- Curbing
Dr Eugene Nweke Corruption In Trade Supply Chain
PREAMBLE : Looking at corrupt practices from a general perspective, one can deduce that, the provision in the fifth schedule of the 1999 Constitution (as amended), especially with regards to the obligation of government officials under the Code of Conduct, it was enshrined, specifically, to ensure higher morality and selfless service, by the officials of the governments at all levels.
Furthermore, a section thereof, prohibits any public officer occupying certain positions, (including all members of the Legislature ) from operating foreign accounts. In addition, Section 2 of the schedule, specifies that, public officers shall not engage or participate in the management or running or any private business, extra profession, contracts, supplies, or trading activities.
This piece does not intend to probe the applicability or the extent to which these provisions are being enforced, in every sense of administration and the purposeful integration into the government policy reforms agenda. Suffice, to state here that a reflection and thoughts of these provisions, will assist in building walls for this piece, hence, the efforts to visit a specific effort of curbing the monster called “Corruption” by past democratic administrations, in pursuant to their policy thrust, with a view to seeing how well such specific policy agenda of anti- corruption crusade fared.
PAST STRATEGIC ANTI- CORRUPTION TOOL/INSTRUMENT.
In the course of exploring the underlying factors militating against corrupt free Ports environment, it will be worthwhile to take ample space, hereafter, to discuss the globally adopted policy thrust by the governments of developing nations and its unfortunate experience in applications, that is the; ” New Public Management” (NPM), and “Deregulation” – being an applicable tool for tackling corruption within the public/private sector, but herein, as a reference point to underscore how lofty measures can jointly and easily be abused by the public and private sectors conspiracies in the long run. The play back experiences, is a true reflection that trailed most of the so called, Foreign Direct Investment- FDI quest and patronage.
STRUCTURES , INFRASTRUCTURE AND CORRUPTION. On wider perspective (with the port industry under focus), It’s obvious to state that, the government must at all times be seen, as having the capacity to create an enabling environment for competitive and predictable economic activities to thrive unhindered, as well as tackling corruption through practical policies, administrative structures, strategic institution reforms, deliberate and purposeful investment in infrastructure and revamp of (almost moribund)applicable facilities, not just in all facets of our maritime related operations alone, but as well as in all facets of our corporate existence /national fabrics. This approach is deemed most appropriate, other than the persistent oral clamor and endless pronouncements by respective governments to eliminate corruption or any form of malpractices in the port industry, without an applicable industrial defined character/measures, especially as it seems to have singled out only one link from the gamut of the International Trade Supply Value and Security Chain, for reforming purposes.
IS CORRUPTION: A GENERAL SUPPLY CHAIN AFFAIR OR IS IT PARTICULARLY CUSTOMS? The International Trade Supply Value and Security Chain is a culmination of several important actors (Links) in the chain. Therefore, to single out a particular link in the trade supply value and security chain for the purpose of restructuring it against corruption and other trade malpractices, while it’s obvious that 85% of the other Links are as well corrupt, to say the least, is to pinch corruption and not fight the monster called corruption in the maritime industry.
It is even worrisome, where the government or authority is seen dishing out oral threats and sanctions, without tackling the real causes and symptoms of corruption in each link with commensurate and appropriate templates, measures and actions. Such approach continues to raise eyes brows, even heightening tension among the officers and stakeholders who see such oral sanctions as a monotonous rhythm, indirectly whittling down government might. At the same time, it dampens the morale of officers and kill their zeal on the job, resulting in disappointments and feelings of apathy in the minds of the Nigerian public.
FIGHTING CORRUPTION- A REOCCURRING DECIMAL. The old slogan of ” I will fight corruption in the Ports” or narrowing it, “I will fight the corruption within the agencies of the government”, “I will Jail Corrupt Civil servant” etc, to the critical minds, has become a seemingly “Government Songs” too often, without cohesive stanza i.e fighting corruption without a clear, practicable roadmap or action plan or a doable indicator. To the trading public, it has become a popular “monotonous rhythm of the benefactor and gladiators” or simply put a “seemingly recurrent decimal”. Corruption must be appreciated to be Nigeria’s greatest monster, not limited to a particular unit or sector within the port industry..
FACTORS SUBTLY PROMOTING CORRUPTION: Generally, corruption begins with our individual and collective quest for materialism and high taste for foreign made goods (opposed to locally made goods ), leading to negative affluence ( get rich quick syndrome /expensive lifestyle), greed and selfishness. The love for foreign made goods has overturned the fortunes of our local productions and export, to an alternate increasingly import trade volume,which continues to soar higher and higher by the day, hence, our International frontiers (gate ways) are exposed to the avalanche of all manner of conveyance modes / trade traffics from across the globe.
In the International Trade Supply Value and Security Chain, the Customs and Exercise Management Act, of 1954, legally conferred on the customs ( being a critical link/ actor in this chain) the designating of the ports/ gateways as customs ports. The bulk of government policies on trade and all trading activities begin, and revolves around customs and its ports. To begin with, government policies towards high revenue targets from imported goods and its inability to stabilize our export trade capacities,/earnings, made the government culpable as an agent of corruption in the system.
GOVERNMENT RESOLVE TO TACKLING CORRUPTION:
FOCUS ON THE NCS:- Government, on the other hand, responsibly appears to be worried and unsatisfied with the customs on two grounds:
1). The reported acts of collusions, that is, the hyped conspiracies between the importers, customs brokers, regulatory agencies, shipping lines, terminal operators and Customs, resulting to imports leaving the ports without the payment of correct duties/taxes and non payment of duties and taxes at all.
2). The influx of illicit trade /Counterfeited goods, whereof, the intensified checks and monitor (anti- smuggling activities) most times, result in higher cost implications to compliant importations. The colossal damage or multiplier economic and security implication seems enormous.
But, the questions asked in most discourses, has been, is the Customs truly to be blamed for this shortcomings, in the face of the mutually adversarial relationship between the customs and trading public? .
X-RAY OF THE PERFORMANCE OF THE NEW PUBLIC MANAGEMENT (NPM) /DEREGULATION CONCEPT IN THE NIGERIA’s CONTEXT, AS NOTED EARLIER. This modest tends to define corruption as systemic in the context of the Nigeria Customs ports parlance, but before undertaking this task, permit me to refer and review the success or failure inherent in the past concerted efforts of the government towards tackling corruption in the private business and public enterprise environment.
Within the context of tackling corruption in the Private Business and Public Enterprise environment, the national administration, most times, believes, that, the best way to tackle corruption within this setting, is by introducing market forces. There is need to also mention issues (fallouts) relating to the government administration of these market forces, via an anti corruption measure called NEW PUBLIC MANAGEMENT(NPM), while not limiting its applications to the traditional understanding of the down and up streams business activities only.
Essentially, this specific measure prompted the ongoing institutional reforms which for reference purposes, commenced effectively over eight (8) years ago in the maritime sector, unlimited to the Nigeria Customs alone. As monitored, emerging facts show that, most of the foreign investors (either as a, contractors, terminal operators, shipping lines, foreign service providers, etc), appear to be more corrupt in their overseas activities than they do in their originating country, though, a larger number of our Indigenous investors are not better off.
Generally speaking, corruption is responsible for making serving officials to befriend politicians, seeking political contacts, because most serving officials believe that, he or she will be a most suitable or qualified political candidate in his local government, state, constituency, or senatorial district, hence, their conviction that, money determines who gets what, where and how, may not be a factor, therefore, the more money at their disposal, the better their chances.
This admissible belief, makes serving officials to harden their hearts to due diligence and work ethics. They shun integrity, patriotism and due process and instead, resort, too look the other way and opt for malpractices(compromises). As noted earlier, even where the government had evolved critical market force known as “DEREGULATION”, which was introduced not only to increase economic efficiency but also to reduce corruption by depriving politicians and bureaucrats of the very powers to allocate resources to themselves by proxy or the power that will give them the ability to corrupt the system.
Regrettably, experience has shown that; while deregulation has introduced other forms of corruption, NPM inspired reforms measures have increased rather than reduced corruptions. For instance; findings showed that, the concept of increased “Contracting Out” and collaborations which indeed promote more partnership between the serving official and the private sectors now create new opportunities for bribery and its vices, for instance:
a). Public officials are tempted to befriend private firms of operational and financial repute or individuals (who turn out to be future employers or business partners), as such he/she is quick to compromise trading defaults or by bending or even breaking the rules for them, while expecting a pay back in the future.
b). Such public officers are later integrated into the board of trustees or directors of the firm or reengaged in a plum job with the private firm or contracted as a lobbying organization or even in international agencies.
c). In some other instances, a serving public official, travels out, signs an M.O.U. for a product franchise with a supplier or manufacturer abroad, having incorporated a firm in proxy with the Corporate Affairs Commission, even secures an operational license in the same man.
i). Uncompetitive and Unstructured Port Charges/Tariff Pricing Structures, causing harsh and business unfriendly port environment.
In addition to the payment of Customs duties, Importers/Exporters pay for as much as over 35 additional illogical and ill-purposeful defined charges/fees to several regulators, authorities and service providers, ranging from 7%Port levy, 1%CISS, 5%Vat, 2%Nac, .5%Etls, Product Registrations Fees, Product StampingsFees, Product sampling /tasting fee, Documentation Fees, Positioning Fee, Examination Fee, Labour Documented Fee, Labour Physical ExaminationFee, Agencies Examination Fee, Fast track Fee, Scanning Fee, Administrative Fees, Royalty Fee, TH Charge, Customs Examination /Release Endorsement Fee, Import Default Compromise/Settlement Fee, Delivery Charge, Storage /Progressive Storage Charge, 2weeks Advance Rating Charge, Container Deposit, Shipping Agency Fee, Container Cleaning Fee, SeaPort Environmental Fee, Stamp Fee, MOCWA, Demurrage fee, Telex release, Transfer Charges, Trucking Fee, Wharf Landing Fee, Brokerage Fee, Association Tolls, etc.
Regrettably, most of these charges are merely duplicated/double handling in nature and illogical, with no value or service function attach, some are above industry average, some with no evaluated cost function, devoid of professional pricing system, nor without a regulatory authorization.
Therefore, a shipper using our Ports, within 4days after the undefined 3days free period (a total of seven days), pays a minimum estimate charges/fees of above half a million Naira per TEU, to Shipping line and Terminal Operator, Regulatory agencies, this is, with the excluding of Customs duties, insurance, Freight Charges, Trucking, facilitation fee, etc, this is opposed to the one stop shop port terminal /shipping charges central payment known as “Anconage charges”, obtainable in Cotonou Port and Port Novo, at a cost of #75,000:00 Per TEU, which has been consistent for over 15 years in practice, excluding Customs duties.
The Combination of these multiple and unstreamelined charges/fees make the Customs Ports Environment highly business hostile, thereby prompting the Shipper(importer or exporter) to devise a shorter route to maximize profits(cutting corners), at the long run, promoting Bribery and Corruption, resultantly, the government is being short -changed.
ii. The Yearly Issuance Of Revenue Target To The Customs – An act that promotes aggressive pursuit for revenue generation by hook or crook, thereby retarding trade facilitation. The prevailing practice, of double issuance of PAAR, three years down the line, is not only an abuse of system, but, a justification, revenue pursuance by hook or crook. Consequently, discouraging Predicability and competitiveness, while breeding unfriendly customs port environment,inflation and capital flight.
In most climes, revenue target to the Customs is benchmarked on the Number of Ships Call/departure in and from the ports and the Volume of cargo processed and handled through Customs Control monthly or yearly. As a performance measurable indicator, this practice breeds and promotes a general operational efficiency, which in turn, wets ground for further revenue collection by other agencies of government.
Honestly speaking, Government on its own part cannot justify its yearly revenue targets issued to the Customs, as government has no firm monopoly to annual, trade throughput Forecast, nor can it forclose or determine the nature and dynamism of yearly importation/exportation statistics/performances, in relation to its duty rates and payable taxes, which is a function of demand and supply.
It is always difficult for government to decide for the trading public their imports /exports direction per year and as such cannot determine nor project the duty rates and derivable taxes thereof.
The adverse effect of yearly revenue target to the Customs is “trade rigidity” as opposed to “flexibility”. Promoting the Culture of overvaluing an import, frivolous demand notices, haggling, inconsistent trade treatments, abuse of discretional powers, intimidations, exploitations, bribery, fraudulent/ malpractices, etc, all in a bid to meet revenue targets for the government and self, for this to be achieved, conspiracies takes a center stage.
Overtimes, Customs values an importation regardless to its quality. This singular act is responsible for cargo diversions, the influx of substandard/counterfeit products through our ports/border stations and unapproved routes.
With regards to the rules governing product import valuation, to a certain degree, the principles and governing rules of ‘Agreed Customs Valuation” -ACV, as provided in Article 20 of the General Agreement on Trade and Tariff of the World trade organization (WTO), is not in most cases practically observed nor adhere to in our import valuation process. Other than observing the sequential methodology in import valuation as provided, Customs unit officers are quick to consult, upload and uphold the internet value of a product as an alternate product valuation decision and viable methodology, which is against the rule. One of the critical rules stated that, the importer/exporter must be duly involved at any stage of the valuation process and communicated in writing of all valuation decisions, with the right of the importer to accept or reject the valuation decision.
This is why the stakeholders are suggesting that, the present PAAR ruling centre, as presently administered, other than promoting the culture of trade valuation impunity, rigidity and abuses, should be expanded and re-administered to be robust, interactive as possible and comply with the existing valuation methodology and applicable principle, which was the original concept driving the PAAR application. Recall, that, the PAAR ruling center is complemented by a system audits unit, the present acts of double issuance of PAAR on same imports, on grounds of revenue pursuit, subjects the system to integrity question.
iii. Revisiting the Nationally adopted Cost, Insurance and Freight (CIF) applicable International Trade Contract Terms (INCOTERMS), –
A Need For The Evolution Of Container Freight Stations To Container Freight Station (i.e CFS/CFS) Shipping Policy Measures in our international import parlance. As Obtains in Most West Africa Country’s Ports:-
The Cost, Insurance and Freight (CIF incoterms) application for all Nigerian bound imports is no longer sufficiently meeting our trading peculiarities as a nation, due to its recognized shortfalls with regards to trade facilitation, safety and security factors and as such requires a policy revisitation and boost.
It’s okay to admit that, the cost, insurance and freight (cif) which provides for the termination of contract upon the discharge of imports at named port of destination, seems to protect the importer for meeting government revenue suitability.
With the “CIF” incoterms application, our port terminal operators are at liberty to keep the cargoes in their custody as long as the cargo owner delays in picking up his cargo, instead of the port terminal serving as a cargo transiting port terminal to outer terminals/ owners warehouse.
The operators comfortably warehouse the cargoes in their terminals unperturbed due to the favorable progressive storage charges approved to them by the Transport Ministry, even against obvious epileptic services occasioned by inadequate space and handling gears for physical examinations. Port facility investment, by some operators to a certain degree, as business men, is not aimed for prompt exiting of the imports out of the ports, but on the expansion works of terminal storage/stacking space, with reasonable intent to warehouse the cargo while promoting deliberate operational barriers and un-transparent Practices and procedures. Though, expectation are high, that, the presently launched Standard operating procedures will add Impetus towards efficiency.
However, with consideration to our high import dependence economy, in relation to the volume of trading activities and again the non compliance attitude of the trading public which accounts for the 80% of Cargo inspection selectivity going through the red channel (Physical examination) and the 20% going through both Yellow, blue channels ( documentary checks).
With an increasingly import volume, these 80% of physical cargo examination overwhelm the terminal operators handling activities/capacities, against the background that most of the terminal operators cargo handling Equipments are inadequate and inefficient and lacking enough space to accommodate this inspection/scanning volume.
It has been established over time that, not only that, the scanning machines installed across the Nation’s port terminals are not in their best working conditions at the onset , but are inadequate.
This state of non working condition and inadequacy of the installed scanners now promote the culture of re-routing Cargoes back for physical examination, with its inherent malpractices and attendant cost implications to the shippers.
In practice, the combinations of these shortfalls do not only wet ground for bribery and corruption to thrive unabated in the system, but create room for the constant compromises (a defeat) of 100% physical examination quest of the government, thereby compromising products quality standards on one hand and the safety and security implications on the other hand.
To curb this trends of malpractices that negate transparency, trade facilitation, loss of revenues, compromise of quality standards, safety and security concerns, the most appropriate and effective solution will simply be to EVOLVE AND ADOPT THE CONTAINER FREIGHT STATION TO CONTAINER FREIGHT STATION-( CFS-CFS) IMPORT POLICY APPLICATION as obtains within the region, especially taking a cue from Cotonou Port in Benin, as a reference point. By CFS-CFS incoterms, policy basis, the Carrier or the Shipping Line is under obligation to undertake 100% Examination of all imports by unloading/Unstuffing the ladened content, as such the Carrier/Shipping line effects as follows:
a). Charge the Shippers Ocean Freight and Issue the Bill of Lading on CFS-CFS basis.
b). The CFS-CFS Bill of Lading entails that, the Carrier will outrightly Possess, acquire or out-source (by working MOU), an outer container station/devanning center at destination port.
>>> c). Equip the outer container terminal or container station with specialized /dedicated cargo handling equipment for devanning operations (Unstuffing/discharging of cargoes), standard examination/Trans-loading bays, including warehousing ( for excess and unclaimed cargo), storage facilities ( especially for empty containers storage), Marshalling truck yards, etc.
d). Since the transfer charge from the Seaport to the Carriers Outer Terminal (Container Freight Station) has been inculcated into the Ocean Freight Rate paid by the Shipper, the Terminal Operator has an obligation to transfer cargo to the outer terminal, upon discharging the cargo from the vessels.
e). The assigned Customs Officer supervises the 100% unstripping excercise ( un stuffing and trans-loading process) of the ladened import, take stock and reconcile declaration made earlier by the shipper.
By this arrangement, cases of concealments, under valuation, under declaration, etc will naturally fizzle out, thereby, compliance, equal trade treatment, uniform practice, haggling, sanity, reduce delays, reduce malpractices, fast track anti smuggling, etc will be achieve, as well as prompt facilitation of reasonable trade .
Again, only the raw material, compliant and specialized (project cargo/refrigerated containers) importations can be scanned, processed and delivery effected at the Seaports -Terminal. The economic, social and security benefits of this arrangement is enormous and can not be understated, though not the subject of discuss. However, this trade policy shift can only be effected and achieved by a sincere, committed and determined Government with passion to promote trade facilitation, eradicate corruption, promote safety and security concerns, with the capacity to demonstrate strong political will.
OTHER CAUSES- As will be discussed subsequently, as improper customs ports.
AN IDEAL APPROACH TO CURBING CORRUPTION IN THE CUSTOMS PORTS.
Features of an improper Customs Ports:
1). Ineffective Service ethos within the Customs management level- e.g. the absence of a constituted board of customs, creating room for open invitation for litigation over administrative policies, godfatherlism, favoritism in promotions/postings, adhoc committees overriding or usurping the functions of line-staff, etc. This defiles professional ethics and gives rooms for the defranchised officers to be material seeking and resorts to compromises.
2). Operational Hostile Relationship Between Customs and the Trading Public: The system thrives on highhandedness and haggling. Professional expertise are not deplored to promote healthy business relationship that is anchored on negotiations, consultations and dialogue between the trading public and the authorities. The Trading public always nurses the sense of not having a say, feeling exploited and intimidated in import – valuation related treatments, whereby, they resorts into other vices undermining ethics and values.
o). The effective engagements of the Private Sector Consultative Group -PSCG ( herein, domesticated and refers to as the Customs Consultative Committee -CCC), for the continuous assisted trading performances research obligations, strategic trade formulated policy interpretation, reviews, sensitization, and dissemination, as well as serving as a tool for operational feedback mechanism to the service.
p). Create an empowerment mechanism by setting up a ‘Report Point’ for the easy accessing of “marked monies”, by the practicing agents whom may be under operational compulsion or subjection to give bribery or lured into corrupt practices. In the other hand, prompt and dedicated custom officer, should professionally play along all form corrupt trade clearance advancement, as may be proposed to by an importer or its clearing agent, but still be bold to correct the negotiated bribe and report further and arrest such trader, while, purposefully down playing on the gospel of the “giver and taker” is culpable application, but as a deliberate way of tracking unrepentant corrupt officer and trader, for prompt disciplinary purposes, to serves as a deterrent and to curbing the excesses of demand for settlements, by prone to give trader/agent and quick to receive officer.
q). Set a mechanism and templates that will promote uniform and equal trade treatment in cargo importation process and clearance. This will promote trading competition and Putting an end on variance import value by different customs commands, on same imports from same country of origin, same foreign exchange rate and to be sold in same market.
r). Encourage the use of Importing Company Bank Account as the TIN and the Importing Company BVN as tool for import security Originating code and the Agency BVN as the declarant password to accessing the Customs Portals. This will checkmate the incidences of : proliferation of fake importers addresses, the associated forgery and the use of brokers licensed firms by fraudsters without his/her consent. Also, curbing the excess of commercial agency license practices.
s). Develop capacity to do a background checks on the potential trucks/truck owner, so as to pencil down the dubious ones among them. This is critical, as some of them are perpetual conspirators to fraudulent practices. They have become so notorious that they are not interested in trucking legitimate imports out of the ports, because of its high profit yielding margin. Though, emerging trends, shows that, importers/agents are acquiring and deploying trucks for personal use.
t). Also beyond the launched standard operating procedures (SOP), Evolve an internal mechanism, Canvass and Support a process that will subject and Vet the ethical practice and competence of the banks, Shipping lines, terminal operators, truckers, brokers, importers, etc Especially, undertake a deliberate background checks on potential licensed agents so as to reduce the likely risk of revenue loss by the agent, while feigning “ignorant or first offender” as an excuse.
u). The ill-equipping and insufficient working capital posture of the Customs agents is a major factor that requires a drastic solution. Suggestively, ‘merger programmes’ to creating a “net-worth/liquidity firm” should be evolved and encouraged in collaboration with the CRFFN.
v). Operational staff of the brokerage firm must be encouraged to undergo a uniform mandatory training program to enable them obtain practicing certificate for improving their operational and managerial competence.
This must be done in collaboration with a statutory body like the CRFFN, as a condition for issuing or renewal of licenses. More so, a continuous professional development program should be structured and sustained.
w). Effective collaboration with accredited associations- though not as an evidence of brokers firm’s integrity and professional stand point in the system, but brokers should be encouraged to belong to any accredited association of their choice this will assist at promoting and enforcing professional discipline and ethics.
This shall also be a prerequisite for the issuance or renewal of license or permit to an agent.
x). Create a flexible compliance rebate scheme or an unstringing compliant traders incentives scheme. A template to this scheme must be seen to be a purposeful, motivating tool that will engender and attract compliance – eg a compensational temporal rebate on reduced import duty rate for a year compliance with importing activities/templates.
y). Evolve specialized independent organ/ alternative trade disputes resolutions mechanism – a process that will afford the shippers sufficient opportunities to seek redress.
In this regard, the customs official practices is key, especially, in relation to exploring modern professional expertise, trade mediation/ disputes resolution tools via mutual understanding, Consultations and negotiations instead of the application of undue excessive and rigid discretionary powers by the officials.
z). Develop a mechanism and capacity to continuously publicize/publish trade disputes resolutions/statistical evidences for reference sake.
This will further Facilitate the resolutions and fair trade treatments during similar situation in the future, thereby, reducing the prompt mutual hostile relationship that exists between the shipper, his agent and the authorities in matters of trade valuations.
CONCLUSION: From the foregoing, It has been proved that Customs Reforms will be incomplete if not all inclusive of the other links in the international trade supply chain and without a political will to holistically address the critical issues highlighted above. For the benefits of effective supervisions, the customs operations, should be subjected to the supervisory obligation of an Independent economic regulator, to attain maximum operational efficiency.
By Dr. Eugene Nweke
