• Saturday, July 13, 2024
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Planned reform of container regime to save over N1.7bn yearly

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Importers, including manufacturers that depend on the nation’s seaports to do business, will soon get some relief as the Federal Government has started perfecting plans to reform the container management regime in Nigeria.

Shipping companies collect container deposit before releasing the containerised cargo to the consignee to serve as risk mitigation for eventual loss, damage, abandonment or detention of the container beyond agreed period.

With this development, the Federal Government through the Nigerian Shippers’ Council (NSC), the port economic regulator, would remove the practice of payment of container deposit by cargo owners, and replace it with insurance cover, a standard practice in developed nations.

A study by Shippers’ Council shows that efforts to return empty containers to the port have devastating effect on traffic management within Apapa and Tin-Can Island ports in Lagos. This is because almost every shipper wants to come to the port at the same time to return the container in order to retrieve the deposit, and this is why there is always chaos on Apapa roads.

By estimation, over N1.7 billion is paid by shippers annually to shipping companies as container deposit, and this comes with additional cost implication on companies doing business at the ports and consumers of the finished products.

In Nigeria, shipping companies charge container deposit of N100,000 for 20-foot container going to warehouses in Lagos and N200,000 for those going to warehouses outside Lagos. They collect N200,000 for 40-foot container designated for warehouses in Lagos and N400,000 for those going to warehouses outside Lagos.

Deposit for refrigerated containers cost N525,000 for 20-foot and N900,000 for 40-foot, while refunds take longer despite Shippers’ Council four-day policy.

Giving insight into the plan, Hassan Bello, executive secretary, NSC, states that the Council wants to stop the collection of container deposit and replace it with insurance cover, because Nigerian shippers spend a lot of money on the payment of container deposit.

“We have initiated discussion with the regulator of the insurance industry, which is the National Insurance Commission (NAICOM), and have set up a committee that is looking at all these issues. If the Council receives the support of stakeholders container deposit would be abolish by the end of first quarter of 2021,” Bello says.

According to Bello, it has been near impossible for cargo owners to retrieve the deposit because the shipping companies have no holding-bay and roads leading to the ports are clogged, and all these make it near impossible for the importer to be able to return the container in good time.

“Collection of container deposit affects the cash flow of businesses, particularly the smaller businesses. In other countries such as China, Bangladesh, Hong Kong and Singapore, container deposit is done through insurance where the risk would not be allotted to the shipper. For instance, a shipper that pays N200,000 as container deposit can pay between N20,000 and N50,000 as container insurance cover,” he says.

“In some countries, no deposit is required rather letter of indemnity or guarantee is collected, while in Sri Lanka about $50 and $100 are collected for 20-foot containers and 40-foot respectively. In Cambodia $100 and $200 serves as deposit on containers,” he notes.

Tony Anakebe, managing director of Gold-Link Investment Limited, a Lagos-based clearing and forwarding company, who confirms that shipping companies collect advance demurrage from cargo owners before releasing the container to importers, attributes such to lack of trust on Nigerians to stick to the agreement of returning the empty container in due time.

“The bottlenecks in Nigerian ports create opportunity for shipping liners to milk Nigerians. For instance, the bad road situation makes it difficult for truck to have timely access in and out of the ports without delay. This deposit is supposed to be refunded to the cargo owner at the return of the empty container, but if the container over stays, the number of days would be deducted from it while the balance would be refunded,” Anakebe states.

He however notes that the situation has continued to increase cost of doing business for importers, who in most cases take bank loan to import, pay charges and duties on imports within a very little profit margin.

“Consumers are the most hit because these charges reflect the continued increase in the market prices of both locally manufactured and imported items,” he says.

Jonathan Nicol, president of Shippers Association of Lagos State, said in a recent presentation tagged ‘the Menace of Empty Containers in Nigeria,’ that maritime stakeholders were waiting anxiously for government’s firm and decisive action towards ridding our communities of empty containers, and banishing unholy traffic gridlock caused by containers littered on the streets.

“It is a threat to the port to accommodate over 2,000 loaded containers by the ship side. The combined weight can cause a deluge. The refusal of liners to export empty containers is a threat to Nigeria’s shipping trade. And when there is scanty space left due to deliberate refusal to evacuate their empty containers, the shipping lines will introduce ‘congestion’ charges against shippers,” he said.

According to Nicol, our communities are littered with empty containers, making life difficult for the communities and enabling the breeding of area boys and touts across our cities.

On the new regime, the Council is proposing that freight forwarders and logistics service providers could come together to set up a collective fund that would service as deposit for shipping liners. Under this scheme, Shippers’ Council could act as guarantor to all participants, and liners would no longer collect deposit from individuals.

According to Bello, to participate, shippers must subscribe to Liability Insurance Cover amounting to about N16 million to cover for container deposit, and each subscriber must contribute 1 percent of the liability cover, which amounts to about N160,000 per annum while other terms and conditions must be meant.

“This would facilitate adequate risk management in the port and insurance companies would know where to track containers to return them to the liners. It would definitely reduce the untold hardship shippers go through at the port,” he says.