European Journal
of
Social Sciences
Volume 12 Issue 3
January, 2010
Contents
A Web-Based Multimedia Approach to Literature in Malaysian Secondary Schools: Learners' Preferences
Subarna Sivapalan and Wan Fatimah bt Wan Ahmad
328-335
Effects of Task Difficulty on Socioaffective Strategy Use in Listening Comprehension
Nooreen Noordin, Katrin Shamshiri and Mohd Sahandarb
336.346
Endogenous Unions Formation
Yolanda Chica and Maria Paz Espinosa
347-361
Prospects and Challenges of Open University in Nigeria
Ajadi, Timothy Olugbenga
362-370
Management and Planning Model for Economical Corporate Cultural and Social Responsibility (CCSR) in Iran
Seyed Reza Salehi Amiri, Esmaeil Kavousy and Seyed Majid Motahar Nezhad
371-386
Ethnic Diversity Management Based on Social Capital Theories
Seyed Reza Salehi Amiri and Esmaeil Kavousy
387-396
Future Markers in Modern Standard Arabic and Jordanian Arabic: A Contrastive Study
Emad Al-Saidat and Islam AI-Momani
397-408
Governance, Leadership Crisis and Underdevelopment in Africa: An Explorative Discourse
E. B. J. Iheriohanma and O. Oguoma
409-619
Code-Mixing in Print Advertisement and its Cultural implications in Hong Kong
Chi-hong Leung
417-429
An Identification of the Effects of the Promotion of Tourism transportation on the Socio-Cultural Environment:
The Case Malaysia
Sharon Cheuk, Janie Liew-Tsopis, Grace Phang Ing and Izyanti Awang Razli
430-440
Assessing the Effectiveness of the Marketing of the Preshipment Inspection Services in Nigeria
J.O. Olujide and R.A. Gbadeyan
441-446
Sustainable Water Management: A Case Study on Saving Behaviour of Turkish Women for Domestic Water Usage
Sonigul Hablemitoglu an'd Emine Ozmete
447-466
Rejuvinating Motivations and Renewing Technology: A Quest for Electronic Endeavor among Malaysian SMEs
Rosmini Omar and Dowi A.Sapuan
457-470
The impact of Using KWL Strategy on Grade Ten Female Students' Reading Comprehension of Religious
Concepts in Ma’an
Omar Salim Muhammad AI-Khateeb and Mohammad Wafa Khalid Idrees
4 71-489
Critical Factors for Diffusion of Web Technologies for Supply Chain Management Functions: Malaysian
Perspective
Arun Kumar Tarofder, Govindap Marthandan and Ahasanul Hague
490-505
The Nature of Women's Participation in the Labour Force in the Post-1989 of Iran
Alihossein Hosseinzadeti, Iman Mombeni and Abdolreza Navah
506-514
European Journal of Social Sciences — Volume 12, Number 3 (2010)
Assessing the Effectiveness of the Marketing of the Preshipment
Inspection Services in Nigeria
J.O. Olujide
Faculty of business and social sciences, Department of business administration
University of Ilorin, P.M.B. 1515, Ilorin, Nigeria
E-mail: olujack52@yahoo.com
R.A. Gbadeyan
Faculty of business and social sciences, Department of business administration
University of Ilorin, P.M.B. 1515, Ilorin, Nigeria
E-mail: timigbade@yahoo.com
Abstract
Preshipment inspection service is a trade facilitating service provided by the independent
inspection agents to government in Africa, Asia and Latin America. The service is carried
out to speed up the clearance of goods at the place of origin or shipment to verify the
type, quality price and customs valuation of goods. However, there have been, in recent
time's widespread malpractices in the port in Nigeria which is in the form of false
declaration: under declaration and over invoicing which has made difficult the smooth
operations and efficient performance of this service. This development therefore made
the Federal Government .introduced the 100 percent inspection examination, in order to
stop the sharp practices going on in the port. The study aimed to assess the effectiveness
of the marketing of the preshipment inspection services in Nigeria and also to consider
other specific objectives such as examinations of some of the government policies
concerning the preshipment inspection contract, the role of the preshipment inspection
company in the development of the economy.
Keywords: Preshipment inspection, false declaration, customs valuation.
1.
Introduction
Nigerian economy in the past decade suffers serious downturn, which affects almost all its sectors. This
was as a result of a lot of problems amongst which are poor management of the economy by the various
stakeholders of Industries, government parastatals and corporations.
Corruption, including malpractices in the Port serves as another big problem in the country
(Nigeria Tribune, 2001). The importers are involved in various malpractices which have disastrous effect
on the economy. Three categories of importer are identified in this respect. They are those who over
invoice, those who-under value and those who engaged in concealment (Guardian, 2001).
The category of importer that over invoice for example, has an over-invoice letter of credit that is
greater than the actual worth of the goods. They have dealings with the inspection Agents and put the
difference to the black market, thus paying the custom duties what they suppose to pay on that because
they can easily • afford it. In the case of those who undervalue, they are engaged in these malpractices so
as to pay less on custom duties. Those that are involved in concealment bring in illegal things in the
containers by hiding the actual content and pay whatever they can pay for those goods.
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European Journal of Social Sciences Volume 12, Number 3 (2010)
For example, the importer may claim to be importing used clothes but had actually imported Lexus Jeep.
All these malpractices mentioned above were seriously eating deep into the revenue being
generated by the customs. This also affects Naira/Dollar relationship, interest rates, inter bank and
exchanged rate which invariably affect the actual interest rate. The belief therefore was that the fall of
Naira is influenced by the under valuation, over-valuation and concealment by importers.
The recent 100 percent examination is one of the attempts by the government to stop these
practices in the Port. This made the Federal Government ordered that goods coming into Nigeria must be
fully inspected at the point of entry.
There is strong indication that the introduction of the 100 percent examination might have
brought about the recent appreciation of the Naira against the U.S. Dollars, as a result of the decline in
demand for foreign exchange. People no longer import those goods like fried plantain, toothpick, Juice,
Toilet Rolls etc. which can be locally sourced (Guardian 2001). At the same time fear have been
expressed that the 100 percent inspection may have negative impart on the economy such as reduction of
income to government. However, the fact remains that with the successes recorded so far, there is hope
that the benefits to be derived from the policy measures will far outweigh the disadvantages.
The Federal Government order of 100 percent inspection policy had led to Port congestion and a
lot of other problems. -This congestion is coming as a result of the change in operating procedure. The
Federal Government had to take the hard decision of 100 percent inspection, because of a lot of under
table business, which had ''earlier been mentioned i.e. undervaluation, overvaluation and concealment.
The 100 percent inspection made-many people, most especially importers who should come for the
containers refused to come, for fear of either having their goods seized or paying an extra surcharge.
There are so many containers that are trapped at the port due to this step taken by the Federal
Government. The exercise does not allow speedy completion of processes for clearing goods at the port.
In general the research problem focused on the dearth of research in to the effective marketing of the
Preshipment inspection services in Nigeria.
The Preshipment Inspection Agents (PIAs) have been accused of responsibility for most of the
malpractices in the port involving both the customs and the importers. Under the Comprehensive Import
Supervision Scheme j(CISS) the PIAs were expected to check fraudulent practices, which importers
adopt while bringing in goods in to country. There is no doubt that if the PIAs do their job very well,
government will be realizing huge sums of revenue from imports. (This Day 2001).
In this study; we have specifically focused on the problems identified below:
(i)
Duplication of ports procedures by agencies of government.
(ii)
Cumbersome document and cargo delivery procedure at the ports especially inadequate Cargo
handling equipment.
(iii)
High clearing cost of goods occasioned by multiple levies charged
(iv)
The general 'Corruption atmosphere in the Port and other problems affecting the quality, quantity
and export market price of the goods being exported.
The general objective of this research study is to assess the effectiveness of the marketing of the
Preshipment inspection services in, Nigeria. Other specific objectives that are examined included
explanation about why countries have recourse to Preshipment Inspection contract, highlight some of the
criticism against the Preshiprnent Inspection contract and examine some government policies
concerning the Preshipment Inspection contract.
2. Research Methodology
The method of research, adopted in this study is essentially a descriptive survey. The source of
our data are both primary and Secondary. Structured and unstructured questionnaires were used to gather
data from the primary data. Interview methods are also used to complement the information obtained
through questionnaire. The secondary data are in form of internal and external sources.
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European Journal of Social 'Sciences - Volume 12, Number 3 (2010)
A case study approach was used by the researchers and Cotecna Nigeria Plc. has been chosen for
empirical demonstration of the services provided by independent inspection companies and the
government of the importing country or user countries.
Convenience sampling was adopted to distribute questionnaires to two hundred and twenty five
(225) selected respondents at both Ilorin and Lagos. This representing the first group of study sample.
Respondents include: Civil Servants, Business people most especially importer and Exporter,
Economist, Lawyer, Chief Executive Officer, Manager amongst others. The statistical technique of
stratification was also used to pick the second group of study sample of one hundred (100) staff (65
Junior and 35 Senior) from Cotecna Nigeria Plc., on which the study questionnaires were administered
to collect the required data. Chi-square and sign tests were used to test the hypothesis and to provide
answers for the research questions.
3. Literature
Essentially, there has been little' work on the study area. A review of work on the study area have shown
that majority of researches done have been on the benefits and problems of the Preshipment Inspection
Contracts (Gbadeyan, 2002; Cotecna, 2001). There have been no major works carried out on the aspect
of effective management of services of the Preshipment Inspection Company in Nigeria. The
Preshipment Inspection Companies are more or less Multinational Companies; hence their services and
activities involve effective marketing in order to be able to achieve its desired objective.
There are various definitions of marketing; an attempt will be made to consider only the few
ones among these: The British Institute of Marketing defines marketing as "the creative management
function, which promotes trade and employment by assessing consumer needs and initiating research
and development to meet then! It coordinates the resources of production and distribution of goods and
services, determines and directs the nature and scale of the total effort required to sell profitably the
maximum production to the ultimate user. This definition though, attempts to offer a good meaning of
marketing however fails to consider .the post purchase aspect of consumer buying behaviour.
.In its own definition the American Marketing Association Committee on definition of marketing
define it as "the .performance of business activities that direct the flow of goods and services from the
producers .to consumers or end users". The problem with this definition is that it makes marketing look
largely like distribution, which is only just an element in the marketing mix. It also fails to. indicate the
role of marketing in determining what goods are to be produced and does not indicate the specific
activities that constitute markets.
According to Modern (1991); Marketing is "the most important managerial task within the
organization, it is that of understanding the needs and wants of customers in the market and of adopting
the operations of the organization to deliver the right goods and services more effectively and efficiently
than its competition". This definition though also considers the importance of consumer needs and
wants, fails to take in to consideration all other factors that can influence consumer purchase decisions
like attitude, culture, customers and other social norms.
Stanton (1.984)-"define marketing as "the total system of business activities designed to plan,
price, promote and distribute want satisfying products and services to present and potential customers".
This definition indicates that marketing also occurs in non-business organizations.
Kurfz et al (1"983) 'defined marketing as "the development and efficient distribution of goods
and services for chosen consumer segments". This definition implies that marketing activities begin after
goods' and services have been produced, actually marketing activities begin before production activities.
There is also another definition by the marketing staff of the Ohio State University which defined
it as "Marketing is the process in a society by which demand structure for economic goods and services
is anticipated or enlarged and satisfied through the conception, promotion, exchange and
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European Journal of Social Sciences Volume 12, Number 3 (2010)
physical distribution of such goods and services." The problem with this definition is that marketing
deals not only with goods and services but also with ideas, issues, concepts and even people.
Kotler and Armstrong (1998) defined marketing as "human activities directed at satisfying needs
and wants through exchange process". The definition is generally accepted as the modem marketing
definition. Marketing exists when man decides to satisfy his needs and wants through exchange process.
Exchange represents one of the four means by which a man obtains product and satisfies his needs.
Services - this like physical products or consumer goods has definition, Kotler (1987) defined it
as "any act or performance that one party can offer to another that is essentially intangible and does not
result in ownership of anything. It is unlike a product because they are consumed as they arc produced.
It is also important because 'all products require service commitment, which is reflected in the purchase
price.
The Pre shipment Inspection Contracts are basically divided into two types: Foreign Exchange
Contracts and Customs Assistance Contracts.
Foreign Exchange Contracts:- The main purpose of this contract is to detect the over invoicing of
goods.
Customs Assistance Contracts:- The mandate of Pre shipment Inspection Agent is to establish the
value of goods for customs purposes and their classification in the national tariff codes of the importing
country. The main concern of the country is to detect whether the appropriate customs duties and taxes
arte paid on the imported goods. However, the Preshipment contracts in practice are often a combination
of foreign exchange contracts and customs assistance contracts. The detection of over invoicing apart
from curbing the flight of foreign exchange could also serve to detect tax evasion. For example,
multinational companies could transfer profits from one country with high corporate taxes to a country
with low corporate taxes in order to reduce the company's global tax liability. This may be achieved by
adjusting invoiced prices on inter company sales (See Gbadeyan 2002 for detail discussion).
Good subjected to Preshipment Inspection Services are: Shipment value, which must exceeds
certain amount fixed by the user country. In Indonesia the value must exceeds USA 5,000.00 F.O.S. The
goods must be coveted by valid master list that provides tariff concession fixed by the user country but
importer has requested for Preshipment Inspected or subjected to letter of credit requirement.' Air
shipment are exempted from Preshipment Inspection, they are instead inspected at the Airport of
destination by the customs authorities.
The following goods are excluded from the obligation of Preshipment Inspection: Precious and
Semi Precious Stones, Gold and other Semi-precious stones. Art objects, Explosives, Fire Arms,
Munitions and other military articles which are not suited to use by civilians as they are imported by
competent authorities and. fireworks. Antiquities Scrap metal, Electricity, Baggage, Separate items of
Baggage, Parcel post, Commercial samples-, Newspapers and Magazines fruit, Legumes, Vegetables,
Fish or Meat, Fresh milk,. Cheese, Yogurt, Fresh food items, Live animals and eggs in incubation,
unprocessed hides, radioactive and nuclear substances.
Also excluded from the obligation for Preshipment Inspection are goods imported by the
following foreign institutions which are accredited to the user government, provided that they are
destined for? their own use and that this is duly proved in a document handed in, along with the predeclaration governmental organizations, non-governmental organization, multilateral bodies and
diplomatic missions (Mozambique 2001).
Initially, when the Pre shipment Inspection Scheme was introduced, it caused confusion among
importers and those selling to Nigeria, but now it have become something else the trading community
has to live with; It cut out the worst abuses of Nigeria's insatiable desire for imports and basic materials,
which are hot over-priced, (Paliwoda 1988). The history of Preshipment Inspection could be traced to
.1979 when the Societies Generale de Surveilliance (SGS) the world's largest trade inspection group was
the sole. Inspection Agent in Nigeria, following Government decision to terminate the
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contract of SGS on the 30th September, 1984. This lead to the regime of a new Comprehensive Import
Supervision Scheme (CISS) which zoned the world into three regions for Preshipment Inspection
purposes (CBN, 1984). The three regions into which the world was divided are designated as Zones A, B
and C.
The new arrangement provides for five inspection agents from different countries. This
introduces a fair degree of competition as against the total monopoly of S.G.S. Cotecna International was
a new company comprised of three as from Switzerland and United Kingdom and Japan. Cotecna is
based in Geneva in Switzerland. The Agent for Zone C, Swede Control/lntertek Services Limited is a
Swedish Firm. Though engaged on the 1st October 1984, the new agents were expected to commence
effective operation by 1st November, 1984. There was a revision of this scheme in 1999. A new zoning
arrangement for the Preshipment Inspection of Imports Scheme was made. There were four zones
created: Zone A,B,C and D instead of former three zones. The appointment took effect form 1 st
•September, 1999 !(CBN 1999). A number of reasons have been given for the change to a new
inspection arrangement amongst which was to introduce competition and terminate the monopoly of
Societe Generale de Surveillance (SGS). This action is believed would affect a higher degree of
efficiency in performance and hence leads to the achievement of the foreign exchange saving objective
of the government. It is also hoped that the new system would be cost effective and thus financially
beneficial to Nigeria.
The Company (Cotecna) is chosen as the case study because of its international recognition and
its appointment by the Federal Government as one of the recognized Preshipment Inspection Agents in
the country with effect from 1st September, 1999, (CBN, 1999).
Cotecna/OMlC (a joint venture of a Prime Swiss Company and a first class Japanese Company)
have been involved for long in the field of commercial inspection and concentrated principally on
Preshipment Inspection Services (PIS) for foreign Governments amongst which include Nigeria.
4.
Analysis and Findings
The testing of hypothesis in respect to the effective marketing of services of the Preshipment Inspection
Companies using the Chi-square statistic computed at 5% level of significance with 2 degree of freedom
indicated that calculated ^2 value (7.7604) is greater than the tabulated value (5.991) i-e- X° > ^- We
therefore reject the null hypothesis H0) and accept the alternative hypothesis (H]),
In respect of the general utilization of the Preshipment inspection services the sign test is used
with the assumption, that the test is performed at 5% level of significance (a =0.05). We would therefore
reject the null hypothesis if Z > -1.96 or Z<1.96. In this survey our P=0.74, Z=4.48 and the critical limit
for P=0.6051 and 0.3949. Since the observed P of 0.74 is outside the critical limit we accept the null
hypothesis (H0) and reject the alternative hypothesis (Hi). We therefore conclude from above ,test of'
hypothesis that-the general utilization of the Preshipment Companies Services was considered fair
despite the ineffectiveness of its marketing activities. The major findings that emerged from this
research work were summarized below: the cost of services provided by the Preshipment Inspection
Company/could be generally described as expensive, there is no strong support for the call for the
scrapping of Preshipment Inspection Companies, the general utilization of the Pre shipment Inspection
Companies Services can be rated as fair, corruption is the major problem facing the Preshipment
Inspection Companies, the 100 percent Inspection Examination introduced by the Federal Government •
is supported by the Preshipment Inspection Company, the Pre shipment Inspection Companies are
receiving adequate support from the government and the number of the Preshipment Inspection
Companies operating in the country is adequate and there is no need for any increase in the number of
existing ones.
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European Journal of Social Sciences Volume 12, Number 3 (2010)
5.
Conclusion and Recommendations
There is general expression of satisfaction with the services receiving from the Preshipment
Inspection Companies, despite the criticism against the scheme by some section of the industry
operators.
In the light of the foregoing, the following recommendations are made: There should be
privatization of the ports, a complete reconstruction of the Port is also needed, with particular emphasis
on the under water structures which have been damaged by corrosion as well as old age. Federal
Government should continue the process of 100 percent Inspection of all imported goods and reexamined the mandate given- to the Pre shipment Inspection Companies in order to make them function
better.
If the government must retain the services of the Preshipment Inspection Agents, there should be
a review of the Enabling Act No. 11 of 1996, with a view to making it more effective. The Preshipment
Companies need to enlighten the general public and importers about their activities, for example on the
procedure about how form "M" should be filled and advice Banks on proper documentation of form "M"
and the importers documents. They should need to make the marketing of their services to' have more
effective impact on the public and it clients or customers and proper communication medium should be
put in place by the Preshipment Inspection Agents, in order to contact their affiliates abroad,
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