Nigeria Customs duty reduced, how is that possible? Is Nigeria getting better already? At first glance, these questions could resonate your mind. Customs clearing Agents, car dealers and importers have cried out for long over high duty rate on imported used cars. Recently, the cry became even louder with depreciating naira value. Some Agents and associations have taken to the street to vent their anger on the clearing cost of used vehicles.
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Has these cries yielded any result? Yes, it has. Let us walk you through on the following paragraphs. Additionally, we will do a separate article to show the impact of this reduction in monetary terms. Thus, this article will only focus on the issues and the resolution so far.
NIGERIA CUSTOMS DUTY REDUCED OR CONFUSED?
Customs Brokers and agents at the various Roll-in-Row-out Terminals in Lagos are in a confusion. Nigeria Customs service (NCS) reportedly reduced the duty payment on imported vehicles by 15%. The Customs Area Controller of Tin Can Island Command once confirmed 15% reduction in import duty rate for used vehicles. In his words, the essence is to discourage smuggling. However, after this confirmation, importers continued to pay 35%, as this was yet to reflect in the Customs systems.
On the contrary, the issue became more complex when reporters approached the National Public Relations Officer of Customs, Mr Timi Bomodi. Regarding duty reduction from 35% to 20%, he said the news is not true. “There is nothing like that, there is no error, and there is no reduction to 20% duty for imported vehicles.” “The service just migrated to the Customs External Tariff (CET), so, it’s not correct. By Monday, it will be adjusted. We just migrated to the ECOWAS tariff platform but, we still domesticated our duty rate at 35 percent. it’s just a hitch, that will be adjusted by Monday,”
THE CONFUSION CREATED AND ASSOCIATION OF NIGERIA LICENSED CUSTOMS AGENTS (ANLCA)
Dr. Kayode Farinto, who is the vice president of ANLCA, refuted the words of Customs relations officer. He believed there was agreement of all member states of ECOWAS, that vehicle clearance be 20% duty, which is what the change is.
In his words, “The proper HS Code for used vehicles before now is 8733320, at 35percent. Meanwhile this negates the CET tariffs, that all member states should allow vehicle at 20percent until we reported to the ECOWAS. “I have noticed that some agents have been capturing vehicles under HS Code 87033319 which is reserved for other Fully Built Units (FBU), for assemblers. NCS must make a categorical statement between now and Monday. They are to inform people to continue to capture on 87033320 which has been reduced to 20 percent rate of duty.
“In view of this development, we urge our members not to force themselves to capture on 35 per cent rate. Duty for vehicles henceforth will be on 20 per cent.
“Dear professional colleagues, it has been observed that NCS has reviewed the duty rate applicable on Common External Tariff (CET) trade portal on vehicles under HS Code 8703 to 20 per cent Duty rate. “Members are to remain calm, as this is not an error but the extant regime. This has gone a long way to buttress ANLCA position that information and communication gap between NCS and General trading community is still at the lowest ebb. We shall continue to abreast members of this development real time.”
NIGERIA CUSTOMS DUTY REDUCED AND ECOWAS COMMON EXTERNAL TARIFF (2022-2026)
In what appears to be a correction of an earlier stance, a circular from DC Timi Bomodi reads below.
“On Friday 1 April 2022, the Nigeria Customs Service migrated from the old version of the ECOWAS Common External Tariff (2017- 2021) to the new version (2022- 2026). This migration is in-line with WCO five years review of the nomenclature. The contracting parties are to adopt the review based on regional considerations and national economic policy.
The nation has adopted all tariff lines with few adjustments in the extant CET. As allowed for in Annex II of the 2022-2026 CET edition, and in line with the Finance Act and the National Automotive policy. NCS has retained duty rate of 20% for used vehicles as was transmitted by ECOWAS with NAC levy of 15%. New vehicles will also pay a duty of 20% with a NAC levy of 20%. This is as directed in Federal Ministry of Finance letter ref. no. HMF BNP/NCS/CET/4/2022 of 7 April 2022.
It is instructive to note that domestic fiscal policy on the importation of motor vehicles and other items is to grow the local economy in these sectors. The focus of NCS is on implementation of these policies in the hope that it achieves its desired objectives. Equally, this is in line with National Automotive Policy and other fiscal policies of government.
The NCS has also activated the use of Chapters 98 and 99 of the CET. This activation is in accordance with WCO recommendation for national use by contracting parties. In our case, it promotes industrialization through sectoral and sub-sectoral incentives for members. Our target is economic growth, enhancement of security and minimized consumption of unwholesome goods.
Note also that the automotive industry, bonafide assemblers, manufacturers of auto spare parts and other local manufacturers enhance technology transfer and skill acquisition, create jobs and increase per capita income.
In Chapter 98 of the current CET – Bonafide Assemblers importing Completely Knocked down (CKD) and Semi Knocked down (SKD) are to enjoy a concession of 0% and 10% Duty rate respectively. While within ECOWAS, duty rate for same items are 5% and 10% respectively. Incentivizing their efforts through policy interventions guarantees a win-win situation for the nation in the end.
Implementing the current CET takes immediate effect, please.”
Nigeria Customs duty reduced by 15% from 35% to 20% is a good news to importers of used and new cars. The clarification by Nigeria Customs puts an end to the speculation by Agents and Importers. However, there seems to be yet one more battle for stakeholder on the issue of NACS charges of 15% for used cars and 20% for new cars. Is it like giving with one hand, and taking back with another hand? Time shall tell, if all concerned parties will accept NACS charges with equanimity.
Is there a lesson learned from the back and forth situation generated by speculations on whether Nigeria Customs duty reduced? I think my colleague captured well when he said below.
“Finally, we advise and urge the federal Ministry of Finance, which is the Supervisory ministry of NCS to notify the freight forwarding associations on issues. Especially on changes as regards operational matter and policy Issues since the present management team has failed in her responsibility to do so. The trading community has the legitimate rights to know of such changes. We thank you for your patient and while we await them to make a formal circular in this regards. Thanks and God bless.”