Tilahun Esmael

Trade Facilitation in Ethiopia:
The Role of WTO Accession in Domestic Reform

Tilahun Esmael Kassahun *
Abstract
Ethiopia is one of the countries with excessive challenges in cross border trade.
The high cost of doing business across borders in Ethiopia has become a major
constraint. The focus of this article is trade facilitation which requires the
examination of the dynamic gains associated with lowering trade transaction
costs and identifying the relative importance of related trade policy reform
measures in Ethiopia. In particular, the current state of the law and practice in
trade facilitation and the international trading environment in Ethiopia are
examined. The article focuses on customs law, border institutions, transport and
logistics services and various issues related with investment and trade policy. In
so doing, it attempts to examine how Ethiopia’s WTO Accession and trade
facilitation instruments can be streamlined with domestic reform.
Key words
Trade facilitation, customs valuation, logistic services, WTO, Ethiopia
DOI http://dx.doi.org/10.4314/mlr.v8iL5
* PhD Candidate (International Law and Economics) Bocconi University, Milan-Italy.

LL.M (Business Law) Addis Ababa University, LL.M (International Economic Law
and Policy, IELPO) University of Barcelona. The author teaches at Haramaya
University College of Law and is currently on study leave. He would like to give his
sincere gratitude to the editorial team at Mizan Law Review and the two anonymous
reviewers for their valuable comments, remarks, and suggestions. He can be reached
at <tilahun.kassahun[at]phd.unibocconi.it>.
Acronyms
CV Customs valuation
CVA Customs Valuation Agreement
ERCA Ethiopian Revenues and Customs Authority
EPPCF The Ethiopian Public Private Consultative Forum
ESLSE Ethiopian Shipping and Logistics Services Enterprise
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
MTO Multimodal transport operator
OECD Organization for Economic Cooperation and Development
TFA Trade Facilitation Agreement
UNCTAD United Nations Conference on Trade and Development
UNECE United Nations Economic Commission for Europe
WTO World Trade Organization
145
146 Mizan Law Review, Vol. 8, No.1 September 2014
Introduction
The high cost of doing business across borders in Ethiopia is said to have
become a major constraint to economic development.1 Ethiopia is one of the
countries with the highest set of challenges in cross border trade. The world
Bank study of trading across borders ranking puts the country at 166th in the
world.2 while, on average, sub-Saharan African customs delays are the longest
in the world, the average delay is 12 days in the region compared with 7 days in
Latin America; the longest delays in the region are in Ethiopia - where the
average trader has to wait more than 30 days for customs to clear goods.3
Transportation delays along the Ethiopia-Djibouti transport corridor are also
widespread. Numerous stages in the process of clearing and transporting
commercial goods in transit from the port of Djibouti to Addis Ababa can take
more than 20 days. This has contributed to the country’s current 132nd rank out
of 189 nations in the World Bank doing business index.
The cost of accessing information, discrepancy and unpredictability in
government policy decisions, general issues of custom which in particular
includes customs valuation, and anticompetitive practices in transport,
especially road and sea transport are directly related to the costs of trading in
addition to the delay in time taken from the port to the inland destination, or the
vice versa. The longer the time taken for import/export procedures or journey,
the more expensive imports, exports and production becomes rendering
Ethiopian exports less competitive.
The ability of countries to deliver goods and services on time and at the
lowest possible cost is a key determinant of integration into the world economy
today.4 With the expansion in the volume of trade, policies that remove non
tariff barriers and expedite the movement of goods and services across borders,
i.e., ‘international trade facilitation’, have emerged at the forefront of the trade
1 Tsegaye Teklu and Endris Negus (2011), The Impact of Border Clearance Procedures
on the Cost of Doing Business in Ethiopia, Private Sector Development Hub, Addis
Ababa Chamber of Commerce and Sectoral Associations.
2 See World Bank Trading Across Borders (2013),
<http://www.doingbusiness.org/data/exploretopics/trading-across-borders> (Last
accessed April 2014).
3 The country’s score on the Logistics Performance Index (LPI), which measures the
extent of trade facilitation in the country, is 2.59, on a scale of 1 to 5, ranked to be
104th among 160 countries. See World Bank Logistics Performance Index
<http://lpi.worldbank.org/international/global/2014> (Last accessed April 2014)
4 Jayanta Roy and Shweta Bagai (2005) “Key Issues in Trade Facilitation, Summary of
World Bank/ EU Workshops in Dhaka and Shanghai - 2004”, World Bank Policy
Research Working Paper 3703, (September 2005), p. 4.
Trade Facilitation in Ethiopia: The Role of WTO Accession in Domestic Reform 147
agenda.5 As Grainger notes; “over the last few decades customs tariffs have
been significantly reduced. [...] Consequently, the gap between tariff duties and
transaction costs has narrowed; ... in view of such low trade tariffs, the
transaction cost associated with paying duties is actually higher than the duties
themselves.”6
Experience shows that trade facilitation is highly dependent on infrastructural
developments.7 However, trade facilitation is not only about the physical
infrastructure for trade.8 Studies indicate now that, “only about a quarter of the
[trade] delays is due to poor road or port infrastructure.”9 “Seventy five percent
is due to administrative hurdles - numerous customs procedures, tax procedures,
clearances and cargo inspections - often before the containers reach the port.” 10
Accordingly, while undertaking the necessary infrastructural changes to
implement deep trade facilitation is still important, most other measures seem to
depend on strong political will.11 Development of this political will requires a
clear understanding of the needs and benefits of trade facilitation in an
economy.
This seems to be one part of the trade facilitation challenges in Ethiopia
which suffers from excessive border bottlenecks, lack of reform and drawbacks
in private investment.12 This has affected Ethiopia’s international trade relation
Andrew Grainger (2008), “Customs and Trade Facilitation: From Concepts to

Implementation”, World Customs Journal, Volume 2, Number 1, p. 17.
6 Andrew Grainger (2007) “Trade Facilitation: A Review”, Working Paper:
<www.tradefacilitation.co.uk> , p10 (Last accessed April 2014).

7 Jean-Paul Rodrigue (2013), Transportation, Globalization and International Trade,
chapter 5 <http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c2en.html>, (last

accessed April 2014) Also see UNDP, Global Event of Landlocked Developing
Countries And Transit Countries On Trade And Trade Facilitation, Trade, Trade
Facilitation and Transit Transport Issues For Landlocked Developing Countries,
<http://www.unohrlls.org/UserFiles/File/Elle%20Wang%20Uploads/LLDCs%20Publi
cation.pdf> .
8 Gary Clyde Hufbauer (2012), Trade facilitation matters!, 14 September 2012.
<http://www.voxeu.org/article/trade-facilitation-matters> (last accessed April 2014).

9 Simeon Djankov et al. (2006), “Trading on Time”, World Bank Policy Research
Working Paper 3909, p. 9.

;° Ibid.
Dan Ciuriak (2010), “Supply And Demand Side Constraints As Barriers For
Ethiopian Exports - Policy Options”, Bkp Development Research & Consulting,
Trade and development discussion paper no. 02/2010 , p. 12.
12
A report for instance states in this regard, “Customs administration and administrative
entry barriers appear to be the major NTB affecting Ethiopia’s trade with COMESA
member states. The NTBs reported within this area with the greatest frequency
include import licensing, customs valuation and formalities, and to a lesser extent,
and has hampered its trading across borders track record at the face of global
competition for foreign direct investment. This article, inter alia, examines the
extent to which reforms on import and export procedures in Ethiopia that target
at reducing the cost and time needed to execute trade across border can
effectively move it closer to the global economy. The focus will be on the legal,
economic, political, and administrative framework, i.e. soft infrastructure, rather
than on traditional infrastructural challenges.
The article is aimed at filling the information gap in Ethiopia that is
important to the political impetus with the objective of carrying out a ‘reality
check’ on ground level challenges and prospects for reform. A particular focus
will be the role of trade facilitation - or lack of it - in explaining Ethiopia’s trade
performance, trade facilitation problems and the role of reform in this area. in
doing so, this article examines whether Ethiopia’s accession to the world Trade
Organization (WTO) will provide strategic opportunity for the country to
reinvigorate its trade facilitation reform objectives in line with international
principles and standards. As indicated by the World Bank, “these standards are
primarily found within WTO obligations and the Kyoto Convention. Meeting
one's WTO obligations and pursuing the objectives of trade facilitation” are
interrelated and this calls for “the additional trade policy efficiencies by
adopting the trade facilitation agenda.”13 Moreover, joining the WTO binds
member countries to commitments and rules that include transparency of trade
laws and regulations and progressive liberalization and modernization of
international trade procedures. It will also be emphasized that joining the WTO
inspires confidence in the stability, predictability, and fairness of the country’s
treatment of its trading and investment partners.14
The article is organized into four sections. In the first section, a brief
introductory review will be made on the nature, economics and benefits of trade
facilitation. The section will also highlight on the current level of trade
facilitation challenges in Ethiopia. The second section identifies the main trade
facilitation challenges in Ethiopia that are mostly within customs law. In
particular a detailed evaluation of the customs valuation practice in Ethiopia will
be made with the aim of assessing the role and impact of the WTO Customs
Valuation Agreement. Section three discusses the linkages between logistics
classifications. There are also complaints pertaining to pre-shipment inspection as

well as consular formalities and documentation”, Imani Development International
(Ltd), (2007) “Non-Tariff Barriers (NTB): Ethiopia,” Final Report, p. 1.
13 Brian Rankin Staples (1998), “Trade Facilitation”, p 27 < http://www.acp-eu-
trade.org/library/files/Staples%20-%20October%201998%20-
%20Trade%20Facilitation.pdf> (Last accessed April 2014).
14 USAID Ethiopia (2007), Ethiopia Commercial Law & Institutional Reform And
Trade Diagnostic, p. 7.
sector reform and in particular maritime transport sector liberalization and its
role for trade facilitation. To this end, brief review assessment will be made on
the legislative and institutional framework of Ethiopia’s maritime transport
followed by an overview on Ethiopia’s WTO accession negotiation and its role,
if any, for maritime services reform in the country. Finally a short discussion is
made on the new WTO Trade Facilitation Agreement and its implications on the
state of trade facilitation in Ethiopia is presented.
1. The Nature, Economics and Benefits of Trade

Facilitation
Traditionally, the meaning of ‘trade facilitation’ was delimited to border
procedure facilitation to make trade procedures as efficient as possible through
the simplification and harmonization of documentation, procedures and
information flows.15 It referred to policies and measures aimed at easing trade
costs by improving efficiency at each stage of the international trade chain.
According to the WTO definition, for example, trade facilitation is the
“simplification of trade procedures”, understood as the “activities, practices and
formalities involved in collecting, presenting, communicating and processing
data required for the movement of goods in international trade”.16
Various international and regional organizations define trade facilitation
according to their mandate and objectives.17 As will be shown below, some
define it narrowly, while others provide broad definitions. The WTO website
puts it as “the simplification and harmonisation of international trade
procedures... for collecting, presenting, communicating and processing data
required for the movement of goods in international trade.”18 A slightly different
focus emerges from the Doha Declaration which, in looking forward to its broad
negotiation mandates, refers to “expediting the movement, release and clearance
15 Jayanta Roy and Shweta Bagai, (2005) “Key Issues in Trade Facilitation, Summary
of World Bank/ EU Workshops in Dhaka and Shanghai - 2004”, World Bank Policy
Research Working Paper 3703, (September 2005), p. 4.
16 Moi'se, E., T. Orliac and P. Minor (2011), “Trade Facilitation Indicators: The Impact
on Trade Costs”, OECD Trade Policy Working Papers, No. 118, OECD Publishing, p
7. <http://dx.doi.org/10.1787/5kg6nk654hmr-en> (Last accessed April 2014).
17 Gainmore Zanamwe, (2005) “Trade facilitation and the WTO: a critical analysis of
proposals on trade facilitation and their implications for African countries”, tralac
Working Paper No 5/2005, p. 5.
18 WTO, Trade Facilitation, <http://gtad.wto.org/trta_subcategory.aspx?cat=33121>
(last accessed June 2012).

of goods, including goods in transit.”19 UNECE defines trade facilitation as a

“comprehensive and integrated approach to reducing the complexity and cost of
the trade transactions process, and ensuring that all these activities can take
place in an efficient, transparent, and predictable manner, based on
internationally accepted norms, standards, and best practices.”20 UNECE
considers trade facilitation to encompass “the systematic rationalisation of
procedures and documentation for international trade.”21
The Organization for Economic Cooperation and Development (OECD)
defines it as “the simplification and standardization of procedures and associated
information flows required to move goods internationally from seller to buyer
and to pass payment in the other direction.”22 The mission statement of
UN/CEFACT envisages trade facilitation as “the simplification and
harmonisation of processes, procedures and information flows, and so contribute
to the growth of global commerce.”23 UNCTAD publications also pursue a
broad definition. According to Poul Hansen and Liliana Annovazzi-Jakab
(UNCTAD), “Trade and transport facilitation ... addresses a wide agenda in
economic development and trade that may include improving transport
infrastructure and services, reducing customs tariffs, and removing non-tariff
trade barriers including administrative and regulatory barriers.”24
The definition of trade facilitation is constantly evolving. For example, trade
facilitation issues, which can be termed as a component of trade costs, are being
used differently in literature dealing with wTO issues, which again are very
19 WTO, Trade Facilitation: Negotiations The launching of negotiations on trade

facilitation, <http://www.wto.org/english/tratop_e/tradfa_e/tradfa_negoti_e.htm>
(last accessed June 2012).
20 Economic Commission For Europe (2002), Committee For Trade, Industry And
Enterprise Development Sixth session, 28 and 31 May 2002 item 20 of the

provisional agenda, Trade Facilitation In A Global Trade Environment, Note by the
secretariat, Distr. GENERAL TRADE/2002/21, p. 14.
21 Ibid.
22 APEC-OECD (2002), Co-operative Initiative on Regulatory Reform Proceedings of
the Second APEC-OECD Workshop on Regulatory Reform Merida, Mexico, April

2002: Merida, Mexico (April 2002).
23 Economic Commission For Europe, (2005) United Nations Centre for Trade
Facilitation and Electronic Business (UN/CEFACT) Recommendation and
Guidelines on establishing a Single Window to enhance the efficient exchange of
information between trade and government, Recommendation No. 33, p. 1.
24 Poul Hansen And Liliana Annovazzi-Jakab, (2008) “Facilitating Cross-Border
Movement of Goods: A Sustainable Approach”, (in) The Global Enabling Trade
Report (eds.), p. 67.
narrow in a sense to deal the barriers to trade in goods and services.25 According
to World Bank, “there is no standard definition of trade facilitation. In a narrow
sense, trade facilitation simply addresses the logistics of moving goods through
ports or more efficiently moving customs documentation associated with cross
border trade. In recent years, the definition has been broadened to include the
environment in which trade transactions take place, including the transparency
and professionalism of customs and regulatory environments, as well as
harmonization of standards and conformance to international or regional
regulations.”26
Thus, trade facilitation looks at how the procedures and controls governing
the movement of goods across national borders can be improved to reduce
associated costs and maximize efficiency while safeguarding legitimate
regulatory objectives.27 In its narrow sense, it addresses the logistics of moving
goods through ports or customs. More broadly, it encompasses several inter
related factors such as customs and border agencies, transport infrastructure,
services and information technology (as it relates to better logistics), regulatory
environment, product standards, technical barriers to trade etc. in order to lower
cost of moving goods between destinations and across international borders.28 It
is thus clear that trade facilitation cuts across a wide range of issues and sectors,
from government regulations and controls, business efficiency, transportation,
information and communication technology to the financial sector. Not only is it
a technical issue, but also includes economic, business, administrative and
policy matters.29
This article uses the broader meaning for trade facilitation in evaluating the
trade facilitation challenges, potentials and reform proposals in Ethiopia. This
considers that the concept of trade facilitation has grown beyond “fixing
borders”.30 The reason behind those efforts that aim to address the trade
25 Prabir De Cesifo (2006), “Regional Trade In Northeast Asia: Why Do Trade Costs
Matter? ”, Working Paper No. 1809 Category 7: Trade Policy, p 3. Presented At
Cesifo Venice Summer Institute,Workshop On Understanding The Latest Wave of
Regional Trade And Cooperation Agreements July 2006.
26 Ibid.
27 Poul Hansen And Liliana Annovazzi-Jakab (2008), “Facilitating Cross-Border
Movement of Goods: A Sustainable Approach”, (in) The Global Enabling Trade
Report (eds.), p. 67.
28 Jayanta Roy and Shweta Bagai (2005), “Key Issues in Trade Facilitation, Summary
of World Bank/ EU Workshops in Dhaka and Shanghai - 2004”, World Bank Policy
Research Working Paper 3703, p. 4
29 Gainmore Zanamwe, supra note 17, p. 5.
30 Barbara Rippel, (2011), “Why Trade Facilitation is Important for Africa”, Africa
Trade Policy Notes, Note #27, p. 2.

challenges beyond the traditional areas is the impact on trade costs of factors
along the whole trading chain. The broader meaning examines the costs that
traders and producers face from production until the delivery of their goods and
services to the overseas buyer and thereby includes all the transaction costs both
directly and indirectly associated with the trading process. Trade facilitation
measures must therefore be designed to assist countries to lower trade costs and
become more competitive in regional and global markets.
Accordingly, trade facilitation is a diverse and challenging subject with
benefits for both business and government at national, regional and international
levels.31 It involves economic, political, business, administrative, technical and
technological as well as financial issues all of which converge at easing the cost
and time of trading across borders.32 Thus any measure that eases transaction
and leads to time and cost reductions in the transaction cycle fits into the
category of trade facilitation.33 Accordingly, the linkages between trade
facilitation, trade, and development are relatively simple in theory.34
Development is enhanced through income growth, which comes from the
expansion of trade, investment, and production opportunities. Trade facilitation
initiatives, with the aim of lowering trade transactions costs, can enhance trade
competitiveness, and expand trade flows, while at the same time playing an
important role in supporting a positive business climate.35 As Krista Lucenti
argues, “the benefits of improving trade facilitation include: increasing trade in
goods and services; promoting competition which can spur productivity gains as
well as lower prices; enhancing efficiency in both the state sector and the private
sector; improving the business environment and so encouraging foreign direct
31 Chris Milner, (2005) “Trade Facilitation in Developing Countries, Centre for

Research in Economic Development and international Trade”, University of
Nottingham, CREDIT Research Paper No. 08/05, p. 7.
32 Sarah Mellisa Ntabazi, (2010) “Combating Corruption in Customs Through Trade
Facilitation: Case of East African Community”, LLM Research Paper, University of

Pretoria, p. 26.
33 Ibid , p. 27.
34 Otaviano Canuto, Facilitating Trade, Facilitating Development, Economic Monitor,
<http://www.economonitor.com/blog/2012/07/facilitating-trade-facilitating-
development/> July 18th, 2012 Also see John S. Wilson, Policy Research Working
Paper ,298 8 Trade Facilitation and Economic Development Measuring the Impact,
The World Bank Development Research Group Trade.
35 Matthias Helble, “Aid for Trade Facilitation”, Policy Research Working Paper 5064,
The World Bank Development Research Group Trade and Integration Team (2009).
investment and increasing participation of small-and medium-sized enterprises

in international trade.”36
2. Customs Valuation in Ethiopia: The Role and Impact of

the WTO Customs Valuation Agreement
Customs valuation refers to the process and method used by customs authorities
to determine the value of a particular imported/exported good. Since tariffs are
usually calculated as a percentage of the value of the goods (i.e., ad valorem),
the particular method used to determine value will directly affect the amount of
tariff duties collected on a particular import item. Due to this, customs valuation
has historically been “a jealously guarded function of government with regard to
international trade.”37 For many countries the discretion given to customs
authorities in valuing trade for the imposition of tariffs and duties has been an
important source of revenue. 38 This is more so in developing countries which
are often characterized by shallow tax bases.39
This is therefore of great concern to traders, as non-transparent valuation
mechanisms typically combined with inefficient or even absent advance ruling
mechanisms “lead to uncertainties regarding the profitability of each trade
transaction.”40 Accordingly, “customs valuation of goods becomes an important
aspect of trade facilitation.”41 Various authors qualify it as “an important
element in a variety of other aspects of international trade including statistics,
quota and licensing arrangement, taxes and other charges levied on imports, and
the application of preference systems.” 42
Ethiopia has introduced several trade facilitation related measures. The
proactive strategy adopted by the Ethiopian Revenues and Customs Authority
36
Krista Lucenti, (2004), Is There A Case For More Multilateral Rules On Trade
Facilitation? (in) Joseph E. Stiglitz (eds.) Agenda for the Development Round of
Trade Negotiations in the Aftermath of Cancun, Commonwealth Secretariat, p 109.
37
FlorianA. Alburo (2006) “Customs Valuation Issues and Research Methodologies”,
UNDP/ESCAP ARTNeT Trade Facilitation Research Team Meeting, , Bangkok (15
March 2006), p. 3.
38
Id, p. 4.
39
Ibid.
40 Yann Duval (2007), “Trade Facilitation beyond the Doha Round of Negotiations”,
Asia-Pacific Research and Training Network on Trade Working Paper Series, No.
50, p. 9.
41
Pushpa Raj Rajkarnikar (2006), “Implementation of the WTO Customs Valuation
Agreement in Nepal: An Ex-ante Impact Assessment “, Asia-Pacific Research and
Training Network on Trade , Working Paper Series, No. 18, p 7.
42
For instance see Walsh, T. J (2003), “Customs Valuation, Changing Customs”, IMF,
Washington , p. 2.
(ERCA) has helped in introducing several policy measures which have not only
streamlined the role of the customs department but has also helped the economy
in a major way without compromising the collection of essential government
revenue. However, various private sector surveys in Ethiopia have been able to
identify that customs valuation is still an issue of particular concern.43
2.1. The WTO Customs Valuation Agreement

The basic purpose of the Customs Valuation Agreement,44 is to require countries
to adopt a valuation system that is “fair, neutral and uniform” and to prevent the
use of arbitrary or fictitious values.45 The WTO Customs Valuation Agreement
is based on a “positive” as opposed to a “normative” economic principle: what
the value of the goods is, rather than what the value of the goods should be, is
taken as the correct customs value.46 Thus, the Agreement’s primary basis of
valuation is “transaction value” which is “the price actually paid or payable” by
the buyer for the imported goods. if the sale was freely negotiated (and the
Agreement contains rules for valuation of sales that are not), the price the buyer
pays the seller can be said to best represent the actual, market value of the
product, and should be used for customs purposes.47 Toward this end, the
agreement requires countries to determine the customs value of ‘imported’48
goods on the basis of the price paid or payable for export to the country of
importation (for example, the invoice price), adjusted, where appropriate, to
include certain payments made by buyers, such as cost of packaging and
containers, assists (i.e. goods or services), royalties, and license fees. Buying
commissions may not be included in the transaction value, discounts obtained
by sole agents and concessionaires must be accepted, and no add-ins or
exclusions other than those provided for in the agreement may be made to the
invoice price.
43 Tsegaye Teklu and Endris Negus (2011), supra note 1.

44 Agreement on Implementation of Article VII of the General Agreement on Tariffs
and Trade 1994 (Customs Valuation Agreement), World Trade Organization (1999),
The Legal Texts, The Results of The Uruguay Round Of Multilateral Trade
Negotiations, Marrakesh Agreement Establishing The World Trade Organization.
45 Bernard Hoekman et al. (2002), Development, Trade, and The WTO, A Handbook,
World Bank, p. 129.

46 Sheri Rosenow and Brian J. O'Shea, (2010) A Handbook on the WTO Customs
Valuation Agreement Handbook of Customs Valuation, Cambridge, p 22.

47 Ibid.
8 It should be noted here that although the general principles expressed in GATT
Article VII - which the WTO Customs Valuation Agreement implements - refer to
imports and exports, the valuation methods defined in the Agreement refer only to
imported goods .
The customs authorities may reject the transaction value by following the
procedures laid down in the WTO decision on shifting the burden of proof when
they have doubts about the truth or accuracy of the transaction value declared by
the importer. In all such cases the agreement puts limitations on the discretion of
customs authorities in determining value, requiring that the value be determined
by applying the following five methods, in the hierarchical (sequential) order in
which they are listed: value of identical goods, value of similar goods, deductive
value calculated on the basis of the unit price at which identical or similar
imported goods are sold in the domestic market, less applicable deductions for
costs incurred within the country of import; constructed value computed on the
basis of cost of production and finally, the “fallback” method.
Except as provided in Article 4, it is only when the Customs value cannot be
determined under the provisions of a particular Article that the provisions of the
next Article in the sequence can be used. If the importer does not request that
the order of Articles 5 and 6 be reversed, the normal order of the sequence is to
be followed. If the importer does so request but it then proves impossible to
determine the Customs value under the provisions of Article 6, the Customs
value is to be determined under the provisions of Article 5, if it can be so
determined.
The agreement also provides a list of methods that may not be used: selling
price of competing domestic products, choice of the higher value when two
alternative values are available, use of the selling price on the market of the
exporting country or on another export market, use of production costs except if
computing according to the fifth method, the price of goods for export to a
country other than the country of importation, and minimum values, other
arbitrary or fictitious values. The agreement requires customs authorities to
accept transaction values not only in cases of “arm’s-length transactions” but
also in instances where transactions are between “related parties.”49 Such
relationships may result, for example, from partnership, control by one company
of the other, or transactions among parent companies and their subsidiaries or
affiliates. In all these cases the agreement urges customs authorities not to reject
customs value unless they consider that the relationship has influenced the value
declared by the importer.
The Customs valuation agreement also contains several special provisions
that apply to developing-country members. They have the right not to apply the
agreement until five years after their accession to the WTO, (for original
members, this means until January 2000), and may request an extension of this
period. They are given an extra three years before they can use the fifth
(computed value) method. Those developing countries which currently value
49 WTO Customs Valuation Agreement, Article 1(d).

goods on the basis of officially established minimum values can, subject to

possible conditions, retain these values on a limited and transitional basis. They
can reserve the right to refuse requests of importers for the fifth valuation
method to be applied before the fourth, as well as other requests for using the
unit value of the goods after further processing.
2.2 Consistency of Current State of the Law and Practice with the
WTO Customs Valuation Agreement
As highlighted above customs valuation is one of the challenging bottlenecks to
trade facilitation. Generally, the existing rules virtually allowed customs
authorities to exercise a large amount of discretion. Accurate, reliable and
timely information is costly to acquire and the rules fail to provide specific
instructions when to use one valuation rule over another. The virtually multiple
valuation rules regime subject businesses to uncertainty and compel importers to
make deals with customs authorities to secure the most privately profitable
terms for their businesses.50 Complications of this sort have compounded the
situation by increasing the incentive to negotiate for the appropriate tariff and
tax payments, and a favorable decision had to be reciprocated illegally. This
regime and practice have spawned integrity problems in Ethiopian customs
administration. in addition to the above, many business operators complain that
when customs officers were dissatisfied with declared values, they frequently
re-assess the value by uplifting it in accordance with administrative guidelines.
No justification for increasing the import value was required other than the
officer not being satisfied, and there were no adequate mechanisms for resolving
valuation disputes.
Since the early 2000’s, the Government of Ethiopia decided to gradually
eliminate the systematic problems in the field of customs valuation (CV) via
modernization of its customs practice. Yet the main observation in the context
of the modernization program was the mere inclusion of valuation principles
included in the WTO Customs Valuation Agreement (CVA). Recently ERCA
has initiated efforts to introduce voluntary compliance of the customs and tax
payers by implementing the Authorized Economic Operators program.51 These
measures certainly display obvious intention of the government to initiate some
genuine reforms in the field of CV. Yet the problem still persists despite such
endeavors. The first obstacle that hinders the effective operation of the CVA in
Ethiopia is the absence of political will and sufficient legal framework that
50 Ethiopia: Joining the WTO? (2008)The Challenge of Customs Valuation, JURIST

Staffer Eric Linge, Pitt Law '10, Addis Ababa Saturday, July 05, 2008).
51 Ethiopian Revenues and Customs Authority, Authorized Economic Operators (AEO),
<http://www.erca.gov.et/indexjsp?id=faq&> (last accessed April 2014).

would ensure full realization of a WTO consistent valuation practice. The

following sections provide several examples where the presently working rules
and practices contradict the CVA provisions.
Meanwhile it should be noted that such evaluation is made for two main
purposes. First, despite the fact that Ethiopia is not yet a member of the WTO,
the country is well in the middle of a lengthy accession negotiation and the rules
and principles of the former require Ethiopia to mainstream its national laws and
practices to its rules at the time of accession, unless otherwise some exemption
in terms of transition period is acquired in the negotiations. Therefore it is
relevant to evaluate to what extent the current system is aligned to the
expectations of the organization. Second and most importantly, it can be said
that the rules and principles contained in the CVA have now become global
standards. About 160 countries that are members of the WTO and two dozen
countries that are either in the process of accession have adopted and largely
implement rules and procedures that are provided in the CVA. In this sense we
can say that implementation of the principles provided under CVA in Ethiopia
is, with or without accession to the WTO, is timely and called for. It should be
seen as alignment of oneself to globally harmonized rules.
2.2.1 The Customs Proclamation
The valuation chapter of the current Customs Proclamation contains several
valuation rules which can be generally considered in line with the WTO
Customs Valuation framework. Article 33 of the Customs Proclamation
specifically deals with the issue of customs value of imported goods. As stated
above, Article 33 (2) defines the customs value for imported goods as the actual
total costs of the goods up to the first entry point to the customs territory of
Ethiopia. This definition is consistent with Article 1 of CVA which stipulates
transaction value of a good as a basis for customs valuation. However, despite
being generally in line with the WTO customs valuation framework, the
Proclamation still suffers from several consistency challengers against its WTO
counterpart. First of all the currently applicable Customs Proclamation (as
amended) provides under Article 32, that “the Authority shall ... prescribe other
methods to be applicable in the case where the method stipulated under this
Proclamation could not be applied and be applicable in the case of second-hand
goods”. An important compliance concern would be when the said second-hand
goods are imported into Ethiopia. Under such cases an issue arises whether
other methods of valuation, except for the method provided for in this
Proclamation would be used to value such second-hand goods.
The WTO Customs Valuation Agreement provides for seven methods of
appraisement of the goods sold for export to the country of importation and does
not differentiate between new and second-hand goods. Even though it is
premature to comment on how the government intends to make use of this
provision, the outcome of this exception will not be compatible with the WTO
Customs Valuation Agreement. ERCA currently uses minimum values for

certain products. Second-hand goods are among the products for which
minimum values are used.52 Therefore, the “other method” mentioned in Article
32, paragraph 4 of the Proclamation is the use of minimum values, and the
intention of the Proclamation is to issue detailed directive on the use of
minimum values. This is of course not to mention that the exception itself, as it
is, is inconsistent with the WTO Customs Valuation Agreement.
The second issue relates to the fact that the Customs Proclamation does not
provide for the use of the lowest value in cases where multiple identical goods
or similar goods values are found. The WTO Customs Valuation Agreement is
clear on how to proceed in cases where plural prices of identical or similar
goods are found. Articles 2 (3) and 3(3) unequivocally provide that in such cases
the lowest price should be used to determine customs value. The Ethiopian
Customs Proclamation is silent on this point as are the subsequent amending
Proclamations and directives. However, in practice, ERCA takes the highest of
the prices that it finds. Using prices of identical or similar goods produced in
another country to determine customs value is itself inconsistent with CVA. The
application of the highest of multiple values practice is not consistent with
CVA.
Moreover, Article 36(1) of the Customs Proclamation provides that the value
“shall be determined by using the unit price of identical or similar goods
imported at or about the same time and which are sold in Ethiopia in their
original states in the greatest aggregate quantity to persons who are not related
to the seller”. This is not consistent with the WTO Customs Valuation
Agreement which states that if the goods being assessed, identical or similar
goods are sold in the condition as imported at or about the date of importation of
the goods being appraised, the price is the unit price at which the goods being
appraised, identical or similar goods are sold in the greatest aggregate quantity
at or about such date. Article 5 does not refer to the use of sale of identical or
similar goods in Ethiopia. A similar inconsistency can also be observed of
Article 36(2) with the CVA.
2.2.2 Ministry of Revenue Directives
A Directive on Customs Price Database Preparation, Distribution and Utilization
was issued by the now defunct Ministry of Revenue in July 2004.53 Its two main
52 See detailed discussion on this below.

53 Directive on Customs Price Database Preparation, Distribution and Utilization No.
10/1996, Ministry of Revenue. Before the recent BPR (Business Process
Reengineering) reform the Ministry of Revenue used to be one of the three important
tax and revenue administration organizations, together with the Inland Revenue
Authority, Ethiopian Customs Authority and National Lottery. The reform resulted in
objectives are stated to be combating under-invoicing through provision of up-to

date price information on goods and to set up a system where similar price
information is available at all customs stations.54 The first substantive element
of this directive is setting up a two-tier pricing system which uses minimum
prices for high risk goods and reference prices for other goods. Articles 6-10 of
the directive govern the use of minimum prices. Article 6 provides that
minimum prices are to be used for goods where there has been repeated under
invoicing. It identified four categories of goods namely; textiles, shoe wear,
consumer electronics, and auto spare parts. For all other goods references prices
are used. It is to be noted here that this system of minimum prices is inconsistent
with Article 7(2) (f) of CVA which specifically prohibits determination of
customs value on the basis of minimum customs values. This would mean that
the ERCA has to abandon using minimum values if it is to implement the WTO
CVA. However deserting the current system automatically could have severe
revenue collection consequences on the country.55 This process thus has to be
coordinated with bringing about an enabling environment where importers
declare the correct transaction value of imported goods.56
Further area of incompatibility is with regard to the valuation methods and
hierarchy order under the CVA. This is seen under Article 9 of this directive
which provides that the price of an identical or similar good produced in another
country shall be used where the price of that good is not brought into list under
the minimum prices database. According to the WTO CVA where customs
value cannot be determined using the invoice price, the price of identical goods
and the price of similar goods is to be applied sequentially.57Article 9 of this
directive evidently contradicts its WTO counterpart by providing that the price
of identical or similar goods produced in another country can be used for
customs valuation purpose.
Another important directive is the Ministry of Revenue Directive on Used
Vehicles and Goods - No.6/1996. This directive was also issued by the former
Ministry of Revenue and amended by ERCA’s directive on Imported Goods
overhaul of the Ministry and the two tax authorities into the Ethiopian Revenues and
Customs Authority now supervised by the Ministry of Finance while the National
Lottery Administration was made accountable to the Ethiopian Revenue and Customs
Authority, by Proclamation No.256/2001.
54 Evgeny Polyakov and Wendwesson Shewarega (2006), WTO Customs Valuation
Agreement: Impact Assessment Study for Ethiopia, Ministry of Trade and Industry,
Ethiopia, Institutional Support to Trade Integration and Implementation of the IF Plan
of Action in Ethiopia Project, Addis Ababa, Ethiopia , p. 21.
55 Id, p. 22.
56 Ibid.
57 WTO Customs Valuation Agreement, Articles 2 and 3.
Customs Duty and Tax Value Price Tariff: directive number 94/2006, with the
objective of making the valuation system of used vehicles and goods
transparent, equitable and accountable. The directive implemented a valuation
mechanism for used vehicles and goods that is not applicable on other goods. it
generally provides that the value of used vehicles and goods is to be based on
the C.i.F. price of the good when it was bought sold as a new good. Based on
this price, a depreciation allowance of 10% is subtracted each year with a
maximum allowance for three consecutive years. This valuation method does
not conform to the methods listed in the wTO valuation Agreement.
2.2.3 Ethiopian Revenue and Customs Authority Directive
ERCA still makes use of a directive, apparently given a confusing name;
Ethiopian Customs Authority implementation Directive to implement the
Directive on “customs price database preparation, distribution and utilization
directive” No. 2/1996 (E.C.), issued by its predecessor (the former ECuA) with
the objective of implementing Directive No. 10/1996. The directive, 2/1996,
embodies new principles which contradict with provisions in the working
Customs Proclamation 622/2009.
Primarily Article 3(2) of the directive provides for one additional test to be
applied sequentially to determine identical good. it provides that identical goods
include goods produced by a different producer but in the same country. Where
no value is found using this method it provides that goods produced in another
“country with similar level of development” can be used. The additional method
of using a different producer in the same country is actually in line with CVA;
however the second supplementary assessment of using products of other states
is inconsistent with Article 15 of the WTO valuation agreement which clearly
prohibits consideration of goods produced in different countries as identical
goods.58 Article 3 (4) of the directive establishes four sets of groups of countries
which are considered to be in like economic development conditions. These
groups are (1) European states including United States, Canada, Australia,
Japan; (2) all countries in Asia except Japan; (3) countries in Latin American;
and (4) all countries in Africa.59 This system is not in line with the WTO
Customs Valuation Agreement. it presupposes the same production and sale
value for countries in one group simply because they have comparable levels of
economic development. This is a simplistic basis to establish customs value of
goods.
58 Evgeny Polyakov and Wendwesson Shewarega, supra note 54.

59 Ibid.
2.3 Analysis of the Impact and Role of WTO CVA for Trade
Facilitation in Ethiopia
As illustrated in the above sections, the purpose of the Customs Valuation
Agreement, as treaty among signatory countries, is to provide reciprocity
between nations when they impose import duties. By using the same valuation
methods in every signatory country, countries avoid the problem of using
valuation as a tool for trade wars. Moreover, businesses can predict their cost of
doing business in another country. Using the same valuation methods, each
country then applies its own ad valorem import duty to the product. This
enhances the predictability of the cost of transactions, thereby encouraging
international trade.60
Today the majority of countries in the WTO share the common view that the
introduction of the CVA provisions in their national customs law will play a
significant positive role in the liberalization of their economies. Therefore, the
reason why a number of countries choose to carry out these measures
unilaterally before they join the WTO is understandable. Nevertheless, when it
concerns the implementation of the WTO-CVA, many countries have
incessantly confronted a number of problems that prevented the universal
incorporation of the CVA provisions in their national laws. Even if most of
these countries are developing countries like Ethiopia, they eventually can
manage to adopt WTO-CVA amenable provisions. Today such countries have
come to realize that applying the CVA means a lot more than simple
introduction of the CVA articles in their national laws.61
Consequently this translates to addressing the trade facilitation needs of
commerce and business in Ethiopia. Generally, the direct positive effect of
switching to valuation based on CVA is the creation of a fair, uniform, and
neutral system for the valuation of goods for customs purposes, that conforms to
commercial realities and that prohibits the use of arbitrary or fictitious customs
values, where all importers and producers are on the same level playing field.
Accompanying reforms will lead to an improved trade environment, better
compliance, and trade facilitation (with reduction in transaction costs).62
60 David Laro and Shannon P. Pratt (2005), Business Valuation and Taxes; Procedure,
Law, and Perspective, John Wiley & Sons, Inc, p. 147.
61 Azizjon Nazarov (2007), Contemporary Implementation Problems of the WTO
Agreement On Customs Valuation Into Domestic Legislation: What Can The
Experience Of Some WTO Members Teach Uzbekistan?, World Trade Institute,
Master Thesis), p. 51.
62 For example, the WTO Committee on Customs Valuation acknowledged strong link
of implementation of this Agreement with trade facilitation. See Nirmal Sengupta &
Moana Bhagabati, (2003) A Study of Trade Facilitation Measures From WTO
Perspective, Revised Interim Report, Madras Institute of Development Studies, p. 7.
Changanaqui and Messerlin (in a study on minimum import prices), show the
need to consider other perverse economic effects. The findings reveal that, in
addition to the farness argument raised above, minimum import prices reduce
price differentials between high-priced and low-priced imported goods falling
within the same product category.63 Consequently, adverse quality effects result,
as there is an incentive for domestic producers to concentrate on the
manufacture of low-quality goods, and an inducement for foreign suppliers to
shift exports toward higher quality products.64
in the mean time, the basic implication of the Agreement in terms of trade
facilitation objectives is to protect the interests of traders by requiring that
Customs should accept, for determining dutiable value, the price actually paid
by the importer in a particular transaction. This applies to both arms-length and
related-party transactions. The Agreement recognizes that the prices obtained by
different importers for the same products may vary. The mere fact that the price
obtained by a particular importer is lower than other importers have imported
the product, cannot be used as a ground for rejecting the transaction value.
Customs can reject the transaction value in such situations only if it has reasons
to doubt the truth or accuracy of the declared price of the imported goods. Even
in such cases, it has to give importers an opportunity to justify their price and if
this justification is not accepted, to give them in writing the reasons for rejecting
the transaction value and for determining the dutiable value by using other
methods. Furthermore, by providing importers the right to be consulted
throughout all stages of the determination of value, the Agreement ensures that
the discretion available to Customs for scrutinizing declared value is used
objectively.
However, implementation of the wTO Customs Valuation Agreement should
not be taken for granted in terms addressing all the trade facilitation needs of the
country. it should also be noted that implementation of the wTO disciplines
comes up with various capacity needs. in this regard Finger and Schuler rightly
remarked that customs valuation is only an inch in the whole yard of customs
operations.65 Indeed, implementation of the customs valuation agreement cannot
be done in isolation without undertaking extensive reforms and without putting
in place institutional safeguards to prevent misuse of the liberal valuation
methods under the agreement since its provisions mostly rely on transparency in
63 Federico Changanaqui and Patrick Messerlin, (19992), The Economic Effects of

Minimum Import Prices (With an Application to Uruguay),” Policy Research, Trade
Policy Country Economics Department The World Bank, p. 2.
64Id, p. i.tj
65 J. Michael Finger and Philip Schuler, “Implementation of Uruguay Round
Commitments: The Development Challenge”, p. 7.

<http://policydialogue.org/files/publications/Uruguay_Round_Finger_Schulerpdf.pdf>
trade transactions. Moreover, as the abovementioned scholars have pointed out,

“while implementing tariff changes may require “no more than the stroke of a
Minister’s or a legislature’s pen”, implementation of reforms in trade procedures
and trade regulations require “purchase of equipment, training of people and
establishment of systems of checks and balances”, 66 which involve substantial
expenditure. In brief, a simple look at the experience of many other developing
member countries to the WTO demonstrates that an effective implementation of
the Customs Valuation Agreement needs to be comprehensive, adequate and
continuous. The ultimate outcome should be de jure as well as de facto
compliance with all WTO CV rules in a country.67
The common concerns shared by the majority of developing countries such
as Ethiopia regarding possible negative impact of the implementation of the
WTO Customs Valuation Agreement relates to the possible reduction in
customs revenues due to under-invoicing and lowered protection levels for
domestic producers. This is an important concern as customs revenue still
represents a significant share in its contribution to the national treasury
combined with prevalent under-invoiced importation practices by the business
community. In this sense under-invoicing of imported goods is an extremely
serious and complex problem that negatively impacts on Ethiopia’s economy in
several ways. It means that the duties and taxes escape the tax net thereby
resulting in gross economic distortions. This also leads to an uneven playing
field, unfair competition and is disadvantageous to goods manufactured in
Ethiopia. The challenges in under-invoicing are indeed issues of concern
because there is no major decline in the instances of under invoicing even if
there is a general decline in the customs duties in the last two decades.
In the mean time various strategies could be designed to address the
problems of directing the country’s custom valuation practice to that mandated
by the WTO. Perhaps the first strategy should be a comprehensive movement
towards narrowing the problem. i.e. the private sector has raised the point that
under-invoicing is done only in the 50-60 percent of total transactions. It is
important that those firms or sectors are identified so that all do not face the
same treatment. One idea is to distinguish manufacturing and trading firms
separately. In this context, there may be some choice between pre-clearance
control and post-clearance control. It can be suggested that the manufacturing
units may find it easier to deal with post clearance audit. In the case of the
traders pre-clearance control should be made more preferred choice. The recent
66 Id, p .3.
67 Azizjon Nazarov (2007), Contemporary Implementation Problems of the WTO
Agreement On Customs Valuation Into Domestic Legislation: What Can The
Experience Of Some WTO Members Teach Uzbekistan?, World Trade Institute,
Master Thesis, p 51.
introduction of risk management system at ERCA can be seen as an important

step in this direction.
Another important issue of concern in this line also includes the fear of
consequent reduction in government revenue as Ethiopia makes a transition
toward strict adherence to the valuation stages under the wTO Customs
Valuation Agreement. Apparently, a review of the valuation practice dictated by
various directives issued by the Ministry of Finance and Economic
Development, the Ethiopian Revenues and Customs Authority etc. all have a
tendency to increase the transaction value of imported goods. This has
presumably inflated the transaction value consequently leading to higher taxable
prices. it is from this perspective that Ethiopia would be concerned not to lose a
large share of its revenue as it moves to dispel its current valuation law and
move towards the more disciplined and deeply regulated valuation hierarchy.
The right solution to this of course lies on the principle of aligning all trade
policy instruments. The most efficient and transparent way of addressing this
challenge is shifting the trade protection and revenue raising role of customs
valuation to actual tariffs thus avoiding dead weight loss to the overall economy.
3. Logistics Services Sector Reform and Liberalization:

What Role for Trade Facilitation
“the monopoly of the Ethiopian Shipping Lines on the transport of
seaborne imports in effect constituted an indirect tax”.68
Logistics services which include activities required for the transportation,
storage and handling of production inputs and finished products from producer
to consumer (or intermediary producer), play a critical role in international
trade. Consumers of logistics services are typically suppliers of products
themselves.69 Consequently, the efficient supply of logistics services helps to
facilitate international trade in a whole range of other products.70 The more
timely, reliable and efficient the logistics supply chain, the more efficiently and
reliably goods can be delivered from the point of production to the point of 68 69 70
68 UNCTAD (2004), Investment Guide to Ethiopia; Opportunities and Conditions,

UNCTAD/ITE/IIA/2004/2, p 64.
69 Institute for International Trade University of Adelade (2006) “The Relationship
between Trade Liberalizatoin in the Logistics Sector and Trade Facilitation”, Asia
Pacific Trade and Investment Review, Vol 2, No 2, p 29, Geneally see Swedish
National Board of Trade (2012) Everybody is in Services - The Impact of
Servicification in Manufacturing on Trade and Trade Policy, Swedish National Board
of Trade -Kommerskollegium.
70 Prabir De and Amrita Saha (2013), “Logistics, Trade and Production Networks: An
Empirical Investigation”, RIS Discussion Papers, Discussion Paper # 181, p. 1.
consumption.71 In particular, increased international trade in unfinished

products, i.e. the movement of intermediate goods within production processes,
requires logistics services of ever higher quality with regard to the reliability,
safety, security and frequency of deliveries.72 73
Accordingly, competitive advantage in both international and regional trade
73
is increasingly defined by logistics as other factors decline in importance. The
capacity to produce consumer goods, other than those protected by patents, can
be replicated in most countries. Low labour cost is a common feature of
developing countries and represents a decreasing portion of delivered cost. Tax
benefits have become a standard offering with relatively little difference
between countries. The traditional advantage of proximity to raw materials has
increasingly been replaced by proximity to markets. Although labour cost and
productivity create some basis for differentiation, these can be overcome
through the introduction of low-cost computer-enhanced manufacturing
equipment. As the opportunities for differentiation in price have diminished
there is now more emphasis on product quality and order cycle.74
One key chain in this long list of logistics services involves international
maritime transport. Historically, most industrialized countries used to own large
national fleets, manned by national seafarers, built in national shipyards and
flagged at home.75 Today, globalization has made shipping a highly competitive
industry. Hence, a ship may be registered in one country, its owner from another
country and its operator from a third country and the “components” of the
shipping service, such as insurance, equipment, the work of seafarers,
bunkering, ship repair or certificates of classification societies are very likely to
have been purchased in a number of different countries.76 In the recent past,
countries sought to increase their market share in the shipping industry in order
to generate income.77 Today, for most developing countries, having access to
71 Ibid.
72 UNCTAD (2003), Development Of Multimodal Transport And Logistics Services”,
Report by the UNCTAD secretariat, TD/B/COM.3/EM.20/2, p 3.
73 John Arnold (2007), The Role of Trade Facilitation in Export Growth”, (in) SADIQ
AHMED and EJAZ GHANI (eds.), South Asia, Growth and Regional Integration,
The World Bank, p 197.
74 Ibid.
75 UNCTAD (2003), “Efficient Transport And Trade Facilitation To Improve
Participation By Developing Countries In International Trade” Note by the UNCTAD

secretariat, TD/B/COM.3/60, p. 6.
76 Ibid.
7 These attempts were supported by the United Nations through a number of initiatives,
such as the adoption, under the auspices of UNCTAD, of the Convention on a Code
of Conduct for Liner Conferences, 1974.
adequate and inexpensive international transport services has become more

important than generating income with the supply of such services.
In Ethiopia, problems in the maritime transport sector have become one of
bottlenecks to international trade. The sector as will be seen below has fallen
almost entirely into a state of state monopoly nearly without internal or external
competition. This section attempts to demonstrate that the improvement in the
performance of logistics services through domestic reform and international
trade liberalization in Ethiopia may generate a virtuous cycle, whereby
international trade is increased and that this, in turn, may increase the demand
for logistics services.78 The benefits of improved performance of logistics
services could be enhanced through governmental measures that assist the flow
of trade across national borders. Further, trade facilitation measures instituted by
the government, including but not limited to more efficient, well-coordinated
border control mechanisms, may promote greater demand for logistics services.
The extent and pace of measures taken by governments to liberalize the supply
of logistics services and to facilitate trade will determine whether or not a
virtuous cycle will be generated and the extent of the benefits that will accrue
from that cycle.79
3.1 Ethiopia’s Maritime Transport Legislative and Institutional

Framework: Restrictive Features
There are essentially few factors that characterize the Ethiopian logistics and in
particular maritime transport services environment in Ethiopia. First of all
Ethiopia is a landlocked country. Ethiopian Shipping Lines and Logistics
Enterprise (ESLSE) is a parastatal company owned by the state. It enjoys a
monopoly in maritime transport and logistics services of the country. The
Maritime Sector Administration Proclamation establishes the Maritime Affairs
Authority, which has regulatory powers on maritime passenger transport.80 The
Transport Authority, under the auspices of the Ministry of Transport and
78 In a recent report prepared by the United States International Trade Commission

(USITC) on the global market for logistics services, it was suggested that improving
the performance of logistics services through liberalization may generate a virtuous
cycle, whereby international trade is increased, which, in turn, increases the demand
for logistics services., See U.S. International Trade Commission, (2005) Logistic
Services: An Overview of the Global Market and Potential Effects of Removing Trade
Impediments, Investigation No. 332-463.
79 Institute for International Trade, University of Adelaide, supra note 69.
80 Maritime Sector Administration Proclamation 549/2007, Federal Negarit Gazeta,
September 2007.
communications, is authorized to represent the Flag State.81 It is also

responsible for the qualification, procedures, and technical standards for the
supply of shipping services. The Ministry of Transport issues the competence
certificate for Shipping and Forwarding Agents.82
Ethiopia’s current level of investment regulation with respect to logistics
services is highly restrictive. Among other maritime services, only forwarding
and shipping agency services are expressly dealt with under Ethiopian laws.
These services are reserved for Ethiopian nationals under the Investment
Regulation No 270/2012.83 This is one of the only eight investment areas that
are exclusively reserved for Ethiopians under the Regulation. Other than the
above, customs clearing services is restricted to domestic investors.
Ethiopian Shipping and Logistics Services Enterprise (ESLSE) is the sole sea
freight transport service provider in Ethiopia although there is no express
reservation by law reserving this service to ESLSE. It is a state-owned company
that has de facto monopoly on transport of import goods. On the other hand, it
can be said that there is no restriction on sea passenger transport under
Ethiopian laws. The service is not clearly addressed under the investment
regulations and there is also no provider of such services presently. Yet it seems
that this service sector is less practical as Ethiopia is a landlocked country and
its current access to sea is done via Djibouti. Despite its similarity to goods,
provision of such service is currently outweighed by the ease and cost
advantages of air transport, and is probably going to remain dormant as it will
bring its own challenges in transit negotiations with Djibouti. Similarly
maintenance and repair and pushing and towing services are not mentioned in
any of the laws. This may be owing to the fact that, as a landlocked country,
these services are not provided within Ethiopian jurisdiction.
Other service areas in the sector include auxiliary services to all modes of
transport, and that contains three specific service types, namely, cargo-handling,
storage and warehouse, and freight transport agency services. As explained
above, freight forwarding and shipping agency services are reserved for
Ethiopian nationals under the investment regulation. On the other hand, the
Freight Forwarding and Ship Agency regulation lists cargo handling and
81 Pursuant to Proclamation No. 468/2005, Transport Proclamation, Federal Negarit

Gazeta of The Federal Democratic Republic of Ethiopia, 11th Year No.58, Addis
Ababa- 6th August, 2005.
82 As per the Regulations No. 37/1998, Council of Ministers Regulations No. 37/1998
Freight Forwarding and Ship Agency License Issuance Council of Ministers-

Regulations, Federal Negarit Gazeta of The Federal Democratic Republic of
Ethiopia, 41h Year No. 46, Addis Ababa - 19th June, 1998.
83 Investment Incentives and Investment Areas Reserved for Domestic Investors
Council of Ministers Regulation, Regulation No 270/2012.

warehousing services as part of activities of freight forwarders.84 In doing so,

Art 3(4&5) list that warehousing and delivery services, and cargo handling
equipment services are the functions of the freight forwarder. Thus, the
Regulation governs freight forwarding services in all modes of transport, as it
contains no references to specific modes of transport it applies to. This means
that cargo handling and storage and warehouse services are reserved for
Ethiopian nationals. Essentially the service is highly capital intensive industry
and the significance of investment liberalization in the area should be discussed.
Moreover, as one major area of discussion in Ethiopia’s accession bid to join the
wTO, and as evidenced from the various inquires submitted by wTO members,
the issue of accession commitments in GATS will have to be considered.
3.2 Multimodal Transport

In 2007, the House of Peoples Representatives came up with the Multimodal
Transport Proclamation, first of its kind in Ethiopia, which is issued with the
intention of providing a legal framework regulating duties and liabilities of
parties to a multimodal transport contract.85 A multimodal arrangement is a
scheme whereby the transportation of goods is 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.86 The Proclamation defines international multimodal transport as;
“the carriage of goods by at least two different modes of transport on the basis
of a multimodal transport contract from a place at which the goods are taken in
charge by the multimodal transport operator to a place designated for delivery.
The operations of pick-up and delivery or goods carried out in the performance
of a unimodal transport contract, as defined in such contract, shall not be
considered as multimodal transport.” 87
The Proclamation envisages that international transport of goods in Ethiopia
is now to be carried out on a door-to-door basis under one contract and with one
party bearing contractual responsibility. Accordingly the proclamation
introduces what is called "Multimodal Transport Document" which is a
document that evidences a multimodal transport contract, the taking in charge of
the goods by the multimodal transport operator, and an undertaking by him to
84 Freight Forwarding and Ship Agency License Regulation, Reg No. 37-1998.
85 Multimodal - Transport of Goods Proclamation; Proclamation No. 548/2007, Federal
Negarit Gazeta of the Federal Democratic Republic of Ethiopia, 13th Year, No. 59,
Addis Ababa, 04 September 2007.
86 According to the government the multimodal service is aimed at streamlining
shipments from Port of Djibouti to avoid warehouse fees in foreign currency.

87 Multimodal - Transport of Goods Proclamation, Art 2(1).
deliver the goods in accordance with the terms of that contract.88 In doing so, the
scope of application of the proclamation is overarched to all multimodal
transport contract after the conclusion of which a multimodal transport
document is issued according to the relevant provisions of the Proclamation.89
Accordingly, the multimodal transport document is to be regarded as
document of title. Thus, where every consignee named in the negotiable or non
negotiable multimodal transport document and every endorsee of such
document as the case may be, to whom the property in the goods mentioned
therein shall pass, upon or by each reason of such consignment or endorsement
shall have all the rights and liabilities of the consignor.90 The Proclamation
further regulates liability for loss, damage or delay arising from multimodal
transport. On final note however, the Proclamation does not regulate specific
issues in multimodal transport administration such as licensing and supervision
of the services providers. These issues were set to be dealt with under a more
technical regulation that would be issued by the Council of Ministers.
Unfortunately, despite various pronouncements from the Maritime Affairs
Authority (MAA) on draft multimodal regulation, the Proclamation as it stands
can hardly be put to use.
3.3 Directives on Multimodal Transport

Despite the lag in introducing a Multimodal Transport Regulation from the
Maritime Affairs Authority, the Ministry of Transport (MoT), which has been
encouraging the usage of a multimodal transportation system since 2007, and
has issued a Multimodal Transport Implementation Directive, effective January
2012.91 The new directive mandated that goods being shipped through the
Ethiopian Shipping and Logistics Services Enterprise (ESLSE) use a
multimodal (land, sea, or road) transportation service operated solely by state-
owned ESLSE. As indicated above, the multimodal arrangement is a system
whereby the transportation of goods is under a single contract but performed
with two different means of transportation. The carrier is liable for the entire
journey, including the shipment’s delivery at the final destination. The
transportation can be performed by rail, sea, and road.
Among others, the Directive instructs all vehicles of three tonnes or less to be
under the new scheme. The directive also underlines that all shipments that use
88 Id, Art 2(4).

89 Id, Art 3 (1).
90 Id, Art 7 (1).
91 It is to be noted here that neither the content nor character of this instrument is
officially and clearly indicated from the side of the Government. It appears now that
there is still confusion on the status of the instrument between being a Directive or a
Circular.
multimodal transport deliver their cargoes to dry ports or warehouses that are
authorized by the Ethiopian Revenue and Customs Authority (ERCA). All
private importers, that open Letter of Credit (LC) from local banks, are required
to bring their container shipments to dry ports and ERCA’s warehouses.92 The
Directive is said to be aimed at streamlining shipments from Djibouti Port to
avoid warehouse fees in foreign currency. it also stipulates for the confiscation
of imported goods after shipments lie at the port for more than six months.
Officials state that these schemes will save foreign currency for the country,
which totals 1.4 million dollars, annually incurred as warehouse fees at Djibouti
Port.
The first directive, effective as of January, does not require private importers
to use the multimodal scheme even if they use ESLSE’s service. The circular
issued on February 13, 2012 required not only state banks but also private banks
to undertake their activity under the new directive right away. The letter from
the National Bank of Ethiopia also indicated that all banks have to report
logistical data of their customers to the Maritime Affairs Authority and the
National Bank of Ethiopia within the first five days of the month.93
As the Directive did not see other options until the directive allows private
companies to be involved in the multimodal transport scheme, various interested
groups are now arguing that the government must provide options for the private
firms to compete in the sector.94 Those engaged in private forwarding business
for instance argue that the government should undertake reform in this regard,
inter alia, allowing freight forwarders and shipping agents to use other ships for
cargo that transport from ports or countries that ESLSE’s vessels do not call.95
92 it is interesting to not here that there are complaints against the legislative power of
the Ministry. Freight forwarders said that the ministry does not have the power to
amend these types of enforcements on state or private banks as private multimodal
operators are allowed to be involved in the industry.
93 Addis Fortune, Supra note 50, The directive did not talk about any monopoly
concerning the multimodal transport operation and because of that the ministry office
should wait until private operators can be included in the sector before it amends
enforcement regulations on banks.”
94 interview with Commander Tilahun, Manager, Ethiopian Freight Forwarding and
Shipping Agents Association.

95 According to a study by Addis Ababa Chamber of Commerce and Sectoral
Association, waiver certificate allowing the sea voyage to be made by another carrier
must be obtained by the importer, at a cost of USD 600-800 per container. See
Private Sector Development Hub,(2009), The Management of Commercial Road
Transport in Ethiopia, Addis Ababa Chamber of Commerce and Sectoral
Associations, p. 159.
3.4 Ethiopian Shipping and Logistics Services Enterprise

(ESLSE), Monopoly, Implications and Effects
Before ESLSE was established upon the amalgamation of three enterprises
including Ethiopian Shipping Lines, the National Bank of Ethiopia has already
issued, in 2008, a directive requiring importers to use Ethiopian Shipping Lines
as a requirement for Letters of Credit (L/C). In cases where ESLSE vessels do
not call on ports from which goods are shipped and ESLSE does not have a slot
charter relationship with carriers calling on these ports, it provides waivers to
importers to use other carriers. Since almost all commercial imports in Ethiopia
require L/C to obtain foreign currency, ESLSE enjoyed an effective monopoly
on most imports into Ethiopia excluding non-commercial imports.
It is thus the collective effect of the above directives that has granted de facto
monopoly to ESLSE. This measure has turned what used to be a struggling
enterprise in the country to one of the most profitable state companies.
However, this has now resulted into corporate inefficiency and increase in prices
for services rendered by ESLSE. Recent reports disclose that, for instance,
importers that used to import minibuses from Europe, in particular the
Netherlands, have claimed to have paid 1,492 dollars to ship one vehicle which
is 75% more than they used to pay before the de facto monopoly was established
by the introduction of the recent directives.96 Importers claimed that the
directive has taken away the opportunity of negotiations on shipment prices,
since it is monopolized by the ESLSE. Importers have disclosed that they used
to pay on average price not more than 900 dollars for each minibus after
negotiations with many shippers. The same opinion is stated by Mulugeta
Assefa, former president of the Ethiopian Freight Forwarders & Shipping
Agents Association (EFFSAA).97
ESLSE rates in 2008 were about 70 per cent higher than the Far Eastern
rates. Sea freight cost covers about 60 percent of the total import supply chain
costs to Addis Ababa.98 * Considering the economic impact of the above finding,
the impact on processing and manufacturing industries is easily noticeable.
Apparently, many components and intermediates in the production of exported
goods in Ethiopia need to be imported from abroad. Most of these components
are subject to a five to ten percent tariff that adds to production costs. Packaging
96 Transport Ministry Makes Waves with Multimodal Directive”, Addis Fortune,

Volume 12, Number 608, Dec 25, (2011).
<http://addisfortune.com/Vol_12_No_608_Archive/Transport%20Ministry%20Make
s%20Waves%20with%20Multimodal%20Directive.htm>
97 Ibid.
98 Nathan Associates (2009), Impact of WTO Accession on the Transport Services
Sector of Ethiopia, Ministry of Trade and Industry, Draft Final Report, p IX.
materials like glass bottles imported for food processing are examples in this
regard. They are not produced domestically and those that could be imported via
road transport from neighboring countries are of poor quality. The available
suspension schemes and drawback mechanisms are unable to reduce such costs
for exporters and should be reformed. Accordingly, shipping costs will be
brought to the forefront in increasing the costs for the nascent manufacturing
sector in the country. Consequently, studies have indicated that the preference
for ESLSE under the foreign exchange directives may increase shipping costs
by an estimated 30% - 50%.99 Currently ESLSE has also received very low
mark for its punctuality.100
3.5 Ethiopia’s WTO Accession and GATS Service Commitments:
Implication for Maritime Services Liberalization
The General Agreement on Trade in Services GATS is an agreement that lays
down a framework of international rules for trade in services. The main
principles that apply to the GATS101 are market access and national treatment
while the schedule of commitments provides the basic framework for the results
of negotiations. In terms of market access, GATS does not provide positive and
normative definition for market access but only provides six types of restrictions
that a member cannot impose, unless identified in its schedule.102 Conceptually
this is also similar to the principles of quantitative market access limitations
under GATT Art XI. Generally, GATS Art XVI:2 provides for rules that
prohibit members from imposing market access limitations. The existence of
any limitation in respect of these areas has to be indicated with respect to each
of the four modes of supply in scheduled sectors.103 The idea is that such market
access limitations are prohibited even if they are not discriminatory.104
However, GATS does not provide a comparable list in respect of national
treatment restrictions, and it is up to members to ensure that all potentially
"Ibid.
Bemnet Aschenaki (2004), Transport Costs in Ethiopia: An Impediment to
Exports?”, Background study for the World Bank FY04 Country Economic
Memorandum for Ethiopia, p 9.
101 GATS, World Trade Organization (1999), The Legal Texts, The Results of The
Uruguay Round Of Multilateral Trade Negotiations, Marrakesh Agreement

Establishing The world Trade Organization.
102 Id, Art XVI.
103 WTO, (2001), Guidelines For The Scheduling Of Specific Commitments Under The
General Agreement On Trade In Services (GATS), Adopted by the Council for Trade
in Services.
104 N Icolas F. Di Ebold, (2010) Non Discrimination In International Trade In Services
‘Likeness’In WTO/GATS, Cambridge University Press, p. 29.

relevant measures are listed in sectors where commitments are scheduled and, if
they wish, members can inscribe various types of national treatment limitation
(e.g., regarding taxation or regulations).105 “If a member no longer wishes to
conform to its specific commitments, it may modify its schedule by providing
compensation in the form of alternative market access (even across sectors).”106
“However, this undertaking may involve difficult negotiation and often creates
confusion regarding the member’s commitments.”107
With respect to the final part of the GATS framework, the GATS schedules
are key framework instruments providing the list of services with members’
commitments in terms of market access, national treatment and additional
commitments. The lists of services correspond to GATT secretariat
classification,108 which is a standardised harmonized framework also following
numerical references to the Central Product Classification system of the United
Nations.109
As explained above, the Ethiopian Shipping and Logistics Enterprise
(ESLSE) enjoys monopoly advantages. It is, in effect, a price setter as no
competitor can force it to lower its prices through competitive methods. This in
turn means that the importer is forced to accept the price set by the shipper. 110
This setting will become an issue for WTO members in Ethiopia’s accession
negotiation. It is the objective of this section to exemplify how the interplay
between liberalization of logistical services on the one hand, and trade
facilitation on the other hand, is equally complimentary and should be borne in
mind in the context of WTO negotiations on services and trade facilitation.
Thus, negotiators in both contexts should at least explicitly recognize the
105 Art XVII, In particular Art XVII lit 2 states; A Member may meet the requirement of
paragraph 1 by according to services and service suppliers of any other Member,
either formally identical treatment or formally different treatment to that it accords
to its own like services and service suppliers.
106 International Monetary Fund, (2010) Reference Note on Trade in Financial Services,
Prepared by the Strategy, Policy, and Review and Legal Departments, p. 5.

<http://www.imf.org/external/np/pp/eng/2010/090310.pdf> General Agreement on
Trade in Services (GATS), Art XXI: Modification of Schedules.
107 Ibid.
108 See Uruguay Round, Services Sectoral Classification List, Note by the Secretariat,
MTN.GNS/W/120 (10 July 1991).

109 Various versions available, see for instance, United Nations CPC classification
(Statistical Papers, Series M, No.77, 1991) Central Product Classification, CPC

Version 1.1, (Updated: 21.02.2002), Version submitted to the United Nations
Statistical Commission, (5-8 March 2002).
110 Derk Bienen et al. (2005), Impact Assessment of WTO Accession, Technical
Assistance to Support Ethiopia in its Accession to the WTO, p. 69.

potential for mutual reinforcement of liberalization of the logistics sector

together with trade facilitation.111
it is the position of this author that Ethiopia, as a least developing country
have much to gain from the liberalization of logistics services. The benefits that
may accrue to suppliers of logistics services, exporters and importers that are
dependent upon such services and nations as a whole are clear. Logistics
liberalization facilitates international trade, which, in turn, drives economic
growth and development. Trade facilitation measures that promote trade may
also consequently promote greater demand for logistic services, thereby
generating a virtuous cycle.112 The following paragraphs further investigate the
nature of GATS negotiations and possible implications for reform.
3.5.1 National Treatment on Maritime Transport and related Logistics

National treatment, if committed, can be the most important principle applicable
to maritime transport. Under the GATS, parties shall accord to other Parties no
less than that accorded to domestic services or domestic service providers.
Equality of treatment between foreigners and nationals imply that protectionist
measures, such as cargo reservation and preference for national shipping,
discriminatory taxes and charges towards foreign flag ships etc., are contrary to
this principle.113 The implementation of the National Treatment clause may
bring about at least the following effects.
The first important effect of the implementation of National Treatment
principle to shipping and the Maritime sector is related to the current cargo
preference policy. One can anticipate that wTO members will seek at least a
minimum of few commitments here. in doing so, the lifting of cargo preference
policy will be an important step towards the integration of Ethiopian maritime
sector to international shipping competition and the efficiency in multimodal
transport.
in terms of the other investment regulations, only Ethiopian nationals are
permitted to invest in shipping agency services. It is unclear whether this
prohibition implies that non-resident shipping agents are barred from supplying
services cross-border into Ethiopia - this would be Mode 1 in GATS terms. Also
111 UNESCAP (2007), Trade Facilitation Beyond The Multilateral Trade Negotiations:
Regional Practices, Customs Valuation And Other Emerging Issues, A study by the
Asia-Pacific Research and Training Network on Trade, 276.
112 Ibid.
113 H.E. Haralambides (1994), GATT and its Effects on Shipping and Ports”,
Proceedings of the KMI/IAME Conference on International Trade Relations and

World Shipping, Seoul (1994), p. 13.
<http://www.maritimeeconomics.com/downloads/papers/HH_GATT%20Seoul.pdf>
unclear is whether Ethiopians are barred from utilizing the services of foreign
ships agents abroad. This is called consumption abroad or GATS Mode 2. In
terms of national treatment provisions under GATS, it is clear that no
investment license can be issued to a foreign company or national to invest in a
shipping agency enterprise in Ethiopia. These restrictions will have to be kept in
mind if Ethiopia decides to include these activities in its WTO accession
commitments. “Given the international nature of the shipping agency business,
Ethiopia should anticipate that other WTO members may seek market
liberalization measures in this area”.114
The implementation of National Treatment may also have its own
implication in terms of multimodal transport services. As indicated in the
sections above, Ethiopia has made some progress towards creating an enabling
framework for integrated logistics services through the adoption of legislation
on multimodal transport. However, restrictions on investment by foreigners in
key areas such as shipping and the apparently confusing regulations relating to
freight forwarding and shipping agency will effectively hinder foreign logistics
providers from investing in multimodal services. It thus would be wise that the
Ethiopian government reviews its investment policy with regard to all auxiliary
transport services with a view towards liberalizing market access in this area.
One thus could also anticipate that WTO members will seek express
commitments from Ethiopia in this area.115 Commitment of such nature thus
may generally mean the entitlement of foreign shipping service providers to
access Ethiopia’s economy, customs clearance, maritime agency, freight
forwarding and so on. With respect to all these facilities or services, foreign
ships would then be treated in the same way as domestic ones.
Another important implication of commitment in national treatment would
relate to the ability of foreign companies to own and operate a dry port
infrastructure and facilities. Perhaps national treatment commitment in this area
would carry a key tool to liberalize multimodal transport. If commitment is
undertaken, the investment could be facilitated for instance through leasing and
rental arrangement with the government. This option also seems economically
compelling from experience.
3.5.2 Market Access

Together with National Treatment, Market Access is the second most important
clause for implementing the principle of non-discrimination. Market access
implies that Members will grant treatment to services and service providers of
114 Nathan Associates, supra note 98, p. 110.

115 Ibid.
other Members no less favorable than that provided for under the terms of their
Schedule.116
Upon Ethiopia’s accession, two issues immediately arise with regard to
market access: the establishment/commercial presence by foreign companies
and the right to provide services. Regarding the establishment of commercial
presence, the effect could differ considerably among different market strategies
by foreign companies. Commercial presence could take various forms and could
be in charge of different activities. These activities may be the marketing and
sale of maritime transport services; the purchase and use of any transport and
related services; transport documentation; customs and other activities;
provision of business information and freight forwarding and agency services
and related activities.
The other issue which can be of fierce debate between Ethiopian negotiators
and WTO members will be on the issue of freight forwarding and shipping
agency services. Experience now shows that there is a considerable level of
commitment undertaken by other acceded countries. Policy wise, one can find
some shallow rationale and standing by the government. For instance, if one
investigates the rationales behind current level of investment restrictions in
shipping agency services, it seems that it is a genuine concern of the Ethiopian
government to encourage the growth of the domestic shipping agency industry.
However, this provision would prevent, in the long run, a foreign multimodal
transport operator (MTO) which includes shipping agencies within its service
offering, from setting up an agency office in Ethiopia. In effect, the restriction
would force the MTO to locate itself outside Ethiopia. Such development will
represent an investment loss for Ethiopia.117 It thus seems logical for the
Ethiopian government to amend the investment regulation to permit foreign
investors to provide ship agency services in Ethiopia.
Inland transport can also be an objective of further liberalization. As
international transport becomes more integrated, and considering the advantages
of multimodal transport, many shipping companies, or their subsidiaries, are
trying to start their business in inland transport, particularly in trucking. As a
first step, the possibility of freely contracting with any local transport service
providers might be granted to foreign shipping companies, especially those in
liner shipping. This free choice of local transport suppliers will surely increase
the competitiveness of the local transport market.
As indicated above, the provisions of National Treatment and Market Access
are binding only in so far as Member’s Schedules specify. If they are negotiated
6 Haralambides, H. E., et al (1994), GATT and its Effects on Shipping and Ports,
<http://www.maritimeeconomics.com/downloads/papers/HH_GATT%20Seoul.pdf >
117 Nathan Associates, supra note 98, p IX.
and become at least subject to minimal level of commitment, Ethiopian

Maritime transport sector may see robust domestic competition, and increase its
international competitiveness further promoting trade facilitation down the line.
This objective could be promoted, at least in medium terms, without a
commitment in market access if a standstill commitment which would prevent
the introduction of new restrictive measures, within a given period of time, is
acceptable as a compromise. During that time Ethiopian maritime transport
sector (in particular the shipping industry) will have to strengthen itself and
adjust in order to be able to compete with others under terms of free and fair
competition.
3.6 The Role of Maritime Transport Sector Liberalization for

Trade Facilitation in Ethiopia
Maritime services and related logistics are important to a large number of
sectors in Ethiopia’s economy because of their direct link to both exports and
imports. Improving the efficiency of maritime transport and related logistics can
have significant positive spillover effects on encouraging trade flows, private
investments, and subsequently enhancing production and job creation in almost
every sector of the economy; for instance by reducing costs of imports for
producers and consumers, at the same time increasing government revenue.
The preceding discussion leads one to press the need for a general change in
policy directions in the maritime transport sector in Ethiopia. Generally, the
reliance on national shipping and maritime transport has proved an expensive
venture. About 95% of Ethiopia’s foreign trade by weight/volume and about
70% by value involve transportation by sea. Following liberalization and
opening up of the economy in the early nineties, there has been a significant
increase in Ethiopia's maritime trade. In this short time, considerable
improvements of containerization of general cargo, carrying capacity, etc. have
been brought about in the sector. Yet, there are still large gaps between what is
needed and what is in existence.
Today, uncompetitive import and export terms have become emerging
problems for Ethiopia’s budding economy.118 As long as semi value added
goods dominate the industrial exports of the nation, transport costs constitute a
large portion of the total export value. While the sector seems to have been
given less attention from policy makers and economic research, findings by the
World Bank (WB) now puts the average share of transport at 28 per cent of the
118 Addis Fortune, Logistics Malaise Regulate, Monopolize Not!, Addis Fortune,
(March 04, 2012).
<http://addisfortune.com/Vol_12_No_618_Archive/Logistics%20Malaise%20Regul
ate%20Monopolise%20Not.htm >
value added to Ethiopian goods.119 While it costs 0.07 dollar cents to transport a
shirt from Bangkok, Thailand, to New York, the cost of transporting the same
shirt from Addis Ababa to New York is 0.11 dollar cents. While it takes 27 days
for a Thai exporter to send its goods to New York, studies show, it takes five
more days for the Ethiopian exporter.120
The monopoly also has its own time constraints especially in areas where the
ESLSE does not have routes and has yet to subcontract them. Under the current
situation, all LC shipments must be handled by ESLSE. If that port is called by
the ESLSE, then, it will be about ESLSE’s capacity to pick it up. If ESLSE does
not call that port, it has the slot system, agreements with other shipping lines to
pick cargo up on its behalf at a premium price.121 * This venture is entirely
dependent on the contractual arrangement to be reached by ESLSE and its
client. This often takes considerable time and causes delays. The evidence could
even be staggering if one looks into what is going on in the ground. Local
experts and stakeholders state that it often takes ESLSE from 15 days - upto two
months, at least, to collect goods from various import destinations by its slot
partners. 122
Yet, even when the port is called by ESLSE, the number of vessels it has and
the volume of cargo that needs to be transported are often incompatible. Local
experts state that ESLSE’s ships cannot efficiently serve the import of the
country, be it on a slot basis or on their own.123 According to them, the problem
starts at origin ports, where goods stay at the ports more than they have to; even
if ESLSE picks them up, it may not pick them up on a timely basis. ESLSE
could or should have outsourced the said services but rather chooses to handle
the fright by its own ships while its ships are not available. In many cases its
takes ESLSE ships to have round trips to the same port more than once to clear
the goods waiting for shipment to Ethiopia. This entails costs not only for
storage but for all programmes in Ethiopia waiting for the goods that face the
delay.124
119
Ibid.
120
Ibid.
121
Ibid.
122
Commander Tilahun, President of Ethiopian Freight forwarders and Shipping Agents
Association, Interview with the author, July 2012 . This has high impact for trade
and it is not difficult to calculate the economic implication of this delay. See Gael
Raballand et al., (2012) Why Cargo Dwell Time Matters in Trade, World Bank
Economic Premise, Number 81.
123
Addis Fortune, supra note 118.
124Ibid,
Hummels, estimates that each day saved in shipping time is equivalent to

about 0.8% reduction an ad valorem tariff.125 For certain production processes
which are recently booming in Ethiopia, such as in electronics, textile and
apparel or other assembly-type operations (engines and motor vehicle), which
require high import content and have small per unit profit margins, delay and
high shipping costs can put investment in this areas out of picture.126 Further, as
these costs have ultimately to be borne by the end users, and where these users
are potential exporters in the domestic market, these factors inevitably raise the
cost of Ethiopia’s exports in international markets and the prices of imports for
the Ethiopian economy. As a local transport economist notes:
for all practical reasons, we need the company to serve this country but not at
the cost of the whole national economy. Compared to other lines serving
Ethiopia from Europe, for example, using [ESLSE] has a 40% rise in price.
For everything coming from India, the price increment is close to 30%. From
Dubai, it is 20%. From China, it is close to 30%. Should we carry this
burden for the survival of ESLSE? Or should we let it go free and have them
work on competitive basis? One of the major factors hindering the fair
distribution of logistic costs in the economy is the monopoly issue.127
In terms of the need for the liberalization of the maritime transport sector in
Ethiopia (and the role of WTO accession in this regard), this article brings into
attention a classical political economy argument in favor of undertaking
commitments for this service in the WTO. The WTO accession efforts could
bring fertile opportunities where genuine economic reform needs would meet
with multilateral economic negotiations. Primarily, commitments in the sector
could provide legal guarantees and certainty to services providers (foreign and
local) thereby introducing foreign competition or fostering existing foreign
competition) in transport services. This consequently could bring more
investment through legal certainty and irreversibility of conditions of operations,
wider choice of services for the consumer including state of the art services,
such as supply chain management for instance, lower prices of services through
competition with national incumbents and other foreign providers, and effective
technology transfer through the use of modern equipment and management
methods and through the employment and training of local staff which will then,
125 David Hummels, (2001) Time as a trade barrier” Purdue University, p 3.

126 See Liliana Annovazzi-Jakab, (2003), Landlocked Countries: Opportunities,
Challenges and Recommendations (in) Carol Cosgrove-Sacks and Mario Apostolov
(eds.) Trade Facilitation; The Challenges for Growth and Development, United
Nations Economic Commission for Europe, p 86.
127 Addis fortune, supra note 118.
at least in the long run, will be able to create its own businesses at least in sub
sectors with low costs of entry.128
Generally, experience over the last decade has shown that state-owned
transport monopolies may not be the most efficient way to assist the trade of a
country. Consequently, developing countries like Ethiopia should be encouraged
to promote private transport companies, be they shipping companies, trucking
companies or railways. it is argued that maritime and (road transport)
monopolies often seal off developing economies from the natural growth of
domestically based transport enterprises.129 In Ethiopia, while there are not
sufficient level studies evidencing the this conclusion, there are reports from
various industry groups which show that industries in Ethiopia suffer from the
current state of maritime transport performance in the country. industries report
a very serious disadvantage for Ethiopian industries vis-a-vis those that reside in
Asian economies with respect to inventories and input costs. On average, the
reports indicate that Ethiopian industries hold twice as much raw material and
finished products compared to their Asian counterparts.130 According to the
reports, higher transaction costs explain a relevant part of the discrepancies in
these inventories: Ethiopian industries faced with higher prices, uncertain
demand and longer delays for small frequent shipments choose to maintain
larger reserves.131 As business people comment with frustration,
there are certain ports wherein the [ESLSE] may not accept bulk cargo (i.e.,
un-containerized cargo). In order to containerize a cargo, the consignment
needs to be at least 10,000 to 12,000 kilograms. For different reasons, bulk
purchasing is not widely practiced in Ethiopia, and the origins of imports are
diverse. If a waiver is obtained from the [ESLSE], it is possible to nominate
a foreign vessel for transporting such imports. But the mode of payment
becomes C&F, instead of FOB. Arranging for such a change in bills of
lading takes a lot of time and becomes a source of delay.132
Considering that the cost of capital is excessively high in Ethiopia than in Asia,
the rest of Africa and Latin America, the commentators point out that these high
inventory levels translate into considerable costs, and ultimately in lower
128 SADC “Advantages Of Gats Bindings For The Transport Sector”

<https://tis.sadc.int/files/3413/2644/9883/Advantages_of_GATS_Bindings_for_the
Transport_Sector_2005_Latrille.pdf>
129 Carlos F. de Castro, (1996) Trade and Transport Facilitation Review of Current
Issues and Operational Experience, A Joint World Bank/UNCTAD Publication,

SSATP Working Paper No 27.
130 Tsegaye Teklu and Endris Negus, supra note 1, p 40.
131 Ibid.
132 Ibid.
competitiveness and diminished growth.133 Considering liberalization of the

maritime transport sector in the context of Ethiopia’s WTO Accession, effort
will thus be compelling and of high importance.
4. The New WTO Trade Facilitation Agreement and

Ethiopia: A Cross-Check
While this article took a broad view to trade facilitation and analyzed issues
such as logistics and customs valuation under this point of view, negotiations to
reach agreement under a narrower perspective of the concept have already been
under negotiation in the WTO since 2001 under Doha Development Agenda
(DDA) negotiations.134 Despite the ultimate failure to reach agreement on
compressive Doha agenda, WTO members were able to ink deal on a Trade
Facilitation Agreement (TFA) in its latest Ministerial Conference in Bali,
December 2013, as a part of a wider ‘Bali Package’.135 At the time of this
writing, the agreement still awaits ratification by at least two third of WTO
members, to come into force. However a discussion on its potential implication
for Ethiopia upon its accession to the system is necessary.
Generally the agreement covers provisions that aim to put discipline over
various impediments to international trade such as cumbersome data and
documentation requirements, disproportionate fees and charges, restrictive
administrative regulations and excessive formalities and other border
procedures. All of these are thought to impose unnecessary restriction on global
133Ibid.
134 Initial steps started at the WTO Ministerial Conference in 1996 for examining how
multilateral action by WTO Member governments might help to reduce these costs
without interfering with legitimate border management objectives such as revenue
collection and security. After some years of analysis and debate in the WTO, it was
agreed in mid-2004 to address these obstacles by adding Trade Facilitation to the list
of subjects that was being negotiated in the Doha Round. WTO Singapore
Ministerial 1996: Ministerial Declaration WT/MIN(96)/DEC (1996); The Doha
Work Programme Decision Adopted by the General Council on 1 August 2004
stated that - (Trade Facilitation) taking note of the work done on trade facilitation by
the Council for Trade in Goods under the mandate in paragraph 27 of the Doha
Ministerial Declaration and the work carried out under the auspices of the General
Council both prior to the Fifth Ministerial Conference and after its conclusion, the
General Council decides by explicit consensus to commence negotiations on the
basis of the modalities set out in Annex D to this document. See World Trade
Organization WT/L/579, 2 (August 2004).
135 Bali Ministerial Declaration - WT/MIN(13)/DEC, Ministerial Conference Ninth
Session Bali, 3-6 December 201; Agreement On Trade Facilitation - Ministerial

Decision, WT/MIN(13)/36 - WT/L/911.
trade.136 The following paragraphs provide brief highlights to the principal

substantive contents of the agreement in light of Ethiopia’s practical context.
4.1 Publication and Availability of Information

The final text of the agreement calls upon WTO members to promptly publish
all information on trade-related regulations and procedures of border agencies,
applied rates of duties and taxes of any kind imposed on or in connection with
importation or exportation, rules for the classification or valuation of products
for customs purposes, regulations of general application relating to rules of
origin and penalty provisions for breaches of import, export, or transit
formalities and procedures for appellate review. This information should be
available to all governments and traders in a non-discriminatory and convenient
manner. The text of the agreement also lays down provisions on how wTO
members should notify the wTO secretariat and others members including a
specific provision on information that should be available through internet and
provisions for the establishment of enquiry points to enhance the availability of
trade-related information 137 The current status of Ethiopia in this regard is at
various stages of potential compliance with the provisions of the TFA.
a) Publication of trade regulations:
Ethiopia has a modest variety of official means used to notify, publish, and
make available trade-related information; most official publications are in
Amharic and English. Official Proclamations on trade-related issues - namely
trade-related laws which are approved by Parliament, Regulations approved by
the Council of Ministers are all published in the Official Gazette (Negarit
Gazeta), which is printed by the state-owned printing office (Berhanina
Selam).138 Occasionally, copies of these official documents run out and they can
only be obtained from concerned government agencies.139
Directives that are approved by the Ministries, Agencies and various State
Governments are not publicized in any formal way except in few cases where
136 Richard Eglin, “The Doha Round Negotiations on Trade Facilitation”, (in) World
Economic Forum (eds.) The Global Enabling Trade Report- 2008 (2008), p 35.
137 Agreement On Trade Facilitation, WT/L/931, Article 1.
138 It is to be noted here that the newly enacted Mass Media and Access to Information
law requires each state body to publish —its directives, regulations, guidelines.
Federal Negarit Gazeta, 14th Year No 64, Freedom of the Mass Media and Access to
Information Proclamation No 590/2008, Addis Ababa, 4th December, 2008. Article
13(1)(g).
9 Generally see Mulugeta Getu, “Law Schools’ Access to Legislation and Decisions:
Current Trends and Suggested Outlets”, Ethiopian Journal of Legal Education, Vol.
3, No.2 (December 2010).
the relevant agency maintains websites. Other than these circulars and
guidelines issued by government agencies on administrative, procedures are
printed as hard copies by the relevant institutions or departments. In terms of
customs laws, the ERCA publishes a general tariff book with preferential tariff
rates and taxes, relevant laws, regulations, and procedures on its websites, in
addition to publishing such information through the Gazette.
b) Enquiry points/single national focal information centre:
On general customs issues, the ERCA has a consultation department that
provides information on customs issues relating to importation and exportation
in Addis Ababa. The other border agencies do not seem to have similar
structures or designated information desks like Customs. Generally, Ethiopia’s
border agencies would therefore need to establish inquiry points/desks or
collectively establish a central enquiry point to meet the specific proposals for
WTO Members.
c) Notification of trade regulations:
While Ethiopia has a mechanism for notifying the general public when
amending and introducing new measures, the Trade Facilitation Agreement
demands that such amendments - especially the ones that relate to core measures
that may have significant effects on trade with other Members, interested
parties, and the WTO Secretariat - should be notified to enable such parties to
submit comments before the amendment is finalized. This notification might
have to be similar to what is provided for under Technical Barriers to Trade
(TBT) and Sanitary and Phytosanitary (SPS) Agreements.
As far as the notification provisions of the TBT and the SPS agreements are
concerned, to date, Ethiopia has only made preparations to establish national
inquiry point under the TBT agreement.140 Much work remains for Ethiopia to
meet the rest of the notification requirements under the SPS agreement and the
national notification authority. Notification obligations on the lines of the SPS
Agreement and the TBT agreements will create additional pressure, even though
this would be beneficial in adding transparency to the trading system. In some
cases, the Ethiopian government has been given contributions from relevant
stakeholders when establishing the inquiry point.
One of the challenges for Ethiopia will be the ability to make information
available electronically and in a sustainable manner given limited connectivity,
electric power interruptions and the limited availability of skilled manpower in
information technology, at least in relevant government agencies. Most
governmental agencies do not have official websites on which to publish
140 See Ethiopian Standards Agency, WTO TBT Enquiry Point,

<http://www.ethiostandards.org/ESA/Contacts.aspx>
information, and those that do only publish partial information which, in many
cases, is outdated.
4.2 Opportunity to comment, information before entry into force

and consultations
Article 2 of the Agreement contains provisions aimed at ensuring that there is a
fair level of specified interval between publication and entry into force of laws
and regulations applicable to international trade and consultations with
stakeholders.141
Currently, in Ethiopia, time periods between publication and implementation
varies from immediate to 4 days, 10 to 30 days, and 60 to 90 days. Information
on when a Proclamation or Regulation would take effect is announced in the
Official Gazette. The Customs Proclamation specifies immediate
implementation while other instruments provide for some interim period of days
between publication and implementation. Thus, the different time periods
between publication and implementation present a potential problem for
Ethiopia. Comparing the current situation with the relevant provisions of the
Trade Facilitation Agreement for an agreed specific interval, Ethiopia would
have to do away with the immediate enforcement provision, which does not
provide for any time period between publication and implementation.
Moreover, Ethiopia does not have a well established mechanism for effective
consultations. Very recently however, changes have been introduced with the
support of international Financial Corporation (iFC). The Ethiopian Chamber of
Commerce and Sectoral Associations has established The Ethiopian Public
Private Consultative Forum (EPPCF).142 Consultations on various customs
related issues have taken place prior to the introduction of new laws, giving
stakeholders an opportunity to contribute to, influence, and comment on
proposed changes to either existing or new laws and regulations before entry
into force. Both informal and formal meetings and workshops facilitate
consultation with relevant stakeholders. Invitations to such events normally state
the policy objectives sought by a new law or an amendment, and the
stakeholders are normally informed of deadlines for submission of comments.
Almost all of the authoritative laws (Proclamations or Regulations) however
141 ARTICLE 2: Opportunity To Comment, Information Before Entry Into Force, And
Consultations, 1 Opportunity to Comment and Information before Entry into Force
1.1 Each Member shall, to the extent practicable and in a manner consistent with its
domestic law and legal system, provide opportunities and an appropriate time period
to traders and other interested parties to comment on the proposed introduction or
amendment of laws and regulations of general application related to the movement,
release, and clearance of goods, including goods in transit.
142 See EPPCF website, <http://www.eppcf.com/?view=featured >
provide for consultations with the private sector when there is a need to change
procedures.
Another issue of contention with some stakeholders is that these
consultations are not encompassing enough and that in some cases the
stakeholders lack technical capacity and information to engage effectively with
the government on the issues under consultation. Generally, most of the
institutions stated that there are no consultative mechanisms to provide an
opportunity for stakeholders to comment before any new laws or regulations are
introduced or before changes are made.
4.3 Advance ruling

Article 3 of the TFA contains provisions on advance rulings by WTO members.
Generally the concept is defined as measures “designating the option for
customs to issue a decision, at the request of the economic operator planning a
foreign trade operation, relating to the regulation in force. The main benefit for
the holder is the legal guarantee the decision will be applied.”143 The TFA
provides a mandatory rule that “each Member shall issue an advance ruling in a
reasonable, time-bound manner to the applicant that has submitted a written
request containing all necessary information.”144
Currently, there is no applicable legal rule or procedure that allows advance
rulings in any of the international trade administration agencies. However, a
draft to Ethiopia’s New Draft Customs Proclamation, includes some provisions
on advance rulings. These include provisions for advance rulings on tariff
classification, applicable duties and taxes, and valuation based on currently
applicable valuation norms which apparently are not in line with relevant WTO
rules. According to Article 95(1) of the Draft titled ‘Advance Rulings’: “The
importer or his agent may be allowed, at request, to calculate the duty and taxes
based on the information provided by the Authority before the goods enter the
customs territory”. Even if the Draft embodies such a provision, Ethiopia has a
long way to go until necessary regulations/directives are introduced which
would put the provision to use.
As far as tariff classification is concerned, Ethiopia has implemented the
international 8-digit HS code tariff nomenclature; it is also a member to the
WCO HS Convention ("The International Convention on the Harmonized
Commodity Description and Coding System"). Application of this rule might on
the other hand require that Customs officials should be provided with targeted
training on implementing and operating advance rulings. Ethiopia may need to
develop a database for advance rulings given that it imports almost all of its
143 See provisions of standard 9.9 of the Revised Kyoto Convention that define the term.
144 See TFA Article 3.
industrial goods. The Draft has also considered providing for submission of a
request for advance ruling through clearing agents. This provision would entail
training clearing agents on how to determine value using transaction value,
manage Advance Rulings, and maintain a database on Advance Rulings linked
to the Customs database for Advance Rulings.
4.4 Procedures for Appeal or Review

The TFA contains rules that mandates wTO Members to provide any person the
right to have access to ‘an administrative appeal to or review by an
administrative authority higher than or independent of the official or office that
issued the decision; and/or a judicial appeal or review of the decision.’145 In
Ethiopia, according to applicable rules, right of appeal for imports, exports, and
transit goods is a nondiscriminatory legal right against the rulings and decisions
of Customs and other border agencies. Moreover, companies or traders have a
right to be represented at all stages of appeal procedures by an agent or legal
representative.
Provisions for traders to raise complaints concerning administrative decisions
informally before moving to a formal appeal procedure exist. Yet the procedure
seems to be lengthy and ineffective. Most businesses opt to pay rather than
appeal in order to avoid incurring additional cost or possibly because the appeal
procedures are too onerous. Although considerable steps have been taken to
improve the Appeal system, a lot more still needs to be done. Accordingly,
Ethiopia may need both human resources and time to introduce necessary
changes to ensure compliance should the proposals be incorporated in the Trade
Facilitation Agreement under negotiation. In addition, Ethiopia will have to
ensure that, with respect to determinations of particular customs values, there is
a truly independent administrative review coupled with similarly independent
judicial review.
4.5 Release and Clearance of goods

Another important set of proposals in the WTO concerns the release and
clearance of goods.146 The TFA requires Members to maintain pre-arrival
processing and special procedures for express shipments.147 This means
145 Ibid, Article 4.

146 TFA Article 7: 1 Pre-arrival Processing, 1.1 Each Member shall adopt or maintain
procedures allowing for the submission of import documentation and other required
information, including manifests, in order to begin processing prior to the arrival of
goods with a view to expediting the release of goods upon arrival., 1.2 Each Member
shall, as appropriate, provide for advance lodging of documents in electronic format
for pre-arrival processing of such documents.
147 Ibid.
application and implementation of the provision would practically require Post

Clearance Audit by the relevant customs agencies.
Article 26(1) of Ethiopia’s Draft Customs Proclamation allows pre-arrival
clearance, and it provides: “The importer or his agent may lodge his declaration
with supporting documents prior to the arrival of the goods and may request for
a pre-arrival clearance to be issued upon examination of the declaration and
supporting documents”. Yet this statement in the draft is too generally and needs
to be defined clearly in the implementing regulations. For express shipments,
Ethiopia should enact and implement the principles contained in the WCO
(World Customs Organization) Guidelines for the Immediate Release of
Consignments by Customs. The Draft has also attempted to establish a formal
system of creating authorized dealers who automatically qualify for accelerated
clearance.
4.6 Border Agency Coordination and Single Window

Article 8 of the TFA Agreement requires WTO members to ensure that their
‘authorities and agencies responsible for border controls and procedures dealing
with the importation, exportation, and transit of goods cooperate with one
another and coordinate their activities in order to facilitate trade.’ To the extent
possible it, inter alia, requires WTO members to establish a mechanism of one
stop border post control.
Ethiopia currently meets some conditions specified in the text of the proposal
but falls short on many others. As the current proposal is articulated with several
enfeebling conditions (“endeavor,” “encourage”), Ethiopia would be considered
compliant insofar as its intentions are concerned. The reality on the ground
however is more complex. There are some irregular meetings coordinated by
Customs with various border agencies. Although Customs, Ministry of Finance
and Ministry of Trade cooperate effectively, cooperation between other agencies
is not really standardized. The situation is reflective of the overall dispersion of
authorities in the area of international trade, where six ministries contribute -
without adequate coordination - to the formulation of trade policy and where
more than ten statutory bodies can be involved in the importation and
exportation processes of the trade facilitation.
As the primary entity responsible for the importation and exportation of
goods, ERCA is often held accountable for delays or data issues that lie outside
its control. Yet ERCA itself it not progressing with the apt speed and vigor that
the nation currently needs. There is also no efficient electronic exchange of
information between the ERCA offices in Addis Ababa and the satellite offices
at border posts and other regional stations. Ethiopia does not also have a single
window for customs facilitation purposes. It thus might need to work further in
this regard if it plans to fulfill what could become a WTO trade facilitation
agreement.
Generally, while its progress is notable, Ethiopia nonetheless has much work
ahead to bring its overall trade facilitation standards in line with the proposals
that are under discussion in the wTO. And, it is only partially prepared to abide
by the new set of rules under draft by the WTO Negotiating Group. The
observations in the preceding paragraphs have shown both achievements and
deficiencies and have noted where high level of early preparation may be
advisable for bringing about the changes envisioned.
Conclusion
As the preceding section indicate the need for trade policy and other endogenous
reform needs, in the area of trade facilitation. i generally argue that efforts
toward streamlining economic development, trade and investment policy in
Ethiopia with domestic legal and institutional reforms to facilitate trade are the
very factors that render the country’s pursuit of WTO accession and trade
liberalization fruitful. In today’s international business environment of global
production network and just in time delivery, businesses seek cost-effective,
efficient, and predictable facilitation in international trade.
As highlighted in this article, Ethiopia’s customs administration is the
foremost agency at the border and plays a prominent role in the release of
goods. The implications of WTO membership include the development of trade-
related institutions such as the laws and regulatory frameworks that govern trade
as well as the administrative mechanisms and processes for designing,
implementing and evaluating trade and trade-facilitation related policies.148 One
instance in this regard relates to the discussion made with respect to the legal
regime on customs valuation of goods in Ethiopia. The current practice of
customs valuation in Ethiopia demonstrates that the WTO valuation methods are
not fully incorporated in legislative guideline. As they cannot be applied
effectively until necessary legislation is prepared and passed, the first key
reform measure should involve legislative upkeep. Thus, legal inadequacy in
Ethiopia still remains. What is needed is a comprehensive customs regulation
with detailed definition of valuation terms, transparent provision of price
adjustment, clear guidance to valuation and other similar measures. We can
thus expect that customs reform and trade facilitation in Ethiopia will be driven
by the Ethiopian government’s decision to accelerate its WTO accession
application.
148 Lesser, C. and E. Moise-Leeman, (2009) “Informal Cross- Border Trade and Trade
Facilitation Reform in Sub- Saharan Africa”, OECD Trade Policy Working Papers,
No 86, OECD Publishing
<http://dx.doi.org/10.1787/225770164564> (Last accessed April 2014)
Meanwhile, the international movement of goods involves not only the

customs administration but also other national economic activities and actors in
the area of logistics and transport and national policies, regulations and
authorities in the area of transport, health, agriculture, standards and other
border agencies. Competition in the maritime transport sector in Ethiopia is
indeed crucial for trade facilitation. However, Ethiopia has one of the most
restrictive logistics regimes with a complete dominance of the state monopoly
with almost no private competition. This has exacerbated other international
trade barriers such as access to ports and location. The burden of high maritime
transport cost is becoming one of the obstacles for industries in the country to
function in a manner that is tuned into modern just in time international trade
practice of the 21st century. Therefore, as highlighted in the preceding sections,
the benefits of improved performance of transport and logistics services could
be enhanced through governmental trade reform measures. Trade facilitation
measures, including but not limited to more efficient, well-coordinated border
control mechanisms, may promote greater demand for logistics services.
Indeed, the extent and pace of measures taken by governments to liberalize
the supply of transport and logistics services and to facilitate trade will
determine whether or not a virtuous cycle will be generated and the extent of the
benefits that will accrue from that cycle.149 This envisages a regulatory
framework which can balance other domestic industrial policy with the need to
foster the liberalization of logistics services.150 Frequent consultation with all the
relevant stakeholders - governmental bodies, suppliers of transport and logistics
services, and exporters and importers dependent upon international transport and
in particular maritime transport and logistics services - will help to realize the
benefits of economic and policy reform in the area. With a clear understanding
of such ground-level needs, the government can use Ethiopia’s currently
ongoing negotiation efforts to WTO accession as a tool of institutionalizing its
reform objectives. ___________■
149 Institute for International Trade, University of Adelaide, supra note 69.
150 Ibid.
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Trade Facilitation in Ethiopia:

The Role of WTO Accession in Domestic Reform

* PhD Candidate (International Law and Economics) Bocconi University, Milan-Italy.

Andrew Grainger (2008), “Customs and Trade Facilitation: From Concepts to

<www.tradefacilitation.co.uk> , p10 (Last accessed April 2014).

chapter 5 <http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c2en.html>, (last

<http://www.voxeu.org/article/trade-facilitation-matters> (last accessed April 2014).

Working Paper 3909, p. 9.

classifications. There are also complaints pertaining to pre-shipment inspection as

1. The Nature, Economics and Benefits of Trade

(last accessed June 2012).

of goods, including goods in transit.”19 UNECE defines trade facilitation as a

19 WTO, Trade Facilitation: Negotiations The launching of negotiations on trade

Enterprise Development Sixth session, 28 and 31 May 2002 item 20 of the

the Second APEC-OECD Workshop on Regulatory Reform Merida, Mexico, April

Trade Policy Notes, Note #27, p. 2.

31 Chris Milner, (2005) “Trade Facilitation in Developing Countries, Centre for

Facilitation: Case of East African Community”, LLM Research Paper, University of

investment and increasing participation of small-and medium-sized enterprises

2. Customs Valuation in Ethiopia: The Role and Impact of

2.1. The WTO Customs Valuation Agreement

43 Tsegaye Teklu and Endris Negus (2011), supra note 1.

World Bank, p. 129.

Valuation Agreement Handbook of Customs Valuation, Cambridge, p 22.

49 WTO Customs Valuation Agreement, Article 1(d).

goods on the basis of officially established minimum values can, subject to

50 Ethiopia: Joining the WTO? (2008)The Challenge of Customs Valuation, JURIST

<http://www.erca.gov.et/indexjsp?id=faq&> (last accessed April 2014).

would ensure full realization of a WTO consistent valuation practice. The

Customs Valuation Agreement. ERCA currently uses minimum values for

52 See detailed discussion on this below.

objectives are stated to be combating under-invoicing through provision of up-to

58 Evgeny Polyakov and Wendwesson Shewarega, supra note 54.

63 Federico Changanaqui and Patrick Messerlin, (19992), The Economic Effects of

Commitments: The Development Challenge”, p. 7.

trade transactions. Moreover, as the abovementioned scholars have pointed out,

introduction of risk management system at ERCA can be seen as an important

3. Logistics Services Sector Reform and Liberalization:

68 UNCTAD (2004), Investment Guide to Ethiopia; Opportunities and Conditions,

consumption.71 In particular, increased international trade in unfinished

75 UNCTAD (2003), “Efficient Transport And Trade Facilitation To Improve

Participation By Developing Countries In International Trade” Note by the UNCTAD

adequate and inexpensive international transport services has become more

3.1 Ethiopia’s Maritime Transport Legislative and Institutional

78 In a recent report prepared by the United States International Trade Commission

communications, is authorized to represent the Flag State.81 It is also

81 Pursuant to Proclamation No. 468/2005, Transport Proclamation, Federal Negarit

Freight Forwarding and Ship Agency License Issuance Council of Ministers-

Council of Ministers Regulation, Regulation No 270/2012.

warehousing services as part of activities of freight forwarders.84 In doing so,

3.2 Multimodal Transport

shipments from Port of Djibouti to avoid warehouse fees in foreign currency.

3.3 Directives on Multimodal Transport

88 Id, Art 2(4).

Shipping Agents Association.

3.4 Ethiopian Shipping and Logistics Services Enterprise

96 Transport Ministry Makes Waves with Multimodal Directive”, Addis Fortune,

Uruguay Round Of Multilateral Trade Negotiations, Marrakesh Agreement

‘Likeness’In WTO/GATS, Cambridge University Press, p. 29.

Prepared by the Strategy, Policy, and Review and Legal Departments, p. 5.

application and implementation of the provision would practically require Post