Why FTZ investors are exempt from duties, others, by Customs

By Anthony Nwachukwu

To encourage economic expansion, investors operating in the nation’s Free Trade Zones (FTZs) are exempt from customs duty on locally sourced raw materials, and their end-products, when brought into the customs area, are freight-free to the extent of the percentage of local raw material(s) used.

However, the operators will pay duty on the foreign raw materials brought into the zone, while importers of the end-product will pay freight on its imported raw material component(s) if the product is brought into the customs territory.

This was explained over the weekend by the Deputy Comptroller-General of Customs, Excise, Free Trade Zone and Industrial Incentive, Katherine Ekekezie, during a stakeholder-sensitisation ceremony on procedure for goods manufactured in FTZs and destined for customs territory.

An FTZ is a special area within a country where foreign and local companies can import materials, manufacture goods, export products and perform services outside the regular customs tax and regulations.

Ekekezie said following complaints by FTZ operators, the agency has now developed a process for the release of goods manufactured, remodeled, stored or assembled in the zone and destined for Nigerian territories, adding that this was to promote the agency’s trade facilitation agenda.

“This process is to resolve all the complaints we have been getting in the free trade zones. It will unify every procedure of the Nigeria Customs Service, and all free trade zones in the country will abide by this same process. It is to make sure that customs duty is collected based on the imported raw materials.

“For example, if you use seven raw materials to produce an eyeglass in the free trade zone, customs is going to charge duty only on the raw materials imported. Assuming out of the seven raw materials, four were sourced locally and three imported, customs will collect duty only on those three imported raw materials.

“This is one of the incentives to the free trade zone operators since they are have brought their money and have come to make where the zone is sited better. Another is that, by the time the finished product is taken into the customs territory, it will not pay freight. Duty will only be paid for those imported raw materials.”

She described the incentive as mutual, since it requires the operators to also give something back. She added: “You must make sure that the environment where you are is developed.

“Some of them build schools and hospitals, and of course there will be massive employment for members of the local communities. These and many more are what we will benefit from the investors.”

She further expressed pride at developing this long-awaited process for the FTZ, stating: “We are no longer going to allow anybody to pay duty based on finished products.

“Neither are you going to pay duty on all raw materials imported into the free trade zones, because it is not all the raw materials that will be used for goods destined for customs territory – some of the products will be used right in the zone, while some will be exported, so they won’t need to pay duty.”

More so, Ekekezie explained that companies in the FTZ cannot source Form M since they are not indigenous, adding: “Once you are within the free zone, you are not supposed to source Form M and customs will also not require Pre-Arrival Assessment Report (PAAR) from you.”

However, “the importer taking his goods into the Nigerian market (from the FTZ) will source Form M, and it will capture the data showing the full product produced, and all the raw materials used in producing the end product in percentages. The importer is the one responsible for the procurement of Form M and PAAR.”

On his part, the Customs Area Controller, Apapa, Compt. Yusuf Malanta, has stressed that sensitising stakeholders and training customs officers on the new procedure are important to the agency’s ongoing drive towards making all its procedures effective and efficient for service delivery at par with international best practice.

This will also help to streamline the FTZ process and procedure by providing an enabling business environment for investors and other stakeholders in line with the agency’s trade facilitation agenda.

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