Coffee Transaction and Tax on Exported Coffee in Ethiopia: Regulations and Procedures

March 08, 2012

Coffee is the major foreign currency generating export product of Ethiopia; Ethiopia is known for its high quality, organic Arabica Coffee and also as the birth place of the commodity. A large number of exporters are engaged in coffee exporting from Ethiopia and even more number of people are engaged in businesses that involve in farming/ producing the product to finally supplying it to the exporters. Hence the authorities have been paying attention to regulate the marketing process. This article takes highlights from:

01Coffee Quality and Marketing Proclamation No. 602/2008, Coffee Quality Control and Transaction Council of Ministers Regulations No. 161/2009 and Proclamation No.99/19998, Tax on Coffee Exported proclamation and its Amendment Proclamation No. 287/2002.

These legal instruments are aimed at creating efficiency in supply of quality coffee to the global market and hence enabling coffee producers to earn better income from coffee transactions.

Coffee Transaction Process

According to Article 5 of Proclamation No. 602/2008, Coffee Transaction shall be executed as follows:

Coffee transactions between a coffee producer and coffee supplier; or where it is supply coffee intended for export, between a coffee supplier and a coffee exporter; where it is supply coffee and below an exportable grade, between coffee supplier and a domestic wholesaler; or where it is not exportable; coffee by product between a coffee exporter and a domestic wholesaler; shall take place in lawful coffee transaction centers.

Supply coffee transaction in auction centers or the Ethiopian Commodity Exchange shall be carried out on the basis of the grade and representative sample certificate issued by coffee quality liquoring and inspection center in an open auction system.

Coffee sold in an auction centers and in the Ethiopia Commodity Exchange shall be sent to the processing warehouse for export preparation with the details of grade, quantity, place of origin and any other relevant information required by law.
Obligations of a person Involved in Coffee Transaction

According to Article 6 of the Proclamation:

Any person involved in coffee transaction shall:

Conduct coffee Transaction in transaction centers only;
Comply with all directives and regulations enacted by the appropriate body for the proper execution of coffee transactions;
Acquire a certificate from the coffee quality liquoring and inception center before submitting supply coffee to auction centers or the Ethiopian Commodity Exchange or consigning coffee to domestic or export market;
Ensure, before loading coffee for transportation, that a vehicle and its driver conform to proper laws;
Own the proper coffee processing and storage facility as well as equipments and personnel, or submit a contract of hire of the same, in accordance with the competence certification process issued by the Ministry or Regional Agriculture Bureaus,
Submit a representative sample from the coffee prepared for transaction when so requested for quality inspection purposes;
Have the appropriate executive body seal and issue a letter of release when transporting coffee from the production area to coffee quality liquoring and inspection center or from coffee quality liquoring and inspection center to market centers and to the ports or to local consumption markets.

Obligation of Coffee Suppliers

According to article 7 any coffee supplier shall:

within 24 hours, deliver red cherry coffee to a processing plant, for processing into washed parchment coffee, semi-washed coffee, or sun dried coffee using the technical process required by the Ministry;
within six month of processing, deliver processed supply coffee to auction centers or the Ethiopia Commodity Exchange for sale;
ensure that the coffee submitted to coffee quality liquoring and inspection centers conforms to quality standards and has a moisture content of not more than 12%
purchase, process and transport coffee only in the area designated to him and submit the same without mixing the coffee with coffee of other agro ecologies;
where it is export coffee graded by the coffee quality liquoring and inspection centers to be traded on the Ethiopia Commodity Exchange, store it in warehouses designated by the Commodity Exchange or where it is coffee to be traded in auction centers and in case he is willing to wait for better price, store it in licensed commercial warehouses not involved in the coffee trading business.

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Obligations of Coffee Exporters

Any coffee exporter shall:

process export coffee in accordance with the country’s quality standard, for export;
not exceeding 24 hours after the conclusion of a contract for sale of coffee, have the contract and the correct sale price registered at the National Bank of Ethiopia, and notify the same to the Ministry and other concerned authorities within 15 days;
export coffee collected from his own farm or purchased from auction centers or the Ethiopia commodity Exchange before the next harvest;
except in cases of mixing processes registered under special permission of the Ministry, export coffee, without mixing different types and maintaining the name of place of origin;
sell coffee by product leftover from export coffee in the auction centers or the Ethiopia Commodity Exchange;
without prejudice to the extension of a contract permitted by the National Bank of Ethiopia upon showing of sufficient reasons, perform the contract permitted by the National Bank of Ethiopia upon showing of sufficient reasons, perform the contract he concludes with the buyers on the due date;
not resubmit for sale to auction centers or to the Ethiopian Commodity Exchange once he purchased the export coffee from the auction center or from the Ethiopian Commodity Exchange and graded by the coffee quality liquoring and inspection center;

Obligations of Domestic Consumption Coffee Wholesalers

Any domestic consumption coffee wholesaler shall:

only purchase domestic consumption coffee from auction centers or the Ethiopia commodity Exchange;
not purchase, sell or transport export coffee;
not sell domestic consumption coffee in coffee producing areas unless it is permitted by the concerned body; and
transport and sell domestic consumption coffee purchased from auction centers or the Ethiopia Commodity Exchange to markets designated for the wholesaler, after having the same sealed by the appropriate executive body and obtaining a letter of release.

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Obligations of Coffee Roasters

Any person involved in the roasting and grinding of coffee for selling shall:

purchase the coffee for such purpose only form auction centers, the Ethiopia Commodity Exchange or wholesalers; and
ensure the description written on the packaging of the roasted and ground coffee conforms with the quality of the coffee.

Obligation of Coffee Producers

Any coffee producer shall:

without prejudice to Article 6(1) of this proclamation, have the right to directly export coffee from his own farm, only after submitting the same to the coffee quality liquoring and inspection center for grading before and after processing for export; and
Sell coffee by product in auction centers or the Ethiopia Commodity Exchange only upon examination and approval of the coffee quality liquoring an inspection center.

Obligations of Service Providers

A body engaged in coffee processing shall properly clean and process the coffee received by it as per the terms of the contact it entered and deliver the same to the owner with evidence of appropriate cleaning for the quality and grade of the coffee.
A body engaged in coffee cleaning and pulping shall prevent the husk or any odor emanation form liquid waste produced by the cleaning and pulping process form causing any negative impact on the environment and community.
The owner of a vehicle that sustained malfunctions or against which a crime is committed while transporting coffee, shall promptly report theme to a lawful organ in the locality.
An owner or agent of a vehicle transporting coffee shall before loading the coffee verify that the coffee has been prepared for transportation in conformity with this proclamation.
A person engaged in providing coffee transportation service, shall transport service, shall transport the coffee he received from its place of consignment to its destination without breaking the seal and tearing the canvas and by preserving its quality.
A body engaged in coffee warehousing shall store coffee received for storage in accordance with the contract entered into.

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Tax on Coffee Exported from Ethiopia

The Legal Instrument which regulates taxes on exported coffee are Proclamation No.99/19998, Tax on Coffee Exported proclamation and its Amendment Proclamation No. 287/2002.

"FOB" means selling price of coffee quoted at the port of loading, agreed between the Coffee exporter and his customer and approved by the National Bank of Ethiopia, from which freight and insurance costs are excluded. (Articles 1of Proclamation No. 99/1998) Collection and payment of the Tax '

The Tax on Coffee exported shall be computed and collected by the Customs Authority.

Article 6 of the proclamation No.99/1998 states that the Tax shall be paid at the Customs Station where the Coffee is declared for export. If the Coffee is not exported on the date on which it shall have been exported and in the meantime the Council of Ministers increased the rate of the Tax, the exporter shall pay the difference between the increased rate and the rate that has actually been paid.

Source: http://www.2merkato.com/2011010196/coffee-transaction-and-tax-on-exported-coffee-in-ethiopia-regulations-and-procedures

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