Critical Analysis of Nigeria Customs Value Adjustments by Tokunbo Olubodun

The latest changes in the operational methods of Nigeria Customs concerning the valuation of imported goods hark back to earlier times when values were arbitrarily assigned to consignments, ignoring actual transaction values. This practice, known as benchmarking, was problematic, particularly since the previous Customs and Excise Management Act (CEMA) did not adequately reflect Article VII of GATT. With the implementation of the NCS Act, 2023, such methods should now be obsolete and considered unlawful.

According to Section 69 of the NCS Act, 2023, the fundamental basis for determining the customs value of goods is the transaction value, defined as the price actually paid or payable for goods sold for export to Nigeria. However, it has become commonplace for officers in the service to manipulate the documented transaction values upwards, often without considering the adverse implications for merchants, the economy, and national security.

The authors behind the Pre-Arrival Assessment Report have expanded their discretion in assigning values to imported goods, frequently relying on third- party websites for these figures, which are often arbitrary. They disregard the actual prices documented by overseas manufacturers or trading partners, justifying their actions by citing directives from superiors.

This operational conduct suggests that Customs officials believe all importers are dishonest in declaring their values, implying that they are complicit in under-invoicing when, in fact, the officers themselves may be instigating the far more damaging practice of over-invoicing. While these officials assert that they are acting to enhance government revenue, their actions facilitate capital flight, potentially funding terrorism, while also depriving Nigeria of its essential investments.

Additionally, such practices contravene section 69 of the NCS Act 2023, as previously mentioned, introducing illegality into the system. This behavior fosters an environment ripe for personal gain, where the costs imposed on companies vary significantly based on personal relationships with Customs officials and what they may be willing to offer in terms of inducement.

Currently, the declared prices for commodities such as Polypropylene Homopolymer, Copolymer, and various types of Polyethylene fluctuate between $1,000.00 and $1,200.00 per metric ton—fixed by officers—far exceeding the market rates ranging between $800.00 and $950.00. These prices vary depending on whether they originate from manufacturers or intermediaries and are influenced by contractual conditions between importers and their suppliers.

To verify raw material prices affected by these customs interventions, it is imperative to refer to the invoices directly from the manufacturers (the ex- factory price). Local importers have the infrastructure and resources to source these materials directly, making their prices the correct reference for determining values during importation, rather than relying on discretionary and speculative numbers obtained from third-party websites with no connection to manufacturers or buying houses.

The personnel stationed at the PAAR Ruling Centre should refrain from arbitrarily raising item values, and any directives promoting such actions must be promptly revoked as they lead to extensive extortion and an uneven playing field for importers. Furthermore, these disreputable practices tarnish the image of Nigeria Customs on the international stage, given that these practices are detrimental to the integrity of the nation.

The management of Customs should leverage artificial intelligence to minimize human error and the biases inherent in human judgment, optimizing the clearance process. There should be a cessation of random benchmarking practices by officers, especially during pre-arrival evaluations, and importers should be empowered to contest value judgments at the post-clearance stage, where necessary.

The recent significant investment in Customs infrastructure by the government is undermined by the indecisive actions of leadership, raising questions about potential benefits derived from the status quo. Until September 2023, we benefited from the Price Verification System (PVS) established through trade reforms. This system significantly reduced deficiencies in customs valuation and curbed rampant under- and over-invoicing, as well as the accompanying extortion practices associated with value assessments. Its discontinuation has led many officials to assume the role of valuation experts, often resorting to third-party websites and exercising their discretion to arbitrarily assign values, all while dismissing genuine invoices from manufacturers and sellers.

The Manufacturers Association of Nigeria (MAN) has not alleviated the situation; they appear complicit, as stakeholder meetings result in no substantive changes. It would have been reasonable to expect them to insist that Customs management address these illegal practices or potentially face legal action, given the clear laws that govern these matters.

To the Director General of the MAN, there are members ready to advocate for the rights of their community, and to the Comptroller General of Customs, there is a willingness to expose the misconduct of specific officers who detract from the reputation of Nigeria Customs and diminish the accolades the service deserves.

I urge the Comptroller General of Customs to promptly address this critical issue that poses significant challenges to the integrity and operational efficacy of the department.