The business potential in importing goods into Nigeria is immense, but the journey from the dock to the warehouse is fraught with regulatory pitfalls that even veteran business owners are prone to falling into.
Not only is the time wasted in customs clearance expensive, but the demurrage charges, confiscation of goods, and the penalties that may follow could easily eat into your profit margins.
List of 10 Costly Customs Clearance Mistakes Nigerian Importers Make
Here are ten mistakes that Nigerian importers commonly make.
- Undervaluing Goods to Reduce Duty
- Incorrect HS Code Classification
- Ignoring Pre-Arrival Documentation Requirements
- Failing to Obtain the Correct Permits and Licences
- Working with Unlicensed Customs Agents
- Neglecting to Reconcile Shipping Documents
- Overlooking Destination Inspection and PVOC Requirements
- Miscalculating Total Import Costs
- Importing Prohibited or Restricted Goods Without Due Diligence
- Not Partnering with a Knowledgeable, Reliable Freight and Customs Partner
1. Undervaluing Goods to Reduce Duty
It is very tempting to declare a low invoice value with the hope of paying less duty on imported goods, but this is not possible because the Nigeria Customs Service uses the WTO Customs Valuation Agreement as a standard. If low values are suspected, customs officers are empowered to reassess using the transaction value method or computed value in disputed cases.
The consequence is not just a reassessment of duty but also the imposition of surcharges and seizure of goods, as well as prosecution. The commercial invoice should reflect what was actually paid, including any commission, royalties, or assets that are part of the value.
2. Incorrect HS Code Classification
All products entering the country are assigned a Harmonized System (HS) code, which is an internationally standardized numerical system used to classify products and determine the applicable duty rate, VAT treatment, and import prohibition status.
Incorrectly classified products can have serious consequences, including paying the wrong duty rate or having the goods held at the port or subject to a post-clearance audit.
The penalty can be severe if the incorrectly classified product is also on the import prohibition list maintained by the Nigerian Customs. It is therefore essential to work with licensed customs agents who are abreast of the latest Nigeria Customs Tariff.
3. Ignoring Pre-Arrival Documentation Requirements
Nigeria operates a destination inspection regime, and a significant portion of the documentation must be in order before the cargo even arrives at the port. Many importers assume paperwork can be sorted out after the vessel docks—an assumption that costs them dearly in storage and demurrage charges.
The Form M, which is the foundational import declaration document opened through an authorized dealer bank, must be processed well ahead of shipment. Failure to have a valid Form M in place before goods arrive can result in the cargo sitting in a terminal while demurrage accumulates at rates that can run into hundreds of thousands of naira per day.
4. Failing to Obtain the Correct Permits and Licences
Products such as medication, foodstuffs, chemicals, electrical home appliances, and used automobiles require permits from NAFDAC, SON (Standards Organisation of Nigeria), the Petroleum Resources Department, and so on, prior to clearance.
This is one important detail that importers of such products usually miss and assume that the freight forwarder is going to handle, only to discover later that the products are quarantined until such regulatory procedures are carried out. However, the way to avoid such situations is to be aware of such requirements prior to ordering the products from the supplier.
5. Working with Unlicensed Customs Agents
This is because the Nigeria Customs Service requires licensing of agents, given the expertise required in clearing goods through the ports, as customs procedures and tariff schedules are constantly being updated.
Yet, many importers turn over their documentation for clearing goods with “connection men,” or individuals without any such licensing, in the expectation that the goods will clear quickly and at a lower charge.
More often than not, the opposite happens, and documentation goes astray, or in some instances, actual fraud is committed by collecting customs duty without paying it into the coffers.
6. Neglecting to Reconcile Shipping Documents
The discrepancy in the bill of Lading, commercial invoice, packing list, and customs declaration is one of the most avoidable causes of cargo holds. If there is a discrepancy in the description of cargo as stated in the Bill of Lading and that stated in the customs declaration, even if it is by a small margin, such as unit of measurement, product name, or quantity, it is enough reason to subject the cargo to examination.
The examination of containerized cargo can take days or weeks, depending on the nature of the cargo, which could be damaged beyond commercial value. All documents accompanying the cargo must be consistent with each other.
7. Overlooking Destination Inspection and PVOC Requirements
Nigeria operates a system of Pre-Arrival Assessment Reports (PAAR) through the NCS and the destination inspection scheme. It is mandatory for importers to obtain a valid PAAR before the goods are cleared.
In addition to this, for some products, importers may need to obtain a Product Certificate under the SONCAP (Standards Organisation of Nigeria Conformity Assessment Programme). Importers may not know about the SONCAP procedures or may think that the procedures are applicable only to large consignments, and when they arrive at the ports, they find out to their surprise that the goods cannot be cleared until the certificate is shown.
Since the SONCAP certificate is obtained from foreign-based certification bodies before the goods are shipped out, there is no way around the system if the goods are already at sea.
8. Miscalculating Total Import Costs
Many of the importers in Nigeria base their business case on the duty alone without taking into account the entire duty structure that is applicable at the port of importation.
In addition to the import duty, the goods are subject to a 7.5 percent VAT, a CISS levy, an ETLS levy, as well as port charges, terminal handling charges, and the professional charges of the customs clearance agent in Nigeria.
The importers, therefore, end up not being able to meet the necessary financial obligations that are needed to release their goods, hence the storage charges at the port as a result of prolonged dwell times.
The building of a comprehensive landed cost model, with the assistance of a knowledgeable freight and customs partner, is not an option; it is a necessity before entering into an import deal.
9. Importing Prohibited or Restricted Goods Without Due Diligence
Nigerian authorities have an import prohibition list. This list includes items such as textiles, bagged cement, frozen poultry products, and second-hand clothing. This list is subject to revision; items are added and removed as needed.
Importers who are not aware of the changes to the list and who assume that “because a particular item was clearable two years ago, it will still be clearable today” are in danger of having the entire import seized and forfeited.
Before ordering an item from a supplier, the status of the item should be checked against the Nigeria Customs Service import prohibition list to make sure that no fresh restrictions have been placed by the government through executive orders or by the central bank.
10. Not Partnering with a Knowledgeable, Reliable Freight and Customs Partner
Yet all of these mistakes have one thing in common: the inability to effectively negotiate the complex and ever-changing import regulations in Nigeria without the benefit of an expert partner.
The reality of customs regulation in Nigeria is that the rules are in constant evolution, with new circulars, changes to tariffs, and exchange rate benchmarks all being implemented on a regular basis. The question of what worked last quarter may no longer work today, and this is precisely where Wolid excels as a freight forwarding partner.
Rather than relying on incomplete and potentially false information from a variety of sources, our clients benefit from our expertise in all facets of freight forwarding, customs documentation, and regulation, as well as our intimate knowledge of the realities of ports in Nigeria.
Clearance Confidence Starts Before the Ship Sails
Customs clearance in Nigeria is an exact science that calls for precision, knowledge, and attention to detail, which leaves no room for assumptions. The errors discussed above are not hypothetical; they occur with importers at all levels of experience, and the cost of these errors could be dire.
The best defense is preparation, proper documentation, correct classification, correct licensing, and the right partner with the right knowledge of the terrain. With the right partner, like Wolid International Ltd, what could be a minefield will become an orderly process.
