Introduction

The Nigeria Customs Service (the “NCS”) recently announced the suspension of the planned vehicle identification number (“VIN”) policy for the valuation of imported vehicles. The suspension was communicated in a circular dated 7^th March 2022 (the “Circular”) and is effective for a period of 30 days, commencing from Tuesday 8^th March 2022.

The Circular however clearly states that the VIN valuation protocol is still operational notwithstanding the fact that licensed clearing agents are fiercely opposed to the policy. Given the controversy surrounding the implementation of the VIN valuation policy, it is important to examine the legal basis for the valuation of imported vehicles in Nigeria.

The VIN valuation policy – Brief background

The VIN valuation system was introduced for the purpose of allocating standard values to all vehicles coming into Nigeria. According to the NCS, the system automatically determines the value of import duty payable on a vehicle immediately the vehicle goes through a dedicated scanning machine. The objectives behind the introduction of the automated scanning system are to increase efficiency, facilitate trade and eliminate human contact that breeds corruption and inefficiency in cargo clearance processes in Nigeria. The objectives of the VIN valuation policy are no doubt laudable.

Despite these laudable benefits, the VIN valuation policy has been fiercely opposed by clearing agents and other stakeholders involved in shipping and importation of vehicles. The major objections are the legality of the policy and the fact that the automated scanning system will significantly increase the import duty payable on imported fairly used vehicles by more than 200% (two hundred percent).

Vehicle valuation – Legal framework

The Customs and Excise Management Act No. 20. 2003 (“CEMA” or the “Act”) provides the legal framework for the valuation of imported goods, including motor vehicles. Specifically, Section 45(1) of CEMA provides that where customs duty is chargeable on imported goods by reference to their value, the value of such goods shall be determined based on the parameters set out in the First Schedule to CEMA, and duty shall be paid on that value as determined.

With respect to the valuation parameters, Paragraphs 1 – 6 of the First Schedule to CEMA lays down 6 (six) parameters for determining the customs value of imported goods. First, the general position is that the customs value of goods bought or imported for use in Nigeria will be determined based on the transaction value of the goods.¹ However, where the customs value cannot be determined based on transaction value, the Act provides that the transaction value of identical or similar goods² shall be applied.

Other valuation parameters provided under CEMA for determining the custom value of imported goods include the sale value of the goods, the computed value or the reasonable value – these methods are to be applied where the transaction value of the goods or the transaction value of identical or similar goods cannot be utilized.

It is important to note that Section 45 of CEMA and the First Schedule to CEMA domesticates Article VIII of the World Trade Organization’s (“WTO”) General Agreement on Tariffs and Trade 1994 (“GATT 94”), which stipulates that the primary basis for determining the customs value of imported goods shall be the “transaction value”. “Transaction value” is defined as the price actually paid or payable for the goods when sold for export to the country of importation.³ The WTO agreement on customs valuation aims for a fair, uniform and neutral system for the valuation of goods for customs purposes — a system that conforms to commercial realities, and which outlaws the use of arbitrary or fictitious customs values.

In view of the position of CEMA and GATT 94 on the valuation of imported goods, the argument is that the VIN-linked valuation system introduced by the NCS is based on an arbitrary valuation parameter and is therefore contrary to the provisions of the First Schedule to CEMA. Given that CEMA is the extant Act that regulates the management and collection of customs duty, the NCS cannot introduce a valuation system outside the ambit of CEMA.

Conclusion

It is instructive to note that any valuation parameter adopted by the NCS for the treatment of imported vehicles or any other imported goods that is contrary to the provisions of CEMA and other applicable legislations will likely be declared illegal, null and void and consequently be set aside if challenged in a court of law. Given the clear provisions of CEMA on parameters for the valuation of imported goods (including vehicles), it is therefore critical for the NCS to re-examine its position and ensure that the VIN valuation system is aligned with the extant provisions of CEMA. This will no doubt extinguish the current controversy and facilitate the realization of the laudable objectives of the VIN valuation policy.

1. Paragraph 1, First Schedule to CEMA
2. Paragraphs 2 and 3, First Schedule to CEMA
3. Article 1 of GATT 94