The details of the new regulations for foreign trade participants are as follows:
1. Authorization of LC and CAD by Commercial Banks Importers and exporters holding foreign currency and retention accounts are no longer required to obtain prior approval from the National Bank of Ethiopia (NBE) for Letters of Credit (LC) and Cash Against Documents (CAD) transactions. Commercial banks have now been granted full authority to approve these applications directly. This shift significantly reduces the time traders previously spent waiting for NBE approval, allowing them to expedite their business processes by dealing directly with their respective commercial banks.
2. Simplified Cargo Shipment Procedures Customers with foreign currency accounts are now permitted to issue shipping orders or initiate shipments without waiting for prior bank authorization. While this simplifies the process, the payment procedure remains contingent upon the verification of the necessary trade documents by the bank. By removing the bureaucratic hurdles that previously hindered the ordering process, this measure facilitates smoother import and export operations and helps accelerate the supply chain.
3. Pro-rata Calculation of LC Service Fees The structure for LC service fees has been updated to align with modern international trade practices. Fees will no longer be charged as a flat, one-time amount; instead, they will be calculated on an annualized basis and applied pro-rata, based on the tenor (duration) of the document. This ensures that traders only pay for the actual duration of the service, significantly reducing the high service costs that were previously associated with long-term document tenors.
4. Implementation of Fee Ceilings To prevent arbitrary pricing, the National Bank has strictly mandated that the annual LC service fees charged by commercial banks must not exceed the pre-established fee ceilings set by the NBE. This regulation acts as a control mechanism to protect traders from excessive costs. Consequently, banks are compelled to offer their services in a clear, transparent, and affordable manner without exceeding the defined limits.
In general, these four key policy changes are designed to liberate trade participants from excessive bureaucracy and reduce overall trading costs. The directives aim to enhance the competitiveness of the foreign trade sector, streamline interactions between banks and their clients, and foster greater transparency throughout the process. By removing day-to-day operational obstacles, the National Bank intends to make the foreign trade sector more efficient and globally competitive.
