and about the decision taken.
• Addressee/Issuing Authority: Minister of Finance, Federal Ministry of Finance, attention: Director Revenue, Revenue Office.
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…duty waivers continued (1)
• Application documents: no specific application requirements or an application format, specific procedures etc. exist. It is recommended to submit:
1. Cover letter by BDF covering: purpose of application, objective of investment project (description of the facility, location, employment, benefits to the Nigerian economy etc.), background information on your company.
2. “Packing list”/list of imports for which you wish to receive the waiver.
3. Supporting documents, e.g. by Federal Ministry of Industry, Trade and Investment and other public institutions (the more the better).
• Process: Firstly, the Director Revenue, secondly, the Director General of the Budget Office, thirdly, the Minister of Finance will each assess and treat the application. In case one applies for an ‘import prohibition waiver’, fourth, the President’s Office will have to make a final decision.
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…duty waivers continued (2)
• Application timelines: timelines for the treatment of a waiver application do not exist. Meaning, after submitting it, one might immediately, months later, or never receive a response. In the case, one applies for an import prohibition waiver, the involvement of the President’s Office will likely be a delaying factor.
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Alternatively , assess if it is more favourable to make the investment in another ECOWAS country and to import locally produced products from that country under the ETLS to Nigeria.
The involvement of various government offices in an undefined process without transparency and fix application requirements and the obligation to conduct this process on a yearly basis, makes an investment that requires duty waivers very risky.