CTN will not facilitate trade or check under-declaration – Ojadi

Dr. Frank Ojadi has been a member of faculty at the prestigious Lagos Business School (LBS) for 15 years. Before entering academia, he worked at various times as the Logistics and Supply Chain Manager for some multinational and large indigenous companies in the steel, aluminum, paper, pharmaceutical, tobacco and hospitality sectors of the Nigerian economy.

Dr. Ojadi obtained a Bachelor’s degree in Engineering Physics from the University of Ife (now Obafemi Awolowo University), MBA from the Maastricht School of Management, Netherlands, and PhD in Transport Economics from the University of Johannesburg, South Africa.

His teaching interests are in operations management, logistics and supply chain management optimisation. His research interests include seaport logistics improvements, sustainable procurement activities, value chain studies of Nigeria’s agro-allied commodities and manufacturing systems.

Ojadi’s research has been published in the Supply chain management: an International Journal; International Journal of Production Research; Journal of Transport and Supply Chain Management. His case studies and technical notes include the Sensational Foods Limited, Talent Drycleaners (among the 15 top-selling cases for 2009, 2010 and 2011 in the category of production and operations management by the European Case Clearing House), Clearing of Imports at the Lagos Seaport, Economic Regulation of Industries and Industrial Sectors, Reforming the Nigerian Police Force and the Nigerian Maritime Security.

Currently, he is researching into the extent of the impact of the pre-arrival assessment report (PAAR) on the flow of imported goods through the Lagos seaport.

Dr. Ojadi has consulted for many companies (banks, beverage industries, etc.) in procurement improvement and logistics and supply chain optimisation. He is a member of the Editorial board of the South Africa-based Journal of Transport and Supply Chain Management, and has been very active in contributing to issues on logistics and supply chain management at the Nigerian seaports.

In this interview, he speaks on the contentious reintroduction of the Cargo Tracking Note (CTN) by Nigerian Shippers’ Council (NSC) four years after it was abolished by the Federal Government.

 

 

Why did the Federal Government scrap the Cargo Tracking Note shortly after it was introduced five years ago?

The Cargo Tracking Note (CTN) was abolished almost immediately it was introduced due to the high cost it imposed on shippers (importers and exporters) and the strong opposition to it.

It is very strange to hear the NSC assume the full powers of the Federal Executive Council (FEC) to reintroduce the CTN. The reasons given by NSC are not convincing since the Nigeria Customs Service has the means and ways of monitoring the risks associated with imports.

Curiously NSC has been silent on who bears the cost of this scheme.

Economic regulation of port operations does not cover issues of this nature. How would the introduction of CTN improve port efficiency? This appears to me to be another taxation which points to increasing the high cost of doing business in Nigeria.

There are a few questions here.

Why will CTN succeed in defeating underdeclaration if preshipment inspection did not achieve that goal? The CTN will be issued by an appointed agent. You cannot write a CTN without inspecting to confirm what has been stuffed into the container. Clean Reports of Inspection were issued at foreign ports by appointed agents during the preshipment era. I’m not sure I understand why this will be different. During the days of preshipment inspection, a Nigerian company once received a container that had in it goods not meant for that company. But the container had supposedly been inspected and a clean report issued. The organisation to issue the CTN has to be present at the ports of embarkation which are scattered all over the world. Who will pay for this worldwide service? Or are we going to restrict all imports to Nigeria to specific ports abroad?

If the exporter abroad has to incur any expenses in getting the CTN, you can be sure it will be passed on to the importer. How will the NSC prevent this?

At what point does the issuing agent verify that the contents of the container tally with the note to be issued? At the embarkation port? At the factory? At the consolidators? Shipping companies are generally protected by the clause ‘said to contain’ when they hand out containers to shippers to stuff with the export cargo. How does the NSC intend to deal with this?

How will this CTN deal with corruption at the Nigerian end? How will you write a CTN for a container stuffed with rejected heterogeneous items? If you are aiming to stop trade fraud, then you must ensure that all imports follow the Form M procedures and prosecute all cases of concealment and/or false declaration of imports.

There are a series of questions to be addressed and it does not seem that NSC has taken time to look at these issues before pushing for the CTN.

 

Can you clarify the concept of general merchandise?

What I mean by that is that in the shipping world, whenever you want your cargo moved from point A to point B and then you flag the port that you need their services, they always, if it is a categorized cargo, they would always send you a container and therefore, when they do, you are to stop the container and tell them what it is that you are carrying and in the preparation of the bill of leading and all the documentations that will accompany that cargo. They clearly state these clauses. So, one of these clauses is what? General merchandise. But of course you know that general merchandise could be anything. You are really required to be specific as to what it is that constitutes general merchandise. That is what I mean by that. We also have the one we call freight of all kinds. Now if you go to the port and take some time off to look at some of the containers during physical inspection, you will probably notice the way they are stuffed, particularly the ones that come without Form M, but come with all sort of things and these are the things we call heterogeneous mix of items. Those could go under general merchandise, that is perhaps how they would describe them or say goods or foodstuffs like they do. But actually here, it is simply that if you have such imports coming into the country, how are you going write the CTN? I have seen a container that contains close to about fifteen different items; used items and so on. Do you write used items or do you write general merchandise?

What is it you are going to put on the CTN? So how will we deal with that? That is the point. How will we categorize those things? What are we going to write to be contained in the CTN for such kind of items? It is a lot easier if you are just importing a heterogeneous set of cell phones so we all know it is cell phones, so you can write that. We need to know how they intend to do this. So we can then figure out if this will really attract some cost or not.

My fear is simply that if they compel the exporter or the shipper abroad to ship, if they compel them to really include the cost of the CTN, the importer here will not know. He would merely take it up as part of the cost of the importation.

So the question invariably therefore is, we are paying for it. So how would the Nigerian Shippers Council stop this from happening? Because if you say that we are not going to make payment for this, how will we stop it from happening?

 

Are you saying that CTN will increase the cost of doing business at Nigerian ports?

CTN will add to the cost of doing the business into the country. That point is clear. CTN will not facilitate trade flows because what facilitates trade flows are essentially the processes and procedures that we have in place.

 

How about security, will CTN boost security?

That was the main purpose for the developed economies that had this experience of terrorist issues to really introduce CTN. So, you have to call it what it is and do not tell people that it will facilitate trade flow or that it would check corruption. It actually came up as a result of security issues and challenges to be able to track a container, track what is in that container so that before it arrives, you have a clear picture of what is in that container. But I tell you that the same information that you have in the bill of leading and in the manifest would also be transmitted electronically to the destination country. But of course, every security instrument that may be introduced in the maritime industry has its cost. And therefore, people would be prepared for the sake of our country and for the sake of the port and citizens of this country; we must bear the cost of introducing a CTN to check against that but not to tell the people that CTN will encourage trade. Call it exactly what it is. It is an instrument for security purposes not necessarily for improving trade.

 

How much did NPA make while implementing CTN?

An article published in Newswatch of Sunday 20th June 2010 reported that NPA collected 150 euros per container (TEU) under the scheme. The report showed that between September 2009 and April 2010, NPA realized 1.59 million euros or N380 million from the scheme.

 

 

Do you think CTN will stop or reduce the physical examination of cargo by Customs?

Customs already has its own processes and procedures which its officers apply to imports and exports. CTN will not change that. It won’t stop physical examination at all.

 

What is your advice for Nigerian Shippers Council under the circumstance?

My advice to them here is simply. They should study this whole CTN procedures, identify clearly the objectives of their reintroducing the CTN and then, figure out clearly if it is really worth their effort or not. 

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