Samsung May Be in Trouble for Violating Nigeria’s Trade Policy

World’s biggest smartphone manufacturer, Samsung, has come under fire from the Nigerian Senate over some sharp trade practices. The Senate is accusing Samsung Electronics of exploiting Nigeria’s trade policy by importing finished goods as assembly parts. In other words, it imports finished goods under the guise of raw materials.

Nigerian Senate committee on Customs, Excise and Tariffs has launched an investigation into the issue.

Speaking to news men on Thursday, Chairman of the committee, Sen Hope Uzodinma said that this issue is not peculiar to Samsung alone.

Foreigners are here, pretending to be manufacturing different products in Nigeria, pretending to be importing raw materials or Complete Knocked Down (CKD) but in the real sense, they have no assembly plant.

How is This a Problem?

Issues like this are major concerns in international trade. Globally, nations favour trade policies that protect their domestic industry and local manufacturing process. Using tariffs, customs duties, and, occasionally, quotas, countries can discourage imported finished goods by making them more expensive and less desirable.

In the same vein, Nigeria gives preferential treatments to companies that import assembly parts to make finished goods in the country. Removing tariffs and reducing customs duties are few ways countries support such companies.

Thus, companies that exploit these laws to import finished goods make a lot of profits at the detriment of the local industry.

The Case Against Samsung

The Nigerian senate committee appears to have a strong case against the Korean manufacturer. According to Senator Uzodinma, during a recent oversight tour, it was discovered that one of Samsung’s major distributors, Somotex, had also been exploiting the system.

Claiming to be a Samsung products assembling company, Somotex has no assembly plant. Somotex receives finished goods such as fridges and televisions from Samsung instead. Yet, it has been “importing CKD and claim to be assembling in Nigeria,” Senator Uzodinma shared.

These dishonest dealings are a big drain to Nigeria’s non-oil revenue. The Senate committee considers it a big issue and has vowed to fight it.

The Implications for Samsung

Uzodinma did not share what actions would be taken against Samsung or its distributor, Somotex. But the global practice is to slap one or more sanctions on the companies.

On the one hand, Nigeria could seize its finished goods being imported as CKD. On the other, huge fines could be imposed the company and its distributors.

Of course, nothing is assured yet. But in the nation’s characteristic manner, how sure are we that Samsung wouldn’t only get a slap on the wrist?