Capital Ethiopia Newspaper

Mystery notice baffles leather exporters

A notice which claimed that a new law affecting the leather industry had been postponed created a stir with people working that industry. The mysterious posting at the Ethiopian Revenue and Customs Authority (ERCA) Bole Airport branch office, said that a regulation banning crust leather which was scheduled to be implemented on December 10 had been postponed until January 9, 2012. “This happened for a few hours and most of the exporters were aware of the notice before we heard about it,” Berhanu Negus, head of quality testing and certification at the Leather Industry Development Institute (LIDI) said. According to Berhanu, the notice came from unknown sources and created confusion between exporters. “We thought that the situation happened intentionally by somebody, who wants to change the law, but we could not investigate further about the source of the problem because we did not see the actual document or notice; there are eyewitnesses who saw what happened,” Berhanu explained. The notice was posted for a few hours and then disappeared when the director of ERCA, Melaku Fenta, called officials from the customs branch office to discuss the issue when informed about the situation by the Ministry of Industry. “We came to know about the notice when exporters asked us about it,” he said. “I arrived at the branch office the same day and one of ERCA’s officers told me that he received a copy of the notice and placed it on his desk but it disappeared when we got to his office,” he explained. Exporters on their part said they still are uncertain if the new law has been postponed. “This is done by someone who wants to interfere with the government’s strategy, otherwise they would not do something like this; it has created confusion and commotion,” the certification service head said angrily. An LIDI official Capital spoke with reported that customs officials have apologised for the confusion. However, he is not satisfied with ERCA’s excuse. “They were expected to put up a public notice explaining the mistake to solve the confusion. That’s what we requested. But they have not done it. Yet, they are responsible for the problem,” he added. He said his office has informed all crust leather exporters that the new law was not postponed and has already been effective as of December 10. “We have informed all exporters through phone about ERCA’s unfounded notice, so they will know that there is no further delay with the implementation of the new law,” he explained. The government has recently attempted to develop the leather sector through regulation. The 2008 regulation imposed up to a 150 percent tax on semi -processed leather. This played a big role in preventing the export of pickle and wet blue (semi processed) products. Following the price hikes on raw hides and skins and supply shortages largely due to the new huge foreign based tanneries that began operating during the last budget year; the government decided to ban crust leather export, which represented the major export from the sector. The government allowed a half year grace period for tanneries to expand their capacity to produce finished leather before imposing the tax on crust to discourage its export. When leather is sold as a finished product it has a higher value than semi or processed leather products. Even though crust has a higher earning value than semi processed leather (pickle and wet blue) the government still wants the leather industry to produce finished products and leather goods such as footwear and garments for export. According to experts, the new law that bans crust export will mean more hard currency earnings, as finished leather earns up to 50 percent more than crust. Footwear for instance can make up to 75 percent more return in foreign exchange than crust. The government plans to earn half a billion dollars from leather exports in the final year of the GTP, a huge jump from the previous record of 100 million dollars.