ST.

MARY’S UNIVERSITY

FACUALITY OF BUSINESS

DEPARTMENT OF MARKETING MANAGEMENT

GROUP MEMBERS ID

1. HERANI ZEWDNEH RMKD/1513

2. MIHIRET NEGASH RMKD/2189

3. MIHRET WOLDU RMKD/1076

4. NARDOS GIRMA RMKD/1516

5. PAULOS DEMELASH RMKD/2190

6. TSINAT FEKADU RMKD/0935

SUBMITTED TO: TAKELE GETENET

SUBMISSION DATE: 23/12/202

1
 Table of Contents
1. Background of Mining industry in Ethiopia…………………………………………3
2. Modes of payment in mining export………………………………………………….3
3. Incoterms used in mining
export…………………………………………………………………………………...4
4. Documents in mining
export…………………………………………………………………………………...5
5. Customs activity in mining………………………………………………………….....7
6. License required for mining export…………………………………………………...8
7. Reference………………………………………………………………………………..10

2
 Background of the Mining sector of Ethiopia
The geology of Ethiopia ranges from oldest (Precambrian) to recent volcanic and sedimentary
formation. Mining is one of the main contributors for economic growth of Ethiopia that it increases
the generation of foreign currency, saves foreign currency by substituting the imports of minerals and
metals, creates employment opportunity and introduces the development of basic infrastructures and
services in newly identified mining activity areas which are found in different parts of the country.
The activity of formally organized and licensed placer miners of precious minerals and gemstones
helps directly and indirectly them (the local community), whose number could range from 3 to 5
million and out of which women involvement is up to 30 %, in poverty reduction by supporting their
livelihood income as well as in extending alternative form of development such as introducing
services (hotel, shops, etc), small cottage industries, modern faming practices and so on in Ethiopia.

The goal of the Government of Ethiopia is to facilitate the establishment of a large and diverse
minerals industry in Ethiopia, which would underpin industrial development in the country, the well
being and employment of Ethiopian citizens in line with gender equality principle, the earning of
foreign exchange and the reduction of poverty, and the establishment of a vibrant and profitable
private sector based mining industry, inclusive of mineral beneficiation, taking all aspects of the
sustainable utilization of the Mineral resources. As result of both the above indicated contribution of
mining and the goal of the Ethiopian government, the government thus focus on Creating the
necessary enabling legal, regulatory, fiscal and institutional environment for the private sector
investment in mining, Carrying out promotional activities to attract private investment in the mineral
sector, Strengthening its ability to effectively carry out its regulatory functions, Conducting basic
geological mapping and maintaining up-to date mineral resource data base, Providing extension
services to artisanal and small scale miners with a view to ensuring safe and environmental sound
mining practices, facilitating the development of adequate infrastructure for the mining development.
Mining is important to the economy of Ethiopia as a diversification from agriculture. Currently,
mining comprises only 1% of GDP. Gold, gemstones (diamonds and sapphires), and industrial
minerals are important commodities for the country's export-oriented growth strategy.

MODES OF PAYMENT IN MINNING EXPORT

An exporter, engaged in import or export business in Ethiopia needs to know what type of
export payments in Ethiopia are possible while doing import export trade in Ethiopia or with
Ethiopian businesses. Moreover, it should be known that which type of payment is preferable
and under what conditions. This article contains, methods of payment practiced in mining export
business and especially what is practiced or allowed in Ethiopia and it specifically deals with
Letter of Credit (LC), Cash against Document (CAD), Telegraphic Transfer (TT) and Advance
Payment. It also contains documents to be included in a letter of credit and specifically in an LC
opened through Ethiopian banks.

3
 1. Letter of credit (L/C)

It is a written commitment to pay, by a buyer's or importer's bank to the seller's or exporter's

bank. LC guarantees payment. A supplier or exporter that has sold to an Ethiopian Importer on
LC basis should present to the bank these four sets of documents: Original sets of CLEAN Bill
of lading, Shipping Document (Airway Bill, Truck way bill or Railway Manifest), Commercial
Invoice that’s verified by the chamber of commerce of the supplier’s country, Packing List and
Certificate of Origin that’s verified by the chamber of commerce of the supplier’s country. If the
goods are imported from China, a CIQ certificate (pre shipment inspection certificate carried out
by China AQSIQ) should be presented along with the other four documents.

Ÿ Documents to be Included in L/C

Documents that are to be included in the L/C are always based on negotiation of the parties. It
is preferable not to include documents that must be signed or authorized by the buyer's
representative or a document that may never be produced (say, a certificate, which should be
issued by a foreign agency) and to keep the list of the documents as short as possible.

It is not necessary to mention all documents required by the contract in the L/C. Most likely, it
is required to present a commercial invoice, a transport document (Original sets of Bill of lading,
Airway Bill, Truck way bill or Railway Manifest), Country of origin invoice and others. What is
required in Ethiopia is mentioned above.

The list of additional documents depends up on the agreement made between the seller and the
buyer. The list may include:

 Certificate of origin
 Certificate of quality
 Weight certificate
 Pre-shipment inspection certificate
 Packing declaration
 Packing list
 Fumigation certificate, and so on.

It is also necessary to specify how many original documents and how many copies are to be
presented. The description of goods stipulated in the L/C must correspond with the description
given in the invoice.

2. Cash Against Documents (CAD)

A transaction in which the buyer assumes the title for the goods being purchased upon paying
the sale price in cash. It’s quicker than LC, but not as safe; Ethiopian exporters are advised to use

4
CAD if they have a very good relationship with the buyer and know that the credentials of the
buyer make it trustworthy.

3. Telegraphic Transfer (TT)

It’s a method of payment in which funds are transferred via telegraph or cable. It’s most
common in business conducted in developing countries, where other types of infrastructure, such
as computerized payments, may not be available.

4. Advance Payment

An advance payment, or simply an advance, is the part of a contractually due sum that is paid
in advance for goods or services, while the balance included in the invoice will only follow the
delivery. It is called a prepaid expense in accrual accounting. In Ethiopia an advance payment
may be allowable and can be done through Telegraphic Transfer. However, the receiver's bank
should provide guarantee for it.

INCOTERMS USED IN MINERAL EXPORT

In case the main transport is by sea, the exporter can also choose the Incoterms CFR (Cost And
Freight) and CIF (Cost Insurance And Freight). In both cases, the exporter takes care of the
formalities and costs until the arrival of the goods at the port of destination. If he has the support
of a good freight forwarder, he can obtain some cost savings because, for example, he can
negotiate the freight with the shipping company.

“The choice of the most suitable Incoterm for an importer or an exporter will depend on
whether they want to control costs, contract the main transport, reduce risks or have greater
security in the logistics chain”

The Incoterms DAP (Delivered At Place), you process and pay the costs of unloading the
goods at destination and in DDP you also take care of customs formalities and inland transport in
the country of arrival. Both cases may present complications and complexities that the exporter
may not be able to control and that may generate extra costs.

Documents in mining export

 Duly filled and signed application form
 A copy of the Tax Identification Number (TIN)
 A copy of the Memorandum of Association and Articles of Association for private
limited and share companies
 A contractual agreement of office rent or office building plan
 A document evidencing the capital allocated for the commercial activity
 Two passport size photographs taken within the last six months

5
  If the applicant is a foreign investor, the investment and residence
 A valid business registration certificate.
 Payment details.
 Transportation document
 Invoice
 Bank document
 Packing list
 Certificate of origin
 Procedure in mining export
 General export procedures for mineral exporters

Below is a summary of the general export procedures for exporters:

 Obtaining Export License: Exporters must be registered with Ministry of Trade and
obtain an export license.
 Acknowledgement of receipt of the Order from Buyer: This involves the production
of internal instructions by the exporter on the works, production and preparation of the
goods for export order.
 Finalization of Export Contract (sales contract agreement): Finalize the export
contract stipulating the method of payment for the export consignment, and submit a
copy to the respective commercial bank by any of such methods as hand delivery, fax,
telex or post. Commercial banks require six copies of letter of credit, and five copies of
advance payment, cash against documents, and consignment note each.
 Application to Export permit: Register the export order with a commercial bank which
will in turn issue the export permit for the particular consignment. All exports except
coffee have to be registered with any of the commercial banks. For coffee, registration
takes place at the National Bank of Ethiopia.
 Registration of Export Consignment: Fill in the Customs Declaration Annex form
issued by the commercial bank and submit to the International/Foreign Business
Department of the Bank.
 Application for Quality Testing and Certification: When export products are ready,
make arrangements for suitable packaging and apply to the Quality and Standards
Authority of Ethiopia for quality testing, and acquire the Export Authorization
Certificate.
 Compliance with Rules of Origin: Fill in the certificate of origin issued by the
Ethiopian Chamber of Commerce and Sectorial Associations or the Customs Commission
in order to qualify under the preferential tariff treatments or free trade agreements.
 Compliance with Tariff Schemes: Fill in the special movement forms or certificates
issued by the Customs Commission.

6
  Insurance of Export Cargo: Insure the export cargo and acquire the insurance
certificate or policy document issued by an insurance company.
 Customs Declaration: To avoid costly delays, the exporter declares all facts about the
export consignment, and all supporting original documents should be forwarded to the
Customs Clearing Agents to enable customs formalities and authorization of the dispatch
of the export goods. Accordingly, the exporter must hand over the Export Permit, the
copy of the Customs Declaration Annex form, the Ethiopian Customs Declaration form,
the Certificate of Origin, and the special movement forms/certificates to the clearing
agents.
 Movement of Export Cargo: To facilitate the movement of goods, transport documents
should be acquired from the respective carrier. Although the type of transport documents
depends on the mode of transport, the documents should be completed and signed by the
carrier or its representatives.

CUSTOMS ACTIVITY IN MINNING

Customs is part of one of the three basic functions of a government, namely: administration;
maintenance of law, order, and justice; and collection of revenue. However, in a bid to mitigate
corruption, many countries have partly privatized their customs. This has occurred by way of
contracting pre-shipment inspection agencies, which examine the cargo and verify the declared
value before importation occurs. The country's customs is obliged to accept the agency's report
for the purpose of assessing duties and taxes at the port of entry.

While engaging a pre-shipment inspection agency may appear justified in a country with an
inexperienced or inadequate customs establishment, the measure has not been able to plug the
loophole and protect revenue. It has been found that evasion of customs duty escalated when pre-
shipment agencies took over. It has also been alleged that involvement of such agencies has
caused shipping delays. Privatization of customs has been viewed as a fatal remedy.[9] In many
countries, import and export data are issued on the basis of national laws (Transparency Laws /
Freedom of Information Act).

There has, however, been some speed bumps when transitioning customs over from the public
to private sector. Factors such as an incompetent private sector, government's reluctance to
change the traditional roles of customs, neglecting priority-setting and lack of transparency in the
transition process have slowed the rate at which the public to private transition has taken place.

7
 LICENSE REQUIRED FOR MINNING EXPORT
There are 7 types of mining licenses under the Mining Law Regime of Ethiopia:
reconnaissance, exploration, retention, artisan, special small scale, small scale, and large scale.

Ÿ 1. Reconnaissance License

Allows its holders to do a general search for any mineral in a particular region. It is issued for
an 18-month period, and is non-renewable and non-exclusive.

Ÿ 2. Exploration License

Allows its holders to search for any mineral in a specified region by means of photographs,
images, geological, geochemical, geophysical or drilling. This license is exclusive and is initially
issued for 3 years. An Exploration License can be issued and renewed for a maximum of 10
years. However, upon each renewal, the license holder is required to relinquish a portion of the
licensed exploration area unless they can declare a resource.

Ÿ 3. Retention License

Can be issued to an applicant that has discovered a mineral resource of economic

significance, but which cannot be developed immediately due to adverse market conditions or
because the required processing technology might be unavailable. This is an exclusive license
that is initially issued for 3 years. After the 3-year period, the license may be renewed once more
for an additional 3 years.

Ÿ 4. Artisanal Mineral Operations License

Issued either to an individual or a small or micro-enterprise whose mining operation is mostly

manual and does not involve employed workers. Exclusive, non-renewable and issued for a
maximum of 2 years.

Ÿ 5. Special Small Scale Mineral Operations License

Issued to holders of an Artisanal Mineral Operations License who now have the capacity to
employ machinery in their mining operations. A Special Small Scale Mineral Operations License
is exclusive and is only issued to holders of an Artisanal Mineral Operations License. Initially
issued for 10 years, where after it needs to be renewed every 5 years.

Ÿ 6. Small-Scale Mineral Operations License

Issued to a mining operation whose annual run-of-mine ore does not exceed a specified
amount. The maximum allowed run-of-mine ore amount varies depending on the relevant
mineral. A Special Small-Scale Mineral Operations License is exclusive, is initially issued for 10
years, where after it needs to be renewed every 5 years.

8
 7. Large Scale Mining license:-This license shall cover the area reasonably necessary to
carry out mining operations. It shall also be transferred, assigned or encumbered with the prior
approval of the Licensing Authority. Large scale mining license shall be valid for a maximum
period of twenty years or the life of the deposits, whichever is shorter. The license may be
renewed for a maximum period of ten years each.

9
 Reference

Wikipedia(article written about mining in Ethiopia)

Import export business in Ethiopia written by administrator published on 24 march 2009

https://logisber.com/en/blog/incoterm

St. Mary’s Import export procedure and policy pdf

irglobal.com Export procedure for mining product written July 30 2012

http://www.mmmd.gov.zm/index.php/downloads/category/3-mining-application-forms

Ministry of Mines and Minerals Development

https://www.mmmd.gov.zm

10
11