· Container deposit in Nigeria is a fraud – NAGAFF
· Freight agents anticipate war from shipping companies
By Kenneth Jukpor
Following Central Bank of Nigeria’s (CBN) move to automate export documentation process, shipping lines in the country have introduced N19,000 charge per documentation for the new procedure, while Nigerian shippers have endorsed Nigerian Shippers’ Council (NSC) initiative to substitute container deposit with insurance.
Shippers Associations in Lagos, Rivers and Bayelsa States have supported the new insurance arrangement despite some ambiguity, even as they began rallying support of other shipping associations across the nation.
Over the years, Nigerian importers have paid the sum of between N150,000.00 and N200,000.00 as container deposits on every empty container used to convey goods into the country by multinational shipping agencies.
Shippers transfer the cost to the profit margin they intend to make, having already calculated the container deposit as foregone payment and part of the cost of importing, but this shouldn’t be the norm. The final consumers of imported goods and services are made to pay for the non refund of container deposits in Nigeria today, while the shipping lines maximize their profits.
The agreement with the shipping companies is that the shippers are refunded the deposits once the empty containers are returned. However, shippers have continued to lament that many shipping companies do not keep to the terms of the agreement when the empty containers are returned.
Speaking with MMS Plus on the introduction of insurance as substitute to container deposits, the Chairman, Bayelsa and Rivers Shippers Association, Mr. Offon Udofia commended NSC for the move, asserting that the new alternative would go a long way to ensuring ease of doing business at the ports.
“I want to thank NSC for this plan and it goes to show that the Council is there for the interest of shippers and other stakeholders in the maritime sector. Shippers have been suffering fiscal losses as a result of container refund because it is difficult to get the money after returning the containers,” he said.
He, however, noted that in Rivers and Bayelsa shippers have already initiated discussions with insurance firms on the issue of container deposits and the return of Cargo Defence Fund (CDF).
Udofia, who is also the Executive Secretary, Institute of Export Operations and Management (IEOM), assured NSC that the institute and the Shippers Association in Rivers and Bayelsa States would support this move for container insurance instead of container deposits.
“By extension, I would also convince of Shippers Associations across the nation, on the need to buy into this development. We started working on this even before discussing with NSC. We just saw the MMS Plus publication which revealed that the Council is taking the same direction and we wholeheartedly support it,” he posited.
He lamented that despite earlier intervention by the Council leading to special officers designated to handle container refunds at the shipping lines offices in Port Harcourt, the problem of container deposit refund remain unsolved.
The President, Shippers Association of Lagos State (SALS), Rev. Jonathan Nicol expressed optimism that the introduction of insurance would prove a more productive approach to addressing the ongoing container deposit quagmire.
Nicol, however, raised concerns that the insurance companies could pose similar challenges in terms of shippers’ access to the funds.
His words: “The maritime industry is gradually somersaulting into retrogression. Shippers Council has for years tried mediation techniques and have been taken for granted. Mediation has not paid off. As interim Economic Regulator, the public expectations were high that at least there will be some semblance of solutions to the myriads of challenges, one of which is the container deposit refund”
“Shipping Lines are core international business conglomerates and have been in this business for so long. They are the owners of the said containers. They are taking the none availability of essential infrastructure and lack of strict regulations by the Nigerian Ports Authority on return of empty containers as an opportunity to amass wealth through deliberate rejection of accepting their empty boxes. The more they delay the better for them”, he said.
He also demanded clarity on who pays the insurance firms in the proposed regime, positing that if shippers could be faced with a new battle with insurance companies over refund.
Nicol stressed that a more holistic approach to solving the container deposit conundrum was to get shipping companies to change their mindset which has been to exploit the infrastructural shortcomings of the country for monetary gains.
Speaking from the standpoint of freight forwarders, the Public Relations Officer of the National Association of Government Approved Freight Forwarders (NAGAFF), Mr. Stanley Ezenga described the collection of container deposit as a fraud.
“After collecting deposits, the shipping lines decide which empty container enters their premises and those that don’t. They ensure that by the time you are allowed to drop the empty containers, you can’t think about getting the deposit because you would already be in debt. This is a fraud,” Ezenga said.
According to him, NAGAFF fully acknowledges and supports this initiative by NSC, however, he warned that shipping lines would fight the introduction of container insurance because of the monetary benefit they enjoy from the container deposit regime.
He assured that freight forwarders would continue to play their role in ensuring timely return of empty containers, even as he opined that container insurance would remove the financial burden on shippers and freight forwarders in the country.
As part of efforts to curb possible challenges with the use of container insurance, Nigerian shippers have also posited that they wouldn’t delegate insurance to freight agents.
“Shippers must be more involved in these negotiations because they pay the insurance and not the freight forwarders. One of the challenges at the port sector is that shippers leave too much for the freight forwarders to handle. The shipper should make the insurance payment themselves before giving evidence to the freight forwarder,” Udofia posited.
The League of Maritime Editors and Publishers, last week, also threw its weight behind the efforts of Shippers’ Council to introduce insurance cover on empty containers.
The association made its position known in a state of the nation press statement, stating that such insurance cover would address the cries of shippers whose refund is denied by shipping companies when the empty containers are returned.
The statement which was signed by the President, Mr. Kingsley Anaroke and the Secretary General, Mr. Francis Ugwoke, said insurance cover will not just end the nightmares faced by shippers on the issue but will save them and the nation billions of Naira being pocketed by the shipping companies through some bottlenecks.
Shippers and freight forwarders were advised to support the move by the Council as it will end payment of container deposits and the nightmare experienced in getting refund.
The group urged the Council to continue with the initiative by negotiating with insurance companies on the possible insurance cover for such empty containers.
Urging the two parties (shipping companies and shippers) to accept the arrangement, the group said it remains a transparent policy in which no one will be cheated.
Noting that some shippers have formed the habit of not returning empty containers which is the reason for collecting deposits by shipping companies, the group said the insurance remains the best option to settle the problem.
In another development, shipping lines under the aegis of Shipping Agencies of Nigeria (SAN) have introduced $50 charge per document to cover the human resource and Information Technology (IT) cost as CBN automates Form ‘NXP’ on the Trade Monitoring System (TRMS).
SAN revealed this $50 fee which translates to N19,000, in a letter addressed to the Executive Secretary of NSC, obtained by MMS Plus newspaper last week.
The letter titled; “Re: CBN’s Directive On Automation Of Export Process – Trade Monitoring System (TRMS) 2”, read: “We note that the above Directive is being implemented without any regard to the suggestions made by SAN. This is imposing another function on ships agencies in Nigeria. We believe that the filing and processing of NXP should be the responsibility of either the merchant or his cargo intermediary, namely the bank.”
“The international best practice is that where a ship’s agent has to process documentation with government authorities on behalf of the customer the latter pays at a cost not less than USD 50 per document because this function entails significant additional human resources and IT costs to the organization.”
“We are therefore using this medium to place the Nigerian Shippers’ Council on notice of the intention of shipping agents represented by S.A.N. to recover from the exporter the cost of implementing the TRMS directive.”
CBN’s Revised Foreign Exchange Manual, 2018 (the Revised FX Manual) stipulates that any person intending to export any product from Nigeria shall, in the first instance, process the Nigerian Export Proceeds Form known as ‘Form NXP’ through an Authorized Dealer Bank, irrespective of the value and whether or not payment is involved. Form NXP is used for commercial exports.