Customs Exempts Enterprise In Free Trade Zone From Duty Payment On Local Raw Materials

Abiola Seun

The Nigeria Customs Service (NCS), over the weekend, said that enterprise in the country’s Free Trade Zones (FTZ) will not pay Customs Duty on locally sourced raw materials.

Recall that 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 subject to the usual customs, tax, labour, and other bureaucratic regulations.

However, speaking during the stakeholders sensitisation and closing 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 is taken into the Customs territory, it won’t pay freight to the service.

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

She said, “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 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 eye glass 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 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. 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.

“I am happy and proud that the Nigeria Customs has now developed that process that investors in the free trade zone have been waiting for. We are no longer going to allow anybody to pay duty based on finished products, no; neither are you going to pay duty on all raw materials imported into the free trade zones. This is so because it is not all the raw materials that will be used for goods destined for Customs territory. Some of the products will be used right in the zone, while some will be exported, so they won’t need to pay duty, and that is why Customs said it will not allow any enterprise pay, that has stopped.”

DCG Ekekezie further clarified that an enterprise in the FTZ cannot source for Form M because it is not supposed to be a Nigerian investor.

“Once you are within the free zone, you are not supposed to source for Form M and Customs will also not require Pre Arrival Assessment Report (PAAR) from you.

“But whoever is going to buy from you, who is now the importer taking his goods into the Nigerian market will source for Form M and it will capture the data showing the full product produced, all the raw materials used in producing the end product in percentages. The importer is the one responsible for the procurement of Form M and PAAR,”she explained.

On his part, the Customs Area Controller (CAC), Apapa, Comptroller Yusuf Malanta, said sensitisatizing stakeholders and training of Customs officers on the new procedure is important to the ongoing Customs drive to make all its procedures for effective and efficient service delivery to meet up with international best practice.

He noted that it will also help in streamlining the FTZ process and procedure through providing an enabling and friendly business environment for investors and other stakeholders in line with the Service’s trade facilitation agenda.

Also speaking, the Managing Director, Nigerian Export Processing Zones Authority (NEPZA), Prof. Adesoji Adesugba who was ably represented by his Technical Advisor, Mu’azu Ruma commended Nigeria Customs for the move.

Mr. Ruma however highlighted the need for more sensitisation from the service to enable them have a full grasp of the process to avoid misunderstanding between the parties involved.

He said, “We from NEPZA should be more grateful today because what is put in process now is obviously what we have been waiting for. Definitely, we know that there may be some hiccups here and there in the process of implementation, but we believe the incentives and concessions that we have been seeking and going back and forth for has been properly captured now.

“We are now being isolated as a special case instead of the general procedure and I think it is really commendable. It is very clear now that you are actually trade facilitators, instead of revenue collectors.

“We believe in further engagement. Our valued investors that are here will come to understand the nitty-gritty of how to apply it. I don’t know how early it will be deployed and become operational, but I believe we need to go into more micro sessions so that we as the regulator and implementers and the investors in the free trade zone can have a better understanding.

The representative of Customs ICT partner, Webb Fontaine Group, gave a detailed presentation of the FTZ process to stakeholders.

He, however, said that Webb Fotaine will at a later date, organise an online training for agents, for them to have a better understanding of the procedure, before the official launch.