HB 37: Free Trade Zone Bill, 2015

Bill Analysis:

SHORT TITLE

Free Trade Zones Bill, 2015

OBJECTIVE OF THE BILL

The objectives of the Bill are: -

• To provide for free zones in Nigeria;
• To establish Free Trade Zones (FTZ) Authority and
• To repeal the Nigeria Export Processing Zones Act

NUMBER OF CLAUSES/PARTS

The Bill has 30 Clauses including interpretation and schedules

IMPLICATIONS

Once the Bill is passed: -

• The Minister of Trade shall have powers to designate from time to time, by order, areas he deems fit to be Free Trade Zones (FTZs). The Nigeria Export Processing Zones (NEPZ) Act provides that this role shall be that of the President. Clause 1(1) of the Bill seeks to shift the role to the Minister of Trade and no longer the President.
• There shall be established the Nigerian Free Zones Authority (the Authority), which shall be responsible for the issuance of licenses to all FTZs within Nigeria. Section 2 of the NEPZ Act established the Nigeria Export Processing Zones Authority (NEPZA) to issue permits and licenses within the export procession zones. The Nigeria Free Zones Authority replaces NEPZA once the Bill is passed.
• An enterprise or a person licensed to operate within the customs territory shall be entitled to receive payment in foreign currency. It shall not be unlawful to transact business within the FTZs in currencies other than the Naira.
• Any approved enterprise may import capital goods, consumer goods, etc., for the purposes of an approved activity, into a FTZ, free of customs duty.
• First schedule of the Customs, Excise, Tariffs, etc., (Consolidated) Act, which lists customs duty rates of goods shall be modified. To modify an existing law or Act, an amendment Bill is required

GENERAL CONTENTS OF THE BILL

1)     Establishment of Free Trade Zones: -

The Minister of Trade shall have the power to designate areas as FTZs from time to time, by order or upon recommendation of the Nigeria Free Zones Authority.

2)     Operation of the Free Trade Zone: -.

The Bill under Clause 1(2) provides that the public, private or a combination of both may manage the operation of the FTZs with approval of the Nigeria Free Zones Authority.

3)     Nigeria Free Zones Authority (the Authority): -

Clause 19 of the Bill provides for the establishment of the Nigeria Free Zones Authority to manage the operation of businesses, transactions and activities within the free zones. This includes issuance of               permits, licenses and certifications for operating within the free zones. In addition, the Authority shall have the power to resolve disputes between employees and employers in the FTZ, as well as formulate operating standards to be observed in the zones.

The Authority also has the power to alter, amend or add to the limits of a zone or change the name of a zone; and approve the establishment of customs, police, immigration and similar posts in the zones. 

4)     Goods and Services within the Zones: -

The Bill under Clause 6 and 7 states that approved enterprises shall be entitled to import goods in the FTZs and receive payment for such goods in foreign currency. The regulations applicable to importation of goods and services into Nigeria and repatriation of the proceeds shall apply in all transactions.

All goods brought into a Zone shall be consigned to the Zone or an approved enterprise. The goods may with the approval of the Authority be transferred from one approved enterprise to another, or from the Zone to an approved enterprise. Goods may also be consigned to a bank acting on behalf of any party to a transaction involving the Authority or an approved enterprise.

5)      Preservation of Goods: -

A zone may take steps to preserve goods within the zone and where the Authority or zone incurs expenses as a result, the owner or consignee shall reimburse the Authority. Clause 7(6) of the Bill provides that goods brought into a zone may unless otherwise directed by the authority be stored, sold, exhibited, broken up, packed, graded, cleaned, marked, separated or manipulated, etc.

Where goods are dutiable on entry into the customs territory, the goods shall be subject to the provisions of the Customs, Excise, Tariff, etc. (Consolid.) Act and any regulations made. When goods are brought from the customs territory into a Zone for the purpose of an approved activity, the goods shall be deemed exported

6)      Exemption of Import Duty: -

All goods consigned to all zones and sub-zones shall be imported into Nigeria duty-free from the commencement of activities by zones and sub-zones (Clause 8). The Bill under Clause 8(2) provides that the First Schedule to the Customs, Excise Tariff, etc. (Consolidation) Act is accordingly modified to accommodate this provision.

7)      Permission to Enter the FTZs: -

No one shall enter, reside or remain in the zones without prior permission of the management of the zone.

8)      Prohibition of Retail Trade: -

No retail trade shall be conducted within the Zone without prior approval from the management of the Zone. (Clause 10)

9)      Prohibition of Ammunition and Dangerous Explosives: - Firearms and ammunition, other than by members of the Armed Forces; explosives, inflammable materials shall not be imported, taken into or stored in a Zone (Clause 12).

10)    Export of Goods: - Goods exported from a Zone into a customs territory shall except as otherwise prescribed by or pursuant to the provisions of this Bill (when passed into law), be subject to the same customs and licensing requirements as applying to goods imported from other countries.

11)    Registration of Products: - All products manufactured or assembled or pre-packaged in a Zone shall be registered. The application for registration shall be subject to the tariffs and other charges prescribed by the Authority

12)   Revocation of Licenses:

1. Any person who enters, remains or resides in a Zone without the prior permission of the management of the Zone shall have his permit revoked by the Zone.
2. Anyone who engages in retail trade as prohibited by the Authority shall have his license revoked by the Authority
3. Anyone who brings in prohibited materials like explosions or ammunitions shall be guilty of an offence.
4. An approve enterprise shall apply for work permits for its non-Nigerian employees.

13)  Incentives for Enterprises: -

Under Clause 16, enterprises operation in the Zones shall be entitled to incentives which include repatriation of foreign capital investment in the Zones at any time with capital appreciation; no import or export licenses required; up to 100% foreign ownership of businesses in the Zones allowable, etc.

14)  Management of the Authority: -

The Authority shall be headed by a Managing Director appointed by the President on the recommendation of the Minister (Clause 22). The Authority shall have a Board headed by a Chairman to be appointed by the President (Clause 20). The members shall be drawn from the public and private sectors.

15)  Fund of the Authority: -

Clause 24 provides that the Authority shall set up a Fund from proceeds from all its activities, services and operations, and all other monies accruable to it from time to time. The purpose of the Fund is to defray all administrative and operational costs incurred by the Authority, including staff remuneration and Board members’ reimbursement

16)  Accountability: -

The Authority shall not later than October 31 of every year submit its budget estimate for the coming year to the Minister, and shall keep proper accounts in respect of each year. Its accounts shall be audited within 6 months after the end of each year (Clause 25).

17)  Jurisdiction: -

Under Clause 26, an enactment applicable in a customs territory shall apply within the Zones. However, the Minister of Trade may by an order published in the Federal Gazette, modify the application of any enactment where it restricts or interferes with the smooth running of the Zone.

18)  Penalty for Non-Compliance: -

Every omission or neglect of any provision of this Bill (when it becomes law) shall be an offence. In respect to such offence, on conviction, an offender shall be liable to a fine of N500,000 or imprisonment for a term of 3 months or both.

Where a Corporate body is liable for an offence under this Bill (when passed into law) shall be punished accordingly.

19)  Repeal Clause: -

Clause 28 of the Bill seeks to dissolve the governing board of NEPZA established by the Nigerian Export Processing Zones Act of 1992, which shall be replaced by this Bill (when passed into law).

The second schedule of the Bill provides that all the rights, liabilities and assets held by NEPZA shall be assigned and vested in the Authority.

20)  Regulations: -

The Authority may, with the approval of the Minister make regulations for the proper implementation of this Bill (when it becomes law)

CONCLUDING ISSUES

The Free Trade Zones Bill seeks to establish free trade zones around Nigeria in order to create trade hubs and boost trade within Nigeria for economic growth. The Bill, when passed into law would repeal the Nigeria Export Processing Zones Act, 1992, dissolve the governing board of the Nigeria Export Processing Zones Authority (NEPZA) and replace NEPZA with the Nigeria Free Zones Authority.

Clause 8(2) of the Bill seeks to modify the first schedule of the Customs, Excise, Tariff, etc. (Consolidation) Act and exempt importation of certain goods from import duty. For this modification to take effect, there is need to amend the Act to this effect.

The Bill is aimed at promoting Nigeria’s trade sector and making the country investor-friendly with provisions like Clause 26(2), which allows the Minister by order published in the Federal Gazette to modify the application of any enactment if the enactment restricts or interferes with the smooth running of the Zone; and Clause 16(1), which lists out incentives for operators in the Zones. This Bill is important because of the positive impact it would have on the economy.

Infographic: