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Cablegate: Nigeria: Tariff and Ban Information

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 ABUJA 000600

SIPDIS


STATE FOR AF/W AND EB/TPP
SATE PASS USTR
COMMERCE FOR ITA/MAC


E.O. 12958: N/A
TAGS: ETRD ECON EINV NI
SUBJECT: NIGERIA: TARIFF AND BAN INFORMATION


REF: USDOC 00785


Introduction and Comment
------------------------
1. Mission provides the following clarifications on
GON trade policy measures as requested by reftel.
Mission understands that Washington agencies will use
this information to prepare a formal high-level
demarche to deliver to the GON. The timing of the
demarche will be key to its effectiveness. To a large
degree, the recent protectionism has been a product of
electoral politics as the GON seeks the support of
important business constituencies. GON officials will
be pre-occupied with the election until the April 19
polls; delivering a demarche before then likely will
be ineffective and unproductive. While the campaign is
in full pitch, arguments for freer trade and tariff
reduction will be overshadowed by electoral
considerations, which usually favor protection. We
suggest that the demarche be post-election, preferably
right after the new government is inaugurated. End
Introduction and Comment.


Mosquito Nets
-------------
2. Trade Measure: 40 percent tariff. (2003 Fiscal
Policy Measures and Tariff Amendments, February 25,
2003)


Background: In April 2000, President Obasanjo hosted
the first African Summit on Roll Back Malaria. Along
with 32 other African Chiefs of State, he promised to
reduce taxes and tariffs on mosquito nets and related
goods. The GON reduced the tariff on mosquito nets (HS
code 6304.9100-9900) to 5 percent in the 2001 Fiscal
Policy Measures and Tariff Amendments, January 4,
2001. In contrast, all other textile imports were
subject to a 50 percent duty. The 2002 tariff schedule
increased the tariff for all fabrics to 75 percent,
without including the exception for mosquito netting.


On February 14, Ambassador Jeter wrote the President,
reiterating an earlier request to eliminate the tariff
on mosquito netting and related goods, in line with
the President's April 2000 commitment. On February 16,
the Ambassador raised the issue directly with
President Obasanjo, who said the tariff would be
removed immediately. However, the 2003 tariff
schedule--approved at a meeting of the Federal
Executive Council subsequent to the Ambassador's
conversation with Obasanjo--incorporated only a
partial reduction of the tariff, to 40 percent.


Impact on U.S. Exports: There are no known U.S.
exports of mosquito netting to Nigeria. However, from
a public health perspective, this high tariff damages
important USG goals to support economic and social
(health care) development in Nigeria.


Pharmaceuticals
---------------
3. Trade Measures: Ban on imports of pharmaceuticals
via land borders. Imports are allowed only through
Calabar and Apapa seaports and Lagos and Kano
airports. (2003 Fiscal Policy Measures and Tariff
Amendments, February 25, 2003)


Background: Counterfeit drugs are widely available
throughout Nigeria and pose a major public health
hazard. There are frequent reports of deaths and
illnesses caused by counterfeit drugs. The ban on
overland trade is an attempt to reduce the
availability of substandard drugs smuggled in from
neighboring states. It is unclear whether this ban
will be properly enforced. History suggests it might
not be.


Impact on U.S. Exports: U.S. pharmaceutical companies
exporting to Nigeria do not typically use land routes.
Most land-border imports of pharmaceuticals are
substandard or counterfeit products entering through
the Republic of Benin. They are smuggled in order to
avoid paying duties or securing National Agency for
Food and Drug Administration and Control (NAFDAC)
approval. As such, this ban is not expected to
substantially impact U.S. exports of legitimate
pharmaceuticals to Nigeria.


4. Trade Measure: All locally made and imported
pharmaceuticals must be registered with National
Agency for Food and Drug Administration and Control
(NAFDAC). The registration process appears relatively
straightforward and forms are readily available, but
there is a registration fee of 1,000,000 naira
(approximately $8,000) for imported over-the-counter
drugs and 250,000 naira (approximately $2,000) for
prescription medicines. The fee for locally made
drugs, over-the-counter and prescription, is 75,000
naira (approximately $600). Registration is valid for
five years. (National Agency for Food and Drug
Administration and Control Tariff Charges Regulations
2001, January 2, 2002)


Background: This registration process replaces one
dating from 1994. There is little information
available about the previous process.


Impact on U.S. Exports: Local importers of
prescription drugs report that they have already
complied with NAFDAC registration requirements and
that they do not find the requirements onerous. From a
trade policy perspective, registration fees are
relatively low but the lack of national treatment is
potentially problematic.


Fruit Juice
-----------
5. Trade Measure: Fruit juice may be imported in bulk
concentrate form only. (2003 Fiscal Policy Measures
and Tariff Amendments, February 25, 2003) The ban
includes fruit flavored drinks, non-alcoholic wines,
and flavored yogurt drinks. (NAFDAC letter, March 3,
2003)


Background: Information Minister Jerry Gana announced
on January 29 that Nigeria's Federal Cabinet would ban
the import of fruit juices in retail packs effective
immediately. Gana continued: "Juices to be imported
into the country must be in drums and must be
processed in the country to generate income and
employment. Packaged fruit juices imported into the
country will be destroyed at the point of entry unless
the consignment is in drums." Industry sources
indicate that the ban aims to protect local producers
and a few importers of juice concentrates. The ban is
confirmed in the 2003 tariff schedule.


Impact on U.S. Exports: Nigeria's overall import
figures are not readily available; however, import
demand increased markedly over the past four years.
The ban has cut off growing U.S. exports of fruit
juices to Nigeria, which totaled $304,000 (U.S. trade
data) last fiscal year. However, U.S. market share in
this hundred million dollar-plus sector remains small.


Sugar
-----
6. Trade Measure: 30 percent tariff and 5 percent
sugar development levy on sugar. (Nigeria Customs
Service Circular, February 6, 2003)


Background: The Nigeria Customs Service issued a
circular January 15, 2003 increasing the duty on
imported sugar (H.S. Codes 1702.1100 - 9900 and
1701.1100 - 9900) from 15 percent to 50 percent. This
duty was reduced to 30 percent within weeks, after
lobbying by domestic interests. An additional 5
percent sugar development levy remains in force. The
effective duty rate is more than 40 percent when port
surcharges and other tax assessments are included.


Impact on U.S. Exports: The United States does not
export sugar. Coca-Cola Nigeria, a franchisee of the
U.S. company, reports the increase has significantly
raised its costs, but is unable to provide data.


Detergent
---------
7. Trade Measure: 100 percent tariff on detergents.
(2002 Fiscal Policy Measures and Tariff Amendments,
March 21, 2002)


Background: Domestic manufacturers of detergent
pressured the GON to increase detergent tariffs in
2002 to 100 percent. According to Proctor & Gamble
(P&G), this undermined a commitment it believed it had
from the GON to maintain detergent tariffs at 40
percent.


Impact on U.S. Exports: P&G Nigeria--a joint venture
with the U.S. company--imports Ariel detergent from
sources outside the United States, so U.S. exports are
not affected by this tariff. However, the company
claims that profits from the import of Ariel were to
be a substantial component of a $10 million investment
in a diaper factory that began operating in 2002 and a
$4 million facility to manufacture feminine pads,
which is currently under construction. The viability
of the two projects is questionable if profits from
Ariel can no longer be realized and included in the
financial investment package. The company points out
that its import duty payments on Ariel have risen from
$4.0 to $5.0 million a year while sales of Ariel have
dropped 25 percent. P&G is interested in building a
detergent factory in Nigeria and has written to the
GON pledging to construct the factory if detergent
duties were to be reduced to 20 percent until 2005.
The company says that an investment plan worth $40
million over three years is at stake.


Poultry
-------
8. Trade Measure: Frozen poultry imports are banned.
(2003 Fiscal Policy Measures and Tariff Amendments,
February 25, 2003)


Background: To revive its poultry sector, the GON
banned poultry imports in August 2002. Before the ban,
virtually all imported frozen poultry entered Nigeria
illegally to evade the 75 percent tariff. Nigeria's
poultry production does not meet demand, and industry
sources estimate its undocumented imports of frozen
poultry at approximately 25,000 metric tons/year,
about 20 percent of national consumption.


Impact on U.S. Exports: Without a ban, U.S. exports
would meet about 40 percent of the 25,000 metric ton
deficit, at an estimated value of about $6 million.
Some U.S. poultry is likely still being imported
illegally, just as it was prior to the ban.


Sorghum, Millet, and Cassava
---------------------------
9. Trade Measure: Sorghum and millet imports are
banned. (GON Import Prohibition List, 1998) Cassava
imports are banned. (2003 Fiscal Policy Measures and
Tariff Amendments, February 25, 2003)


Background: Sorghum, millet, and cassava are crops
important to subsistence farming in Nigeria and the
GON has banned their import for many years. Nigeria
has plans to be a major cassava exporter. (Cassava is
used for tapioca pudding and industrial starch.)


Impact on U.S. Exports: The ban is believed to have a
minimal impact on U.S. exports of sorghum and millet.


Vegetable Oil
-------------
10. Trade Measure: Imports of food-grade vegetable oil
in bulk are banned. (2002 Fiscal Policy Measures and
Tariff Amendments, March 21, 2002)


Background: Vegetable oil imported in retail packs
faces a 60 percent tariff. GON trade officials
complained that bulk food grade oil imports were being
passed off as industrial grade, thus paying a lower
duty. These officials claim that banning bulk imports
of food grade oil makes the tariff easier to enforce.
However, industry sources say that raw and refined
palm oil is smuggled from Malaysia in bulk.


Impact on U.S. Exports: The United States exports
soybean oil to Nigeria in retail packs. We have
insufficient information on local demand for vegetable
oils to determine the volume of U.S. vegetable oil in
bulk that might be exported should the ban be lifted.


Flour
-----
11. Trade Measure: Flour imports are banned. (GON
Import Prohibition List, 1998)


Background: In an effort to encourage local
agricultural processing, the GON has banned flour
imports for many years.


Impact on U.S. Exports: Nigeria is a large export
market for U.S. wheat, and removal of the ban on flour
could be detrimental to this trade. Were the ban to be
lifted, it is unclear that U.S. flour would be cost-
competitive with flour milled in other countries.


Printed Fabric
--------------
12. Trade Measure: Certain printed fabrics known
locally as African prints may not be imported. (2003
Fiscal Policy Measures and Tariff Amendments, February
25, 2003)


Background: The ban on African prints was announced in
an August 27, 2002, Ministry of Finance circular.
Customs Service Circular No. 25/2002, dated September
24, 2002, directs customs offices to implement the
ban. Subsequently, Ministry of Commerce officials--who
claimed the ban was necessary to meet AGOA trans-
shipment requirements--reported it had been lifted and
replaced by a complicated import licensing system. The
Standards Organization of Nigeria and the Customs
Service, the would-be implementers of the system,
could provide no details on how it would work. The
2003 tariff schedule states that the printed fabric
import ban will remain in effect for 2003. It does not
differentiate between African prints and other types
of printed fabrics.


Impact on U.S. Exports: Post is unaware of any U.S.
exports of African prints prior to the ban. U.S. trade
data indicates the Unites States exported $400,000 in
woven cotton fabrics to Nigeria in 2002. Although
these U.S. goods are not targeted by the ban, it is
possible that confusion surrounding the extent of the
ban could result in cancelled orders, impounded
shipments, or other difficulties that might reduce
U.S. exports.


Used Clothing
-------------
13. Trade Measure: Used clothing imports are banned.
(Unknown source)


Background: Customs Service officials say a ban on
imports of used clothing has been in effect since the
1970's. However, the ban has been poorly enforced, and
these goods continue to pour over the Benin border.


Impact on U.S. Exports: The impact on U.S. exports
appears to be minimal due to widespread lack of
enforcement.


Rice
----
14. Trade Measure: The GON applies a 100 percent
tariff on rice imports. (2002 Fiscal Policy Measures
and Tariff Amendments, March 21, 2002)


Background: Rice is a staple of the Nigerian diet. GON
officials believe the country has the potential to be
self-sufficient in rice production. To date, the GON's
policy instrument of choice to encourage rice
production in Nigeria--high tariffs--has proven
unsuccessful. It has substantially raised prices for
the average consumer without significantly increasing
domestic production.


Impact on U.S. Exports: U.S. rice exports to Nigeria
currently approximate 5,500 metric tons/year, which
excludes the 12,500 metric tons sold to an NGO in 2003
for monetization under a USDA food aid program.
Nigerian rice imports total about 2 million metric
tons annually. Industry sources say U.S. raw rice
would be competitive, but Nigeria imports mostly
finished, parboiled rice. U.S. finished rice sells for
$30 to $40 a metric ton more than Indian and Thai
rice, so even if the duty were lower, U.S. exporters
would be unlikely to increase their market share.
Industry sources report that the GON is considering
proposals by investors who would be prepared to mill
rice in Nigeria if the duty on unfinished rice were
lowered to 5 percent. Such a scenario could help U.S.
rice exporters.


Bottled Water, Biscuits (Cookies), Noodles, Spaghetti,
and Toothpicks
--------------------------------------------- ---------
15. Trade Measure: Imports of Bottled Water, Biscuits
(Cookies), Noodles, and Toothpicks are banned.
(Customs Service Circulars, March 3, 2003)


Background: President Obasanjo announced bans on these
goods at a campaign stop in early March. A supporter
of the governing party, Dangote Industries,
manufactures spaghetti. There are numerous water,
cookie, and toothpick manufacturers in Nigeria.


Impact on U.S. Exports: Industry sources say the
United States exports biscuits to Nigeria, but data to
support that claim is not readily available. Clearly,
the ban would affect whatever exports there are. The
United States did not export bottled water, noodles,
or toothpicks to Nigeria in 2002. Ironically, the ban
on biscuits and noodles could bolster U.S. wheat
exports.


JETER
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are:


1.Insert the standard sections headers. Use Insert|File.
2.Insert a PSD table. Use Insert|Spreadsheet|Create Link
3.Insert a Trade Matrix or a Prices table. Use
Insert|Spreadsheet|Create Link

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