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See how Customs’ valuation policy on cars affects Nigerians

See how Customs’ valuation policy on cars affects Nigerians

On February 2022, the Nigeria Customs Service (NCS) introduced a new valuation system known as Vehicle Identification Number (VIN) Valuation used in giving values to all imported used and new vehicles.

The valuation policy not only gave uniform tariffs to the same model of cars but also raised the amount importers and their agents pay as import duties to the government.

VIN policy also generated several controversies as freight forwarders claimed that it increased the import duties of cars by 300 percent. This had a 360-degree impact on Nigerians in several ways as many Nigerians now have to save for years to be able to afford a foreign used car.

Here are four ways that the new Customs valuation policy affects Nigerians.

Reduces age limit of imported cars

The introduction of the VIN valuation system by Nigeria Customs has gradually eased off the importation of very old fairly used cars popularly known as ‘tokunbo’ cars. It reduced the age limit of vehicles from the former 15 years to 12 years.
It also pegged the duty payable by cars not captured on the Customs system especially old cars at nine years.

This means that with the new Customs valuation system, all imported used cars ranging from 2000 to 2013 models that are not captured in the valuation system are expected to pay the same import duty as the 2014 model of that particular car irrespective of the year.

Giving an insight into how VIN valuation operates, Adekunle Oloyede, Customs area controller of the Tin-Can Island Port Command of Customs, said that vehicles that are older than 12 years cannot be seen on the Customs system.

According to him, Customs might be able to see the VIN of that particular vehicle in the system but there will not be any value for that vehicle.

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“In the first place, Customs is supposed to seize those kinds of vehicles but there is a clause in schedule three of the VIN policy which states trade, meaning that those vehicles may not fall within trade but for personal use. This is why the system will pick the value of the vehicle that the law allows.

“Last year, the system was picking 2013 import duty but this year, the Customs VIN Valuation system is now picking 2014. This automatically means that even if an importer brings in a 2008 model of car which has exceeded the acceptable age limit of vehicle, the system will give that car the value of the 2014 model of that same car to pay,” Oloyede said.

He said the Customs system does not have data for those outdated cars because they are meant to be seized, crushed, and use for other purposes but due to the economy of the country, Customs still allows cars from 2005 and 2007 instead of rejecting them totally, the system gives such cars value of 2014.

Raises tariff on imported cars

Since the introduction of the VIN Valuation system in Nigeria, the import duties paid on cars have increased tremendously.

For instance, a 2012 model car now pays as much as N1.2 million as import duty alone, and when the importer adds the shipping as well as the terminal charges, the cost of bringing in the vehicle would become mind-blowing.

Rilwan Amuni, a Customs licensed agent, said the amount required to clear a vehicle at the port is now more than the purchasing price of the vehicle.

He accused Customs of arm-twisting the clearing agents and dealers to generate revenue for the government.

He added that the vehicle identification number valuation system was technically used to increase the import duty on vehicles coming into the country.

Inflate prices of cars

After the introduction of Customs’ new valuation policy, the prices of foreign used cars in Nigeria went up in some cases by as much as 300 percent.

For instance, the Volkswagen Golf car, which sold for between N400,000 and N450,000 in 2015/2016 now goes for N2.4 million and N2.6 million; the foreign used Toyota Camry model car which used to go for between N750,000 and N850,000 in 2015/2016 now goes for between N3.5 million and N3.7 million.

While foreign-used Honda Accord car that used to go for between N750,000 and N800,000 within the same time now sells for as high as N4.5 million and above.

Only 9 years old cars can receive a rebate

Prior to the introduction of VIN valuation, car dealers thrive on importing accident vehicles, which enables them to pay affordable amounts as import duty.

Here, Customs gives such vehicles duties with about a 30 percent rebate in addition to the depreciation value of the car in question depending on the age.

Now, bringing accident vehicles is no longer attractive as most of those cars no longer enjoy rebates from depreciation value except if the age of the car falls within nine years – 2014 to date.

Confirming this, Oloyede said Customs do not give depreciation value on vehicles that are no longer acceptable for import.

“For vehicles within the acceptable age from 2014 and above still get a rebate from the depreciation value. The VIN Valuation system is programmed in such a way that nobody needs to touch it but on December 31, 2023, it will automatically base the age limit from 2014 to 2015,” he said.

Oloyede said that Customs does not use benchmark value but transaction value according to the general agreement on tariff and trade.