Payment procedures of bank for import and export trade in Ethiopia.
Due to the foreign exchange controls in place in ethiopia, the payment for all imported goods transaction might be undertaken through Commercial banks. Thus, both importer and exporte payment arrangements have to be agreed and accomplished with the importer’s bank. Exception franco – valuta based payment. We will see it on other articles.
In order to proceed payment through commercial banks the importer intiate the procedure by applying for it and must present/have the following documents;
- Business license
- has an account in the bank
- A pro-forma invoice from the supplier/exporter
Next, it is to arrange for the method of payment and obtain a bank permit from the bank.
Among the methods of payment for import trade those widely used in Ethiopia are the following:
LETTER OF CREDIT (L/C):
Documentary credit (L/C): is a written undertaking by a bank given to the seller at a request and/or the instruction of the buyer to make payment or accept and pay bill of exchanging (draft) drawn by the seller up to a stated sum of money within a prescribed time limit and against stipulated documents.
DOCUMENTARY COLLECTION:
Documentary collection: is a method through which banks handle a seller’s commercial documents with or without financial documents in accordance with instructions received from the seller in order to deliver the documents to buyer (importer) against payment and/or acceptance or against other terms and conditions.
ADVANCE PAYMENT
Advance payment: is a method through which a seller receives payment from a buyer prior to shipment or the agreed upon goods or rendering the agreed upon service.
- Import-Payment though bank transfers
- Export-Payment through bank transfers, traveler cheques, cash (as long as it is declared).
Once the payment issues have been completed and the supplier has been informed, the goods will be shipped to Ethiopia.
Upon arrival of the goods at the port of entry in Ethiopia, they will be placed in a customs warehouse and the importer must accomplish the necessary customs formalities.
What are customs formalities the importer should undertake? You can get in other articles.