OGFZA, Intels Bicker over Audit, Allegations of Unlawful Operations

• Logistics firm threatens to sue agency over false, malicious charges

By Eromosele Abiodun

The Oil and Gas Free Zones Authority (OGFZA) and Intels Nigeria Limited (INL) at the weekend disagreed over allegations that the logistics firm was involved in unlawful operatons.

OGFZA had ordered a comprehensive compliance audit into the operations of Intels Nigeria Limited (INL) in the last 10 years (2006-2016).

It said appointed a team of auditors to carry out the compliance audit of Intels, which is a concessionaire of the Nigerian Ports Authority (NPA), because of the company’s serial violation of the laws and regulations governing operations in the free zone and its refusal to submit to inspection of its records, warehouses and equipment imported under the zero duty regime of the free zone in compliance with the OGFZA Act.

Intels Nigeria Limited is also a licensee of OGFZA.

In a letter to the Managing Director of Intels, drawing his attention to the serial breaches, the Managing Director of OGFZA, Mr. Umana Okon Umana, accused Intels and its affiliate companies of having “transferred and sold off their assets” imported into the free zone under the zero duty regime which only free zone companies are entitled to, “without the approval and consent of the authority,” in contravention of Section 12(6)(a-b) of the OGFZA Act, which states as follows:

“Where any goods which are dutiable on entry into the customs territory are sent from the export free zone into the customs territory, the goods shall be subject to the provision of the customs, excise tariff, etc. (Consolidation) Act and any regulations made thereunder, and if the goods are intended to be disposed of in the customs territory, shall not be removed from the Export Free Zone unless— The consent of the authority has been obtained; and

b)   The relevant customs authorities are satisfied that all imports restrictions relevant thereto have been complied with and all duties payable in connection with the importation thereof into customs territory have been paid.”

Giving background to the unlawful actions by Intels, Umana, explained that on March 20 2017, the authority issued a new Standard Operating Procedure (SOP) to enforce the laws and regulations in the free zone.

He revealed that two days after the issue of the new SOP, 16 affiliate companies of Intels filed applications for deregistration from the free zone, adding that ll 16 letters were signed by Mike Epelle.

Further investigation revealed that the revised SOP was intended to stop unlawful and illegal practices that were prevalent in the zone based on an improbable arrangement that allowed an affiliate of Intels, called Development Management Service (DMS), to take over the powers of OGFZA, which is the regulatory authority of the oil and gas free zones, for the issuance of directives and conveyance of approvals to the Nigeria Customs Service on the movement of cargoes in the zone without the approval of OGFZA, contrary to the OGFZA law.

The procedure, it was gathered, raised a question of conflict of interest with regard to the impartiality of DMS regulating transactions involving Intels and its affiliates.

To stop the unacceptable practice, the new SOP made it mandatory that all requests for transfer of cargoes from the free zone had to be made to the authority in keeping with the law, to protect the interest of government and other stakeholders in the zone.

Investigation revealed that it was in the wake of the new SOP that 16 affiliate companies of Intels rushed applications for deregistration from the free one in one day, just two days after the new SOP came into effect.

OGFZA promptly informed the companies that in line with section 15 (1) of the OGFZA Act that they would have to be audited to ensure that their assets are fully accounted for and that appropriate revenue payable to the federal government is remitted when the assets are disposed off.

In keeping with section 15(1)(a-c) of the Act, a joint team of OGFZA and NCS was set up to visit the premises of the companies to inspect the records and equipment of the companies, preparatory to final deregistration, but the companies refused to submit to the compliance audit, which suggest that they had something to hide.

Intels had similarly refused to submit to the inspection of its records and equipment in compliance with the OGFZA Act after the authority received report that it had disposed of its assets without the consent of OGFZA.

Findings showed that the assets that had been unlawfully disposed of by Intels and its affiliate companies, including Prodeco, a construction firm, add up to 3,000 project vehicles, trucks, cranes, forklifts, and a large number of assorted construction equipment at some point.

Sources at the NCS said the unlawful sale of assets imported into the free zone amounts to smuggling, which is a crime punishable under Nigeria laws.

In the letter, OGFZA also drew the attention of Intels to the fact that its free zone operating licence, which had expired since  December 31, 2016, had not been renewed following Intels’ failure to comply with conditions precedent to the renewal of licence, which includes payment of any outstanding amount due to the authority and presentation of any other documents, returns or information which the authority may require.

Although Intels has paid the licence renewal fee, it has failed to comply with the other conditions for licence renewal as stipulated in section 35 (a-c) of the 2003 Oil and Gas Free Zones Regulations.

Sources noted that by refusing to allow the authority to inspect its records and warehouses, Intels has failed to comply with section 35(c) of the Oil and Gas Export Free Zones Regulations 2003 for the renewal of licence.

Intels has been accused by many of disdain for the laws of Nigeria and of committing several acts of impunity.

The NPA is also currently in a serious contractual dispute with Intels over its failure to comply with the Treasury Single Account (TSA) policy.

Following the compliance failure, the NPA had announced the cancellation of a multi-million dollar pilotage contract with the company.

But in its response, Intels threatened legal action against OGFZA and Umana for levelling “false and malicious allegations” against the company.

It said not only are the allegations, injurious to the business interest, but also its reputation.

The company said it was compiling the losses being suffered by the organisation due to Umana’s actions both in his official and private capacity.

“We have no doubt that as these are deliberate actions, you are well aware of the consequences as these are clearly crude, irresponsible and off-limits. At the appropriate time, we will initiate necessary legal measures to ventilate this grievance,” INL said.

It listed some issues of contention between  it and OGFZA, which it said Umana capitalised on to disparage the reputation of the company.

The issues, according to the company, included the refusal of OGFZA to renew the 2017 Operating License for it; the imposition of land charges by OGFZA; nullification of its Industry Wide Standard Tariff (IWST) and other port related charges by OGFZA.

Intels also frowned at Umana’s “penchant for conveying messages to government agencies and clients injurious to its business interest and reputation; non-payment for its premises occupied by OGFZA at Onne and Heliconia Park Estate.

It said it had engaged OGFZA in discussions with a view to resolving the matters amicably, in line with its conviction that a harmonious working relationship will be of mutual benefits to the two organisations and will be in the overall interest of both parties.

“However, it has now become imperative to formally address the various issues on both the law and facts with the hope that OGFZA will be better guided to retrace its ill-advised actions,” the company said.

“OGFZA has refused to release INL licence for 2017 on the ground that INL has to pay all charges and fees demanded by the OGFZA notwithstanding that INL has paid in full the renewal fee for the licence.”

“In the circumstance, we demand that OGFZA should forthwith issue INL licence for 2017.”

According to the company, OGFZA’s position is misconceived and ill-advised.

Intels further stated that OGFZA “seems to be suffering from a confused interpretation of what could be described as free zone related activities as against other port or NPA related activities.

“We are aware that there are few cases of overlap, but those are easily traceable to transactions involving free zone cargoes and in those instances the role of the OGFZA is clearly defined along with aspects of the transaction for which it is entitled to charge fees. Still, such fees do not extend to the rates covered by NPA related activities,” it stated.

Intels went further to demand the payment of debts owed it by OGFZA. These include OGFZA’s indebtedness in the sum of $27,548.85 and N24,912,510.42 for the various services provided by Intels to OGFZA as well as the sum of $1,719,246.28 for use of its facilities by OGFZA at various locations including Onne, Heliconia Park Estate, Aba Road Estate both in Port Harcourt, Rivers State and Warri, Delta State.