US embassy cable - 02ABUJA3304

C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 003304 
 
SIPDIS 
 
 
STATE FOR EB/TPP AND AF/W 
STATE PASS USTR FOR CMILLER AND PCOLEMAN 
COMMERCE FOR ITA/MAC 
GENEVA PASS USTR FOR TAGLIANI 
 
 
E.O. 12958: DECL: 12/01/2012 
TAGS: ETRD, BEXP, KTEX, ECON, NI 
SUBJECT: NIGERIAN TEXTILE BAN: "WE'RE DOING THIS FOR AGOA" 
 
 
REF: A. USDOC 6040 
     B. LAGOS 2034 
     C. ABUJA 1810 
 
 
Classified by Ambassador Howard F. Jeter; Reasons 1.5 (b) and 
(d). 
 
 
Summary 
------- 
1. (U) Standing the spirit of free trade on its head, a 
senior Nigerian Commerce Ministry official says the GON 
temporarily banned imports of certain printed fabrics and now 
imposes import restrictions on these items as part of the 
country's efforts to qualify for AGOA trade benefits. The 
Standards Organization of Nigeria will implement these new 
regulations, which include testing for dangerous chemicals, 
labeling, and enforcement of intellectual property rights. In 
addition, the Nigeria Customs Administration will enforce 
minimum values and shipping restrictions announced August 
2002 (Ref. B). The Commerce official also claims the new 
regulations are WTO consistent and that HS code 5210.600 
exists at the international level. 
 
 
2. (C) There is a much simpler, more plausible explanation 
for the new trade regime in textiles: the protection of a 
troubled domestic industry. Additionally, a poor 
understanding of the international trading system among GON 
trade policy experts and systemic corruption in the Customs 
Service that makes tariff collection difficult explains why 
protection for these textile manufacturers was granted in 
this WTO-inconsistent fashion. End Summary. 
 
 
3. (U) Ministry of Commerce Director for External Trade Y.F. 
Agah met November 29 with Econoff to discuss the GON's import 
ban and new registration system for textiles known as 
"African prints." These textiles, usually brightly colored 
and printed on both sides, are primarily used to make 
traditional attire for both men and women. Agah--three months 
ago promoted from Deputy Director for Multilateral Trade to 
Director for External Trade--has been working on this issue 
for the GON at the interagency level since 2000. 
 
 
A New Import Licensing Regime 
----------------------------- 
4. (U) Agah maintained that the ban on imports of African 
prints was intended to regulate the textile trade by 
eliminating illegal trans-shipments so that Nigeria could 
qualify for AGOA textile benefits. He said the GON recognized 
that Nigerian manufacturers could become competitive 
exporters of African prints to the United States if AGOA 
benefits were accorded. The first step was to gain 
recognition of Nigerian African prints as folkloric articles, 
something he claims AUSTR Rosa Whitaker agreed to at the 
April 2002 TIFA held in Washington. 
 
 
5. (U) The second step was to regulate imports of Asian-made 
African prints into Nigeria, much of which had illegally 
passed through Atlantic ports or across the Benin border. He 
said that before the GON could establish a workable visa 
system to prevent trans-shipment, it was necessary to first 
establish an orderly, legal trading regime. Agah separately 
mentioned legislation now pending in the National Assembly 
for an AGOA-consistent textile visa system that would be the 
next step in efforts to prevent trans-shipment. 
 
 
6. (U) On August 27, the Ministry of Finance announced a ban 
on imports of African prints effective on August 31. The ban 
was intended to be temporary, pending establishment of new 
import regulations for those textiles (Ref. B). Agah claimed 
the system was now in place and the temporary ban was lifted 
in October. Agah mentioned that in addition to the import 
requirements in the August 27 notice--such as a minimum 
import price, restriction of imports to Apapa and Tin Can 
ports only, and incentive pay for customs agents--the GON had 
established other import rules that would be implemented by 
the Standards Organization of Nigeria (SON). 
 
 
7. (U) First, the SON would certify harmful chemicals were 
not used in manufacturing the fabric. Agah claimed many 
foreign manufacturers used dangerous chemicals--chlorides and 
sulfates--in printing the fabrics. According to Agah, these 
chemicals often precipitate severe allergic skin reactions. 
Second, the SON would verify that each bolt of fabric or 
finished garment is accurately stamped to indicate the 
country of origin and manufacturer. He asserted that many 
imported fabrics were fraudulently stamped "Made in Nigeria," 
when in fact they were not. Frequently, the fabric would not 
include any information at all on its origin. Third, the SON 
would certify that the designs used in the African print were 
original and not copied from other manufacturers. 
 
 
8. (U) Agah could not provide additional information on the 
process an importer would go through to get SON 
certifications. Nor could he say whether any importers had 
applied for SON certification or whether any African prints 
had actually been imported under the new system. He said the 
regime had only been in place for two months, and the SON had 
probably not clearly defined these import procedures. He 
suggested Econoff contact the SON, based in Lagos. (Note: 
Lagos Econoff has been unable to contact a SON official who 
is aware of these new certification requirements for imported 
African prints. End Note.) 
 
 
WTO Concerns 
------------ 
9. (U) Agah told Econoff that Article XVIII of the GATT 
Agreement permits restrictions on imports of printed fabrics 
as a safeguard measure to protect local industry from an 
import surge. When asked how the GON determined there was a 
damaging import surge, he answered that the markets were 
being flooded with cheap printed fabrics from India and 
China. At least four Indian companies were mass-producing for 
the Nigerian market, Agah maintained. He said that the market 
price for imported fabrics was 250 Naira (about $2), while 
similar Nigerian fabrics sold for 850 to 1,000 Naira ($6.50 
to $7.75). Agah acknowledged that no notification had been 
made yet to the WTO on this justification for the new import 
regime. 
 
 
10. (U) Agah argued that Article XX also allowed for the 
import restrictions based on public health concerns. As 
mentioned above, Agah claimed that many imported African 
prints are made using harmful chemicals. He said that it was 
consistent with the WTO framework that the GON be allowed to 
regulate this trade. 
 
 
11. (U) On the issue of national treatment, Agah stated that 
domestic manufacturers of African prints already 
"scrupulously" followed the regulations the SON would now 
enforce for imported fabrics. He indicated that the SON 
regularly visited textile manufacturers to ensure compliance. 
Therefore, there was no reason to also restrict the sale of 
local textiles. 
 
 
Customs Implementation 
---------------------- 
12. (U) Agah explained that the Bureau of Customs would not 
only enforce a minimum import price but also a minimum volume 
per 20-foot container. The Ministry of Finance had not yet 
determined the import price to be applied, he said. The 
minimum quantity, however, would be 6,000 meters of fabric 
per container. Such a minimum was necessary because, 
according to Agah, all too often importers had claimed to 
bring in half-full containers when in fact the container was 
full to the brim. He indicated that physical inspection of 
each and every container was not practical, and therefore a 
minimum volume and price is necessary to prevent 
under-invoicing. 
 
 
13. (U) Agah said that the import regime would be applied 
only for goods declared under the Harmonized System heading 
of 5210.6000, which he claims exists at the international 
level. He indicated the heading was established to ensure 
that only African fabrics, and not other printed or dyed 
fabrics, would be affected by the new import regime. 
 
 
14. (U) Agah claims that the WTO Agreement on Customs 
Valuation has not yet been implemented in Nigeria, and 
therefore establishing a minimum import price was not 
contrary to WTO rules. He believes that in the wake of the 
lack of progress at the 2000 WTO Ministerial in Seattle, many 
developing countries, including Nigeria, were granted a de 
facto temporary exemption from implementing a customs 
valuation system based on transaction values. In the long 
run, he said the GON is planning to implement transaction 
value and move away from its current pre-shipment inspection 
regime that is based on reference values, but he was unable 
to provide a timeline for this changeover. (Note: The 
Comptroller of Customs for the Lagos Zone told Econoff in 
Lagos that he has no knowledge of the lifting of the ban or 
any standards to be implemented by the Customs Service.) 
 
 
Comment 
------- 
15. (C) Contrary to Agah's claim, Nigeria's efforts to become 
a textile exporter under AGOA was not the sole reason for the 
ban on African prints and the new import regime. It likely 
was not even the primary reason. A more significant factor 
was the GON attempt to protect the domestic market for 
domestic textile manufacturers, who include wealthy, 
politically connected businessman such as Aliko Dangote. For 
quite some time, local manufacturers have been vociferously 
complaining about being unfairly squeezed by Indian 
competitors. We have seen similar trade measures imposed on 
goods such as used automobiles and frozen chickens. In those 
cases, the GON similarly claimed it wanted to stop smuggling 
or protect consumer health. 
 
 
16. (C) Embassy and Washington-based officials have 
previously briefed Agah on the requirements of an 
AGOA-consistent textile visa system. The GON should be aware 
that such a system is based on record-keeping by producers to 
prevent trans-shipments, not on import restrictions. Agah 
seemed genuinely surprised that we would find GON textile 
trade restrictions, ostensibly implemented for the sake of 
AGOA, an unwelcome development. This episode shows that GON 
officials have a relatively shallow understanding of 
international trading rules. (Agah, although wrong on many 
points, is truly one of the GON's most senior trade experts.) 
 
 
17. (C) Another reason the GON is employing WTO-inconsistent 
non-tariff barriers to protect domestic industry is that 
tariffs are extremely difficult to administer in Nigeria. 
Smuggling--facilitated by corrupt customs officials--is 
rampant, and any tariff enacted to protect domestic industry 
is easily circumvented and therefore does not satisfy local 
manufacturers. GON officials apparently believe they can 
better control trade through non-tariff barriers. End Comment. 
JETER