How to Benefit from Import Customs Duty Incentives for your Ethiopia Agribusiness Investment Project

Last updated March 14, 2015

Are you in the process of planning or starting new agribusiness project in Ethiopia or expanding an existing one? If so, you should be considering physical resources necessary for your commercial farming or agro processing establishment. The high cost of importing capital goods and construction materials may be a serious concern, if you have to pay import duty fees levied on such high value items that could rise as high as hundred thousands or even millions. Fortunately, you do not have to pay! The government of Ethiopia will exempt your goods from customs duty. But that can be attained as long as you know how best to benefit from this attractive incentive scheme. Follow the basic step-by-step guides provided by this article to learn how.

1

Assess the requirements for your Ethiopia agribusiness project

Not all investors have the same needs of goods necessary for their respective projects. As part of the business conceptualization or planning exercise, therefore, it is necessary that you determine what items you really require. Whether or not you will be allowed to import the items also depends on the objective necessity of the goods for your project.

2

Determine an investment area eligible for incentive

According to Regulation number 270/2012 as amended in July 2014, any investor engaged in the areas of investment specified in the Schedule attached with it except some may import duty-free capital goods and construction materials necessary for the establishment of a new enterprise or the expansion or upgrading of an existing enterprise. Normally agriculture is open for both domestic and foreign investors. However, you are advised to check the Schedule for details if you wish to secure a duty-free grant head on.

3

Get prior approval to import customs duty free

You should submit in advance the list of capital goods and construction materials to be imported duty-free and be able to get approval of same from the Ethiopian Investment Commission. This can be part of the application for investment permit that requires you to provide adequate information on your goods requirements. You may check application form for the permit which is available at http://www.investethiopia.gov.et.

4

Consider buying from a local supplier or obtaining goods imported free of customs duty by way of transfer

This can save you a lot of time and effort that importing would normally require. Not just that, you can also be refunded with the customs duty paid if you wish to buy some or all of the required capital goods or construction materials from local manufacturing industries.

Know that transfer also comes with similar ease of access to the benefits. Because you can obtain goods imported free of customs duty as long as you have similar duty-free privileges.

5

Be aware of conditions if you wish to import spare parts and motor vehicles

Know that, according to Regulation no. 270/2012 as amended by no 312/2014, you will be allowed to import spare parts the value of which is not greater than 15% of the total value of the capital goods. You can do that within five years from the date of commissioning of your agribusiness project.

According to the regulation, motor vehicles can be exempted from customs duty partially or wholly based on the types and nature of the items. You are advised to consult the relevant directives issued to determine the exemption of vehicles considering these preconditions.

6

Know when you can import

You can star importing only after you obtained a business license or other relevant certificate. That in other words means when you start implementing your agribusiness investment project. You may be required to produce a letter evidencing this from the regional investment agency where your establishment is located.

7

Plan to invest a ≥200,000 USD and ≥50 permanent local staff agribusiness project to import at any time

Depending on your needs or capacity, you may wish to stager the importing of the required capital goods, construction materials, spare parts and motor vehicles over a longer time than the valid period for exemption of customs duty. In the old days, you either had to do so within the timeframe allowed or you miss out the benefits. Now you can import at any time and still be exempted!  

Be aware that the Investment Incentives Regulation (Amendment) No. 312/2014 has been recently promulgated in favor of investors. Any investor engaged in manufacturing industry or agriculture who has invested at least 200,000 USD or equivalent Ethiopian Birr at the prevailing rate of exchange and has created permanent employment opportunity for at least 50 Ethiopian nationals shall be entitled to import, at any time, duty-free capital goods necessary for his/her existing enterprise. Don’t miss this opportunity!

8

Locate the institutions that authorize your duty free privilege

Normally the Ethiopian Revenue and Customs Authority (ERCA) is primarily responsible for this. But the Ministry of Agriculture (MoA) also authorizes your privilege by verifying whether or not the goods you want to import are allowed depending on the nature of your agribusiness project. So do other agencies for different types of business they are primarily concerned with.

9

Have the right documents

You should prepare the required documents for customs clearance. The basic ones according to a guide by Ethiopian Investment Commission (then agency) and the Dutch Embassy in Addis Ababa (2008) are as follows:

  •  Letter of request
  • Business license/investment permit
  • Import permit for crop protection supplies, fertilizers, plant material and soil (Safety Material Data Sheet).
  • Bill of lading/airway bill
  • Copy of packing list
  • Certificate of origin (supplied by the Chamber of Commerce in your home country)
  • A phytosanitary certificate for plant material
  • Bank permit if payment goes through bank
  • 10 copies of the imports’ invoices.
10

Get a confirmation letter of the investment agency

For importing a duty free car, you need a confirmation from the investment office of the region where you will be investing. Staff of that office has to go to your site and check whether construction work or land preparation has started.

11

Obtain a letter of duty free

Once custom exemption on imports is granted, you will be given a letter of duty free.

This letter, together with the required documents listed above, must be handed over to a customs clearing agency which will then handle and finalize the customs part.

12

Decide whether you want to use the services of a customs clearing agent

Usually the customs part for handling your imports is done by a customs clearing agent. It is therefore recommended to use this service. You may need to appoint an agent who is knowledgeable about the customs clearance procedures in Ethiopia.

13

Provide the documents

Provide the letter of duty free you obtained together with the required documents to the customs clearing agency if you have appointed one. The agency needs these to handle and finalize the customs aspect for your goods freight, by air or sea.

14

Declare your imported materials

Locate the specific office of the Ethiopian Revenue and Customs Authority and declare all materials. This may be Addis Ababa, Djibouti or Adama depending on where your goods arrived.  The customs authorities will approve the letter of duty free. It will then take them around two weeks to prepare a declaration.

15

Obtain a transit approval

Once everything is verified, you will be given a transit approval on the declaration. When importing a container, you or your agent will have to go to Djibouti (for sea freight) or to customs at the Bole Airport in Addis Ababa (for air freight).

Submit the original declaration with the transit approval and the copies of the bill of lading, invoice, packing list, certificate of origin and, if necessary, a phytosanitary certificate to the customs authorities in the harbour or airport.

16

Collect a delivery order of the container and pay all expenses for the container

The expenses normally include cost of storage, rent, and insurance.

Next, the customs authorities will open the container and check its content as written on the packing list. Provided that everything is according to regulation, customs will give you a removal note.

17

You are done! Drive to your farm!

The truck is now ready to drive to your farm or agro-processing establishment. Remember that you should at this time empty and return rented containers to the harbour as soon as possible, if any.

Notes
Take note that this article was prepared by Amare Molla, Information Hub Coordinator for ABSF, and as such does not reflect the views and opinions of the institutions involved in funding or managing the AGRIbiz.et website. The article is written with utmost care by referring available and reliable information sources on the agribusiness and investment situation of Ethiopia. It is also thoroughly reviewed by Gertjan Becx, the ABSF project coordinator, and other experts of the project. Despite that, you are advised to check the accuracy of the information as investment incentive schemes and requirements and procedures to access benefits from the incentives may change over time with, for instance, changes in related policies and regulations.
Tips
  • You are advised to follow up the shipping logistics and customs clearance so that you can deal with head on problems, if any, which you may not know. For example, compliance with document submission requirements may affect the save and sound arrival or speedy clearance with customs duty exemption of your imports. Be it minor or major, anything can happen along the transportation logistics chain without you knowing it until you face the consequences.
  • Note that duty free import clearance is usually done by a customs clearing agent. You may choose to use the services of an agent for efficiency and effectiveness of the task to be accomplished.
  • You can consider buying goods that entered Ethiopia duty free from an investor who has similar privileges.
Warnings
  • Abide by the law. In doing so, you will be doing good to yourself, ensuring the validity of the investment permit and the entitlements and benefits you gained from the duty free import incentive. Remember your commitment to the law as you filed application for investment permit.
  • Do not involve in illegal transfer or use of the goods you imported duty free or you will face the consequences. The incentive privileges are granted to the investing agribusiness entity and can be used only for the purpose of the agribusiness project approved to that entity.
References
Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA). 2013. Investment Guide of Ethiopia. ECCSA, Addis Ababa, Ethiopia. Ethiopian Investment Agency (EIA) and Embassy of the Kingdom of the Royal Netherlands. 2008. Agricultural Investment in Ethiopia: a Guide for New Investors. EIA, Addis Ababa. Ethiopian Investment Commission (EIC). 2014. Invest in Ethiopia. EIC, Addis Ababa. http://ethioinvest.net/images/pdf/Investment_Brochure_to_Ethiopia.pdf Accessed on November 27, 2014. Ethiopian Investment Commission website. www.ethioinvest.net. Accessed November 4, 2014. Ministry of Justice. Council of Ministers Regulation to Amend the Investment Incentives and Investment Areas Reserved for Domestic Investors Regulation No 270/2012. Regulation No. 312/2014. Ministry of Justice. Council of Ministers Investment Incentives and Investment Areas Reserved for Domestic Investors Regulation No 270/2012.