1.

0 INTRODUCTION

Pre-shipment activities as defined by the World Trade Organization (WTO) encompass the

verification of the quality, quantity, price including exchange rate and financial terms, and the

customs classification of goods to be exported to the country of the user members1. Pre-shipment

Inspection as a policy measure would appear to be inconsistent with current tidal wave of economic

deregulation as it exhibits some element of control. However, even at the international level, the

relevance of pre-shipment inspection of imports is duly recognized, especially for developing

countries, to protect them against importation of unwholesome, highly inflated or low quality

goods. Thus, the WTO has provisions for Pre-shipment inspection to ensure that pre-shipment

inspection does not hinder trade and that the operations of the pre-shipment inspection agents are

transparent.

In Nigeria, one of the topical issues in economic discourse is the pre-shipment inspection of

imports. This is understandable in view of the high dependence of Nigeria on imports. Both the

big and small scale importers have in recent years questioned the continued relevance of pre-

shipment inspection of imports. The focus of this work shall be to critically analyze the legal and

institutional framework for the Pre-shipment Inspection Scheme, the operation of the Inspection

agents and the remedies available to the importer.

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Article 1, Agreement on Pre-shipment Inspection, Uruguay Round Agreement

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2.0 HISTORICAL BACKGROUND TO THE PRE-SHIPMENT INSPECTION

The tremendous increase in demand for import following the sharp increase in oil prices in the

1970s resulting in unexpected wealth in Nigeria provided opportunities for unscrupulous overseas

suppliers and their Nigerian collaborators to engage in all sorts of malpractices which resulted in

considerable loss of foreign exchange. Such malpractices included importation of low quality and

time-expired goods into the country without regard for the health and safety of the ordinary

citizens. The country virtually became a dumping ground for all sorts of goods with little or no

consideration for the health hazards posed by the importation of unwholesome goods. As a result

of the massive importation, the country’s external resources were depleted.

The immediate reaction of the authorities was to tighten Exchange Control measures. As part of

the measures, the central Bank of Nigeria (CBN) introduced an interim arrangement in 1977 to

review the documentation for foreign exchange applications with a view to forestalling overpricing

of imported goods as well as other forms of malpractices. This initial effort was targeted at such

commodities as sugar, rice, wheat, canned fish and cement2. However, because of the specialized

nature of commodity price intelligence which was beyond the scope of the CBN and coupled with

the insufficient information on the prices of imports available to it, the effort of the Bank did not

yield the desired result.

A study group on buying commission set up in 1975 together with the 1978 budget speech gave

further insight into the proposed pre-shipment inspection scheme. It emphasized the introduction

of import supervision before shipment. This is a scheme whereby a competent company and

reputable international institution will be retained by the Federal Government to examine all

2
O.K. Anifowose, The Nigerian Experience in Pre-shipment Inspection, Nova Associates, Lagos, 6/11/97 at p.2

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shipments of certain categories of goods destined for the Nigerian market before shipment from

the countries of manufacture. The task of the company will be to confirm that the goods are in

accordance with the specifications of the importer and the prices being charged are reasonable and

competitive.

Thus, the Pre-shipment Inspection of Imports Decree No. 36 of 1978 was promulgated to give

legal backing to the Comprehensive Import Supervision Scheme (CISS) under which the Societe

Generale de Surveillance (SGS) was appointed as the sole Inspection Agent with effect from

January, 1979. The arrangement with the SGS as the Sole Inspection Agent was only partially

successful, the main reason being that the company could not cope with the volume of involved in

pre-shipment inspection of imports in all countries of the world for a big country like Nigeria.

Dissatisfaction with the performance of SGS led to the termination of the contract in 1984 and the

appointment in its place of three new Inspection Agents namely: Swede Control/Intertek Services,

Bureau Veritas Limited and Cotecna International Limited. In April, 1910, SGS was reappointed

under the scheme and in 1996, ISC Services Limited was appointed as he fifth Inspection agent.

However, with the termination of the contract of the Messrs Cotecna International limited and SGS

in April 1997, only three Inspection Agents remain under the CISS Programme. The enabling

Decree for pre-shipment inspection was also reviewed with the abrogation of Decree No. 36 of

1978 and promulgation of Pre-shipment Inspection of Imports Decree No. 11 of 1996.

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3.0 COMPREHENSIVE IMPORT SUPERVISION SCHEME (CISS)

3.1 AIMS AND OBJECTIVES OF CISS

The Comprehensive Import Supervision Scheme (CISS) was designed broadly to assist the drain

in the country’s foreign exchange reserves and to ensure that the goods being imported are not

only in accordance with the quality, quantity and price quoted on the proforma invoice, but that

they also satisfy the import regulations in the country. To this end, the Federal Government signed

contracts with each of the pre-shipment agents appointed under the scheme. In 1988, the Federal

Government further increased the mandate of the agents to include verification and assessment of

import duty payable on goods imported into the country.

3.2 INSPECTION PROCEDURE

In order to achieve the stated objectives, the following procedure for inspection has evolved:

 Quality and Quantity Inspection

The Inspection agent is required to carry out a physical inspection of goods destined for Nigeria

on receipt of relevant Forms ‘M’ from the processing bank. Pre-shipment inspection is carried out

to the extent necessary to demonstrate that the quality and quantity of goods to be imported

corresponds satisfactorily with the description and specifications furnished on relevant import

documents. Inspection takes cognizance of such factors as manufacturing process, standards and

controls operated by the manufacturer in particular and those set for the production in general.

 Price Comparison, Evaluation and Verification

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The agent is also required to carry out a price comparison to ascertain whether or not prices

invoiced for the goods correspond, within reasonable limits, with the export prices generally

prevailing in the country of supply. The procedure also considers the acceptability of home market

prices, the competitiveness of the price as well as the identification and reporting of repatriable

commissions payable to beneficiaries in Nigeria.

 Verification and Assessment of Import Duty Payable on Import

Since April, 1988, the Inspection agent has been required to ascertain and calculate the import duty

payable on imports based on appropriate tariff and the Naira value of the goods on C.I.F. basis

using the applicable exchange rate as advised by CBN.

 Legality

The agent in carrying out its obligations under the CISS Agreement is mandated to recognize the

laws and regulations operating in Nigeria in general and the specific import regulations of the

exporting country in particular. This is necessary to ensure that goods being imported comply with

the legal requirements of the Nigerian Government as well as with the international trading

regulations3.

On completion of the Inspection exercise, the agent is required to issue an Import Duty Report

(IDR) based on the submission of the following documents:

a. Bill of Lading or Airway bill

b. Attested Seller’s Final Invoice

3
Ibid

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Where the result of the Inspection is unsatisfactory or there remains an unresolved discrepancy in

the course of Inspection, a Non-Negotiable Report of Findings (NNRF) is issued. This does not

permit the goods to be shipped. However, in the event that the goods are flagrantly shipped, the

importer would not be able to pay for the goods.

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4.0 THE PRINCIPAL OF THE PRE-SHIPMENT INSPECTION AGENTS

The Minister of Finance, on behalf of the Federal Government, enters into agreement with the

Inspection agents and mandates them to carry out surveillance and Inspection services on goods

imported into the country subject to specific conditions and operational guidelines. The ministry

therefore is the principal in the contract under the scheme and the Pre-shipment Inspection

agents are the agents of the Federal Ministry of Finance.

OTHER REGULATORY INSTITUTIONS

These agencies, together with the Federal Ministry of Finance, constitute the Technical Committee

or the Comprehensive Import Supervision Scheme as provided for in the Pre-shipment

Inspection of Imports Decree 11 of 1996 to assist the CBN in its general administration of the

scheme.

 Central Bank of Nigeria

The Pre-shipment Inspection Decree charges the Central Bank of Nigeria with the responsibility

for the general administration of the CISS. The CBN is the Chairman of the technical Committee

on CISS and it also monitors payment of customs revenues and other charges, collating of data on

import trade and producing appraisal reports on the activities of the pre-shipment inspection agents

and other trade related activities.

 Nigeria Customs Service

The role of the Nigerian Customs Service under the Scheme is principally to ensure that goods are

cleared in accordance with stipulated procedures and that appropriate duties are paid. It prevents

trans-border criminal activities such as smuggling and also enhances income generation.

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  Authorized dealers (banks)

With the introduction of the Second-Tier Foreign Exchange Market (SFEM) in 1986, banks

were given full authority to approve and allocate foreign exchange to their customers for eligible

transactions subject to prescribed documentation requirements.

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5.0 EVALUATION OF THE PRE-SHIPMENT INSPECTION SCHEME

The ultimate objective of the pre-shipment inspection of goods is to protect the interests of the

importer and the country at large. Despite the advantages of the scheme however, there are some

problems which require attention under the scheme. The scheme was primarily designed to address

the importation of obsolete, substandard and illegal goods. Unfortunately, a number of frivolous

Nigerians still continue to collude with their overseas suppliers to ship prohibited goods as well as

obsolete and reconditioned equipment and machinery imported as new items. Smuggling has been

seen to be prevalent as such goods are shipped in without the requisite pre-shipment inspection.

Furthermore, there have also been reported cases of wrong classification of imported items and by

implication wrong declaration of import duty payable. Delays in issuance and dispatch of IDRS is

yet another prevailing issue. Pre-shipment inspection itself does not guarantee the safety of goods

in transit. Malpractices such as piracy, pilfering, scuttling and other normally insurable risks

involved in shipping are out of the control of the Inspection agents whose functions terminate as

the goods enter the vessel.

These problems among many others resulted in the abolishment of the Pre-shipment Inspection

Policy, and in its place, the Destination Inspection policy.

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6.0 DESTINATION INSPECTION POLICY FOR IMPORTS

Nigeria aborted its pre-shipment inspection policy in favor of a Destination Inspection Policy for

Imports. Under this policy, all imports are inspected on arrival into Nigeria. The Nigeria Customs

Service (NCS) is currently in the initial stages of procuring scanning equipment which is expected

to scan containers in a more accurate and timely manner. By virtue of the Nigeria Destination

Inspection Import Guidelines, to receive clearance for goods imported into Nigeria, traders must

present a Bill of Lading, Commercial Invoice Exit Note, duly completed Form ‘M’, Packing list,

Single Goods Declaration, and a Product Certificate. Until recently, the importer was also required

to submit a Combined Certificate Value & Origin (CCVO) which contains the description of

goods, port of destination, country of origin, date of shipment, country of supply etc.4 However,

in line with international trading procedures and recommendations from stakeholders, the Central

Bank of Nigeria (CBN) reviewed its trade transactions guidelines and replaced the CCVO with the

simpler Certificate of Origin in April 2017. The revision also prescribes a 48-hour maximum

processing time from the receipt of application.

4
International Trade Administration, Nigeria - Import Requirements and Documentation (2018) retrieved on March
9, 2019 from https://www.export.gov/article?id=Nigeria-Import-Requirements-and-Documentation

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7.0 CONCLUSION

On the whole, that Nigeria is an import-dependent country is well known, It is therefore hardly

surprising that any action or policy statement relating to international trade is of immense interest

to a wide spectrum of the economy from consumers to retailers, importers and domestic producers

of goods and services. This interest is captured in no less a way by the seemingly unending policy

shifts by government in respect of imports supervision and ports administration. There have, as

such, been near cyclical shifts between pre-shipment inspection and destination inspection in the

last three decades. This tidal wave of change has been viewed by some as a reflection of

inconsistency in policy formulation and implementation on the part of the Nigerian government;

others, however, believe that the changes in policy are a culmination of factors that set the pace

for a dynamic environment. Whatever the interpretation, it is clear that government takes the matter

of import supervision seriously as a central part of its economic management policy

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REFERENCES

 Fidelis Tilije, Combating Financial Crimes and Related Customs Offences Under

Destination Inspection in Nigeria, All Africa (2004) retrieved from

https://allafrica.com/stories/200404090488.html accessed on March 9, 2019.

 International Trade Administration, Nigeria - Import Requirements and Documentation

(2018) retrieved on March 9, 2019 from https://www.export.gov/article?id=Nigeria-

Import-Requirements-and-Documentation

 O.K. Anifowose, The Nigerian Experience in Pre-shipment Inspection, Nova Associates,

Lagos, 6/11/97 at p.2

 Tobi Adenubi, Benefits of Destination Inspection of Cargoes, The Nigerian Tribune,

retrieved from https://www.tribuneonlineng.com/113941/ accessed on March 9, 2019.

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