Capital Ethiopia Newspaper

ERCA flip-flops in customs’ payment

Just after a week the method went into operation, the Ethiopian Revenue and Customs Authority (ERCA) has replaced the insurance bond guarantee scheme for customs duties’ payments through cash payment orders (CPO). The payments are made for cargoes that are disembarked at the Port of Djibouti and brought to Ethiopia through freight forwarders. These services are dubbed as operating under uni-modal schemes (involving one transportation mode).
A week ago the authority was allowing private freight forwarders to use this uni-modal scheme for goods that transit at Port of Djibouti. Hence imported items under the uni-modal scheme could be transported to Ethiopia by freight forwarders after they deliver a 115 percent worth of insurance bonds of the calculated customs fees.
To operate via a uni-modal scheme, insurance firms will have to put up a 115 percent guaranteed bond of the total customs fee that is expected to be paid by importers when the product is imported into the country.
Previously ERCA had set a 150 percent insurance bond amount for the scheme, but the percentage was later reduced to 115 percent because insurance firms complained about the first proposal.
ERCA’s new operation was implemented for just one week, when on Wednesday February 29, the authority suddenly switched gears and announced that the uni-modal operation with the insurance bond would be discontinued as of the next day. “Uni-modal operators have to use CPO cheques for payment of customs duties for their imported goods,” the announcement indicated.
“Based on the new announcement the uni-modal operation will not be applicable because we cannot clear products at the port of Djibouti with CPO cheques,” freight forwarders told Capital.
The uni-modal scheme, which was introduced a week ago, was given as option for private freight forwarders and shipping agents to undertake their operation for cargoes that are transited through Djibouti Port.
Freight forwarders however insist that it is totally absurd to undertake the uni-modal shipment method with customs clearance through CPO.
At the beginning of the year the Ministry of Transport (MoT) introduced a multimodal operation scheme to be undertaken through the state owned Ethiopian Shipping and Logistics Enterprise (ESLE).
This directive that has been effective since January 1, 2012 instructs all shipments that use multimodal transport systems to deliver their cargoes to dry ports or warehouses that are authorised by ERCA. Also, all private importers, that open an LC (Letter of Credit) from state banks, are ordered to bring their container shipments and vehicles of three tonnes or less to the designated dry ports and ERCA’s warehouses. 
Following the amendment, private freight forwarders have been complaining about the new scheme because the regulation allowed for the state firm to fully control the business. Later the government expanded the amendment to private banks as of mid February. As per the first directive that has been effective since January, private importers were not obliged to use the multimodal scheme even if they use ESLE’s service. Again private banks were not forced to implement the directive.
The circular which was written on Monday February 13 and signed by Yohanes Ayalew, National Bank of Ethiopia’s Chief Economist and Vice Governor of Monetary Stability, instructed not only state banks but also private banks to undertake their activity under the new directive effective immediately when carrying out LC payment forms for their clients.
Meanwhile, the government said it would allow multimodal operation for the private operators, but it did not yet disclose when that would start.
On Saturday February 25, members of Freight Forwarders and Shipping Agents Association met at ERCA’s warehouse to talk about the issue with Fasil Tadesse, customs department head of ERCA but the official did not attend. 
Currently private operators handle 83 percent of the total freight forwarding operation.
“We have not worked on clearing any containers over the past three weeks,” a private freight forwarder who has been involved in the sector for several years told Capital. The freight forwarder said in anonymity that most of his clients have been forced to go to the state owned firm because of the new directive. Many operators agreed with his statement.
“Our last option is waiting for the government to allow the private sector to get involved in the multimodal scheme,” they said.
Currently bulk import and export is still allowed to operate under the old trend but most of the bulk items are governmental.  
The multimodal arrangement is a scheme whereby cargoes are transported under a single contract but performed with two or more different means of transportation. The transporter is accountable for the entire journey, including the shipment’s delivery at the final destination. The transportation can be carried out by rail, sea, and road.