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International Business Institute

Preparation and Customs Clearance

The School of Commerce at Addis Ababa University, Ethiopia, received a container-full of mostly business books and journals on January 27, 2014. The receipt marked successful completion of the first large-scale shipment of hard-copy education content by the 39 Country Initiative (39CI). It took six months for the shipment to arrive at its final destination, three more months than expected. The shipment arrived at Djibouti port, 772 km from Addis Ababa, within the expected timeframe (i.e., in roughly two months); however the second leg, requiring customs clearance and in-land transportation to Addis Ababa, took three more months than expected. The School of Commerce faced a number of challenges and incurred unnecessary costs as a result. This note briefly discusses these challenges and the practical lessons from the experience. The following discussion is organized around two core parts, namely preliminary preparation and the customs clearance process.

Preliminary preparation

Once the shipment reaches its destination port, a consignee will have a few days of grace period within which no demurrage is charged. Demurrage is a charge for container storage beyond the allowable free time. Once the grace period expires, a certain rate of demurrage will start to be calculated on a daily basis. As such, proper preliminary preparation can help clear the shipment on time and thus minimize costs to the consignee. Such preparation mainly involves collecting relevant documents such as the following:

  1. Commercial invoice and bill of lading/sea-way bill
    The consignee needs to have these documents to interact with the freight company agent located at the destination port. The consigner (i.e., Ivey Business School) or the freight company needs to send these documents to the consignee (i.e., School of Commerce at AAU), along with contact information of the agent taking care of the shipment at the destination port. While these documents should have been sent before the shipment arrived at Djibouti port, the consignee required and collected these documents after the arrival of the shipment. Two factors, at least in part, contributed to the delay in accessing the documents. The first was the consignee’s lack of experience in handling a shipment of this nature; the second was the consignee’s incorrect assumption that nothing could be done before the shipment arrived at the Djibouti port.

  2. Certificate of Donation
    The Ethiopian Customs Authority (ECA) requested this document to verify the nature of the shipment and assess whether duty free entry is warranted. This document is prepared by the consigner and sent to the consignee. As with the documents in (a), the certificate of donation was produced once it had been requested by the Customs Authority. Having this document ahead of time could have saved some delay.

  3. Sample list of books/journals
    This document is required by ECA to further verify the nature of the shipment. In the absence of this document, ECA officers will need to unload and inspect sample books. This document is prepared by the consigner and it includes information on a sample of books/journals included in the shipment. It is advisable to list at least 10 of the most common books/journals in the shipment and specify such information as title, author(s), edition, and publication year of each book/journal in the list. 
  4. Memorandum of Understanding
    This document was requested by ECA to verify the nature of the relationship between the consigner and consignee. This is usually requested of an NGO that receives donations from outside the country to verify the relationship between the donor and the recipient. That said, in this case the consignee was requested to furnish this document even though the consignee is not an NGO. While the document had to be supplied to comply with the request, the need for it may be specific to the situation and/or ECA.

  5. Prospective project proposal
    Requested by ECA, this document specifies, among others, why the donation was made and how the recipient would use the donated materials. The document serves as an express agreement between the donor and the recipient, and thus needs to be signed by both parties. The document is requested for all types of donated properties (not only books), to ensure that they are being sent and received with purpose. However, this requirement may only apply to the specific situation and/or ECA.

  6. Support letter from the appropriate federal or regional government unit
    ECA requested this document to support its decision on whether the shipment can be admitted duty free. It was to attest that the shipment would be used for direct educational purpose, and not for sale. The support letter was obtained from the Ethiopian Ministry of Education. 

Custom clearing process

Identifying which documents were needed and later collecting or preparing them contributed to the delay. However, it was the custom clearance process and related activities which consumed more time. In fact, some of the documents mentioned above are by-products of the custom clearance process (e.g., prospective project proposal). The following discusses this process by classifying it into five major phases.

  1. Recruiting and hiring customs clearing agent
    Since the consignee had no designated customs clearing agent, it needed to recruit and hire one. Being a public organization, the consignee had to follow a formal procedure for the purpose. The procedure—including announcing and collecting bids and eventually evaluating the bidders and awarding the service— took several weeks.

  2. Establishing duty free status
    Before ECA allowed duty free entry of the shipment, it needed to verify the nature and ultimate purpose of the shipment. To this end, evidence needed to be collected from the consigner and from the relevant local government unit. A Certificate of Donation was collected from the consigner, and it confirmed the nature of the shipment (i.e., donation of used books and journals). Since Addis Ababa University (AAU) is not a purely not-for-profit institution (i.e., it has a for-profit book center that sells books, for example), ECA wanted to verify that the shipment would not be used for eventual sale. As such, ECA requested a support letter from the responsible national government unit verifying that the shipment was for use within the university and would not be sold in any way. As a result, the consignee had to write a letter to the university president, who then wrote an official letter to the Ethiopian Ministry of Education, explaining the situation and requesting the support letter. Finally, the Ministry of Education wrote an official letter to ECA to support entry of the shipment free of tax. These exchanges of letters, with delays along the way, consumed much more time than expected.

  3. Other custom clearing challenges
    Once the shipment’s status was established as a donation, then ECA applied the requirements stipulated for donations. ECA, hence, demanded that the consignee produce documents applicable to NGOs when they receive donations from abroad. While some of the documents could be supplied by the consignee, some clearly did not apply to the School of Commerce. The consignee had to produce a Memorandum of Understanding and a prospective project proposal, both signed by the consignee as well as the consigner. Further, the support letter from the Ministry of Education as well as kind assistance and a favour by an ECA officer (a School of Commerce alumnus) was useful in eventually clearing the shipment.

  4. Shipment off to Modjo dry port facility in Ethiopia 
    When processing the custom clearance, the consignee appealed to pick up the shipment from the Djibouti port to avoid unnecessary demurrage expenses.  In response, ECA requested that the consignee write an official letter, with the school header and official stamp, agreeing to supply the required documentations and settle all the related payments. Having received the letter, ECA allowed the shipment to be picked up from Djibouti port, but insisted that the shipment would be retained at Modjo dry port facility, around 76 km from Addis Ababa, until all the documentation was finalized and the required payments were made.

  5. And, finally to Addis Ababa
    Final pick-up of the shipment from Modjo port entailed one last requirement: a list of books/journals. This document missing, the port officers would resort to physical inspection of the books and thus require unloading at least some of the boxes. However, the required document was prepared by the consigner and sent in time to avoid any further delays arising from unloading and reloading. Finally, the shipment was released from the dry port and made its way to its final destination—School of Commerce. On January 27, 2014, it arrived at the school premises.

  6. Costs incurred
    To be sure, the discussion above provides only a limited understanding of the scale of the challenges faced and the efforts exerted. As well as the time and efforts, the consignee paid US $ 2084 for the custom clearing agent and US $ 5580 for demurrage and other related services such as loading and discharging. The majority of the cost could have been avoided and the lessons have been learned the hard way. However, all these indicate the value the school attached to the donated educational materials and, more importantly, its commitment to partnering with and genuinely embracing the aspirations of the 39CI.  

Handling and use of the educational materials upon arrival at AAU

The following discusses the handling and use of the books, journals, and case materials. The discussion is organized around four major activities.

  1. Storage
    Upon arrival at the school, the shipment was stored in a room that was set aside for the purpose. In the meantime, a task force was formed to sort through the materials and classify them into reasonable categories. The task force included faculty from different departments of the school.

  2. Preliminary sorting, classification, and viewing
    Once the task force was formed, the boxes were opened in the presence of the dean, faculty, librarians, administrative officials, and purchasing manager of the school. Due to the sheer volume of the shipment, the task force agreed to sort through the materials and temporarily classify them into three groups: books, journals, and others (i.e., including loose case materials). The school then arranged a viewing session in which the university president and other officials, as well as the school community, were allowed to observe the donated educational materials.

  3. Registration and use
    Right after the viewing session, the school library started the process of registering each piece of material. For this purpose, the books were moved to a separate room in the library, where librarians meticulously record relevant, identifying information of each piece. This activity indicated that a total of 8,400 books and 5,090 journals and cases were included in the shipment. Clearly collecting and recording information about a total of 13,490 units of educational material was no simple task. Prior to this shipment, the library had about 39,000 reading materials in its stacks. Thus, the shipment represented roughly 35% of the reading materials available in the library. Students and faculty were allowed to use the registered materials; however, they could only use them inside the library, as the materials need to be catalogued by the main library of the university before they could be checked out. Instructional manuals and teaching notes were not made available to students, and their use is limited to faculty only.

  4. Cataloguing at the main library
    The policy of the university library requires that new reading materials be catalogued at the main library and registered in its database before they can be borrowed (checked out) by faculty and students alike. A list of reading materials that have been popular among the faculty and students was identified to expedite their cataloguing and registration. As a result, numerous books/journals have now been made available for borrowing. As well, the cataloguing and registration at the main library is to achieve the purpose of identifying books relevant to other schools and subsequently distributing them across libraries in the university. The process can also help identify excess books/journals, if any, so that they can be donated to other universities in the country. 

In conclusion, the main objective of the shipment has been achieved and students and faculty members now have access to the latest reading materials included in the shipment.