Ethiopia is not a member of the World Trade Organization (WTO) and thus has no bound tariff rates. Both VAT and excise taxes are imposed on imports. Most goods and services are subject to a 15% VAT, however basic commodities such as wheat, edible oil, sugar, rice, pasta, macaroni, and eggs, and services including financial services, educational services, healthcare, and transportation services are exempt from VAT. Electric Vehicles are also exempted from VAT during import and local sales. High tariffs continue to insulate certain sectors of the economy, such as textiles and leather, from outside competition and limit U.S. participation in the market.
The GOE also offers duty-free import incentives for investors in certain sectors, especially for those located in the industrial zone and planning to export goods and generate foreign currency. Ethiopia has over 20 state-of-the-art industrial parks located along key development and trade corridors developed to attract investors in a variety of priority sectors. In addition, the country has developed a Free Trade Zone (FTZ) in the eastern part of the country, Dire Dawa. The main aim of the FTZ is to increase foreign trade, enhanced competitiveness, and create an efficient logistics cost and time.
Goods imported from the Common Market for Eastern and Southern Africa (COMESA) members are granted a 0 to 10% tariff preference, (depending on the type of goods) under the Free Trade Agreement (FTA). Tripartite FTA membership among COMESA, the South African Development Community (SADC), and the East African Community (EAC) members will allow zero tariffs and duties, which will impact Ethiopian trade when it completes the COMESA accession process (timeline for completion is unclear). Customs duties are payable on imports by all persons and entities that have no duty-free privileges. In 2019 Ethiopian customs ceased its policy of reducing, or eliminating, customs duties on imports of knocked-down and semi knocked-down industrial inputs. This new revision has reclassified these products to be treated with basic tariff rates. Revenue generation, not protection of local industry, appears to be the primary purpose of Ethiopia’s tariffs.