CHAPTER ONE

CUSTOMS OPERATIONS IN ETHIOPIA – A BRIEF OVERVIEW

2.1. Overview of Customs Functions

Ethiopia is the second largest country of Africa in terms of population and one of the fastest
growing economies in Africa. Presence of large public sector is one prominent feature of
Ethiopian economy which is in transitional phase of becoming a market economy.

The World Customs Organization (WCO) defines Customs as “the government service which is
responsible for the administration of Customs law and the collection of import and export duties
and taxes and which also has responsibility for the application of other laws and regulations
relating, inter alia, to the importation, transit and exportation of goods.”

In Ethiopia, ERCA’s (Ethiopian Revenue and Customs Authority) functions include the
enforcement of the Customs Proclamation provisions governing the import and export of cargo,
baggage and postal articles; the arrival and departure of vessels, aircrafts, and other means of
transport; goods in transit; and the governance of any goods subject to customs control, including
rights and obligations of persons taking part in customs formalities.

2.2 Principles of Customs Operations in Ethiopia

Customs operations involve the administration of customs law relating to the importation,
exportation, movement or storage of goods and the collection of duties and taxes. In this regard,
customs operations are a key factor for trade facilitation and economic development of a country.
For such a crucial sector to function soundly it should stand on principles that guide its course to
worthwhile goals.

Accordingly, the Ethiopian customs law contains provisions that clearly prescribe the basic
guiding principles that have to be applied on customs operations. These guiding principles,
which have important implications for the roles of all stakeholders, including the traders
themselves, are the following ones:

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1. Self-assessment: It is the responsibility of importers and exporters or their agents to assess
and submit the value of goods to the customs office, which then determines the appropriate
duties and taxes to be paid based on the information provided by traders.

2. Risk management: ERCA steers its activities through assessing, directing and controlling
risks which emanate from the import and export of goods. The purpose is to strike a balance
between trade facilitation and controls. Successful implementation of the risk management
principle helps to avoid unnecessary delays and wastage of resources by concentrating customs
control on high-risk consignments and expediting the release of low-risk consignments.

3. Transparency: Under this principle, ERCA provides relevant information about trade
including the rates of duties and taxes, fees and charges, customs laws and procedures, appeal
procedures, etc. – through publications and other means. This guide is one example of ERCA’s
commitment to enhancing the transparency of its operations.

4. Accountability: ERCA clearly defines the duties and responsibilities of each actor in customs
operations.

5. Service orientation: As a result of the preceding principles, ERCA is committed to creating a

conducive environment to provide equitable, expeditious, predictable and reliable services.

6. Prevention of illegal practices by promoting self-compliance: Under this principle, which is

related to risk management and self-assessment, ERCA will seek to prevent illegal practices such
as commercial fraud (under-or over-invoicing, wrong description and classification of goods,
etc.), smuggling of prohibited and restricted goods, and others, by taking measures that promote
self-compliance. Examples of such measures are the provision of information and advice to
traders, advance rulings for customs classification, customs valuation and preferential origin, the
implementation of post clearance audits, or the use of simplified procedures for authorized
traders.

7. Promotion of priority sectors and economic development: This principle is aimed at the
Authority to play its vital role in expediting the economic development of the country by
providing special service to priority sectors, such as manufacturing.

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To uphold these principles, a vital system that informs all the functions of customs operations is
the customs approved treatment or use of goods. Under this system, in keeping with the
standards that are set by the customs law all the goods that pass customs are treated without
any discrimination as to the nature, quantity, origin, and destination or shipment conditions.
However, the application of this system is precluded in situations where it would conflict with
measures put in place for public morality, protection of health and life of humans and animals
and plants, the protection of cultural heritages, or other specific treatment or use of goods
provided by law.

The national import and export procedures and laws provide special privileges and schemes for
foreign direct investments, exporters and industry park participants.

The Ethiopian Revenue and Customs Authority is currently developing different modern
technologies. These include; Electronic Single Window System (ESWS), Electronic Customs
Management System (ECMS) and Cargo Trucking. In addition, ERCA is using modern cargo
scanning technologies to facilitate the international trade and to support foreign direct
investment.

2.3. Prohibited or restricted imports and exports

According to article 43(1) of the commercial registration and business licensing proclamation no.
980/2016, the Ministry of Trade and Industry (now Ministry of Trade and Regional Integration)
can ban importation into or exportation from Ethiopia of certain goods and services. The
prohibition made by the Ministry may be complete prohibition or temporary prohibition. The
complete prohibitions are permanently applicable for specific imports or exports. However, the
Ministry may issue a temporary suspension of the prohibitions where it is found necessary. For
instance, teff is permanently prohibited unless for persons of Israeli origin residing in Ethiopia
(but not more than 4000 tons) and commercial farmers. However, the Ministry had reportedly
issued a temporary suspension of the prohibition where there is an excess of products.

On the other hand, the Ministry may issue a temporary prohibition on import and export. Most of
the temporary prohibitions are issued where there is food scarcity, drought or other serious
circumstances in Ethiopia.

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In relation to restriction of import-export goods, the various relevant government organs,
discussed in the beginning of this article, have the power to restrict the importation or
exportation of certain goods. The import of certain goods into Ethiopia is restricted for safety,
security, environmental, health and other reasons, i.e., they must not be imported without
permission.

A business person is required to obtain a pre-import permit and export permit to import and
export restricted goods, respectively. For instance, the importation of medical supplies,
pharmaceuticals, food supplements, and baby food are restricted, thus an importer needs to
obtain a pre-import permit. Further, an importer who obtained a pre-import permit should also
have an entry permit that is issued at the port of entry. Similarly, a person, who wants to export
coffee, is required to obtain an export permit to from the Coffee and Tea Development Center
which is under the Ministry of Agriculture and Natural Resource.

And also, as a general rule, allows any commodity to be traded freely, this is not true for two
categories of goods: Some are “prohibited goods,” according to Article 4 of the Customs
Proclamation, which must not be imported into, exported from, or transited through Ethiopia.
Examples are illicit narcotics and drugs or worn clothes.

Secondly, restricted goods are not allowed to be imported, exported or transited unless in
compliance with the requirements of the specific restriction. Normally, restricted goods are
administered by specific regulatory agencies. Examples of restricted goods are medicines and
pharmaceutical products, foods and beverages, communication equipment, fertilizers, seeds, live
animals, etc.

2.4. Legal Basis for Customs Operations

The following laws and secondary legislation are the basis on which ERCA’s operations rest:

 Value Added Tax Proclamation No. 285/2002;

 Excise Tax Proclamation No. 307/2002;
 Ethiopian Revenues and Customs Authority Establishment Proclamation No. 587/2008;
 A Proclamation to Amend the Value Added Tax Proclamation No. 609/2008;
 A Proclamation to Amend the Excise Tax Proclamation No. 610/2008;

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 A Proclamation to Promote Sustainable Development of Mineral Resources,
Proclamation No. 678/2010;
 A Proclamation on Export Trade Duty Incentive Schemes, Proclamation No. 768/2012;
 A Proclamation on Investment, Proclamation No. 769/2012;
 Customs Proclamation No. 859/2014;
 Income Tax Proclamation No. 979/2016;
 Commercial Registration and Business Licensing Proclamation No. 980/2016
 Tax Administration Proclamation No. 983/2016
 Customs Warehouse License Issuance Council of Ministers Regulations No. 24/1997;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
25/1997;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
80/2002;
 The Revised Regulation on the Importation of Goods on Franco- Valuta Basis Council of
Ministers Regulation No. 88/2003;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
89/2003;
 Customs Clearing Agents Council of Ministers Regulation No. 108/2004;
 Import Sur-tax Council of Ministers Regulation No. 133/2007;
 Investment Incentives and Investment Areas Reserved for Domestic Investors Council of
Ministers Regulation No. 270/2012;
 Temporary Admission Directive No. 28/2002 E.C;
 Goods Released under Security Directive No. 37/2002 E.C;
 Postal Parcel Customs Procedure Directive No. 38/2002 E.C;
 Customs Warehouse Administrative Directive No. 40/2002 E.C;
 Disposal of Abandoned Goods under Customs Control Procedure Directive 56/2003 EC;
 Vehicles Tax Incentive Directive No. 04/2004 E.C
 Directive Providing for Simplified Customs Procedures for Authorized Economic
Operators, Directive No. 65/2004 E.C;
 Franco-Valuta Directive No. 66/2004 E.C;
 Export Trade Duty Incentives Directive No. 86/2005 E.C;

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  Establishment of Compliance Review Committee and Procedures Directive No. 91/2006
E.C;
 Directive to Determine the Working Modalities of the Customs Complaints Review
Sections No. 107/2007 EC;
 Second Schedule Tariff Application Directive No. 45/2008 E.C;
 Determination of Customs Dutiable Value Directive No. 111/2008 E.C;
 Administrative Penalties for Customs Offences and Forfeiture of Goods Implementation
Directive No. 112/2008 EC;
 A Directive to Amend the Establishment of Compliance Review Committee and
Procedures Directive No. 113/2008 E.C;
 Directive to Determine Temporary Importation of Goods Accompanied by Tourists,
Directive No. 116/2008 E.C;
 Directive of Transit Procedures No. 117/2008 E.C. 11
 Directive to Determine the Application of Customs Declaration, Directive No. 118/2008
E.C;
 Directive of Goods Examination and Goods Subject to Prior Customs Procedure.
Directive No. 119/2008 E.C;

The key legal texts can be accessed at the ERCA website (http://www.erca.gov.et).

Area regulated
Regulatory ag
(related to imports
No Regulatory Responsibilities
and exports) to
agency
imports and exports)
 Issues Import Release Permit
Ministry of All import and export  Issues Import Release Permit for
1
Trade (MOT) goods Legal-Metrology Instruments
 Issues Export Release Permit
Ethiopian
Investment
Commission All goods imported  Issues and renews Investment permit
2 (EIC) and and exported by  Issues Custom Duty-Free permission
Regional investors letter
Investment
Bureaus
3 National Bank Foreign currency  Registers sales contract agreement

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  Issues Export Bank Permit
 Issues Foreign currency Approval
of Ethiopia
 Issues Bank import permit for:
(NBE) and
 Letter of Credit
Commercial
 (Open L/C)
Banks (CBs)
 Advance Payment
 Approves Purchase Order for CAD
 Issues Phytosanitary Certificate for
reexport
 Issues Veterinary Health Certificate
Import of plants,
Ministry of  Issues Export Permit for Animal Feed
seeds, plant products,
Agriculture &  Issues pre-import permit for plant
pesticides and
4 Natural &plant Products• Issues pre import
fertilizers Export of
Resources permit for fertilizers& pesticide• Issues
animal feed, live
(MOANR) import release permit for plant & plant
animals and meat
Products
 Issues import release permit for list of
registered pesticides
 Issues Duty drawback authorization
letter
 Issues & renews Export trade duty
incentive
Ministry of Incentives related to
5  Scheme Certificate
Industry (MoI) manufacturing
 Issue and Renew 2nd Schedule
Certificate
 Approvals of raw material
 Supply contract agreement
Ministry of
Mines,  Issues Export Permit
Export of mineral
6 Petroleum &  Issues Customs duty & tax
products
Natural Gas  Free support Letter
(MoMPNG)
Ethiopian
Conformity
Conformity with  Issues Laboratory Test Report
7 Assessment
accepted standards  Issues inspection report
Enterprise
(ECAE)
Federal  Issues pre-import permit (Criteria
8 Transport Import of vehicles specification)
Authority (FTA)  Issues import release permit

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 Ethiopian
 Issues Pre-Import Permit
Radiation Import of radiation
 Issues Import Release Permit
9 Protection emitting equipment
 Issues Export Release Permit
Authority and machinery
&Transport License
(ERPA)
Oromia Islamic
Affair Supreme
10 Export of meat  Issues Halal Certificate
Council
(OIASC)
 Issues pre-import permit and/or
Food, Medicine Import & export of
Special import permit
and Health Care drugs, medical
 Issues export permit
Administration supplies or
11  Issues import release permit
and Control instruments, baby
 Issues free sale certificate/letter
Authority food, supplement
 Issues health certificate
(FMHACA) food, cosmetics
 Issues list of registered drugs
Veterinary Drug
and Feed  Issues Pre-Import Permit
Import and export of
Administration  Issues Import Release Permit
12 veterinary drugs and
and Control  Issues re/export Permit
animal feed
Authority  Issues list of registered drugs
(VDFACA)
Information
Import of  Issues pre-import permit
Network
13 communication and  Issues import release permit
Security Agency
security equipment  Issues re/export permit
(INSA)
Ministry of  Issues Pre-Import permit
Import of
Communication  Issues Import Release permit
telecommunication
14 and Information  Issues Export/Re-export permit
and network
Technology  Issues Customs duty & tax
equipment
(MCIT)  Free permit
 Issues pre-Import permit for live
animals & animal products
Import of live  Issues import release permit for live
Ministry of
animals, animal animals &animal products
15 Livestock and
products, and export  Issues international veterinary health
Fishery (MOLF)
of animal feed certificate for cattle, sheep &goat,
meat & meat product, Hide &Skin•
Issues export permit for animal feed
16 Ethiopian Radiation emitting  Issues Pre-Import permit

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 Radiation
Protection equipment and  Issues Import Release permit
Authority radioactive sources.  Issues Export/Re-export• permit
(ERPA)
ECCSA - Goods Export to
Ethiopia Member states of
Chamber of COMESA and any  Issue COMESA Certificate of Origin
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Commerce & countries which have  Issue Ordinary Certificate of Origin
Sectoral no preferential
Association treatment ag

Note: - Breaches or attempted breaches of customs rules are generally considered as an offence
in Ethiopia, as elsewhere. Traders should therefore know their responsibilities as well as the
implications of violations. Otherwise, there will be penalties regarding their custom offences.

Conversely, ERCA recognizes that it may also make mistakes. Also, the customs administration
sometimes takes decisions with which an importer or exporter may not agree. In line with the
principles of transparency, accountability and fair treatment, any person who feels aggrieved by
an ERCA decision may appeal or submit a complaint.