CHAPTER TWO

CUSTOMS RELATED ACTIVITIES AND PROCEDURES

2.1 Overview of Customs Functions

The World Customs Organization (WCO) defines Customs as “the government service which is
responsible for the administration of Customs law and the collection of import and export duties
and taxes and which also has responsibility for the application of other laws and regulations
relating, inter alia, to the importation, transit and exportation of goods.” In Ethiopia, ERCA’s
functions include the enforcement of the Customs Proclamation provisions governing the import
and export of cargo, baggage and postal articles; the arrival and departure of vessels, aircrafts,
and other means of transport; goods in transit; and the governance of any goods subject to
customs control, including rights and obligations of persons taking part in customs formalities.

2.2 Principles of Customs Operations in Ethiopia

Customs operations involve the administration of customs law relating to the importation,
exportation, movement or storage of goods and the collection of duties and taxes. In this regard,
customs operations are a key factor for trade facilitation and economic development of a country.
For such a crucial sector to function soundly it should stand on principles that guide its course to
worthwhile goals. Accordingly, the Ethiopian customs law contains provisions that clearly
prescribe the basic guiding principles that have to be applied on customs operations. These
guiding principles, which have important implications for the roles of all stakeholders, including
the traders themselves, are the following ones:

 Self-assessment: It is the responsibility of importers and exporters or their agents to

assess and submit the value of goods to the customs office, which then determines the
appropriate duties and taxes to be paid based on the information provided by traders.

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  Risk management: ERCA steers its activities through assessing, directing and
controlling risks which emanate from the import and export of goods. The purpose is to
strike a balance between trade facilitation and controls. Successful implementation of
the risk management principle helps to avoid unnecessary delays and wastage of
resources by concentrating customs control on high risk consignments and expediting
the release of low risk consignments.
 Transparency: Under this principle, ERCA provides relevant information about trade
– including the rates of duties and taxes, fees and charges, customs laws and
procedures, appeal procedures, etc. – through publications and other means. This guide
is one example of ERCA’s commitment to enhancing the transparency of its operations.
 Accountability: ERCA clearly defines the duties and responsibilities of each actor in
customs operations
 Service orientation: As a result of the preceding principles, ERCA is committed to
creating a conducive environment to provide equitable, expeditious, predictable and
reliable services
 Prevention of illegal practices by promoting self-compliance: Under this principle,
which is related to risk management and self-assessment, ERCA will seek to prevent
illegal practices such as commercial fraud (under-or over-invoicing, wrong description
and classification of goods, etc.), smuggling of prohibited and restricted goods, and
others, by taking measures that promote self-compliance. Examples of such measures
are the provision of information and advice to traders, advance rulings for customs
classification, customs valuation and preferential origin, theimplementation of post
clearance audits, or the use of simplified procedures for authorized traders.
 Promotion of priority sectors and economic development: This principle is aimed at
the Authority to play its vital role in expediting the economic development of the
country by providing special service to priority sectors, such as manufacturing.

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2.3. Legal Basis for Customs Operations

The following laws and secondary legislation are the basis on which ERCA’s operations rest:
 Value Added Tax Proclamation No. 285/2002;
 Excise Tax Proclamation No. 307/2002;
 Ethiopian Revenues and Customs Authority Establishment Proclamation No. 587/2008;

 A Proclamation to Amend the Value Added Tax Proclamation No. 609/2008;
 A Proclamation to Amend the Excise Tax Proclamation No. 610/2008;
 A Proclamation to Promote Sustainable Development of Mineral Resources,
Proclamation No. 678/2010;
 A Proclamation on Export Trade Duty Incentive Schemes, Proclamation No. 768/2012;
 A Proclamation on Investment, Proclamation No. 769/2012;
 Customs Proclamation No. 859/2014; Income Tax Proclamation No. 979/2016;
 Commercial Registration and Business Licensing Proclamation No. 980/2016
 Tax Administration Proclamation No. 983/2016 • Customs Warehouse License Issuance
Council of Ministers Regulations No. 24/1997;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
25/1997;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
80/2002;
 The Revised Regulation on the Importation of Goods on Franco- Valuta Basis Council of
Ministers Regulation No. 88/2003;
 The Customs Tariff Regulations Amendment Council of Ministers Regulation No.
89/2003;
 Customs Clearing Agents Council of Ministers Regulation No. 108/2004; • Import Sur-
tax Council of Ministers Regulation No. 133/2007;
 Investment Incentives and Investment Areas Reserved for Domestic Investors Council of
Ministers Regulation No. 270/2012;
 Temporary Admission Directive No. 28/2002 E.C;
 Goods Released under Security Directive No. 37/2002 E.C;

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  Postal Parcel Customs Procedure Directive No. 38/2002 E.C;
 Customs Warehouse Administrative Directive No. 40/2002 E.C;
 Disposal of Abandoned Goods under Customs Control Procedure Directive 56/2003 EC;
Vehicles Tax Incentive Directive No. 04/2004 E.C
 Directive Providing for Simplified Customs Procedures for Authorized Economic
Operators, Directive No. 65/2004 E.C;
 Franco-Valuta Directive No. 66/2004 E.C;
 Export Trade Duty Incentives Directive No. 86/2005 E.C;
 Establishment of Compliance Review Committee and Procedures Directive No. 91/2006
E.C;
 Directive to Determine the Working Modalities of the Customs Complaints Review
Sections No. 107/2007 EC;
 Second Schedule Tariff Application Directive No. 45/2008 E.C;
 Determination of Customs Dutiable Value Directive No. 111/2008 E.C;
 Administrative Penalties for Customs Offences and Forfeiture of Goods Implementation
Directive No. 112/2008 EC; • A Directive to Amend the Establishment of Compliance
Review Committee and Procedures Directive No. 113/2008 E.C;
 Directive to Determine Temporary Importation of Goods Accompanied by Tourists,
Directive No. 116/2008 E.C; • Directive of Transit Procedures No. 117/2008 E.C. 11
 Directive to Determine the Application of Customs Declaration, Directive No. 118/2008
E.C;
 Directive of Goods Examination and Goods Subject to Prior Customs Procedure.
Directive No. 119/2008 E.C;
The key legal texts can be accessed at the ERCA website (http:// www.erca.gov.et).
Proclamations and Council of Ministers Regulations can also be bought at the Birhanna Selam
Printing Press.

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2.4. Documentations and other Terminologies used in International
Trade

The following are some of the major documents and certain terminologies used in international
trades:

 Terms of Trade:refers to the rate at which one country’s products exchange for those of
another. It depends on the price of commodities entering in to international trade. It is
said to be favorable to a country when the price of its exports are high relative to the
prices of its import. It is said to be unfavorable when the price of its imports are high
relative to the price of exports.
 The balance of payment:is the difference between a nation’s total payment’s to and total
receipt from foreign nations during a given time. International payments and receipts
arise from the purchase and sate of goods (visible trade) and the purchase and sale of
service (invisible trade).
 Custom duties:these are taxes levied by the government on imports and exports. Custom
duties are levied in the following ways.
i. Ad. Valorem:The tax is calculated on the value of the goods imported or exported. On
the imports, it is the value of the goods at the port of entry (port of destination), which
is the CIF value (CIF= Cost, Insurance and Freight). On the ixports, it is the value of
the goods at the port of origin i.e. the F.A.S value (Free along side ship).
ii. Specific:This shows that tax is levied on the quantity of the goods imported or
exported. Example 100 Birr per carton.
 Bill of Lading (B/L):is a documentation which evidence a contract of carriage by sea and
the taking over or loading of the goods by the carrier, and by which the carrier undertakes
to deliver the goods against surrender of the document. A provision in the document that
the goods are to be delivered to the order of the named person or the bearer. Possession of
B/L is equivalent in law to possession of goods. It enables the holders to obtain delivery
of the goods at port of destination and the transit; it enables him to deliver the goods by
merely transferring the bill of lading. B/L is used as: a contract for shipment of
merchandise, a receipt for merchandise, a document of freight charges, a document title
to merchandise, a guide to the carrier’s staff in handling the shipment.
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  Packing list:is a document that lists the type of materials, the number of pieces, the
contents, weights and measurements of each as well as the marks and numbers.
 Insurance Certificate:the exporter arranges for the insurance of the goods against the
anticipated accident while goods are in transit. Any one can get insurance policy against
payment of premium which is usually a percentage of the insured value.
 Certificate of origin:It is a document that shows the origin of goods and must be sent by
the exporter to the importer to enable him/her to get advantageous of special treatment.
Due to special trade agreements between countries, goods sent from friendly country to
another receive preferential treatment in import duties.
 Inspection Certificate (if required):it is a document normally prepared by independent
entity other than the exporter to cheek the condition, quality or quantity of goods being
shipped
 Tariffs:is the most common barrier to foreign trade. It is done by artificially raising the
price of the foreign product through increasing tax on imported goods. Tariffs may be ad
valorem or specific.
 Quotas:these are quantitative limits fixed on the importation of specific commodities.
The protection offered by quotas is more certain than can be obtained by raising import
tariffs, as the effect of the latter depends on the price elasticity’s of the imported
commodes. Quotas bring no revenue to the state. Quotas are the most serious kind of
restrictions since it takes the form of physical limitation on quantity of the commodity,
which is allowed to enter the country in a given periods.
 Exchange control:importers require foreign currencies in order to buy goods abroad.
Importers requiring foreign currency must apply to the Commercial Bank, which can thus
effectively, control the variety and volume of imports by controlling the issue of foreign
currency.
 Letter of Credit (LC): Letter of credit is an instrument issued by the importer’s bank to
another bank or to its branches in exporter’s country. In a simple term a letter of credit is
an undertaking by the buyer’s bank to pay specific amount to exporter, provided certain
conditions specified in the credit are meet. In giving such undertaking, the bank puts
itself in the place of the buyer concerning the payment.

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2.5. Customs clearance

The RKC establishes standards and recommends good customs practices for importation,
exportation, temporary admission and special procedures. The RKC defines customs clearance as
“the accomplishment of the Customs formalities necessary to allow goods to enter home use, to
be exported or to be placed under another Customs procedure” and release as “the action by the
Customs to permit goods undergoing clearance to be placed at the disposal of the persons
concerned.” This part of the guide is about the customs clearance operation applicable on
importation and exportation of cargo, travelers’ baggage and postal parcels, in accordance with
the Customs Proclamation, related Councils of Ministers regulations and directives and customs
procedure manuals.

2.5.1. Cargo Importation

According to Article 2(2) of the Customs Proclamation, “cargo” is any good imported or
exported by any means of transport other than stores of means of transport (i.e. goods to be
consumed during the journey, such as spare parts or food items) for commercial use and baggage
of travelers. Cargo import clearance procedure means the accomplishment of the customs
formalities necessary to allow cargo to enter into the customs territory.
The clearance procedure includes:
 Submission of the goods declaration (see section 5 above);
 Acceptance or rejection of the goods declaration (see section 5.6 above);
 Checking the goods declaration against the documents produced (invoice, bill of lading,
certificate of origin, permits, etc.)
 “Checking the goods declaration” is defined in the RKC as the action taken by Customs
to satisfy themselves that the goods declaration is correctly made out and that the
supporting documents submitted fulfill the prescribed conditions;
 Examination of the goods, if required Assessment and collection of duty and taxes; and •
 Release of goods.
The following goods can be given priority in undergoing customs procedures, where the
declarant applies to get the service before/ after the goods enter to customs territory:

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  Medicines;
 Inflammatory goods;
 Radiation emitting goods;
 Seeds;
 Live animals and chicken;
 Organisms destined for laboratory and examination;
 Inputs for export goods;
 Chemicals that pollute the environment;
 Current newspapers and journals;
 Foodstuff and fruits;
 Export goods;
 Authorized economic operators and special customs service users;
 Goods and spare parts that are necessary for regular operation of company and urgently
needed;
 Relief cargo; and
 Other goods that are specified by ERCA.

2.5.2 Examination of Goods

“Examination of goods” refers to the physical examination of goods by a customs officer to

satisfy that the origin, country of export, nature, condition, quality, quantity, tariff classification
and value of the goods are in accordance with the information furnished in the goods declaration.
This includes the examination of goods on the basis of declarations by travelers. The
examination of goods by ERCA is needed to ensure that goods to be released are covered by a
registered declaration.
For this purpose, ERCA may take samples for examination and analysis. The declarant is entitled
to be present when the goods are examined or samples are taken; provided, however, that if he
fails to appear, ERCA can proceed to conduct the examination or to take the samples in the
presence of the warehouse operator.

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The examination of goods may take place at: Customs premises; • Government offices and
companies premises; • Warehouse or project site; • Industry zones; or • Any place approved by
the deputy manager of customs affairs at an ERCA branch.
According to the Goods Examination Directives No. No. 119/2008, the following are eligible for
examination outside of customs premises: •
 Eligible agencies and companies:Government agencies and government share
companies; o Beneficiaries of export trade tax incentive schemes; • Projects owned by
federal and regional governments; • Public or regional development associations; and •
Authorized Economic Operators.
 Eligible goods: • Manufacturing raw materials, chemicals and inflammatory goods; •
Fuel and fuel products; • New vehicles, if imported in a quantity of twenty and above at a
time by one importer; also three wheel vehicles 40 and above; • Fertilizer, relief cereal
and other bulk cargos; • Mirrors of vehicles and buildings; • Export consignments; • Big
factory machinery, investment goods and other goods not convenient for examination at a
customs station; • Other goods can be allowed by the deputy branch manager.

2.5.3. Clearance of imported goods

i. Clearance of Goods Imported for Home Use

“Clearance for home use” is the Customs procedure which provides that imported goods enter
into free circulation in the Customs territory upon the payment of any import duties and taxes
chargeable and the accomplishment of all the necessary Customs formalities. “Goods in free
circulation” means goods which may be disposed of without Customs restriction. Imported
goods that have completed the necessary customs formalities and have been released for free
circulation are considered as domestic goods.

Nevertheless, goods released for free circulation may lose this status if:

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  The goods declaration for their release for free circulation is invalidated;
 They are imported for inward processing and treated under the duty draw back or voucher
scheme;
 They have to be re-exported because they are defective or fail to meet the required
standards; or
 They are re-exported or used only for the permitted purpose and subject to drawback
system.
The following steps must be completed to obtain release for import cargo:
I. Registration of the goods declaration. The goods declaration that needs to be used
for clearance of direct imported goods for home use is IM-4;
II. Assessment and payment of import duties and taxes, if required;
III. Submission of the goods declaration;
IV. Checking the goods declaration and supporting documents;
V. Acceptance or rejection of the goods declaration (when rejected, correct and
submit the causes of rejection)
VI. Determination by ERCA of the risk level of the accepted goods declaration
(green: automatic release of goods; yellow: verification of the goods declaration
and supporting documents; red: physical examination and verification of the
goods declaration and supporting documents; blue: automatic release of goods at
the importer’s own premises);
VII. Verification of the goods declaration and supporting documents – this may
include, in certain cases, the verification of other legislative requirements
administered by other regulatory agencies (e.g. veterinary, health, phytosanitary,
etc.);
VIII. Examination of the goods, if required

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 ii. Temporary Importation
Temporary importation takes place when goods enter a customs territory for a limited period of
time and are then removed from the territory again, unchanged, and without any duty liability
arising.
In Ethiopia, goods necessary for the following purposes may be imported temporarily:
 Trade promotion;
 Technology transfer;
 Tourism and cultural exchange;
 Construction works;
 Consultancy services; or
 Relief.
Spare parts and other consumable goods are not allowed to be imported temporarily. ERCA may
refuse to authorize the use of the temporary importation procedure where it is impossible to
identify the goods. However, ERCA may nevertheless allow temporary importation where, in
view of the nature of the goods or of the operations to be carried out, the absence of
identification measures is not liable to give rise to any abuse of the procedure. Once ERCA has
authorized temporary importation and received a security, goods may temporarily be admitted
duty and tax free, subject to their re- export. Nevertheless, duties and taxes must be paid on the
depreciated values of temporarily imported goods upon their re-export, based on the tariff
currently applicable.
Temporarily imported goods can also be used locally by paying duty and tax when it is approved
by the Ministry. Furthermore, ERCA may permit the transfer of temporarily imported goods for
construction works or consultancy services, within the authorized period, to other duty free right
holders with respect to similar goods.
The time limit for temporarily imported goods to stay in Ethiopia depends on the purpose of the
temporary import, as follows:
 Goods for tourism, cultural exchange or technology transfer: six months;
 Goods for trade promotion and welfare services purposes: two months from the date of
completion of the trade promotion or welfare service;
 Goods for construction works, consultancy services, and welfare services or as per a
project agreement: these goods must be re-exported within the period specified in the

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 project agreement or within three months after the completion of the project or welfare
services.
ERCA may extend the time limit if the importer provides an acceptable justification for why the
goods cannot be re-exported within the specified time. If temporarily imported goods are not re-
exported within the specified time limit, the security provided will be transferred to the
Government and the goods may, upon the completion of the appropriate customs formalities,
remain in the country or be reexported.

iii. Re-Importation
Re-importation is the importation into a customs territory of goods that had previously been
exported from the territory. Goods exported temporarily by completing customs formalities for
the following reasons may be allowed to re-enter the country without payment of duties and
taxes: • vehicles, equipment and machinery taken out by a person for the purpose of carrying out
his/her work abroad; • goods exported for trade fairs, exhibitions or cultural shows; and •
defective goods that are re-exported. Goods may be eligible for duty exemption only if returned
from abroad within one year, unless a longer period is specified in a directive issued by Ministry.
The goods declaration used for clearance of re-imported goods is IM-6.

2.5.4. Clearance of exported goods

i. Outright Exportation
Outright exportation is the customs procedure whereby goods in free circulation leave the
customs territory and are intended to remain permanently outside it. The following formalities
must be completed for the outright exportation of cargo (goods):
I. Registration of the goods declaration. The goods declaration used for clearance of
outright exported goods
II. Assessment and payment of export duties and taxes, if any
III. Verification of goods declaration and supporting documents – which includes the
verification of other requirementsadministered by other regulatory agencies (e.g.
veterinary, health, phytosanitary, etc.); and
IV. Examination of the goods, if required.

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ii. Temporary Exportation
Temporary exportation is the exportation of goods that the declarant specifies as intended for re-
importation. To facilitate the re-importation at a later stage, Customs may take identification
measures on the goods. In Ethiopia, temporary exportation may be authorized for the following
goods and purposes:
 vehicles, equipment and machinery taken out by a person for the purpose of carrying out
his work abroad;
 goods exported for trade fair, exhibition or cultural show. The goods declaration used
for the clearance of temporarily exported goods is
 The temporary exportation procedure may be terminated by declaring the goods for
outright exportation, subject to compliance with the conditions and formalities applicable
to this.
iii. Re-exportation
Re-exportation is the exportation from the customs territory of goods previously imported into
that territory. There are often occasions where imported goods may have to be exported again.
Such situations arise where the import goods are found defective after customs clearance or are
not in accordance with specifications or requirements of the consignee. Goods are also often
temporarily imported for the purposes described in the above and are then subject to re-
exportation upon the completion of the intended objectives.
The following conditions shall be fulfilled to re-export goods imported and declared for home
use:
• The goods are not prohibited, and their entry is not contrary to customs law; and
• The importer requests the customs office of entry to allow re- exportation before
completing customs formalities upon payment of 5% of the duties and taxes to be
paid on the goods.
For temporarily imported goods, re-exportation is allowed if the following conditions are met:
 Within the specified period the importer has submitted a request to the customs office of
entry to allow the re- exportation; and

 Duties and taxes are paid on the depreciated values of temporarily imported goods upon
their re-exportation based on the tariff currently applicable

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2.6. Subordinating Department:

Secretariat
 Research, examine, study, report and regularly give advices on important issues to
Director General of GDCE;
 Prepare, compile and maintain necessary documents of Director General of GDCE;
 Examine all documents; draft of requests, files or other opinions before submitting to the
management of GDCE for approval;
 Prepare and manage internal audit on Customs and Excise Units and perform other
missions determined by Director General of GDCE.
 Department of Administration and Management
 Prepare, manage customs officers’ issues including statistics, compliance, change or
transferal of position, promotion, admiration or punishment, and set up policy relating
to salary cadre, supporting fees and other leave fees;
 Prepare and organize training for customs officers and as well as officers of relevant
ministries and private sectors if necessary;
 Manage the reception and delivery of official documents;
 In charge of other administration tasks including producing report, evaluating work
efficiency and issuing nomination and mission letters;
 Control statistics of the use of weapons in the unit;
 Manage duties of GDCE related to finance and accounting issues, participate in
determining and examining plan on revenues-expenses and other payments, manage the
demands, purchases, distribution and maintenance of equipment and tools and other
properties of GDCE;
 Perform other duties determined by the Ministry of Economy and Finance.

Department of Planning, Technique and International Affairs

 Propose reasonable policies related to tax collection procedures, revenue target, and
develop master plan and action plans of Customs and Excise Units;
 Develop, research and participate in supervising the implementation of regulations and
policies related to customs tariff; customs valuation on export-import goods, evolution

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 on rules of origin in accordance with the evolution of national economy and international
trade including amendment of commodity classification, assessment on the impact of
trade facilitations practices, development of methods for analysis and management of
customs laboratories;
 Develop and manage the implementation of the plan for development of customs
information system especially automation system on customs procedures as well as
gathering and maintaining export-import statistic, managing the utilization and
maintenance those systems;
 Investigate and continually amend the customs transaction value list of export-import
goods, value of currency and exchange rate in accordance to actual situation as the basis
for consideration and decision on work implementation of local customs units;
 Examine and counsel on customs technical aspects especially on customs valuation,
origin and commodity classification and participate in auditing on these above issues as
well as settlement of other issues;
 Perform duties as the international affairs center related to customs sector as a whole; o
Study and analyze information related to economy and international trade by
comparing with data of customs administration of regional and global trading partner
countries;
 Cooperate with World Customs Organization, other customs administrations and other
organizations which involve in customs sector;
 Coordinate and cooperate with relevant units of ministries, government institutions under
the framework of economic cooperation and international trade;
 Participate in supervising and evaluating efficiency of customs operations;
 Perform other duties determined by the Ministry of Economy and Finance.

Department of Prevention and Suppression

 Cooperate in developing policies for investigation and suppression of all kinds of

smuggling activities, tax evasion and other violations within customs territory;
 Appoint intelligent network and special forces for prevention and suppression of all
customs frauds and other violations;

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  Store goods under temporarily detention waiting for final decisions from competent
organizations and manage those goods according to specific purpose;
 Nominate operation team for investigation and suppression of smuggling activities by
taking action on major targets throughout the country according to the instruction of
Director General of GDCE;
 Serve as the center for cooperation, management, collection and compilation of all
information related to goods, individual, transportation mean and all kind of violation
tricks from the local and international sources and analyzing and assessing the risk of
these information to be used for suppression of tax evasion and smuggling and other
kinds of violations against other competent institutions of Cambodia and foreign
counterparts;
 Perform other duties determined by the Ministry of Economy and Finance.

Department of Legal Affairs; Audit and Public Relation

 Investigate and counsel on the establishment of customs regulations and other

regulations related to customs operations;
 Examine the implementation of customs regulations and other regulations related to
customs operations and amendment of customs regulations;
 Control and participate in examining the request for establishment of customs bonded
warehouse, free zone, customs broker services and similar businesses and investigate the
premise of the businesses and services in compliance with provision of laws and
contracts in force;
 Coordinate customs abuses and other disputes by providing opinions in order to provide
ruling on customs violations and submit to Director General of GDCE for verification
and decision in accordance with provisions of law on customs;
 Examine and assess, on behalf of public relation unit of GDCE, the complaints from
private sector in order to balance between efficiency of implantation of laws and
regulations in force and facilitation of international trade;
 Establish and examine the implementation of risk management plan in order to
determine high risk target;

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  Collect, analyze, assess and control information and data from different sources and put
into trader credibility management system and risk selectivity criteria management
system;
 Supervise the implementation of inter institutional agreement with other government
agents in accordance with trade facilitation through risk management policy;
 Develop plan and organize the audit on high risk business premises determined by
GDCE;
 Perform other duties determined by the Ministry of Economy and Finance.

Department of Customs Procedures

 o Participate in policy preparation for managing investment activities and import-export

activities done by non-governmental organizations, embassies, government
institutions and other persons with preferential Customs procedures;
 Examine and manage the issuance of import-export permit with preferential Customs
procedures determined by the GDCE and investigate and control the consumption of
materials and all kinds of exempted goods under specified purposes;
 Arrange post clearance audit on Customs declaration and attached documents. Make
conclusion and take a proper measure if necessary;
 Perform other duties determined by the Ministry of Economy and Finance.
 Department of Customs Procedures leads by a director and have some deputy- directors
as assistant.

Department of Excise
 Propose the duty and tax policy, managing production, importation- exportation,
distribution and storage of petroleum products and products subject special taxes
determined by the Ministry of Economy and Finance;
 Set up master plan and action plan for development of excise sector and trade
facilitation through each Customs regime of Customs and Excise administration;
 o Manage, control import-export clearance, the collection of duties and taxes,
distribution, transportation, movement and storage of petroleum products
throughout the country including warehouses or business premises;

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  Manage process of the business premises producing goods bearing special taxes, duty-
free shops, postal package clearance determined by the Ministry of Economy and
Finance and as well as cooperate with other competent institutions in order to
investigate and suppress Customs frauds related to these business operations;
 Perform other duties determined by the Ministry of Economy and Finance.
 Department of Excise leads by a director and have some deputy-directors as assistant.

Department of Free Zone Management

 Participate in policy preparation for managing the functioning of free zones in the
Kingdom of Cambodia especially all Special Economic Zones in accordance with
existing laws and regulations, internationally best practices and Kyoto Convention on the
Simplification and Harmonization of Customs Procedures in order to assure the
 smoothness and quickness of the import-export clearance of goods out of and into the
zones;
 Participate with Cambodian Special Economic Zones Board in examining request for
import of equipment, materials and other goods for construction of infrastructure of zone
developer;
 o Coordinate for effective participation of competent Customs officers to work
permanently with Special Economic Zone Administration in examining and approving on
the spot the incentives on import of production equipment, construction materials and
other production inputs of investor in the zone;
 Manage, examine and verify the compliance in implementing duties and tasks of the zone
developer and investors during the construction of infrastructure and production premise,
and conducting business;
 Manage and lead directly on the Customs and excise offices to Free Zone or to Special
Economic Zone;
 Perform other duties determined by the Ministry of Economy and Finance.
 Department of Free Zone Management leads by a director and have some deputy-
directors as assistant.

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 Chapter 3
BANKS IN IMPORT-EXPORT
3.1. INTRODUCTION
Bank is an institution which deals in money and credit. It accepts deposits from the public and
grants loans and advances to those who are in need of funds for various purposes. Banking is an
activity which involves acceptance of deposits for the purpose of lending or investing. In
addition to accepting deposits and lending funds, banking also involves providing various other
services along with its main banking activity. These are mainly agency services, but include
several general services as well. A banker is one who undertakes banking activities, accepting
deposits and lending money for different purposes.

The essential features of banking activities are as follows: - i. accepting deposits from public; ii.
lending or investment of such deposits; iii. incidental to the activities of accepting deposits for
lending or investing, banks undertake activities like — a. Promoting and mobilizing savings of
the public; b. Providing funds to trade and industry by way of discounting bills, overdraft, cash
credit facility, and transfer of funds from one place to another; c. Providing agency services to
customers, such as collection of bills, payment of insurance premium, purchase and sale of
securities, etc., and other general services, such as issue of travelers’ cheques, credit cards, locker
facility, etc; Money deposited with the bank is assured as far as its safety is concerned. Further
the depositor is allowed to withdraw it whenever required. Banks allow interest on deposits.
Such interest helps in the growth of funds deposited with the bank. Thus the rate of interest
provided on deposits acts as an incentive to the depositors.

3.2. NATURE AND SCOPE OF BANKING ACTIVITIES

Banking activities are considered to be the life blood of the national economy. Without banking
services, trading and business activities cannot be carried on smoothly. Banks are the distributors
and protectors of liquid capital which is of vital significance to a developing country. Efficient
administration of the banking system helps in the economic growth of the nation. Banking is
useful to trade and commerce.

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Banking activities are useful to trade and industry in the following ways.

 Money deposited in a bank remains safe. Precious articles too can be kept in the safe
custody of banks in lockers.
 Banks provide credit facilities to their customers. Customers with bank accounts also
enjoy better credit in the business world.
 Banks encourage the habit of saving and thrift among people. They mobilize savings and
invest them in productive activities. Thus, they help in increasing the rate of savings and
investment in the country.
 Banks provide a convenient and safe means of transferring money from one place to
another and facilitate business dealings/ transactions.
 Banks collect and realize bills, cheques, interest and dividend warrants etc. on behalf of
their customers.
 Foreign trade is facilitated considerably with the help of banks which receive and make
payments, provide credit and deal in foreign exchange.
 They protect importers from the risk of loss on account of exchange rate fluctuations.
 They issue letter of credit and provide information on the credit worthiness of importers.
They also act as referees of their customers.
 Banks meet the financial needs of small-scale business units which are located in
economically backward areas. § Farmers and artisans in rural areas can also avail of bank
credit for financing their activities.

3.3. TYPES OF BANKS

A. RESERVE BANK OR CENTRAL BANK:

In every country, the bank which is entrusted with the responsibility of guiding and regulating
the banking system is known as the Central Bank. The Reserve Bank does not deal directly with
the members of public. It acts as bankers’ bank maintaining deposit accounts of all other banks
and advances money to banks whenever needed. It regulates the volume of currency and credit,
and has powers of control and supervision over all banking institutions.

The Reserve Bank also acts as government banker and maintains the record of government
receipts, payments and borrowings under various heads. It advises the government on monetary

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and credit policy, besides deciding on the rate of interest on bank deposits and bank loans. It is
the custodian of currency reserves consisting of foreign exchange, gold and other securities.
Another important function of the Reserve Bank is the issue of currency notes and regulation of
the money supply.

B. COMMERCIAL BANKS:

Commercial banks are banking institutions which accept deposits from the public and grant
short-term loans and advances to their customers. In Ethiopia, there are public commercial banks
as well as private sector banks which are corporate organizations. The largest commercial bank
is the State Ethiopia is commercial bank of Ethiopia. The main source of income of commercial
banks is the difference between the interest they charge on loans and the interest they allow on
deposits. Commercial banks generally grant short-term loans repayable within one year. But they
also meet the medium-term and long-term requirements of business enterprises. Besides
accepting deposits and lending money, commercial banks provide other services such as issue of
bank drafts, traveler’s cheques and letters of credit, collection of bills, dividends and interest
safe keeping of valuables, transfer of money from one place to another, payment of insurance
premium etc.

C. INDUSTRIAL BANKS:

Industrial Banks are corporate organizations which specialize in providing industrial capital by
subscribing to the share and debenture issues of public companies. Industrial banks normally
meet the long term requirements of funds for purchase of land, plant and machinery, and
financing of expansion and diversification activities of industrial companies. These banks
generally secure representation on the board of directors, and provide technical guidance in the
management of industrial companies.

D. FOREIGN EXCHANGE BANKS:

Business firms engaged in foreign trade receive and make payment through foreign currency. In
order to facilitate such transactions and also help exporters and importers, there are banking
institutions which primarily engage in transactions involving foreign exchange. These are known
as Foreign Exchange Banks. Besides financing foreign trade, the exchange banks also render
services incidental to their main function, such as acting as referees, collecting and supplying

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information about the foreign customers, providing remittance facilities. They engage in other
kinds of banking business as well, like acceptance of deposits, grant of loans and advances, etc.
However, financing foreign trade remains their field of specialization.

E. DEVELOPMENT BANKS:

Development banks are special financial institutions which provide long-term capital to industry.
Rapid development of industries in India after independence requiring huge financial investment
and promotional efforts led to the establishment of these instructions. Development banks assist
the promotion, expansion and modernization of industries, besides providing long-term finance,
these banks also subscribe to the capital issues of industrial undertakings, if the public
subscription falls short of the total issue. Thus they act as underwriters as well. Moreover, these
banks provide technical advice and assistance, if needed.

F. REGIONAL RURAL BANKS:

Commercial and industrial banks cater to the financial needs of trade and industry. In rural areas,
there are small farmers, farm labourers, artisans and small entrepreneurs, who need financial
assistance. To meet their financial needs, a separate category of banks known as Regional Rural
Banks have been set up. These banks are financed by nationalized banks. The central
government specifies the local limits within which regional rural banks shall operate. The banks
are allowed to establish their own branches or agencies within the specified area.

They grant loans at lower rates of interest than the rates charged by other banks. These banks are
rural based, rural oriented and organized like commercial banks. The purpose of these banks is to
finance agricultural operations and provide employment to rural educated youth who possess the
requisite orientations. Regional Rural Banks have been conceived to combine the strong points
of both the co-operative and commercial banks eliminating the weaknesses of both.

G. CO-OPERATIVE BANKS

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3.4. CUSTOMERS CATEGORIESIN BANKING SERVICES
Category of customers expressed groups of individuals with similar properties that are identified
with those who do business with a bank. They are diverse and differ with different interests and
needs. For a banker is particularly important: ü To recognize categories of customers that come
in direct contact; ü To identify the transactions necessary for each category; ü Know the law,
existing for different types of customers Customers can be divided mainly in legally, into two
categories: Legal and - Individuals. Legal entities may be, in turn, grouped by type of ownership,
legal form of organization and type of economic activity (business). For example, in Romania,
most accounts are held by legal persons.

1. CORPORATIONS OF CUSTOMERS

Method of establishment of companies is regulated by law. “In terms of corporate bank accounts
should be noted that each bank based on the law on banking has developed its own regulations
(rules) to open and operate such accounts. These regulations are constantly improving to meet
the demands of market economy development. Laws and regulations are published in our
country in the Official Gazette. At the same time, it is important to know the internal regulations
of banks”. It is also important for banks to know whether a person is a client company, the right
of legally constituted, before doing business with him, each type of company is subject to certain
regulations.

Are established in some specific forms that determine both the organization and their activity;
Have obtained, by law, the status of legal person; - In case of termination payments are subject to
bankruptcy. In their capacity as bank customers, these companies must meet requirements set by
the bank, on the opening and operation of their bank accounts. Thus, companies who open bank
accounts are asked a series of documents showing their form of legal organization, company
name, type of work, the company's capital, specimen signatures for persons to operate the
account etc.

2. INDIVIDUAL CUSTOMERS

“A customer - an individual can be defined and described as a person holding a bank account for
personal use. Such customers must comply with existing regulations and bankers must ensure
that they do not open and use bank accounts for illegal purposes”. Individual customers still have
a low share in overall banking. In Romania there are types of accounts specifically for this

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category of customers. For individuals, opening a bank account requires only: - Request for
account opening - Presentation of an identity - identity, Romanian individuals or passport for
foreign individuals. Only individuals can open accounts in their names, with the possibility of
account holders and empower others for signature in mind. In other countries, joint accounts -
open two names - are common, for example, family, husband and wife can open an account with
both names. In Chapter individuals, the only consideration that banks should consider it is old
people who want to change an account. It is envisaged that the very young may not fully know
the consequences of making certain transactions with banks and therefore, such persons are
protected to not be manipulated to benefit from them. Also, it would be unwise for banks to
engage in complex loan agreements with people too young. Even if the law is not explicit in this
regard, banks may have their own regulations regarding the minimum age of clients. In Romania,
as in many other countries, starting from the age of 18 years, individuals have full legal capacity
and as such, can exercise their rights and assume obligations related to provision of legal
relations which they conclude. Conditions for maintaining Clients who have been admitted by
the bank, following the fulfillment of criteria and enter into normal relations and current affairs
will be followed always, the purpose of determining to what extent they maintain, want or reduce
their performance original.

3.5. CURRENT AND SAVING ACCOUNT OPERATION

 Current account: A current account, also known for instance as a chequing or

transactional account, is designed for handling personal daily finances. It is possible to
have one's wages or other recurring payments, such as pensions or benefits, paid in a
current account, and use the account to pay bills and invoices. A current account is also
suited to the management of investment accounts and loans.
Various services may be connected to a current account, such as online and mobile
banking services, direct debiting and bankcards to access the account. A current account
can also be combined with a credit function, but this is always agreed on separately.

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 The interest paid on a current account varies by bank. The return on interest is affected by
the interest rate itself and the interest calculation method: the interest is paid for example
either daily on funds available on the account or on the basis of the lowest monthly
balance. At the moment, interest paid on current accounts is very low.
The pricing of current accounts varies by bank. The account can generally be opened free
of charge. A monthly fee may be charged on the use of the account, which then includes
a specific service package. Alternatively, each service is priced separately.
 Accounts intended for saving and investment: Accounts intended for saving and
investment purposes have not been designed for the management of personal daily
finances and may be restricted by withdrawal limits. Such limits can refer either to the
total amount withdrawn or the number of withdrawals over a certain period.
A savings or investment account can be either continuous or fixed-term. A continuous
savings account is a good alternative when wanting to save for a certain purpose, for
example for a new home, car or domestic appliance. You can, for instance, make a
specific monthly deposit in the account. A fixed term account is a time deposit where
funds are deposited for a fixed period of time. The funds may generally be withdrawn at
the maturity date only, when the term is over. The interest paid on savings and
investment accounts varies according to the amount and lifetime of the deposit. Usually
the interest rises if the amount of funds increases. The bank may levy charges if
withdrawals exceed the agreed amount.

3.6. BANK RELATED RULES:

 Act responsibly and within authority: Be disciplined, responsible and take
accountability for the risks you take and make sure they are appropriate to your business
or activity. You must keep to our limits and policies and not make decisions that are
beyond your delegated authority
 Combat financial crime. It is critically important to protect the worldwide financial
system. You must comply with laws, regulations and Group standards on anti-money
laundering (including those on tax evasion), preventing financing for terrorism, fraud or
sanctions. Reject bribery and corruption. Bribery is illegal, dishonest and damages the

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 communities where it takes place. You must not give or accept bribes nor take part in any
form of corruption.
 Anti-Money Laundering: Adherence and compliance to the Bank group policy is the
responsibility of all employees. In this framework, the Bank requires its employees and
managers to adhere to high standards and to stringently maintain the regulations on
matters of compliance. It is the policy of the Bank to take appropriate steps to prevent
persons engaged in money laundering, terror financing, fraud, or other financial crimes,
from exploiting the Bank's network, products and/or services. The Bank examines, on a
regular basis, its compliance strategy, the objectives and goals in order to implement and
maintain an effective compliance plan in reference to the Group activity which reflects
high standards and best practice.

3.7. DETERMINANTS OF BANKING NURTURE (COMPETITIVE ADVANTAGE)

 Exports maximization: This is another determinant factor that does have an impact in
the banking sector
 Relative political and economic stability: Favorable government actions and relative
political and economic stability have helped support strong growth and earnings in
several Ghanaian service industries. However, infrastructure weaknesses and other issues
hinder business activity in these same services industries and limit their contribution to
growth in other sectors
 Capacity Building: Developments in training and financial regulation, the growing
availability of information and communications technology (ICT) solutions, a skilled
workforce, tax incentives for financial sector investors, and a relatively stable business
environment have also contributed to the growth of banking industry.
 Enhancing the core competencies: This deals with all the conditions that can meet the
bank’s desire
 Partnership formation: Logically a single bank cannot be perfect enough if and only if
there is no tie with others this is because of a number of reasons.
 Flexibility in the rules of the country
 Credit supply and demand factors : From a policy perspective it is important to gauge
the relative contributions of credit supply and credit demand forces to developments in

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 loans to the private sector. Unfortunately, the impact of these forces is difficult to isolate
and estimate. However, some indications can be gleaned from survey data and model-
based estimates. For example, according to the results of the euro area bank lending
survey for the fourth quarter of 2011, both supply and demand developments may
continue to weigh adversely on lending. In particular, credit standards for both loans to
households and loans to enterprises are expected to have tightened further in the first
quarter of 2012, although to a lesser extent than in the fourth quarter of 2011, while
demand is expected to have fallen significantly further.1 At the same time, following the
three-year LTROs, loan supply may be less dependent on the availability of market
funding and more closely linked to the risk-bearing capacity of banks and thus their
capital positions. However, the supportive impact of the easing of funding strains on
lending conditions and loans to the private sector may take time to unfold
 Poor quality of man power: Business organizations in services are systems interacting
with costumers and their internationalization involves more sophisticated organizational
structures and involvement of high quality human resources than most manufacturing
sectors.
 Market Structure
 Unbalanced Competition
 Saving cultural constraints

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 CHAPTER FOUR

SUPPORTIVE SERVICE IN IMPORT EXPORT

4. 1. SHIPMENT RELATED ACTIVITIES AND PROCEDURES: TRANSPORTATION

Three modes of transportation are available for exporting products overseas: air, water (ocean
and inland), and land (rail and truck). Whereas inland water, rail, and truck are suitable for
domestic transportation and movement of goods between neighboring countries (the United
States to Canada, France to Germany, etc.), air and ocean transport are appropriate for long-
distance transportation between countries that do not share a common boundary.

Export-import firms may use a combination of these methods to deliver merchandise in a timely
and cost-efficient manner. The exporter should consider market location (geographical
proximity), speed (e.g., airfreight for perishables or products in urgent demand, etc.), and cost
when determining the mode of transportation. Even though air carriers are more expensive, their
cost may be offset by reduced packing, documentation, and inventory requirements. It is
important to establish with the importer the destination of the goods, since the latter may wish
the goods to be shipped into a free trade zone that allows for exemption of import duties while
the goods are in the zone.

 Air Transportation: Airfreight is the least utilized mode of transportation for cargo and
accounts for less than 1 percent of total international freight movement for advantages
and disadvantages of this transportation type. However, it is the fastest growing mode
and not just confined to the movement of high-value products.
 Ocean Freight: Ocean shipping is the least expensive and the dominant mode of
transportation in foreign trade. It is especially suitable for moving bulk freight such as
commodities and other raw materials. Today, almost all ocean freight travels by
containers, which results in minimal handling at ports. If a full container- load cargo is to
be shipped, a freight forwarder arranges for the container to be delivered to the shipper’s
premises. Once the container is fully loaded, it is moved by truck to a port to be loaded
onto a vessel. Less than container-load freight is usually delivered at the port for
consolidation with other shipments.
Types of Ocean Carriers The following are the three major types of ocean carriers
 Private fleets. These are large fleets of specialized ships owned and managed by
merchants and manufacturers to carry their own goods. Apart from its cost
advantages, ownership of a private fleet ensures the availability of carriage that
meets the firm’s special needs. Such ships can occasionally be leased to other

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 firms at times of limited activity. Some firms in certain industries, such as oil,
sugar, or lumber, own their own fleets.
 Tramps (chartered or leased vessels): Tramps are vessels leased to transport,
usually, large quantities of bulk cargo (oil, coal, grain, sugar, etc.) that fill the
entire ship (vessel). Chartered vessels do not operate on a regular route or
schedule. Charter arrangement can be made on the basis of a trip or voyage
between origin and destination or for an agreed time period, usually several
months to a year. The vessel could be leased with or without a crew (bare-boat
charter). The major factors for the continued existence of tramp shipping are that
 it provides indispensable ocean transportation at the lowest possible cost,
and
 it is adaptable to the changing and/or unanticipated requirements for
transportation.
When charter rates are low, commodity traders tend to move materials in advance
of actual delivery time to take advantage of low transportation costs. The just-in-
time system that delivers products when they are needed is not often feasible in
cases in which transport and distribution could be impeded by severe winter
weather. A commodity trader’s decision to purchase and export a product is
influenced by the spread between the export and purchase price, the charter rate,
and any warehousing or storage cost. This means that an exporter can purchase
and export a product even before delivery time if the charter rate and storage cost
are substantially less than the spread to allow for a reasonable profit margin.
 Conference lines. A shipping conference line is a voluntary association of ocean
carriers operating on a particular trade route between two or more countries.
Shipping conferences date back to the nineteenth century when such associations
were established for trade between England and its colonies. One of the
distinguishing features of a liner service is that sailings are regular and repeated
from and to designated ports on a trade route, at intervals established in response
to the quantity of cargo generated along that route. Even though the sailing
schedule is related to the amount of business available, it is general practice to
dispatch at least one ship each month.
 Land Transport Land transportation carriers (trucks, trains) are mainly used to transport
exports to neighboring countries as well as to move goods to and from an airport or
seaport. Rail transport has its own unique advantages: capacity to handle bulk cargo, free
storage in transit, as well as absorption of loading, unloading, wharfage, and lighter
charges. With the proliferation of free-trade agreements in various regions, there is likely
to be a marked growth in the role of land carriers in transporting exports among countries
that are in the same geographical area. For example, in eastern and southern Africa, an
agreement that allows movement of land carriers across countries would make trucks and
trains the dominant mode of transportation for exports. This is because land transport

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 already accounts for over 80 percent of the region’s freight movements and with a
regional arrangement, these transportation services could easily be extended to
neighboring countries with limited capital investment.
 The use of land transportation is considered economically justifiable for large flows of
cargo over distances greater than 500 kilometers (310 miles). A recent Swedish study on
intermodal techniques (rail/truck) in transportation found that improving the
competitiveness of intermodal transport for short-distance trips requires the operation of
“corridor trains” that make short stops every 100 or 200 kilometers along a route.
Intermodal transport is not just limited to moving goods between rail and truck; it is also
used for any service that requires more than one means of transportation (e.g., rail and
ocean, truck and ocean) under one bill of lading. Such arrangements, ideally, must seek
the fastest and least costly transportation for the shipper. The essence of intermodal
contract is an agreement between different types of carriers (steamship lines, railroads,
trucking firms, airlines, etc.) to achieve certain well-defined and carefully described
functions. The advantages of such a mode of transport is simplicity for the shipper and
consignee (one bill of lading and no other arrangements necessary), reduced damage
because of fewer handlings, and reduced pilferage due to limited exposure of cargo. Such
services are already offered by the integrators in the airline industry.

4.2. PACKING

The rigors of long-distance transportation of goods require protection of merchandise from

possible breakage, moisture, or pilferage. This means that goods in transit must be packed not
only to allow the overseas customer to take delivery of the merchandise but also to ensure its
arrival in a safe and sound condition. Consumers in many countries often prefer packaging with
recyclable or biodegradable containers due to environmental concerns. For example, about 70
percent of packaging material used in any of the federal states in Germany must be recycled or
reused. Packaging cost has an influence on product design. In certain cases, it is considered less
costly to ship disassembled parts or dense cargo to save shipping cost.

Merchandise should be packed in strong containers, adequately sealed, and filled, with the
weight evenly distributed. Goods should be packed on pallets if possible, to ensure greater ease
in handling, and containers should be made of moisture-resistant material. Packing must be done
in a manner that will ensure safe arrival of the merchandise and facilitate its handling in transit
and at its destination (see International Perspective 6.2 for an example of product packing tips).

4.3. FORWARDING AGENTS

A freight forwarder is the party that facilitates the movement of cargo to the overseas destination
on behalf of shippers and processes the documentation or performs activities related to those
shipments. Freight-forwarding activity dates back to the thirteenth century when traders
employed middlemen, or “frachtors,” to cart and forward merchandise throughout Europe. The

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frachtor’s responsibility later extended to provision of long-distance overseas transportation and
storage services, issuance of bills of lading, and collection of freight, duties, and payment from
consignees.

Many forwarding concerns originally started as freight brokers, but with the continuing increase
in manufactured shipments, the forwarding work took precedence over the broker activity.
Today, some forwarders handle ship loads of large parcels either on a common carrier or tramp
vessels as brokers, but for the most part, forwarders deal with individual shipments varying in
size or containers

4.4. INSURANCE RELATED ISSUES

Export-import firms depend heavily upon the availability of insurance to cover against risks of
transportation of goods. Risks in transportation are an integral part of foreign trade, partly due to
our inability to adequately control the forces of nature or to prevent human failure as it affects
the safe movement of goods. Insurance played an important part in stimulating early commerce.
The primary purpose of insurance in the context of foreign trade is to reduce the financial burden
of losses arising from the movement of goods over long distances. In export trade, it is
customary to arrange extended marine insurance to cover not only the ocean voyage but also
other means of transport that are used to deliver the goods to the overseas buyer.

Risks in Foreign Trade: Businesses conducting export-import trade face a number of risks that
may adversely impact their operations, such as the following:

 Political risk: Actions of legitimate government authorities to confiscate cargo, war,

revolution, terrorism, and strikes that impede the conduct of international business.
 Foreign credit risk: Nonpayment or delays in payment for imports.
 Transportation risk: Loss (partial/total) or damage to shipment during transit.
 Foreign exchange/transfer risk: Depreciation of overseas customer’s currency against
the exporter’s currency before payment or the non-availability of foreign currency for
payment in the buyer’s country.

Marine Insurance: Marine policy is the most important type of insurance in the field of
international trade. This is because (1) ocean shipping remains the predominant form of transport
for large cargo, and (2) marine insurance is the most traditional and highly developed branch of
insurance. All other policies, such as aviation and inland carriage, are largely based on principles
of marine insurance. Practices and policies are also more standardized across countries in the
area of marine insurance than in insurance of goods carried by land or air.

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Types of Policies There are two general types of marine cargo insurance policies: Perils-only
policy: This policy generally covers extraordinary and unusual perils that are not expected
during a voyage. The standard perils-only policy covers loss or damage to cargo attributable to
fire or explosion, stranding, sinking, collision of vessel, general average sacrifice, and so on.
Such policies do not generally cover damage due to unseaworthiness of vessel or pilferage. An
essential feature of such a policy is that underwriters indemnify for losses that are attributable to
expressly enumerated perils. The burden is on the cargo owner to show that the loss was due to
one of the listed perils. Export-import companies have the option of purchasing additional
coverage (to include risk of water damage, rust, or contamination of cargo from oil, etc.) or take
an all-risks policy that provides broader coverage. All-risks policy: The all-risks policy provides
the broadest level of coverage except for those expressly excluded in the policy. In the case of
all-risks policy, the burden to prove that the loss was due to an excluded clause rests with the
underwriter. Additional coverage can be provided through an endorsement on the existing all-
risks policy or through a separate war-risks policy.

4.5. ASSURING QUALITY IN IMPORT EXPORT

Ensuring quality is the best means of winning consumer confidence and sales. Many
manufacturing firms find that they must meet new and different standards criteria (national,
corporate, regional, or international) to compete in the global marketplace. Even though the
majority of industrial standards are voluntary, there are mandatory government imposed
standards in the fields of health and safety, food and drugs, and the environment. In many
European countries, consumers often base their purchasing decision on proof of certification for
the product or service. European community directives also mandate that companies meet certain
product certification standards in order to sell in the European Union.

In the area of imports, quality standards provide a basis for assessing quality of products and
services. Suppliers are provided a guide as to the quality of product to be manufactured, while
buyers are provided with the confidence that the goods are safe and meet high quality standards.
It is important to establish quality testing and inspection procedures, and in the case of large
orders, the importer could appoint a quality inspector at the supplier’s location to assess and
advise the supplier on quality. Acceptance and payment on a letter of credit can be made
conditional on receipt of a satisfactory inspection certificate.

An example of a quality control program for imports is the one jointly created by Chrysler, GM,
and Ford (the QS-9000). The QS-9000 employs the ISO-9000 international quality assurance
standard coupled with industry specific criteria. The program mandates the use of QS-9000
quality standard by suppliers around the world. It requires organizations to implement
continuous performance improvements with regard to quality (ISO-9000) and environmental
management (ISO-14000). This is intended to ensure that products or services satisfy the
customer’s quality requirements and comply with any regulations applicable to those products or
services

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 CHAPTER FIVE:
GENERAL TOPICS AFFECTING IMPORT – EXPORTS

5.1. Introduction
International trade is the exchange of commodities, products, services, capital between people
and companies in different countries. International trade has existed for a long time, but trade
has increased hugely in the past few hundred years and has a major impact on the economies
of many countries.
Many various factors, such as political, economic, and practical factors can affect the growth of
international trade. Exchange rates, competitiveness, growing globalization, tariffs and trade
bariers, transportation costs, languages, cultures, various trade agreements affect companies
by its decision to trade internationally. Political policies and other government concerns, such
as the relationships between trading nations, are highly important to the growth of
international trade. A politically stable nation with few policies restricting international trade
will likely be able to expand its worldwide trade rapidly. Political instability, however,
particularly when it leads to violence, can be a major barrier to trade growth — many nations
place steep tariffs on exports or imports from certain nations or industries for such reasons.
While such tariffs can be used to protect fledgling industries or to place political pressure on
some nations, their overall effect on international trade is often negative. One of the biggest
stories of the past 20 years has been the successful integration of many developing countries
into the global economy and their emergence as key players in international trade. Developing
countries are diverse in the quality of their political and economic institutions but there are
strong reasons to believe that “better” institutions give countries a competitive advantage and
produce better trade outcomes

5.2. International trade fairs and import- export

How does trade fairs benefit to Exports and Importers? Advantage of Trade fairs, bridges gap
between buyer and seller. Trade fairs are beneficial in the following ways:
 In countries where media advertising is not permitted, fairs and exhibitions have a
particularly important role in trade promotion.
 International fairs bring together at a convenient place potential buyers and from all
over the world and facilitate broader communication and information dissemination.
 Fairs and exhibitions provide the sellers opportunity to promote their products and to
contact both existing and potential customers. They get an opportunity for direct
interaction and feedback.
 Fairs and exhibitions provide an opportunity to know the developments and trends in
the industry concerned. in trade fairs/exhibitions, participants include not only the
manufacturers/sellers of the final products but also the suppliers of machinery and
technology, raw materials and intermediates, packaging devices and materials etc
 They also often enable participants and visitors to know about business opportunities,
government policies, assistance packages etc. For example, at the Indian Seafood Fair,
the Seafood Exporters Association and the Marine Products Export Development

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 Authority seek to give wide publicity about the government policies and assistance for
the development of India's seafood export industry, including the scope for foreign
participation.
 Fairs and exhibitions facilitate gathering of competitive information.
 Fairs and exhibitions may help the manufacturers in improving the sourcing or
technology, materials and buyers. Similarly, they help the buyers in improving the
sourcing of supplies.
Trade fairs and exhibitions, thus, provide multiple benefits to both the manufacturers
marketers and the buyers. Fairs and exhibitions often generate considerable amount of
business enquiries and business for many participants.
Broadly, there are three categories of trade fair/exhibition visitors. They are:
 Those who may be curious or show an interest but are not potential customers. This
category includes different types of "nuisance", visitors.
 Those who demonstrate a genuine interest. This category indur3Ps potential customers
and influential people like VIPs and journalists.
 Those with a keen interest in the product or service now and who are definitely
prospective customers.
The above information explains, how trade fairs helps to find buyer and seller each other?
Comment below your thought about benefits of trade fairs in international business and role of
it.

5.2. Chamber of commerce role in import- export

What Is a Chamber of Commerce?

A chamber of commerce is an association or network of businesspeople designed to promote

and protect the interests of its members. A chamber of commerce is often made up of a group
of business owners that share a locale or interests, but can also be international in scope. They
will choose leadership, name representatives, and debate which policies to espouse and
promote.

Chambers of commerce exist all over the world. They do not have a direct role in creating laws
or regulations, though they may be effective in influencing regulators and legislators with their
organized efforts.

The first chamber of commerce was founded in France in 1599.

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Types of Chambers of Commerce

Chambers of commerce may follow several different formats.

 Regional, and Community Chambers Regional, city, and community chambers are
focused on regional or local issues featuring cooperation with local government, but
may also promote broader pro-business initiatives that cross borders, such as promoting
trade between immigrant groups and their home country.
 City Chambers City chambers aim to promote a city's economic interest locally and
possibly globally.
 State Chambers In the U.S., state chambers focus on statewide and sometimes national
advocacy, and therefore have greater influence over regulations and legislation.
 National or International Chambers National or international chambers focus on
advocacy or lobbying for national or broader issues.

International Chamber of Commerce

The International Chamber of Commerce (ICC) is one of the largest, most diverse business
organizations in the world. The ICC was founded in Paris, France in 1919. The organization has a
vast network of committees and experts working on behalf of its members in all sectors in
order to ensure that they are fully informed about issues that may impact their respective
industries. International Chamber of Commerce (ICC) supports the work of the United Nations,
the World Trade Organization, and other intergovernmental bodies.One of the most important
contributions of the ICC is their publication of international commercial terms, also known as

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Incoterms. Incoterms are intended to facilitate global commerce by providing parties involved
in domestic and international trade with a kind of shorthand to help understand the exact
terms of their business arrangements. The ICC developed the Incoterms in 1936. Incoterms are
globally recognized and used in foreign trade contracts to clarify the obligations of both buyers
and sellers.

Compulsory Chambers

In some countries, businesses of a certain size are required to join a chamber of commerce,
which provides a degree of self-regulation, as well as promotes member businesses, supports
economic development, and oversees worker training. Such chambers are popular in Europe
and Japan.

In some countries, chambers of commerce provide key economic data by surveying their
membership. For example, the British Chambers of Commerce Quarterly Economic Survey is
used by the government to gauge the health of the economy.

Chamber of commerce in ethiopia

Chambers of commerce is local organizations that promote, protect and represent the interests
of businesses of all sizes in the community. The concept of Chamber of Commerce was
introduced to Ethiopia for the first time in 1943. The need for its establishment basically
emanated from the economic crisis occurred during that time. The establishment of the
Chamber of Commerce was seen as a solution to address the distribution of scarce
commodities such as cotton, yarn, and woolen products. Members of the Chamber of
Commerce were allowed to distribute those scarce commodities to stabilize the market. The
Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) is an apex organization of
Chambers and Sectoral Associations in Ethiopia. It has eighteen members including nine
Regional Chambers of Commerce and Sectoral Associations, two City Chambers of Commerce

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and Sectoral Associations, one National Chamber of Sectoral Associations and six Sectoral
Associations organized at national level.

Chamber of Commerce Goals

CCSA is established to fulfill the following objectives as per proclamation no 341/2003:
 Providing different services to the business community
 Safeguarding the overall rights and benefits of its members
 Promoting and publicize products and services of the country
 Serving as a bridge between the business community and the Government
How Chambers of Commerce Help Exporters
Many local chambers of commerce provide sophisticated and extensive services for members
interested in exporting.”
They include:
 Export seminars, workshops and roundtable discussions.
 Trade promotion programs, including overseas missions, mailings and event planning.
 U.S. pavilions at foreign trade shows.
 Contacts with foreign companies and distributors.
 Export sales leads and other opportunities to members.
 Transportation routing and shipment consolidations.
 Hosting trade missions from other countries.
 International activities at domestic trade shows.
 Certificates of origin.

In line with these objectives, ECCSA is entrusted with the following duties and responsibilities
 To encourage the establishment of Chambers at different levels and provide necessary
support
 To find local and foreign markets for products and services
 To participate with the concerned organs, in identifying export products, improving their
quality and quantity and in finding solutions to problems pertaining to trade activities
 To establish relations with foreign chambers in order to exchange information and share
experience
 To organize or participate in local or foreign trade exhibitions upon obtaining license
from the concerned organ
 To settle disputes arising out of business transactions between members, by way of
arbitration, when the parties so request
 To issue product certificate of country of origin upon delegation by the Government
 To prepare commercial gazettes, bulletins, reports, compile statistical information and
provide different trainings

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  To make members aware of business related government policies, proclamations,
regulations and directives; and participate at discussion forum prepared by the
Government;
 To determine the contribution to be made by members
 To charge fees for the services it provides
 To own property, enter into contract, sue and be sued in its own name
 To perform such other duties deemed necessary for the attainment of its purp
The services delivered by the ECCSA are mainly the following:
 Provision of business information to the business community
 Research & Advocacy
 Business Advisory
 Business Networking
 Trade Fairs/Exhibition
 Investment Guide
 Exporters Guide
 Importer Guide
 Issuance of Certificate of Origin
 Document Authentication (Export)
 Invoice Chamberization
 Affidavit of support for the business community
 Need based training
 Technical & Skill development
 Preparation of Strategic Plan, Project Proposal, etc.
 Soliciting supports for members from donors

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