CTN: AN ADDITIONAL TAX BURDEN ON MANUFACTURERS?
CTN: An additional tax burden on manufacturers?
By ADEWALE SANYAOLU and CHARLES NWAOGUJI
Monday, March 08, 2010
For over two months now, operators in the real sector of the economy, consisting mainly members of the Manufacturers Association of Nigeria (MAN), National Association of Chambers of Commerce, Industries Mines and Agriculture (NACCIMA) and the Lagos Chamber of Commerce and Industries (LCCI) have been locked in a fierce battle with the government, represented by the Nigerian Ports Authority (NPA) over the recently introduced Cargo Tracking Note (CTN) charges at the ports.
CTN is an additional document obtained from NPA's representative at all ports around the world on every commodity imported or exported from Nigeria.
To the protagonists of the scheme, CTN is an international Cargo verification solution and procedure, which is in accordance with the ISPS Code. And Nigeria being a member of the International Maritime Organisation (IMO), it is mandatory on her to subscribe to all the Charters of the organisation, the CTN being one of them. They also argue that the CTN is a device to track down dangerous goods in containers while also checking the excesses of importers and their agents who indulge in over-invoicing and under-declaration of cargo.But to those against the initiative, such as MAN and LCCI, CTN is an additional levy on manufactures in the country.
They are not happy that Nigerian manufacturers should at this time of unfavourable business environment be burdened with additional tax burden. The development has pitched the two different bodies-MAN and LCCI against NPA, claiming that, they as stakeholders were not in anyway carried along before it decided to implement the policy, which they described as an unfortunate development.
In a recent interview with Daily Sun, the President of MAN, Mr Bashir Borodo lamented the decision of NPA not to rescind its decision on the CTN levy, saying such remained very unfortunate because the charges imposed does not in anyway have a corresponding value on manufacturers and importers.
Specifically, he said since NPA had maintained a hard stand on the issue, the shipping companies according to him, equally said they could not bear the burden.
And as such, they have to pass the charges to manufacturers, importers and subsequently unto the final consumers. According to Borodo, the new policy will see manufacturers spending between N40,000 to N80,000 on the cost of clearing containers, maintaining that the only explanation that was given, was that, the levy remained the trend globally. It would be recalled that MAN had two weeks ago convened a meeting with the management of NPA over the CTN issue, but the meeting ended in a deadlock as both parties were unable to arrive at a positive conclusion.
Based on the negative outcome of the meeting, MAN directed its members not to comply or pay the charges until it was able to reach an amicable resolution with all parties involved in the CTN implementation process. For the National President of the National Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), Dr Simon Okolo, the FEC approved the CTN scheme because it believed that the scheme would impact positively on ports operations and the government's fiscal policy but they failed to take the Organized Private Sector (OPS) along which formed the major stakeholders.
The CTN scheme, according to Okolo would encourage smuggling and other forms of economic sabotage at the port of entry. 'As for me, I think the CTN is not a step to further make the operations at the ports safer, because, from the point of loading of goods to the point of delivery, it has been said that all goods heading to Nigeria, one would know exactly what each container contains. So l don't know what they are talking about,' he said. The NACCIMA boss asked why the government should use a foreign company to collect the money in foreign currency.
'In other parts of the world, the CTN charges are as little as $2, why are Nigerian ports charging 50 Euro, which is a lot of money for manufacturers who depend on imported raw material for their production,' Okolo queried. 'My fear is that the system will be an additional burden on importers by increasing the cost of doing business at the nation's ports, as this will increase freight charges for importers or exporters. Our perspective is quite clear. This concept will not work now in Nigeria, especially now that the sector is facing hard times. The pronouncement by government is to finally nail the manufacturers,' he said.
Besides MAN, NACCIMA, the LCCI has equally raised its voice against the introduction of the levy, saying such was capable of running manufacturers who already have so many charges to contend with out of business. As a way out, the Chamber has petitioned Acting President, Goodluck Jonathan, urging him to as a matter of urgency rescind the decision of NPA over the CTN Levy.
But the management of NPA has said that, the introduction of the CTN charges would not lead to additional cost to the importers, adding that the charge had already been built into what shippers have been charging.
A statement by the Assistant General Manager, Public Affairs, NPA, Mr Musa Iliya states: 'The CTN does not come with additional cost to the importer. The little fees charged are inbuilt in the freight that shippers have been charging. Evidence available suggests that some shippers have been collecting and pocketing the fees long before the federal government decided to implement the system.
'Also, from the date of commencement of the scheme, there has been a significant compliance all over the world and no shipper that complied required any importer to make additional payment.
The manufacturers or any importer are not involved in an international maritime procedure done by shippers in liaison with our agents' the statement said. But a petition which was signed by President of LCCI, Mr.Femi Deru, explained that the appointment of a Belgium based Company-Transport and Ports Management System Limited as the sole agent of NPA for the collection of the levy in such a hurried manner remained an indication that the CTN was to serve some narrow interests at the detriment of the economy.
The statement reads in part 'We wish to draw to draw the attention of Your Excellency to the recently introduced Cargo Tracking Note Levy (payable in foreign currency) by the Nigerian Ports Authority and affirm that it is profoundly inimical to private enterprise and harmful to economy. 'The CTN does not add any value to the cargo delivery processes in any way. Yet this levy adds an estimated 20 per cent to freight cost by Nigerian importers annually' the statement said.
Besides, Deru maintained that the introduction of CTN by NPA will lead to an estimated 20 percent increase in freight cost of imported goods, calling on the Acting President to stop the 'illegal' CTN levy, as importers have been paying ports levy of seven per cent of import duty for over a decade for the development of the ports. Deru argued that the CTN levy was unnecessary at this time when businesses were grappling with atrocious operating cost conditions, as it was insensitive of the NPA to introduce a levy, which has no basis in logic, morality or law, which constitute a burden on business.
Specifically, the LCCI President stressed that already the shipping companies have a cargo tracking mechanism for all cargoes on their vessels, adding that already the bill of lading provides a comprehensive documentation on cargoes being brought into the country or leaving the country.
But the Vice President NACCIMA, Alhaji Sulaiman Hameen has maintained that only dubious importers are opposed to the new policy. Hameen, at a recent parley with journalists in Lagos faulted those calling for the suspension of the implementation of CTN on the basis of their not being consulted by the Federal Government before the scheme was introduced.
'Actually there are two issues involved in Cargo Tracking Note. The first issue is when and how the policy came about. When the policy was being put together, the private sector and the stakeholders were not consulted and were not informed for input. It was mainly a government idea that was taken to the Federal Executive Council for approval and was subsequently approved.
'Now the other issue is the policy itself. Is it a good policy for the Nigerian port? As far as I am concerned and for people who think like me; it is a very good policy.
Nigerian ports need it and what we should do is to forget about the past whether we the private sector were consulted or not, that should not be the main issue now. The main issue is how to make the policy work in the interest of the Nigerian port and that is where we are now and I believe that is what we should be discussing not whether the government consulted us or not because governments all over the world behave the same way. American government sometimes doesn't consult its citizens; for instance the way they went to Iraq. Many American citizens were against it but still they went there and they thought they were working in the interest of American citizens. So we should look at the policy in details and take advantage of whatever is good in it. That is what I feel we should do, not to be arguing about whether the private sector was consulted or not', he stated.
The NACCIMA Vice President who obviously was not dancing the same tune with his President also said that one of the numerous merits of the scheme is its ability to effectively keep tab on all Nigerian bound cargo thereby eliminating under-declaration, smuggling and other forms of economic sabotage and also ensuring the safety and security of the cargo.
'First of all, the greatest thing CTN will do is to track Nigerian-bound cargo from the time it is loaded either in the container or as a bulk cargo into the ship. It will be tracked till it lands in Nigerian port. That will be a great thing for Nigerian importers and Nigerian shippers; that is, the importers and the exporters because it is not one way. It also works for export; all the exporters too will enjoy it. From the time you load any cargo in Nigeria in the container or in the ship as a bulk cargo, it will be tracked till it lands wherever it is going either in China, UK, America or whatever. So the case of cargo been lost in transit will not be there anymore, so this is a good thing that it will do to Nigerian shippers both importers and exporters and also it will reduce the malpractices in the Nigerian import business.
'A lot of people will go abroad, they will shop for so called raw material or spare part and they will collude with their supplier to put other things in the container. Things that are not declared are even more expensive than the declared cargo in the container. So what will happen is that this is common with the so called manufacturers. 'When a cargo arrives in Nigeria, they will use what we call Fast Track System to fast track the cargo into their warehouses in their factory. So now they will corrupt Customs officials to bring out those extra items in the containers without paying duty to the government.
'With the CTN, that will be virtually removed. They will not be able to do that anymore. If you see some people who are against it, they must be one of those people who are doing that kind of thing, so it will eliminate that kind of thing. Nigerian government will be able to get more from the custom duty, so that is another area it will help the port and the economy', he said.
Also, the Comptroller General of the Nigeria Customs Service, Alhaji Dikko Abdullahi, also supporting the levy called on Nigerians to support the Federal Government's introduction of the Cargo Tracking Note in the interest of safety, security and prompt clearance of goods at the port. The Comptroller-General, said that contrary to widely-held speculations, the CTN will neither increase freight charges nor port cost, while also aiding cargo clearance procedures.
'You see, when we talk about this procedure, the procedure is that we are very much aware on the various ways that cargoes come into the country with some of them not having verification because where government says these are the fiscal policies; these are the laid down rules as regards imports but with this cargo tracking note, the shipper must tell us what the container is carrying including the documents of the container. So, it will actually assist the Customs in knowing what is in the container. It will help us reduce burden of physical examination except where we think we have profiled the container for 100 per cent examination. I believe it is very good. I believe it's going to bring much awareness to the people of Nigeria about what (the importer) is going to bring in terms of security and it will increase our revenue collection because we are going to know how much cargoes or the exact quantity of what is in the container', the Customs boss stated.
In this regard, the Customs boss called on members of the organized private sector and maritime stakeholders to embrace CTN, adding that the newly introduced scheme will guard against sharp practices, under-declaration of cargo and concealment by importers. 'As a custom officer, I can bring you the bill of laden and can tell you that there are no actual content of what the cargo is carrying and that is why we have false declarations. One may tell you that he's carrying used engines, but when we open, we will find out that he's carrying textile. But with the cargo tracking note, there is no way you are going to say something different from what you are carrying.
I believe good and sincere Nigerians should embrace it for our own security. You can see the latest thing that happened to Nigeria, we have just been listed on the world terror list, but when we give ourselves 100 per cent open security, I believe everyone will trust us, and we will be accepted by the international community. 'I think nobody should have fear of any additional money. I don't think Nigerians should panic about that. I don't believe there's going to be any additional money added to the cost of doing business in Nigeria,' he said. The Cargo Tracking Note was approved by the Federal Executive Council at its meeting of December 9, 2010.
A former President of the Association of Nigerian Licensed Customs Agents (ANCLA), Alhaji Inua Mohammed has explained that, the introduction of CTN was long overdue in Nigeria, adding that it would not inject any extra charges on shippers and agents, just as he charged government to come out with an harmonized duty rather than having arbitrary charges on shippers operating in the nation's seaports.
Also canvassing strong support for CTN, the National Association of Government Approved Freight Forwarders (NAGAFF) said it was pertinent to educate freight forwarders, manufacturers, importers and members of the trading public on the relevance of CTN not only in Nigeria, but also to the international community, adding that, the idea of mandatory CTN was introduced by United Nations through the International Maritime Organization (IMO) under the ISPC code in response to the September 11 2001 terrorist attack in the US.
Meanwhile, the Federal Government has given reasons why it introduced CTN. Transport Minister, Alhaji Ibrahim Isa Bio, recently defended the approval granted by the Federal Executive Council (FEC) for the introduction of the Cargo Tracking Note (CTN) scheme. The Minister said that the FEC approved the CTN scheme because it believes that the scheme will impact positively on ports operations and government's fiscal policy. The CTN scheme, according to the Minister, will also curtail smuggling, under-declaration and other forms of economic sabotage at the port of entry.
'As for me, I think the CTN is a step further to make our operations at the ports safer, because, from the point of loading of goods to the point of delivery you will know exactly what each container contains. And in the bill of lading, it will be well described. So, it will help us to check under-declaration. You know people will under-declare. They will have goods of higher value and tell you they have tokunbos. By the time you open it, you discover they have brand-new cars or exotic textile materials.
It will help us to curtail smuggling, because people who try to conceal the actual content, we will now know because of the Internet. CTN operates with the Internet, so it is accessible to anybody. For people who smuggle in arms and ammunitions, it will be seen. Any vessel coming to Nigeria is already on the list, you see it on the net, the name of the vessel, year of manufacture, the crew names and all other details. And all vessels leaving Nigerian ports with the goods of export, you'll also see it', the Minister said. He also disclosed that the nation would be short-changing itself if it does not implement the CTN in line with global trend.
'Let me give you a brief history of cargo tracking. CTN was introduced by the International Community after the September 11 attack on the United states of America. Because terrorists can attack any target not only by aviation, they can also do that through the ships. And then movement of arms and ammunitions can also take place majorly through the maritime sector. So, CTN is an internationally-applicable system of tracking how goods travel from one country to another.
I think America introduced that after September 11 and the EU (European Union) endorsed it and most countries in Africa have endorsed it and are operating it. Since that was already internationally-accepted, whether you are a member country that subscribe to it or not, you are paying that amount knowingly or unknowingly to the service provider of CTN.
'If you don't operate CTN, it is to your own disadvantage, because, whether you like it or not, you have already paid for it and that was the genesis. And we believe that we are losing, so by implication, if we are paying for services that we are not gaining, then why don't we fully subscribe to it?', Bio stated.
The Minister said that he had directed the Nigerian Ports Authority (NPA) to engage stakeholders to address areas of concern over the newly-introduced scheme.