- Who can import to Ethiopia and export goods out of Ethiopia?
- Prohibition and Restriction of Import-Export
- Foreign Currency in Import-Export Trade
Under the current legal system the import and export trade is regulated in accordance with several laws, which include;
- Commercial Registration and Business Licensing Proclamation No. 980/2016 (DOWNLOAD)
- The 1960’s Commercial Code of Ethiopia (DOWNLOAD)
- A Proclamation on Export Trade Duty Incentive Schemes, Proclamation No. 768/2012; (DOWNLOAD)
- A Proclamation on Investment, Proclamation No. 769/2012; (DOWNLOAD)
- Various tax laws including Value Added Tax Proclamation No. 285/2002 (DOWNLOAD) (as amended in Proclamation no. 609/2008) (DOWNLOAD); Excise Tax Proclamation No. 307/2002 (DOWNLOAD) (as amended in Proclamation No. 609/2008) (DOWNLOAD); Customs Proclamation No. 859/2014 (DOWNLOAD); Income Tax Proclamation No. 979/2016 (DOWNLOAD); and Tax Administration Proclamation No. 983/2016 (DOWNLOAD);
- The Revised Regulation on the Importation of Goods on Franco- Valuta Basis Council of Ministers Regulation No. 88/2003; (DOWNLOAD)
- Import Sur-tax Council of Ministers Regulation No. 133/2007; (DOWNLOAD) and
- Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation No. 270/2012. (DOWNLOAD)
The Ministry of Trade and Industry (the former Ministry of Trade) is the major body of the government to regulate all import and export goods in particular it issues an Import Release Permit an Import Release Permit for Legal-Metrology Instruments, and issues Export Release Permits. Differently, the Ethiopian investment commission issues and renews investment permit (which serves also as an import permit) as well as Custom Duty Free permission letter. The other major organ is the National bank of Ethiopia (NBE) which regulates the foreign currency aspect of import-export. The responsibility of the NBE include registration of sales contract agreement; issues Export Bank Permit; issues Foreign currency Approval; and issues Bank import permit for Letter of Credit, (Open L/C), Advance Payment, approves Purchase, and order for cash against document (CAD).
There are also other regulatory bodies which specifically issue import and export permit for specific goods. For example; the Ministry of Agriculture and Live Stock issue import permit for plants, seeds, plant products, pesticides and fertilizers, and export permit for animal feed, live animals and meat products; the Ministry of Mines and Petroleum issue permit for the exportation of mineral products; the Food, Medicine and Health Care Administration and Control Authority (FMHACA) regulates the import and export of drugs, medical supplies or instruments, baby food, supplement food, and cosmetics; and the Information Network Security Agency (INSA) issue Import permit for communication and security equipments.
Here are some major points on the Regulation of Import and Export License. (See also the article Import-Export Procedures in Ethiopia)
According to Regulations No. 270/2012 (as amended in 2014), import-export trade in Ethiopia is available for both domestic investors and foreign investors. Note, that an investment permit issued by the Ethiopian investment commission also serve as an import permit.
A business person who desires to engage in import-export trade, first, has to obtain a business license and import permit (note that export permit is only required for certain goods) from the Ministry of Trade and Industry (Article 43(2) of the commercial registration and business licensing proclamation no. 980/2016) or other government agencies which can issue business license and import-export permit.
There is also a special import permit that such business person must acquire for the importation of certain goods. For instance a special permit is required for the importation of ‘genetically modified food’, infant and follow up formula or complementary food, and medicine for clinical trials or any other scientific investigation for conducting laboratory quality test for registration purpose. (See article 10(4) article 11 of Council of Ministers Regulation No. 299/2013 to provide for Food, Medicine and Health Care Administration and Control) (DOWNLOAD)
(See also the article Regulations of Commercial Registration and Business Licensing in Ethiopia)
According to article 43(1) of the commercial registration and business licensing proclamation no. 980/2016, the Ministry of Trade and Industry 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.
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.
Foreign Exchange Allocation for importers and Priorities (Article 6 of Directives No. FXD/46/2017)
Importers are, first, required to register an application for foreign exchange allocation within the commercial banks. In the allocation of foreign currency a bank shall give priority to the following import items and payments, among them, on first come first served basis;
- fuel, motor oil, lubricants and LGP gas
- agricultural inputs and machineries which include seeds and pesticides, irrigation pumps, animal feeds, and machineries and equipments.,
- pharmaceutical product (medicine, laboratory equipments and reagents, and medical equipments and appliances),
- factories’ requests for procurement of machineries, equipments, spare parts, raw materials and accessories;
- import of nutritious food for babies
- spare part for construction machineries for own use construction companies whose total value not exceeding USD 50,000
- educational materials (exercise book, ball pen, pencil and printing papers)
- imports of chemicals
- profit and dividend transfer
- transfer of excess sales of foreign airlines
- sales from share and liquidation of companies by FDI
Despite the above, priorities a bank must sale foreign currency to its all other customer’s on the basis of first come first served bases. However the importer has to lodge a request for foreign currency only in one bank. Importers are prohibited to submit application for foreign currency in more than one bank. Further, the importer must adhere to any provisions of proclamation, regulation and directives. Any importer who fails to comply will be black listed from six month up to two years.
On the other hand, the following goods are exempted from the registration procedure and are granted on demands.
- Foreign currency request from non-residents foreign currency and non-resident transferable birr account;
- Foreign currency accounts of nonresident Ethiopian and nonresident Ethiopian origin;
- retention accounts;
- forex request for all transactions set under the operation of forex bureau directives no. FXD/17/2001;
- invisible payments such as consultancy, commissioning, installation, and royalty fees, payment of services and travel payment by non-residents non transferable account, communication and other service payments, aviation services payments and associated costs, cargo handling, freight and other associated costs, payments on exports freight and transit services;
- other payments authorized by the NBE especially external debt payment obligations and supplier’s credit; and
- salary transfer of foreign nationals.
Retention and Utilization of Foreign Currency for Exporters (Directive No. FXD/48/2017)
An exporter has a right to retain their foreign exchange earnings but only through retention accounts. In plain word, an exporter can obtain the foreign currency which is paid to him by the buyer, provided that he/she has a retention account in one of the banks authorized by the NBE.
There are two types of foreign exchange retention accounts (current accounts) which are designated as “foreign exchange retention account A” and “foreign exchange retention account B”. An exporter with an Account A can retain 30% of the account balances for an indefinite period of time. On the contrary, an exporter with Account B can retain 70% of the account balances for up to 28 days. After the 28 days, any balance will automatically be converted into local currency in the next working day by the customer’s bank using the prevalent buying exchange rates.
Note that, the exporter must give a written authority, which should clearly stipulate the type of account to be opened, for the bank.
Local merchants or entities may also create a retention account, provided that they are authorized by the NBE, to collect credit card/debit card/prepaid card/payments for goods and services they sale; and cash notes for goods and services they sale such as hotels, duty free shops, airline ticket offices and travel agents, tour operators, and shops operating at the airports on the airside.
Note that banks, which are authorized to operate retention accounts, are required to send to the NBE the aggregate balances of foreign exchange held under retention account “A” and “B”.
Utilization of Retention Accounts
In relation to the Utilization of FXC Retention Accounts, Accounts A and B must be used to finance direct business services related and current payments such as;
- Import of goods except vehicles, and related services in relation to the business including: payment for expenses incurred on exporting of goods and services, payment for promotional activities, payment for subscription to business publications, payment for training fee and educational expenses, payment for services by non-residents, payment to import materials required for export packaging labeling and auxiliary items.
- Payment for settlement of external loan and supplier’s credit
- Payment to refund tour operators
- Service payments for consultants, experts or professional who rendered services.
- Other payments against transaction that might be approved by the NBE from time to time.