ECOWAS Trade Liberisation Scheme: The Smuggling Tool Of ‘Hostile’ Neighbours

ECOWAS

 

For the federal government to have unabashedly proclaimed that illegal shipment of rice through Benin republic was killing the local rice industry after repeatedly claiming that it has stopped the importation of the commodity by up to 90 percent, it may have stumbled into inexorable proof that its previous claims of having stopped net  importation was less than true.

“Our problem is smuggling. As we speak, a neighbour of ours is importing more rice than China is importing. They do not eat parboiled rice, they eat white rice, they use their ports to try and damage our economy,” Audu Ogbeh, Minister of Agriculture, said recently in Abuja. Although, the minister did not name any of Nigeria’s immediate neighbours, there were only Niger in the northern frontier, Cameroun in the east and Benin republic to consider.

About three years ago, Nigeria had banned outright the importation of rice and shortly afterwards, the federal government declared self sufficiency in local production.

The reality is that as legal importation to Nigeria ceased, neighbouring countries such as Benin, Cameroun, Niger and others have seen their parboiled rice imports increase significantly. Ironically, these countries mostly consume white rice (another variant of the staple), whereas they import more parboiled rice, which, considering their population, can last them for a decade.

Benin Republic, for instance, with an estimated population of 11 million people imported 609,893 metric tonnes of parboiled rice from India in 2017, while Niger, with an estimated population of 21 million people, imported 98,179 metric tonnes, while Nigeria, curiously, with a population of 186 million imported only 8,726 metric tonnes.

Also, data by the Thai Rice Exporters Association shows that Benin Republic’s imports from Thailand from January to November 2017 stood at 1.64 million metric tonnes, a 32 percent increase from 1.24 million metric tonnes within the same period in 2016, and an increment of 104.45 percent from 805,765 metric tonnes exported to Benin republic in 2015. Cameroun also imported 663, 667 metric tonnes of parboiled rice from Thailand between January and November 2017, a 47.64 percent increase from 449, 513 within the same period in 2016, and 449, 297 metric tonnes in 2015.

There was no doubt that Ogbeh was referring to Benin republic whose nearby deep sea port of Cotonou has posed a huge challenge to both shipping and cargo traffic in Nigeria.

Authorities in the Francophone country has been leveraging on the ECOWAS Trade Liberalization Scheme (ETLS) protocol to act as a trading post for the shipping of goods destined for Nigeria. Under the terms of the ETLS, goods made in any country within the Economic Community of West African States trading bloc are traded almost duty free among member countries.

Concentrating mainly on consumables, including those not under prohibition, companies and individuals  import large consignments through Cotonou Port. With facilities within the port axis and active connivance of the government of the Republic of Benin, the importers repackage the goods with fresh labels falsely indicating they were manufactured in any ECOWAS country with Ghana and Cote d'Ivoire being their preferred choice.

The goods are then loaded on trucks and driven into Nigeria as goods that qualify for special treatment until the ETLS protocol.

When the scheme was initially adopted, only agricultural, artisanal handicrafts and unprocessed products were covered. However, in 1990 further agreement was reached and industrial products were approved to take part in the scheme with a caveat.

Under its rule of origin, only industrial goods with at least 60 percent local content or 30 percent value added goods could benefit from the 0.5 percent levy that effectively eliminated import duties.

In the spirit of the ECOWAS protocol, while Nigeria evolved policies to prop up the fortunes of her real sector, she always exempted goods covered under the ETLS. Thus, when tariffs are reviewed to discourage the importation of luxury goods or the goods local manufacturers are adequately producing, the federal government usually exempts goods deemed to have been made by any ECOWAS member country by retaining the payment of just 0.5 percent levy as stipulated by the protocol.

Similarly, even when an outright ban is imposed on any product, the Nigerian government always ensured that any good labeled as made in the sub-region got special treatment stipulated under the ETLS.

In a recent report on the francophone country, Reuters described Benin as a "warehouse state" because it acts as a smuggling hub for goods bound for Nigeria. According to the World Bank, smuggling is big business in Benin, accounting for 20 percent of Gross Domestic Product (GDP). But on paper, there is little trace of the trade. The government of Benin officially records Nigeria-bound imports as being for domestic consumption, the International Monetary Fund (IMF) said in another report. But in reality, more than 80 percent of the goods entering Benin are ultimately re-exported to Nigeria.

Elaborating on the adoption of under hand tactics to undermine Nigeria as a state policy, Reuters stated in a report published in March 2017: "This (deceptive classification of imports) has the advantage of concealing the scale of the business from Nigeria, which has accused Benin officials of undermining its laws. It also allows Benin to collect VAT and other fees on the imported goods.

"Officials turn a blind eye to secret canal networks dug to ship goods across the lakes and lagoons of the border region, as well as the bribes sometimes paid to let them through, residents say. They do the same for cheap Nigerian fuel coming the other way, often ferried into Benin in jerrycans on small canoes."

Also in a recent report, the World Bank put the value of goods smuggled into Nigeria through Benin at over $5 billion yearly. Calling the situation a "headache" for Nigerian authorities, the bank also says the loss in customs revenue from the figure is over $400 million annually.

Rice importation from Thailand into Nigeria had a diametrical relationship with that of Benin Republic, crashing by 91 percent from the 2015 record of 644,131 tons to just 58,260 tons at the end of 2016.

Coming at a period that the federal government enforced policies to curtail rice importation,  a policy backed by the Central Bank of Nigeria's denial of foreign exchange allocation to fund rice importation, government's worst fears of a concerted collaboration between unscrupulous businessmen and Beninoise authorities to scuttle the enhanced local rice production programme may have been confirmed.

Reuters called it a state policy of "secretly re-exporting goods it has not produced."

 

What ECOWAS Trade Liberalisation Scheme Says

ETLS is the main tool for promoting West Africa as a free trade area. It permits the free movement of goods originating or produced in ECOWAS member-states by eliminating tariff and non-tariff barriers (customs duties, quotas, prohibitions or any such restrictions). This is to facilitate the easy circulation of ECOWAS originated products within the community.

 

CATEGORIES OF GOODS UNDER THE SCHEME

The following categories of goods can benefit from ETLS, provided they originate from the ECOWAS region:

 

Agricultural goods:

Livestock

Unprocessed goods

Artisan handicrafts

Industrial goods

The following goods do not require an ETLS Certificate of Origin to be traded duty free within the region but with the appropriate sanitary certificate from the Nigeria Agricultural Quarantine Services:

 

Agricultural goods

Artisan handicrafts

 RULES OF ORIGIN

If an exporter wants to trade industrial goods duty free within the region; he/she needs an ETLS Certificate of Origin to prove that the product originates from the ECOWAS region. To get this certificate, the product must comply with one of the following rules called Rules of Origin. These rules determine whether an industrial product can be classified as originating from the ECOWAS region.

 

Rule 1: Wholly Produced Goods

Goods are regarded as wholly produced within ECOWAS, if at least 60% of their raw materials used in their production originate from the ECOWAS region.

 

Rule 2: Change in Tariff Heading

The World Customs Organisation has developed a Harmonised Commodity Description and Coding System known as the HS System which provides a standardised system for classifying traded products for the purpose of charging customs duty, although every country is allowed to charge its own

tariff rate. The HS system uses number codes to classify products under different chapters, headings and subheadings. An exporter's finished product will fall under a specific "Chapter" and "Heading" and in some cases a "Sub-heading" in the HS coding system. If the finished product was manufactured with the exclusive use of materials which are classified under a different "Heading" from that of the finished product, it can be traded duty free.

 

Rule 3: Value Added Criteria,

If the materials used in producing the product receive a value addition in the production process enough to form at least 30% of the ex-factory price of the finished goods, the good are considered as originating from the region and can be traded duty free within the region.

     

PROOF OF ORIGIN

A harmonized ECOWAS/UEMOA Certificate of Origin is given to exporters as Proof of Origin and is issued by an appointed recognized institution in each member state. In Nigeria, the National Association of Chambers of Commerce Industry, Mines and Agriculture (NACCIMA) is responsible for issuing the Certificate of Origin.

 

PROCEDURE FOR OBTAINING A CERTIFICATE OF ORIGIN (CoO) IN NIGERIA

1. The exporter obtains an application form from NACCIMA.

2.  The exporter fills the CoO application form providing details of his/her enterprise and the export transaction for which the CoO is sought.

3. The form is submitted along with supporting documents and payment of processing fees to NACCIMA.

4. A CoO is issued to the exporter upon verification and approval by the National Approvals Committee (NAC).

COMPOSITION OF THE ETLS NATIONAL APPROVALS COMMITTEE (NAC)

In order to ease the process for approval of industrial products for ETLS, the National Approvals Committee (NAC) was created in each Member State of ECOWAS. In Nigeria, NAC was inaugurated in 2004 and its members are composed from the following ministries, agencies and organisations:

Ministry of Foreign Affairs (MoFA) - as Chairman

Federal Ministry of Industry, Trade and Investment (FMITI)

Federal Ministry of Finance (FMF)

Nigerian Export Promotion Council (NEPC)

The Nigerian Customs Service (NCS)

National Association of Chambers of commerce Industry, Mines & Agriculture (NACCIMA)

Standards Organisation of Nigeria (SON)

National Agency for Food Drug Administration & Control (NAFDAC)

Manufacturers Association of Nigeria Export Group (MANEG)

National Office of Technology Acquisition Programme (NOTAP)

 

ROLE OF NAC

NAC is responsible for approving companies and products that meet the originating product criteria. NAC examines, screens and processes applications submitted by applicants for C o O.

It also embarks on factory inspection visits to verify information provided by applicants. Upon verification, the NAC approves or disapproves based on anyone of the criteria of rules of origin cited above. Approvals are then forwarded to ECOWAS Commission for confirmation and onward communication to other member states.

 

ETLS ACCOMPANYING DOCUMENTS FOR MOVEMENT OF GOODS WITHIN ECOWAS

 

A product imported or exported under the ETLS must be accompanied by the following documents (among others):

ETLS Approval Letter issued by the ECOWAS Commission through the

Ministry of Foreign Affairs.

ECOWAS/UEMOA Certificate of Origin provided by NACCIMA.

ECOWAS Export Declaration Form issued by the Nigeria Customs Services.

 Once these documents have been confirmed by the Customs authorities, and relevant permits shown, the goods can enter the importing country duty- free and unhindered.