Ethiopia enacts new Customs Amendment Proclamation

January 15, 2020 Simret Kebede 1,093 Comments

The Customs Amendment Proclamation No. 1160/2019 transfers the powers of government bodies such as the Ethiopian Energy Authority, the Ministry of Mining and Petroleum Operations and the Ethiopian Investment Commission to allow duty fee rights to the Ministry of Finance.Accordingly, duty free privileges on import and export of goods are granted only by the Ministry of Finance. Any duty free right obtained from project agreements signed by government bodies will also be exercised by the approval of the Ministry of Finance. In this respect, the Proclamation gives tacit recognition to and authorization of application of duty free privileges that emanate from project agreements signed by government bodies. This is particularly relevant to implementation agreements or government support agreements that provide for duty free privileges.With respect to duty free privileges provided under international treaties agreements signed and approved by Ethiopia in connection with diplomatic relations will be implemented under the recognition of the Ministry of Foreign Affairs.The Customs Commission is mandated with keeping data and records, following up the implementation and taking corrective measures to ensure that goods imported or exported with duty free privileges are used for their intended purposes. The Council of Minister will issue Regulation on the conditions in which duty free rights are granted and implemented.The intent behind transferring powers of granting duty free privilege to the Ministry of Finance seems to emanate from the desire to have central control over granting of duty free rights. Though the results of such change are to be seen, it is expected there will be some challenges in ensuring fair and effective grant of duty free rights by the Ministry of Finance. This is primarily because, there are various pieces of legislation that provide for the eligibility of duty free rights. There is generic Investment Proclamation that is applicable on wide array of investment activities. Duty free privileges under the Investment Proclamation are handled by the Ethiopian Investment Commission.  For years the Commission had been handling duty free privilege applications and such experience is valuable. The Commission is widely regarded as investor friendly and its procedures and processes are geared towards easing doing investment in Ethiopia.There are also sector specific proclamations that provide for duty privilege of actors involved in such sectors. These proclamation include the Geothermal Proclamation, the Mining Operations Proclamation and the Petroleum Operations Proclamations. Licensees under these proclamations are eligible for duty free privileges with respect to import of goods and equipment that are necessary for their operations. The Ministry of Mining, Oil, Gas and Petroleum and the Ethiopian Energy Authority know the work programs of the licensees and have better understanding of what type of goods and equipment are necessary to undertake such work programs. Thus, they are better situated than the Ministry of Finance to evaluate duty free privilege applications made by licensees that fall under their respective jurisdiction. Therefore, they can offer speedy service since they are sector specific and have expertise knowledge of the sector.Though it is widely acknowledged that there are misappropriation of duty free privileges by some investors, it is expected the transfer of the powers of regulators to the Ministry of Finance will have unintended consequence of hampering effective and speedy handling of duty free applications. This is particularly true for those who are engaged in geothermal, mining and petroleum operations.

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