HOW TO SET UP A CLEARING AND FORWARDING COMPANY IN NIGERIA

Nigeria’s economy relies heavily on imports and has significant growth potential, necessitating a renewed emphasis on infrastructural development. Due to the extensive nature of the maritime sector, both local and foreign operators need to coordinate their efforts and resources to engage with the government in order to enhance the overall infrastructure of the maritime sector  in Nigeria. Government on its part has succeeded in coordinating the operations of industry players in the maritime sector by educating and enforcing the need for industry players to ensure compliance with regulatory requirements that makes for efficiency and reliability. One of such is the compulsory requirement for service providers in the maritime sector to obtain an operational licence or permit from the necessary government agency before commencing operations.

Some of the necessary licenses include the Shipping Company License, Bonded Terminal Operation License, Shipping Chandler License, Service Boat Operation License, and Clearing and Forwarding Agent License, among others. The importance of obtaining an operational license cannot be overstated. One significant reason is the peace of mind it provides to citizens who utilize the services of these providers, knowing that the service provider is recognized by the government and that their operations in Nigeria have been officially approved.

This article focuses on the clearing and forwarding business and outlines how to establish a Clearing and Forwarding agency in Nigeria.

What is clearing and forwarding?

Clearing refers to the paperwork and procedures necessary to facilitate the passage of goods through Customs and other government agencies at the port. This process includes various tasks such as submitting Customs declarations, paying Customs duties and tariffs, and obtaining permits for clearing goods at the port. The role of a Clearing and Forwarding Agent is vital for the smooth movement of goods from the ports. Handling all the paperwork until the goods reach their final destination requires the expertise of Professionals known as Clearing Agents. These agents specialize in managing the documentation, tariffs, duties, and taxes associated with the importation and exportation of goods. They also ensure that goods at the port do not incur demurrage charges by completing all necessary tasks as quickly as possible.

Forwarding, also known as Freight Forwarding, involves the physical transportation of goods to their ultimate destination. Section 30 of the Council for the Regulation of Freight Forwarding in Nigeria Act defines a Freight Forwarder as a person or a company who arranges the carriage or movement of goods and associated formalities on behalf of an importer or exporter along international boundaries of sea ports, cargo airports or land border stations.

What are the duties of a clearing agent?

1. In addition to fulfilling the requirements provide by the Nigerian Customs, depending on the contents of the cargo, the clearing Agent may also extend the processing of documentation to the Nigerian Food and Drugs Administration and the Standard Organization of Nigeria.

• A clearing agent serves as a liason between the client and the Customs.

• They provide advisory services about tariffs, classification of goods, the process of import and export, regulatory compliance issues.

What are the duties of a forwarding agent?

1. They manage the logistics involved in shipping goods from one place to the other.
2. They monitor shipments to ensure that they arrive on time.
3. They play the role of ensuring compliance with international trade regulations and the requirements of the Customs of different countries.
4. They ensure the safe and efficient delivery of goods to their final destination.

Who can be a clearing and forwarding agent in Nigeria?

A Clearing and Forwarding Agent is a person that has been registered and licensed to act as an agent in Customs clearance, transportation of goods across international boundaries and other related transactions.

The introduction of licensing for Clearing and Forwarding Agents in Nigeria was essential for improving the maritime sector. By implementing these licensing requirements, security risks associated with entrusting cargo to unknown individuals have been significantly reduced, minimizing the chances of clients losing their goods after clearance. Additionally, licensing has helped combat money laundering and other financial crimes by bringing industry operators under the scrutiny of the Nigerian Customs Service and other security agencies.

What agencies regulate the licensing of clearing and forwarding agents in Nigeria

1. Corporate Affairs Commission (CAC): The CAC is the regulatory authority for corporate entities in Nigeria. To establish a Clearing and Forwarding agent company, an application must be submitted to the CAC, which requires a minimum share capital of N1,000,000 (One Million Naira). The company’s objects must include the business of “clearing and forwarding,” among other activities.

• Council for the Regulation of Freight Forwarding in Nigeria (CRFFN): The CRFFN is established under the CRFFN Act and is responsible for regulating freight forwarding in Nigeria. It determines the standards of knowledge and skills that individuals must meet to become registered members of freight forwarders in Nigeria. According to Section 4 of the CRFFN Act, the council’s functions are as follows:

1. Determining the standards of knowledge and skill to be attained by persons seeking to be registered as freight forwarders;
2. Regulating and controlling the practice of freight forwarding;
3. Regulating and controlling all associations of freight forwarding agents;
4. Regulating and controlling persons who are engaged in freight forwarding;
5. Ensuring uniform standards of professional conduct and education relevant to freight forwarding practice;
6. Promoting the highest standards of competence, practice and conduct among members of the profession;

• Nigerian Ports Authority (NPA): The NPA was established by the Nigerian Ports Authority Act of 1999. Its primary responsibilities include providing and operating necessary facilities at the ports, maintaining and improving port operations, regulating the use of the ports, and addressing related matters. Additionally, the NPA is tasked with ensuring safety across all ports in Nigeria.
• Nigeria Customs Service (NCS):In 2023, former President Muhammadu Buhari signed the Nigeria Customs Service Act, 2023 into law. This new legislation repeals the Customs and Excise Management Act, along with other regulations governing customs and excise. The Act also regulates the administration and management of customs activities throughout Nigeria

What are the requirements for registration as a licensed customs agent

At the NCS, the applicant is required to submit an application to be registered as a Licensed Custom Agent. In support of the application to the Nigerian Customs Service, an applicant must attach the following documents:

1. Company incorporation documents from the CAC;
2. Forms Sale 135 and 158
3. Curriculum vitae to show vocational experience of directors;
4. Sworn declaration of directors’ non-involvement in fraud or any other criminal activity;
5. Evidence of title of office;
6. Company’s scale of charges;
7. Three years tax clearance certificate of the company;
8. Bank recommend letter;
9. Particulars of company’s vehicle
10. Sketch diagram and office plan
11. Letter of appointment of customs representative
12. Letter of acceptance of customs representative
13. Passport photographs of the customs representative
14. Audited account of the company
15. Evidence of payment of the prescribed licence fees.

What are the requirements for obtaining the clearing and forwarding agent licence from the Nigerian Ports Authority

The application to the NPA to be registered as a Clearing and Forwarding Agent will be supported by the following documents:

1. Company’s incorporation documents
2. Bank reference letter;
3. Three years tax clearance certificate;
4. Proof of payment of registration fee into the NPA revenue account.
5. Customs Agent license issued by the NCS

What are the requirements for registration with the CRFFN?

The registration with the CRFFN is done via the online portal of the CRFFN. The requirements for registration with the CRFFN are as follow:

1. valid email address for receiving the registration code;
2. director’s email address and phone number

Upon filling the online form, the email address provided will receive a registration code which the applicant will use in completing the registration.

The above will be followed by the payment of the registration fee. After which the applicant will receiving an email requesting the presence of the company’s representative at the physical office address of the CRFFN. The visitation to the office of the CRFFN must be done within a required period of time.

What is the process for obtaining the operational licences?

As has been earlier posited in this article, to operate as a licensed clearing and forwarding agent, one must first incorporate a company with the Corporate Affairs Commission (CAC). This is necessary because the license is only granted to corporate entities. Once the company is incorporated, the next step is to open a bank account and register the company with the Federal Inland Revenue Service (FIRS). This is important because the company will need to present a bank reference letter and a Tax Clearance Certificate to both the Nigeria Customs Service (NCS) and the Nigerian Ports Authority (NPA). After completing these steps, the applicant can proceed to the CRFFN portal to register online

Application to the NCS

The registration with the CRFFN will be followed by the application to the NCS requesting to be registered as a licensed Customs Agent. The application to the NCS is in two stages. The “Provisional Approval” stage and the “Final Licence” stage.

Provisional approval

After submitting the application to the NCS, the application details will be reviewed and assessed. If the applicant has provided all the required documents, they will receive a “Provisional Approval” from the Tariff and Trade Department of the NCS. This Provisional Approval will outline the conditions that the applicant must meet to obtain a Customs Agent license. Please note that the conditions specified in the letter from the Tariff and Trade Department must be completed within one month from the date the letter is received.

Final licence

Upon meeting the conditions outlined by the trade and tariffs unit in the notice of provisional approval, the applicant will submit evidence demonstrating that all requirements for the license have been fulfilled. This evidence will be attached to a letter informing the Comptroller General that the applicant has complied with the provisions of the conditional approval. If the National Customs Service (NCS) is satisfied with the contents of the application for a final license, it will grant a Customs Agents license to the applicant.

Application to the NPA

At the NPA, the applicant is required to submit an application to be registered as a Clearing and Forwarding Agent. The application should be addressed to “the GM (Easter or Western Ports). The application should be supported by the previously-listed documents.

Upon assessing the application, the applicant will receive an invoice for the payment of the required fees after which the licence to operate as a Clearing and Forwarding Agent will be granted.

Can one operate using only one of the licences issued by any of the agencies?

Section 18 (2) of the CRFFN Act provides that notwithstanding the provision of any other law, no organization or firm shall practice as a Freight Forwarder in Nigeria, unless it is registered by the Council. Section 19(2) of the CRFFN Act also provides as follows:

(1) Notwithstanding the provisions of any other laws, any government agency responsible for granting of permits, approvals and licenses to freight forwarders shall in addition to any other requirement, require the applicant to submit a certificate of registration as a registered freight forwarder issued by the Council.

 (2) Every freight forwarder licensed under the Customs and Excise Management Act prior to the coming into force of this Act, shall immediately after the commencement of this Act, submit to the Nigerian Customs Service and any relevant authority, a certificate of registration issued by the Council.

Also, one of the requirements for obtaining the Clearing and Forwarding Agents Licence from the NPA is that the applicant must present the Customs Agent licence obtained from the NCS.

Flowing from the above, it is clear that it is impossible to operate without obtaining all the required licences.

What is the applicable cost associated with obtaining the licences and permits to operate as a clearing and corwarding Agent.

The following are the applicable cost to process the required approval for operating as Clearing and Forwarding Agent.

What is the duration for completing the process of obtaining the licence

Company incorporation can be completed within one week from the date of submission of the application on the portal of the CAC.

The licensing process at the NCS also requires that an officer of the NCS visits the company’s physical place of business to confirm that the address those indeed exist and that the applicant has a proper office place to run its operations. Therefore, approval will be largely dependent on the outcome of the office inspection.

However, at Koriat & Co. we have mastered the process and we are able to guide clients in ensuring that all the requirements are in order. Meeting all the requirements can reduce processing time to as little as two weeks.

The registration with the NPA can be completed within a period of three days.

The registration with the CRFFN can be completed within a period of one week.

What is the duration for the licences

The licences issued by both the NPA and the NCS are valid till the 31^st December of each year regardless of when the licence was obtained. Holders of the licences are required to apply for a renewal annually.

The registration with the CRFFN requires that the licencee pays an annual membership fee in other for the Council to continue to recognise the licencee as a valid member of the council.

Are there any other registrations required after obtaining the licences from the necessary agencies?

Upon obtaining the licence from the required agencies, the licencee is expected to approach the CPC Unit of the Nigerian Customs Service to obtain a login password for the company. The purpose of the login password is to enable the licencee obtain assessment for shipments and cargos through the portal of the NCS.