Ending Excessive Charges by Shipping Companies

Eromosele Abiodun examines claims by customs agents that shipping companies and terminal operators’ charges on storage and demurrage contravene Sections 20, 31 and 97 of the Customs and Excise Management Act

International shipping is a complex subject that contains many variables. Proper handling paves the way for a reliable and cost-effective management of ocean freight. That is regardless of whether an importer ships one container now and then, several per month or more than 10 per day.

Many businesses depend on viable international shipping to ensure the persistence of partnerships and clients and sustain profitability. Avoiding delays is critical to guarantee an uninterrupted operation. However, international shipments could face shipping delay charges resulting from various clearance issues. Sufficient preparation and understanding the different resulting charges in advance is key.

When it comes to clearance delays, importers, as well as exporters seem to throw around three terms interchangeably: demurrage, detention, and per diem. From common usage, it may seem like they all mean storage when they, in fact, do not. If your international shipment stays beyond a certain amount of allowed free time at a site, you face storage charges. That includes ports, airline terminals, rail facilities or a bonded warehouse. The storage fee compensates the facility for the use of their space and equipment, i.e. a container taking up space or blocking processing.

The amount of free days and the charge for storage will differ from one facility to another. This is often also based on the volume an importer or your freight forwarder is passing through the facility.
It is a norm the world over for steamship lines to charge demurrage, a fee to compensate for the use of their shipping containers.

Experts believe demurrage fees are in place to discourage using the provided containers for storage and to compensate for container usage.

“Before you pick up your international shipment, you must pay all demurrage charges in full. The fee may differ greatly from carrier to carrier and from port to port. You are granted a limited number of free days, depending on the carrier and the location. After your free time runs out, you will be charged demurrage for each additional day. These charges tend to increase per day after exceeding a certain amount of days,” said a top player in the maritime sector

The detention charge, he stated, usually applies to domestic trucking adding, “The trucking or drayage company bills you for the so-called detention of their trucker or driver in cases. This happens when the loading or unloading of your shipment or containers takes too long. Detention fees are billed at an hourly rate. You can usually expect a free time or grace period of around one to two hours for loading or unloading a container. But this will depend on whether it is a domestic shipment or destined for import or export.”

He added that per day applies when an importer require the use of equipment beyond a set amount of free time.
“Steamship lines and airlines charge this fee, and equipment include ocean containers and unit load devices (ULD). You have some free days, depending on the equipment and the carrier, before per diem kicks in. With imports, the charge applies to cargo leaving the arrival terminal. With exports, it applies to shipments leaving the departing terminal. Per diem fees accumulate until you return the equipment to the terminal of the port, rail yard dock or airline,”he stated.

Analysts believe terms of shipping delay charges, often used interchangeably, results in confusion when receiving bills for detention, demurrage and per day charges.

Nigeria’s Peculiarity
While it is a known fact that international shipping is intricate, the confusion in the Nigerian maritime industry over shipping companies’ charges has over the years raised dust with stakeholders at daggers drown as to who is right or wrong.

The problem assumed a new dimension recently with customs brokers plying their trade at Lagos ports declaring war on terminal operators and shipping companies over the N4billion demurrage accrued from the recently shelved strike by truck drivers.

For six days last month truck drivers shunned lifting of cargoes at the ports in protest over alleged extortion by security agencies. Resulting to over N4 billion accrued as demurrages and storage charges that importers had to clear.

THISDAY investigations revealed that N668 million demurrage was incurred daily for the duration of the strike which translated to N4billion.

The amount resulted to a running battle between clearing agents, importers on one hand and the service providers on the other.

While the clearing agents were calling for waivers over the strike period, the terminal operators remained indifferent.

According to a manager in one of the container terminals in Lagos, the terminal operators will collect the demurrage accrued during the period under review.

Vice President, Western Zone of the National Association of Government Approved Freight Forwarders (NAGAFF), Ibrahim Tanko, appealed to the shipping companies and terminal operators, on behalf of other freight forwarders, to grant them waivers on accrued demurrage.

He declared that the strike action was not the making of customs brokers, hence the need for the service providers to grant demurrage waivers.

“Is it our fault that the containers are incurring storage and demurrage? It is not the fault of the importers but the fault of the importers representative. Clearing agents are representative of importers and not terminal operators nor shipping companies. Why are we bearing the cost of someone else’s action? Don’t forget we are in business looking for profit. That is why we are here, “a manager in one of the terminal operators declared.

He added: “Why didn’t government call terminal operators, shipping companies to a meeting and give concession to cargo owners and we tell them that since we are also going to pay our lease fees like we use to pay every time, they should give us concession so that we can give others concession. If government is not giving us concession, why are we giving other people concession.”

“If people are saying truckers went on strike because of the roads, they incur demurrage and all that, it is government that is supposed to be discussing with us because if not, everyone can go on strike and they will ask us to give them waivers we can’t do that,” he said.

Reacting, the National Publicity Secretary of the Association of Nigerian Licensed Customs Agents (ANLCA), Joe Sanni, asked clearing agents not to pay the demurrage accrued to terminal operators and shipping companies during the strike period.

He said the Executive Secretary of the Nigerian Shippers Council (NSC), Hassan Bello, promised to visit terminal operators and shipping companies on how to reduce the storage and shipping demurrages.

Sanni, who quoted the Chairman of Tin-Can Island chapter of ANLCA, Segun Oduntan, said in a meeting with the shippers’ council boss, he promised to intervene.

He said: “Coming out from the meeting with shippers’ council, the chief executive will be going out on Monday to the terminals and shipping companies to tell them why they have to waive and refund if they collect any during the strike.”

He, however, charged clearing agents not to make further payments to on demurrage to terminal operators or shipping companies.

Before the truckers’ industrial action, some customs agents in the country had called on the federal government to urgently check the unlawful activities of shipping companies and terminal operators whose actions they said hinder imports and exports and violate the ease of doing business directives issued by the government.

Customs and Excise Management Act
In a petition addressed to Vice President Yemi Osinbajo, the customs agents alleged that the shipping companies and terminal operators’ charges on storage contravene Sections 20, 31 and 97 of the Customs and Excise Management Act that limit the days for rent charges and conferred authority to Nigeria Custom to charge rent after specific days by the board.

The agents in the petition signed by National President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, stated that duplication of charges such as terminal delivery charges/ terminal handling charges, deposit repayment delays and process procedure that lack regulation of the economic interest in the port.

They stressed that there is the need for the federal government to intervene to address the cost of doing business by a total review of the procedure, process and cost in the ease of doing business.
The Presidential Enabling Business Environment Council (PBBEC), they added, should urgently address the following short falls, which is militating against our import and export trade that resulted to massive diversion of goods to neighbouring ports.

Also, the agents called on the federal government to use part of the seven per cent port development levy for the development of port access roads, trailer parks.

According to Amiwero, “The condition of the Tincan Island Port Axis of Apapa Oshodi express road leading to the ports is a death trap, big potholes and gridlocks resulting in loss of lives and continued destruction of loaded goods that always fall on cars, trailers and sometime persons.”

He said: “It is a complete setback to trading across borders (TAB) for ease of doing business on trucks that spend weeks to access and exit the ports which result to delay and rejection on most of the fragile export products in international market and high cost in import clearance.

“The Nigeria Ports Authority (NPA) is no more in port operation, the percentage collected from the seven per cent Port Development Levy should be used for the development of the trailer parks and port access roads.”

On the increase of revenue collection on the recovery of short levied duties on discrepant cargo as provided under Section 142 of Customs and Excise Management Act, he said: “The discrepant cargo, as covered under Section 142 of the Customs and Excise Management Act and the Import guideline paragraph J are non contraband goods with discrepancy, which is allowable for treatment and issued with demand notice (DN) Section 142-(2).

“Recovery of Duties states: Where any duty has been short levied or erroneously repaid, then the person who should have paid the amount short levied or to whom the repayment, has erroneously been made, shall on demand by the proper officer, pay the amount short levied or repay the amount erroneously repaid as the case may be. Any such amount may be recovered as if it were duty to which the goods in relation to which the amount was so short levied or erroneously repaid were liable.”

Amiwero also called on the government to address multiple checks and delays of clearance by Nigeria Customs Service.

He said: “The process of clearance is associated with multiple interventions of various alerts headquarters Abuja, CIU, Valuation Gate etc that takes days and increase the cost and time in contravention of WCO Kyoto convention on simplification and harmonization of Customs procedures.

“The Customs procedure should comply with WCO Kyoto convention and (FAL) Convention of (IMO) for Minimisation, harmonisation and simplification of Customs procedure with regards to various checks after release from the Port, (FOU), CG Squad in line with international best practice of One-Stop-Shop process.”
The Acting President, Yemi Osinbajo had in a bid to boost business activities in the country earlier in the year signed the ease of doing business executive order.

The effort was in the attempt to grow the country out of recession, stimulate economic activities and generally improve the business environment in Nigeria through promotion of transparency and efficiency.
Federal ministries, departments and agencies have since gone into frenzied activities in the bid to carry out the Executive Orders and exhibit compliance with a view to achieving the objectives of the orders. One of the fall outs of the executive orders is on port operations and this brought to mind the challenge of ensuring ease of doing business at the entry points vis a vis the subsisting issue of influx of sub-standard and harmful products of very low quality into Nigeria.

In 2011, then Minister for Finance and Coordinating Minister for the economy, Dr. Ngozi Okonjo-Iweala, ordered that agencies like NAFDAC, Standards Organisation of Nigeria (SON), Agricultural Quarantine Services should exit the Seaports. Prior to the pronouncement, all of the regulatory and security agencies have offices located within the seaports complexes.

The executive pronouncement then clearly directed that they all relocate their offices outside the ports and participate in cargo examinations on the invitation of the NCS. Outside this, no effort has been made by government to check the excesses of shipping companies and terminal operators whose activities seem to be undermining the ease of doing business directive.