As NSC Moves to Abolish Container Deposit
Eromosele Abiodun writes that the move to abolish container deposit will reduce losses due to illegal charges imposed on importers by multinational shipping companies
Nigerian ports are said to be among the most expensive place to do business in the world. Aside from the cost of doing business, there are multiple challenges that have left observers’ wonder how a people can descend to a level that defy human reasoning.
Efforts to resolve the multiple problems, which include poor infrastructure, poor traffic management, corruption, racketeering and pilfering has never yielded any positive results.
This is not to say that government agencies are not trying. They are trying but entrenched interests who have made an industry out of the crisis in the ports have ensured that every effort made to restore sanity is frustrated.
At the expense of Nigerian shippers, shipping companies are smiling to the bank imposing all manner charges on importers and exporters. Common of the most contentious and unexplained charges include; demurrage charges, container deposit charges, storage charges and landing fees.
The Nigerian Shippers Council (NSC), the port economic regulator, has been in the forefront of the fight to end unreasonable charges. Irked by a report that put Nigeria’s loss through illegal shipping charges imposed on Nigerian importers by providers of shipping services at N64 billion, the NSC had on October 29, 2014, published a public notice to terminal operators and shipping companies, directing a downward review of their charges.
Acting as the port commercial regulator, it stated that some of the charges had been a subject of controversy and persistent complaints by importers and customs agents.
The charges, whose reversal was to take effect from November 3, 2014, included: the progressive storage charge; free storage period; shipping line agency charge; container cleaning and maintenance fee and container demurrage.
The council had ordered an increase in the container storage period at the ports from three days to seven days and also directed shipping companies to reduce their charges from N26,500 to N23,850 for a 20ft container and from N48,000 to N40,000 for a 40ft container.
It further directed shipping agencies to refund container deposits to importers and agents within 10 days after the return of the empty containers. The council had increased the container Free Storage Period to seven days instead of three days. The council also increased container demurrage-free days to 10 days and directed that henceforth, container deposits must be refunded within 10 days after the empties had been returned to the shipping companies.
The Executive Secretary of the NSC, Mr. Hassan Bello, while confirming the review said the decision was arrived at after several meetings and consultations with the terminal operators and shipping companies.
“We were all in agreement with this decision. The cost of doing business at our ports is very high compared to our competitors. Once we remove these charges, we would attract more cargo to our ports. Terminal operators are to revert the storage charge to that which was approved as far back as May 1, 2009.
“That was when the last approval was given. But they unilaterally increased the charge; now, they have to revert,” he said.
He added: “The free storage period, that is, the period before you are charged for storage or demurrage has been increased from three days to seven days. We have also told the terminal operators that the seven days free period will take effect from the time when the container is discharged from the ship. The free period formerly took effect even when the ship had not discharged the container. This is in line with what is happening in the region and in the world all over.”
Bello explained that shipping companies were required to reduce the shipping line agency charge. For a 20 feet container, the shipping line agency charge was reduced from N26,500 to N23,850. For a 40-feet container, it was reduced from N48,000 to N40,000. Shipping agencies were also directed to refund container deposits to importers and agents within 10 working days after the return of the empty containers.
“There is a container cleaning and maintenance fee, which shipping companies charge about N2,500; it has been reduced to N1,500. The free period before which container demurrage is charged has been increased from five days to 10 days. This is just the beginning of the revolution; we want to drive down cost and have efficient ports. We equally want to stop arbitrariness in tariff increase, and to eliminate unnecessary charges,” he added.
The NSC’s research team had carried out investigation on what Nigeria loses annually to illegal shipping charges imposed on importers by multinational shipping companies and terminal operators who took over cargo handling operations from the Nigerian Ports Authority (NPA) since 2006. The findings of the team grieved the council, prompting it to reduce some of the shipping charges.
The ports regulator had viewed the illegal charges as ‘imported inflation’ into the nation’s economy by the shipping companies and terminal operators.
A breakdown of the figure, which was allegedly collected illegally in 2013, by both terminal operators and shipping companies showed that the sum of N32.04 billion was collected by the affected providers of shipping services on Shipping Line Agency Charge (SLAC); Progressive Storage Charge – N28.8 billion while the sum of N2.5 billion was collected on container cleaning charge. The research team had also compared shipping charges in Nigeria with those of Cotonou Port, in Benin Republic, which has been the haven for diversion of Nigerian cargoes which are later smuggled into the country.
The report revealed that while an importer in Nigeria pays N62,682 and N87,695 as Terminal Handling Charge, customs examination and delivery charge for 20ft and 40ft container, it costs N24,000 and N48,000 respectively for 20ft and 40 ft container in Cotonou port. On Free Storage Period, the NSC discovered that while it is three days in Nigeria, it is seven days in Cotonou and Ghana and 11 days in Cameroun. It was also found that unclaimed container deposit being held by shipping companies runs into several billions.
Ending Container Deposits
Meanwhile, after several setbacks and following assurances by the National Insurance Commission (NAICOM) the NSC has said it will finally abolish container deposit by June ending this year.
Bello said Nigerian shippers paid a whooping N16 billion as container deposit in 2018 alone.
Container-deposit also known as a deposit-refund system, is the collection of a monetary deposit on certain containers at the point of sale and/or the payment of refund value to the consumers. When the container is returned to an authorized redemption center, or retailer in some jurisdictions, the deposit is partly or fully refunded to the redeemer who is presumed to be the original purchaser.
The NSC boss said: “We are sure of this new deadline because we have stakeholders on our side. We are talking with stakeholders, which include the shipping companies who are the owners of the containers. On the regulatory side, we are working with NAICOM and we have called individual insurance companies.
“Some of the insurance companies have already written us that they want to undertake the insurance and the shipping companies are happy about that. As we speak, a meeting is going on between NSC, NAICOM and other partners. We are actually thinking of the best way forward. There will be a process flowchart that will talk about registration, which take care of the empty containers that are being dumped all over the place.”
Bello also assured that the NSC would continue to ensure the smooth running of the port as it did during the COVID-19 lockdown.
He said the port automation that the NSC is working hard to achieve will put an end to port congestion, Apapa traffic gridlock and corruption at the port.
Port automation will also stop revenue leakages, corruption and make Nigeria’s ports to be more competitive.
While praising the federal government on its effort to develop new deep seaports in the country, he said the Lekki Deep Seaport will be the game changer for Nigeria and help Nigeria define its role in the transportation sector.
“The Lekki Deep Seaport will no doubt justify the need for Public Private Partnership (PPP) in infrastructural development, “he said.
He said the NSC has gone far in its quest for port automation adding that reports from major terminal operators showed that they are fully digitalized.
“They are commending the NSC for what we are doing to promote port efficiency in Nigeria. Payments at some terminals now are been done online, some terminals have achieved 70 to 80 per cent automation. The second phase is the integration of systems with banks and government agencies like the Nigeria Customs Service (NSC), “he said.
Bello also decried the environmental pollution at the nation’s seaports by hawkers who loiter the place with engine and other hazardous substances.
“Our port environment is not clean, we are working with the Nigerian Ports Authority (NPA) to clean up the place, move out hawkers and retailers whose activities is messing up the port, “he added.
The federal government, he added, has linked the port with rail, which he stressed is a significant achievement, “Because rail carries more cargo and is cheaper and most efficient. We now also use our waterways where we use barges to move cargo to other parts of the country.
“The electronic call-up system that was recently introduced by the NPA will help solve the traffic problem along port access roads. We all need to support it, it requires discipline, and we all need to work together for its success. We all know some people who are benefiting from the crisis will not want it to work, we must not allow them.”
Impact of Charges
Experts believe Nigerian consumers are the ones being over burdened with high charges, which they described as a tax imposed on imports, which are goods coming into a country.
Charges, they argued, may range from a few percent of the cost of the good to well over 100 per cent of the cost of the good!
The charges, they added, is ultimately passed on to consumers, resulting in higher prices.
The experts believe the bid to drive down cost of doing business at the port was a good plan, which will help the system in the long run.
“Every time you go shopping, you likely pay higher prices because of tariffs and quotas. It is hard to believe that some of the goods you may be purchasing cost you more than twice as much as they could because of these economic measures! Dairy products, vegetables, tobacco, wool clothes, auto parts, brooms, Chinese tires, leather shoes, peanuts, and chocolate are just some of the common items we pay more for because of tariffs or quotas, “said a player in the industry who do not want his name in print.
He stated that there are many reasons that charges and quotas may be used adding that the most common reasons are often geared towards protecting newer or inefficient domestic industries that are seen as important to the economy and the production of jobs.
He added: “The government view is that by protecting these domestic industries, we can maintain jobs through increased sales of domestic goods. This ultimately can lead to higher tax revenue collected. The additional tax, or tariff, on imported goods can discourage foreign countries or businesses from trying to sell products in a foreign country.
“The additional taxes make the foreign import either too expensive or not nearly as competitive as it would be if the tariff didn’t exist. This can lead to fewer choices of goods and a lower quality for consumers. The amount of chocolate, fruits and vegetables, and automotive parts you have to choose from are all subject to the effects of tariffs.”
Domestic producers, he stated, benefit by ultimately facing reduced competition in their home market, which leads to lower supply levels and higher prices for consumers.
He said: “When a consumer does purchase a higher-priced imported good with a tariff imposed on it, the consumer now has less money to spend on other things. This forces consumer to either buy less of the imported good or less of some other good, ultimately lowering the purchasing power of consumers.
“It is important to remember that although consumers may pay higher prices because of tariffs and have limited options, the potential benefit is that domestic sales of goods can increase, ultimately leading to higher domestic sales and more jobs for companies inside the country.”