A Desperate Double-Edged Sword Over Cargo Palletisation

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Cargo at the port

Although it was touted as the new standard in international shipping, the ground swell of opposition to the new policy and the scary amount of money that could potentially be lost by the Nigerian economy annually when it is adopted has got shippers trying to figure out the imperative for adopting a measure that may not have been subjected to the input of stakeholders.

In 2017, the federal government had decided to introduce the palletisation of cargoes and set January 1, 2018 as commencement date for its implementation. The policy was driven not by the desire to reduce the cost of doing business or to hasten the process of cargo delivery. Rather, it was inspired by the bid to improve the physical inspection of imported goods.

Instructively, the idea of the policy’s adoption came against the backdrop of successive cases of illegal importation of assault rifles shipped into the country through containers under false declaration.

Vice President Yemi Osinbajo

 

However, following the strident outcry from shipping companies, freight forwarders and shippers, the federal government postponed its take-off date to March 31, 2018 and slightly reviewed the policy.

The Presidential Enabling Business Environment Council (PEBEC) established by the federal government following Nigeria’s poor rating in the World Bank categorization on the ease-of-doing-business index made key recommendations including palletisation of imports, advance issuance of cargo manifests, reduction in documentation requirements and scheduling of joint physical examination by the Customs. The recommendations are aimed at facilitating seamless trade in the country and across the nation’s borders.

The Minister of Finance, Mrs. Kemi Adeosun, had drawn attention to measures to ensure drastic reduction in time spent on processing export goods and 24 hours clearance of cargoes imported into the country.

Kemi Adeosun, Minister of Finance

 

To the providers and users of shipping services, palletisation is the least of the challenges facing improved maritime operations in the country. They are of the view that the policy may cost Nigerian shippers about $60 million annually which will, in turn, negatively impact on end-users of goods palletised.

The General Manager (Shipping) of SIFAX Group, Mr. Henry Ajoh, who represented the Executive Vice Chairman of SIFAX Group, Dr. Taiwo Afolabi, at a recent town hall in Lagos, expressed fears over the implementation of the new policy stating that “it cannot work in Nigeria”. According to Ajoh, what the ports need urgently is enhanced cargo examination system to facilitate ease of doing business.

He said: “We need scanners. Government needs to deploy technology at the ports for customs examination and release processes. That is the way to go. Palletisation takes us backward and cannot work in Nigeria.”

Mr. Todd Rives, Managing Director of CMA CGM – a leading container carrier operating in Nigeria – said that the policy will lead to the loss of over $60 million annually. He cautioned that prior to implementation, the policy must be thoroughly thought out by government.

Olayiwola Shittu, ANLCA President

According to Prince Olayiwola Shittu, national president of the Association of Nigerian Licensed Customs Agents (ANLCA), the palletization policy holds no benefit for the country. It will further breed corruption in the ports.

“The policy will be difficult for shippers because we are an import- dependent nation. Palletization will enhance corruption in the ports, as a good chunk of the internally- generated revenue in the port go into private pockets. Palletization should not be our priority; rather, let us look at how we can improve services at the ports,” he said.

Contrary to a possible ease of doing business at the ports, observers opine that the controversial policy will increase the diversion of Nigerian-bound cargoes to the ports of neighbouring countries where the policy is not in place.

“Without handling proper equipment at the ports, terminal operators cannot key into the project because most of the equipment at their disposal are obsolete”, Chief Boniface Okoye, Managing Director, Bonntex Group stated recently.

“If government continues with the palletisation policy, shippers will suffer and the cost of doing business in Nigerian ports will be high,’’ the President, Shippers Association in Lagos State (SALS), Jonathan Nicol, said while calling on the federal government the policy Nicol, however, said that the association expressed its concern so that government would not lose more cargo to the ports of neighbouring countries.

According to Nicol, some shippers have already left Nigeria as a result of unfavourable import policies.

 

“We expect government to restructure the entire maritime administration because shippers are facing a lot of challenges at the ports. “The Nigeria Customs Service generated N1.03 trillion in 2017, which showed that most operators at the ports did what was right,” he said.

He said that before now, shippers spent N50,000 on a truck trip from Apapa to Ikeja, saying that they now spend N350,000 as a result of bad port access roads. “If government continues with the palletisation policy, shippers will suffer and the cost of doing business in Nigerian ports will be high,” he added.

In a bid to assuage importers’ opposition to its new cargo import policy on palletisation, the federal government shortly before the initial January 1, 2018 commencement date shifted it to March 31 and relaxed the rules guiding the policy and urged all importers to comply with international standards and stacking prescription by the original manufacturers of products.

In a statement, the Federal Ministry of Finance, said the decision was sequel to a series of complaints and requests received from the trading public in respect of the palletisation policy contained in the 2017 revised import guidelines to further strengthen the ease of doing business drive.

The statement by the Director, Home Finance, Olubunmi Siyanbola, on behalf of the Minister for Finance, Kemi Adeosun, said: “All container cargoes coming into Nigeria should comply with international standards for packing/stuffing and loading into containers; and specific packing and stacking standards prescribed by the original manufacturer of the product.

“Dead-pile loading, or loading without pallets of containerised cargoes, is acceptable provided it conforms to the criteria outlined above. With the exception of used automobiles and heavy machinery, any loose packed new or used items without manufacturers’ loading and packing prescriptions should be packed in crates or cartons atop pallets accordingly.”

The reviewed guideline stated that all containerised cargoes should be loaded neatly in a manner that will promote safety in handling and facilitate speedy examination and clearance at the ports by the Nigerian Customs Service.
The minister warned that failure to comply with the provisions designed for seamless implementation of the palletisation policy, the Nigerian Customs Service (NCS), “shall invoke sanctions as prescribed in the Addendum to the 2017 revised import guidelines issued by the Federal Ministry of Finance.”


Adeosun, however, added that the grace period given up to March 31, 2018 for exemption from palletisation policy of goods for which Form “M” had already been established prior to the effective date of January 1,2018 for full implementation of the policy, remained in force.

And endorsing the proposed policy at a recent forum in Lagos, Executive Secretary of the Nigerian Shippers’ Council (NSC), Mr. Hassan Bello, said that palletization of cargo has become an international practice Nigeria must not shy away from. He insisted that as a regime, it will enhance physical examination of cargo by the Nigeria Customs Service (NCS). Bello, however, noted that there are cargoes that cannot be palletized even as he promised that the Council would always listen to stakeholders and take their concerns to the relevant government authorities.

But that assurance has not changed the dynamics within the shipping community. The Manufacturers Association of Nigeria (MAN) expressed discontent with the policy. Director, Corporate Affairs, MAN, Mr. Ambrose Oruche, said it will only increase the cost of doing business in the country.

“The intention of the government is to ease the cost of doing business, by making the inspection of consignment easier; however, the palletization policy will only increase the cost.

“If wooden pallets are used, treatment costs will be incurred; meanwhile, steel and plastic pallets are expensive. Who then bears the cost of the pallets from the exporting country?   If the cost is imposed on the manufacturer, who imports the raw materials, they will eventually transfer the costs to the consumers.”


As the new March 31 implementation deadline appears sacrosanct, industry watchers nevertheless, hail federal government’s eagerness to reduce the cost of doing business in the ports. But the stakeholders are worried that implementing several policies formulated in the past has been problematic because ab initio, government never made provisions for inputs from relevant industry stakeholders while formulating them. Consequently, they have failed to achieve the purpose(s) for which they were put in place.  As recalled at a recent forum in Lagos, such failed policies in the past include the Pre-Shipment Inspection Policy (PSI), the Destination Inspection Policy (DI), the policy on Professional Import Duty Administration (PIDA), Cargo Scanning Services through Service Providers, National Automotive Policy, Cargo Tracking Note, Advanced Cargo Information System (ACIS), among several others.

Contrary to government’s position, only a drastic reduction in the rate of physical examination will enhance the ease of doing business and reduce the cost of doing business in the port. Palletization policy will promote manual approach to cargo examination at the detriment of technology-driven processes. Stakeholders note that the federal government should pay more attention to germane issues such as the provision of scanning machines, automation of customs processes and repair of the port access roads to drive the ease of doing business in Nigeria.

There are also health and safety hazards over the pallets that will be brought into Nigeria from various countries of the world. Without putting in place necessary control measures before making palletization compulsory, Nigeria risks becoming a dumping ground for all manner of pallets. This will be very difficult to manage as is the case presently with abandoned empty containers which are part of the reasons for the perennial Apapa gridlock. Imported wooden pallets that are not well treated before use may also become conduits for dangerous foreign organisms in the country which could pose significant health hazards; plastic pallets may be difficult to manage and thus constitute environmental hazard for the country.

EXPLAINER:
THE DYNAMICS OF PALLETISATION

Palletisation is a policy initiative of the Presidential committee on ease of doing business in Nigeria which stipulates that all containerized cargoes coming into the country must be palletised. This is to assist officers of the Nigerian Customs Service in providing an easy and faster way to physically examine containers being brought into the country.


Pallets are plane (flat) structures utilised in cargo container ships for supporting goods or containers. Cargo consignments are piled atop these structures, the process being referred to as palletizing.

Palletising is regarded to be a sure-safe way of dispatching marine cargo consignments, just as palletised cargo ships are held in high regard in the shipping sector across the world. The process helps in easy handling and storage of goods on ships.

Alongside the sizing of the pallet structures, the material used to build the structures also becomes important. Utilisation of inferior materials could result in detrimental shipping, which would affect the trustworthiness of the shipper and the consignor, thereby affecting his credibility.

The most ordinarily used component for shipping pallets is wood. There however are various regulations that need to be addressed before a wooden pallet is approved for utilisation. Though qualitatively, the wood needs to be of a softer variance, it’s imperviousness to attract contagion is equally mandatory.

Thus wooden pallet structures are disinfected and coated with necessary varnishes to prevent contagion. Apart from wood, steel, paper, and even plastic are used as viable structures for cargo consignments’ palletising.


Although the government is yet to advice shippers on the dimension applicable for pallets coming to Nigeria, the dimension is usually 40’ x 48’ and has a capacity to carry goods as heavy as 1,000kg. approved size, weight capacity and nature of material to be used as pallets.

Items exempted from palletisation are categorized by weight, including heavy metals such as flat steel sheets, aluminum; mobility which refers to commodities that can roll by itself such as motor vehicles, mobile gas cylinders, firefighting equipment, and container space whereby adequate space of at least 2ft is between each cargo for ease of movement inside the container such as earth moving tyres. Also exempted are fragile goods such as large, high precision diagnostic health machines


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