Beyond Duty-Free Operating Environment In Free Trade Zones

Beyond Duty-Free Operating Environment In Free Trade Zones

The recent announcement by the Nigeria Customs Service (NCS), over the weekend, that enterprises in the country’s Free Trade Zones (FTZ) will not pay customs duty on locally sourced raw materials, has been classified has a welcome development by the major stakeholders in the industry.

A Free Trade Zone (FTZ) is a special area within a country where foreign and local companies can import materials, manufacture goods, export products, and perform services without being subjected to the usual Customs, tax and regulations.

Speaking in Lagos during a stakeholders’ sensitization ceremony on procedure for goods manufactured in FTZs destined for Customs territory, the Deputy Comptroller General of Customs, Excise, Free Trade Zone and Industrial Incentive (Exc, FTZ & II), Katherine Ekekezie highlighted that when finished products from the raw materials are taken into the Customs territory, it won’t pay freight to the Service.

According to the Service, the move was in line with the Customs trade facilitation agenda, even as it said it has come up with a process for the release of goods manufactured, re-modeled, stored or assembled in the zone and destined for Nigerian territories.

According to DCG Ekekezie, “People in the free trade zones were complaining that they were treated like they weren’t in a free trade zone and procedures weren’t adhered to and the CGC called our attention in the Excise department and we also called the attention of the ICT unit where we set up a committee to look into the issues and find a solution. We reached out to the free trade zone operators, and then we went to work for more than one year to bring this to pass.

“This process is to resolve all the complaints we have been getting in the free trade zones. The process will unify every procedure of the Nigeria Customs Service, and all free trade zones in the country will abide by this same process. It is to make sure that Customs Duty is collected based on the imported raw materials.

“For example, if you use seven raw materials to produce an eyeglass in the free trade zone, Customs is going to charge duty only on the raw materials that were imported. Assuming out of the seven raw materials; four were sourced locally and three were imported, Customs will collect duty only on those three imported raw materials.

“This is one of the incentives given to the free trade zone operators because they are investors who have brought their money and have come to make the environment where the zone is sited better. So this is one of those incentives given to them by the government.

“Another one is that by the time the finished product is taken into the Customs territory, it will not pay the freight. Duty will only be paid for those imported raw materials. It is a very good incentive because the operators too are also supposed to give something back; it is give and take. The government gives you, and you also give government. You must make sure that the environment where you are is developed. Some of them build schools and hospitals; and of course, there will be massive employment for members of the local communities. These and many more are what we will benefit from the investors

This is a new move in the right direction as this will encourage nascent industries to grow rapidly.

However, this is not anything new, it has always been there. The DCG only help to make clarification at this moment. The local manufacturers need the right policy framework to thrive and make export, which is what the nation desperately needs now. There is also need for industrial clusters outside the FTZs to drive export.

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