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The Ethiopia Revenue and Customs Authority (ERCA) says the new directive issued under Proclamation No 94/2006 encourages multimodal transportation to save expenses when importing materials from the Djibouti Port.
“Even though the new notice, posted Friday February 28 at Mojo Dry Port was a clarification it also modified a 45 day old edict,” an ERCA representative said. “This is because the note includes additional issues not originally listed in the rule,” the representative added. In the new notice ERCA set a new rate for tax, based on the distance for cargo transportation from ports to the country.
According to experts, the new tax scheme will replace the customs duty that was previously 5 percent, and calculated from the FOB.
The Ethiopian Shipping and Logistics Services Enterprise, the nation’s sole multimodal provider, is now calculating the freight charge based on the load of the cargo.
The current arrangement will reduce the cost of the cargo when companies use multimodal transportation, (when one provider moves freight using two or more different methods, remaining responsible for it the entire time), because the previous 5 percent charge was calculated from the invoice (free on board), which is a pricing term that includes the costs of the goods, all transportation, and insurance costs from the manufacturer to the port of departure and loading the vessel, as well as the expense of loading and unloading the vessel and safety precautions), which are calculated from hard currency. “However, the current rate is only being calculated from the charge of the shipping enterprise inland freight tariffs,” experts told Capital.
Based on the clarification notice posted at Mojo Dry Port and the other circular signed by Fekadu Bekele, Director of Prices and Tariffs at ERCA, and sent to the Addis Ababa Kality Customs Branch Office, the tax is calculated based on the percentage of the shipping enterprise’s tariffs for transportation from every potential port that Ethiopia is using. For instance the percentage from the Port of Djibouti to the central part of the country is different than the percentage of Port Sudan or Berbera Port. “The percentage is different based on the distance from Mojo Dry Port,” experts explained.
According to the new tax table stated on the notice, the tax levy from the port of Djibouti-Galafi-Mojo is 25.98 percent or a quarter of the price that shipping line charges its customers. The percentage from Djibouti-Dewele-Mojo, Mombasa-Moyale-Mojo and Barbara-Togochale-Mojo is 13.15, 64.89 and 27.89 percent respectively.
The port handling payment of 5 percent is exempted for the cargo being transported by multimodal means because it is included in the cost of ocean freight. “The current directive highly encourages use of the multimodal, scheme that is a monopoly for the state owned shipping and logistics enterprise established with the amalgamation of the three state enterprises engaged in transporting goods about three years ago,” freight forwarding experts explained. They said that it may affect uni-modal actors and users.
According to experts, it is difficult for uni-modal users or freight forwarding companies to bring the freight documents that allow the authority to calculate the tax based on the new arrangement. “Because of this, the directive imposed a month and a half ago, will be applied for uni-modal users,” experts said.
Capital last week reported that ERCA issued a new directive imposing an additional 12 percent levy on imported goods, while ERCA denied imposing any new tax. According to a new directive signed by Beker Shale, director general of ERCA, on January 23, 2014, importers have to pay an additional 12 percent tax when they are importing goods into the country, but the authority said that this was already mentioned in the directives issued a decade ago.
The new rule is based on a previous customs proclamation known as 622/2009.
The new directive; ‘Imported Goods Customs Duty and Tax Value Price Tariff: No 94/2006’ requires importers to pay three duties during the process of importing goods into the country.
According to article 14 sub article 3 of the new directive: if imported goods do not have an original document and information about additional customs value and port handling fees, based on article 39 of the 2009 proclamation, customs and tax values will be included in the new tariff imposed on the directive.
According to the directive, when goods first enter Ethiopia, transportation costs declared on imported goods must pay an additional 5 percent on top of the customs tax they already pay.
The value of the tax they have to pay is determined based on FOB. Based on that, 5 percent tax is calculated from the FOB price, and it is included in the customs and tax value, which becomes the new levy for import.
The other new fee added in the new directive is the fee calculated for the cost of insurance. The directive indicated that based on the accepted FOB price importers have to pay 2 percent of the insurance cost for imported goods that are transported to the first entry of the Ethiopian territory located at Galaffi or Dewale.