The Ethiopian Revenues & Customs Authority (ERCA) has suspended the process of importing solar lanterns because of erroneous HS identification codes, for over half a year.
This came as a result of the importers’ refusal to pay 30pc duty, claiming the items are allowed into the country with tax-free modality.
The Authority has also requested the Ministry of Finance & Economic Cooperation (MoFEC) for clarification over the issue and is awaiting a response and have ceased customs clearance until then.
A letter written by Sufian Ahmed, former minister of the then Ministry of Finance & Economic Development (MoFED), exempted the solar lanterns from tax after giving them a new name, Lanterns Operating by Renewable Energy Sources, replacing their former name solar lanterns, seven years ago.
It also stated that the items use a renewable source of energy, which technically means they purely operate with renewable energy and not electricity.
But the problem surfaced in June, 2017 after ERCA suspended the operation of the customs clearance for the items and demanded the importers to pay 30pc duty. ERCA reasoned that the solar lanterns give light after processing sunlight into electric power.
But their category was under the items that work only with a renewable electric source of power such as kerosene and paraffin fuel lamps. But the solar lanterns use both an electrical source of power and renewable solar electric source.
“We faced a challenge while we tried to refer national tariff codes after the request from our branches,” stated Fikadu Bekele, director of tariff allocation programme at the ERCA in his letter to MoFEC.
Last month the ERCA wrote a letter to the MoFEC demanding clarification over the issue in four areas.
The Authority requested the amendment of the code for solar lanterns that work with renewable solar electric power on the national tariff list. It also asked for the preparation of different codes for these items in line with the global standard tariff code, and categorisation of LED Lamps and fittings under the tariff code with a tax exemption privilege. Clarification on how to settle the pending case and past issues were also part of the request.
“Because of this problem, we were forced to pay five million Birr duty despite the items being exempted from tax,” said Tekeste Asfaw (PhD), general manager of Vera International Business Plc, one of the importers of solar lanterns.
Another active player in the industry also finds it repelling.
“This process has been discouraging many entrepreneurs to engage in this business,” said Dereje Walelegn, general manager of Lydetco Solar Ethiopia.
The Association of solar panel importers also called a meeting with its stakeholders to discuss the matter last month. Representatives from the MoFEC, ERCA and Ethiopian Energy Authority (EEA) were present during the meeting.
A source from MoFEC confirms that the Ministry has already decided to provide a new HS code for the items and proceed with the clearance of the imported items. The tariff code will be amended and will still be under the category of items exempted from taxation. The Ministry is waiting for the approval of the Minister, Abraham Tekeste (PhD).
In a country that promotes renewable energy, the number of solar items imported has been increasing by 90pc annually. In 2015/16 fiscal year, the country imported solar panels worth 16 million dollars. And within the first four months of the past fiscal year, an import worth five million dollars was made.
But the import process lagged following the prolonged loan approval of the Development Bank of Ethiopia (DBE), which has received 20 million dollars finances from the World Bank for the import of solar lanterns, solar home systems and biogas.
The country has also included the import of these items in the second edition of Growth & Transformation Plan’s (GTP II). During the period, the country plans to distribute 3.6 million solar lanterns and 400,000 solar home systems with a target of ensuring rural electrification.
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