• Wednesday, February 21, 2024
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BusinessDay

Manufacturers fear profit hit as PAAR traps raw materials at ports

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Manufacturers in the country are apprehensive that delays in the clearing process of goods at the ports, which are holding up their raw materials, will lead to shortfalls in their first-quarter bottom-lines as their production processes have been slowed down or brought to a halt altogether.

The slowdown of the goods clearing process at the ports is a fallout of the introduction of the Pre-Arrival Assessment Report (PAAR) by the Nigeria Customs Service (NCS).

Customs introduced PAAR on December 1, 2013 to overrule the Risk Assessment Report (RAR) formerly issued by Destination Inspection (DI) service providers. However, there have been systems bottlenecks in the transition from the RAR to the PAAR clearing procedures.

One of the components of the slowdown is the disconnect between the banks issuing ‘Form M’ and other clearing documents with the importers of consignments and the NCS headquarters.

BusinessDay checks show that imported raw materials of many big manufacturers are currently trapped at the ports while agents of the principals shuttle from office to office, in and outside the ports, in an effort to speed up the clearing process.

Sources close to the Manufacturers Association of Nigeria (MAN) say manufacturers have expressed worry that delays in obtaining the essential raw materials from the ports would result in their inability to deliver on their targets this quarter.

Ten weeks after the introduction of PAAR in compliance with the Federal Government directive to Customs to take over destination inspection operations, clearing of cargoes from Nigerian seaports has become more difficult for importers and their agents, a situation that has further increased the dwell time of cargo.

A source close to a big multinational brand that is into the production of Fast Moving Consumable Goods (FMCG) in the Nigerian market, who pleaded anonymity, said the company had over 60 containers of imported raw materials trapped in the port for over seven weeks, adding that the company was also battling with the repayment of bank loans on which interest is growing by the day.

Our source further lamented that the company was being required to pay millions of naira as demurrage to the shipping companies and storage charges to terminal operators due to no fault of theirs.

The delays at the ports, which in the long run slow down the production processes of the industrial sector, would affect the sector’s capacity to deliver on its target, said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), adding that some of the manufacturers who borrowed money from banks would have to bear with accumulated interest. All this would add to the cost of production.

“The impact of this delay on the manufacturing sector and importers generally would be negative. Therefore, Customs, shipping companies and terminal operators need to see a way to waive the accumulated demurrage for those concerned because the delays were not caused by importers and it would be unfair if they are compelled to pay for what is not their fault,” said Yusuf.

He said it was natural for the new destination inspection regime to have such transitional challenges, adding that the equipment handed over to Customs by service providers were not exactly in the condition they should be.

“We need to give them some time to be able to settle in properly and everything will be sorted out,” he said.

Rasheed Adegbero, outgoing director-general of MAN, told BusinessDay in a telephone chat that the association had moved to find out the extent of the damage brought upon their members by these developments at the ports.

According to him, when imported raw materials get stuck at the ports, it results in a stock-out of raw materials, which means that the internal stock level of the manufacturers will decrease, resulting to low production levels. “This is not good for the manufacturers’ business,” he said.

By:  AMAKA ANAGOR