Continental Free Trade And Shipping In Nigeria: Ownership Or Flagging?

ACfTA SHIPPING CRITERION

Article 6 of Section II of the AfCFTA states that :

“The terms "their vessels" and "their factory ships" in paragraph 1(h) and

1. (i) shall apply only to vessels, leased vessels, bare boat and factory ships which are registered in a States Party in accordance with the national laws of a States Party and meet one of the following conditions:

   1. a)the vessel sails under the flag of a State Party; or

   2. b)at least, 50 per centum of the officers of the vessel or factory ship are nationals of the States Party or States Parties; or

   3. c)at least, 50 per centum of the crew of the vessel or factory ship are nationals of the States Party or States Parties; or

   4. d)at least, [50/51] per centum of the equity holding in respect of the vessel or factory ship are held by nationals of the States Party or States Parties or institutions, agency, enterprise or corporation of the government of the States Party or States Parties”.

   Article 2 of the General Provisions state that The State Parties undertake to grant all transit traffic freedom to traverse their respective territories by any means of transport suitable for that purpose

2. State Parties undertake not to levy any import or export duties on the transit traffic referred to in Article 2(1). However, in accordance with Article 8 (1) of this Annex, a State Party may levy administrative or service charges equivalent to services rendered.

Article 5 Licensing of Transitors and Carriers

1. Any person intending to be engaged in the operation of transit traffic under the provisions of this Annex shall be licensed for that purpose by the competent authorities of the State Party in whose territory he is normally resident, or established and the competent authority shall inform all the other State Parties of all the persons so licensed.

2. The conditions for the issuance of the licences referred to in Article 5(1) to persons resident, or established in a State Party shall be the following:

From the AfCFTA it has become clear that any vessel that expects free and unlimited passage to trade in the African Continental Free Trade area needs to be flagged in an African State that is a party to the Agreement and in addition has 50 percent of its crew from a state party or the equity shareholding in respect of the vessel in 50/51% equity holding in nationals of a state party.

It is interesting to observe that the requirements appear quite similar to those of the Cabotage Act in Nigeria which rather than protect coastal shipping for indigenous operators has by way of the waiver system still left Cabotage trade quite porous to foreign participation and as such has been unable to circumvent the pertinent issue of capital flight.

The AfCFTA on the other hand permits flagging and as such, foreign vessels using the mechanism of flags of convenience in State Parties will easily participate in trade and enjoy all the incentives including the unfettered passage afforded therein.

It is common knowledge that Liberia which is also a State party to AfCFTA is one of the biggest Ship Registries and as such foreign Ship owners who have registered their vessels in such registries will partake of unrestricted trade along the African transit corridor.

The AfCFTA in its protocol on trade on goods seeks to bestow certain incentives on vessels plying the African waters to increase intra african trade. It is instructive to reflect on how much of the global fleet is indigenously African. Needless to say there will be an increase in flagging demands in African states which will bring in some measure of revenue but quite clearly the revenue realized from flagging is much lower than the benefits derived from vessel ownership. Voyage charter freight and time charter hires generate a substantial portion of the earnings from international trade and the terms of carriage tend to be determined by the Ship owner or Carrier. Clearly a substantial portion of such earnings will probably be remitted out of the African economy therefore not contributing to the development envisaged by the AfCFTA. From an economic perspective it is debatable whether flagging alone will decisively reduce the cost of regional carriage of goods by sea thereby making intra African trade cheaper in terms of transport costs.