Overview

This proclamation establishes a legal framework for duty incentive schemes to promote Ethiopian exports, accelerate industrial growth, improve foreign exchange earnings, and enhance the competitiveness of domestic products in international markets. It repeals and replaces the previous duty incentives proclamation (No. 543/2007).

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Key words and phrases

Export Trade, Duty Incentive Schemes, Duty Draw-Back, Voucher Scheme, Bonded Export Factory, Bonded Manufacturing Warehouse, Bonded Input Supplies Warehouse, Industrial Zone Scheme, Raw Materials, Producer Exporter, Indirect Producer Exporter, Raw Material Supplier, Input-Output Coefficient, All Industry Rate, Voucher Book, Certificate of Eligibility, Duty-free Importation, Ethiopian Revenues and Customs Authority, Ministry of Industry, Ministry of Finance and Economic Development, Time Limit (for export/use), Penalty for Unused Raw Materials (50% duty), Forfeiture of Incentives (after third failure), Transfer of Raw Materials/Products, Local Sale of Duty-free Goods, Re-export to Country of Origin, Evasion of Duty

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Key Definitions

• Duty: Any indirect tax payable on imported or locally purchased raw materials, commodities, or accessories.
• Duty Draw-back: Refund of duty paid on raw materials and accessories used in producing exported goods.
• Exporter: A licensed person supplying locally produced goods to foreign markets.
• Producer Exporter: A person who produces and exports goods (wholly, partially, or periodically).
• Indirect Producer Exporter: A person supplying products (raw, semi-processed, or finished) to other producers or exporters.
• Raw Material Supplier: A person supplying imported raw materials without further processing to producers/exporters (excluding bonded warehouse beneficiaries).
• Voucher Book: A document issued by the Revenue and Customs Authority to record duty balances for raw materials imported under the voucher scheme.
• Input-Output Coefficient: A measure of raw materials/accessories needed to produce one unit of export goods.
• All Industry Rate: A percentage-based duty draw-back rate calculated on the FOB value of exports.
• Bonded Export Factory: A factory under customs control that produces exclusively for export using duty-free raw materials.
• Bonded Manufacturing Warehouse: A warehouse under joint customs-factory control for storing duty-free raw materials and finished export goods.
• Bonded Input Supplies Warehouse: A warehouse for storing duty-free raw materials/accessories until sold to producers.
• Industrial Zone: A designated area with infrastructure and policy incentives for industries.

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Main Provisions

1. Duty Incentive Schemes Established

The proclamation establishes six duty incentive schemes:

1. Duty Draw-back Scheme – Refund of duties paid on raw materials/accessories used in export production.
2. Voucher Scheme – Allows beneficiaries to defer duty payments by recording them in a voucher book.
3. Bonded Export Factory Scheme – Enables duty-free import of raw materials for factories producing exclusively for export.
4. Bonded Export Manufacturing Warehouse Scheme – Allows duty-free storage of raw materials and finished goods under customs control.
5. Bonded Input Supplies Warehouse Scheme – Permits duty-free import and storage of raw materials for sale to producers.
6. Industrial Zone Scheme – Provides duty-free import benefits for industries within designated industrial zones.

2. Beneficiaries

Eligible beneficiaries include:

• Producer exporters
• Indirect producer exporters
• Raw material suppliers
• Exporters

3. Duty Draw-Back

• Duty paid on imported or locally purchased goods can be refunded upon fulfilling conditions set by the Ministry of Finance.
• Refunds are not made for amounts below Birr 1,000.
• Payment must be made within 30 days of a complete claim.
• Draw-back rates are calculated based on all industry rates or, pending their implementation, on input-output coefficients.

4. Voucher Scheme

• Beneficiaries receive a voucher book from the Revenue and Customs Authority.
• Duty on imported raw materials is recorded in the book instead of being paid upfront.
• Raw materials must be used in export production within one year (extendable by one additional year).
• Unused raw materials attract a penalty of 50% of the duty if not exported or properly sold locally.

5. Bonded Schemes (Factory, Manufacturing Warehouse, Input Supplies Warehouse)

• Raw materials are transported duty-free under customs control to the factory or warehouse.
• Goods must be exported within one year (extendable by one year).
• Failure to meet deadlines results in a penalty of 50% of the duty.
• Customs authorities inspect inputs, storage, and exports.

6. Industrial Zone Scheme

• Duty-free import of raw materials for industries within industrial zones.
• Products can be for export or local consumption.
• Duty is charged on goods destined for local consumption before they leave the zone (based on all industry rates).
• Similar time limits and penalties apply as in other schemes.

7. Transfer of Ownership and Raw Materials

• When an enterprise changes ownership, duty and tax accounts must be settled for imported raw materials.
• Raw materials and products can be transferred between beneficiaries, with duty accounts settled as if exports occurred.
• Transfers must occur within specified time limits.

8. Local Purchases and Wastage

• Beneficiaries may pay duty on locally purchased raw materials and claim refunds under the draw-back scheme.
• Wastage and byproducts from production may be sold locally after duty payment.
• Defective products not fit for export may also be sold locally after duty payment and certification by the Ministry of Industry.

9. Time Limits and Penalties

• Repeated failure (three times) to meet export time limits results in forfeiture of incentive benefits.
• Raw materials not used or exported within the time limit incur a 50% duty penalty.

10. Offences and Penalties

• Offences include providing false information, submitting inaccurate documents, concealing information, obstructing implementation, or selling duty-free goods locally without authorization.
• Penalties increase with repeated offences:
  • 1st offence: 3–5 years rigorous imprisonment + Birr 30,000–50,000 fine.
  • 2nd offence: 6–10 years rigorous imprisonment + Birr 60,000–100,000 fine.
  • 3rd offence: 9–15 years rigorous imprisonment + Birr 90,000–150,000 fine + forfeiture of incentives.
• Unauthorized local sale of duty-free goods: 7–15 years imprisonment + Birr 70,000–150,000 fine.

11. Repeals and Transitory Provisions

• Repeals the Revised Duty Incentives Schemes Proclamation No. 543/2007.
• Transactions started under the previous proclamation are completed under its provisions.
• Transfers of raw materials imported before this proclamation’s effective date are governed by Article 22 of this proclamation.

12. Implementation Powers

• The Council of Ministers may issue regulations.
• The Ministry of Finance and Economic Development may issue directives.
• Other public bodies may issue directives on specific matters.

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Effective Date

The proclamation came into force on September 4, 2012

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This proclamation is central to Ethiopia’s export promotion strategy, offering flexible duty incentives to boost industrial production, increase exports, and attract investment while ensuring compliance through strict time limits, record-keeping, and penalties for abuse.