Federal authorities have tightened duty-free import rules for steel, imposing a stricter cash deposit requirement to safeguard against abuse. Under the new requirement, investors must deposit cash equal to the duty amount, which will only be released from locked accounts when legitimate use is verified.

The move comes following accusations of rampant contraband and unchecked duty-free steel imports. Ethiopian Customs Commission officials hope to curb abuse of the duty-free privileges, citing serious regulatory and revenue collection issues stemming from its misuse.

According to Muluwork Derese, deputy commissioner, the rule addresses long-standing exploitation of these privileges, particularly in construction and raw material imports, which are vulnerable to corruption. She noted that steel import privileges have created systemic issues while reinforcement bars intended for projects are diverted to the local market at lower prices, disrupting regulation and government investments.

"It ensures steel is used as intended," she told Fortune.

Customs officials reported 201 duty-free import requests were granted this fiscal year, all under increased scrutiny.

Ethiopia provides several incentives to attract domestic and foreign investors, including duty-free imports of capital goods and construction materials for business setup and expansion. However, authorities claim these privileges have been widely misused.

They argue that large-scale housing and construction projects have stalled, leading to a stockpile of rebars in the local market, driving competitive pressures against steel entering through contraband. Over three months ago, Customs Commissioner Debele Kabeta demanded that only high-level officials such as defence and national intelligence chiefs, alongside the Minister of Finance, could authorise duty-free benefits. The Commissioner reserved final approval rights for himself, limiting his subordinates' ability to process these privileges.

The restriction coincides with Tigray Regional State’s post-war reconstruction. Over 47 investors who are seeking the privilege from the region’s Investment Commission find themselves wrestling with the impact.

For Haleka Moges, general manager of Moges Negu Commercial Ranch Plc, the deposit requirement disrupts his company’s financial plans. Established in 2006, the Company was on its way to building a hotel and factory. While importing 11,500tns of steel for the construction, Moges said there were restrictions on the duty free privileges.

"It’s a burden," he said, noting that three hotel projects have been stalled due to these new restrictions.

Haleka’s financial issues are compounded by a 570 million Br loan, which has ballooned to nearly a billion Birr due to accrued interest. He noted ongoing efforts to secure financing to resume operations.

"We requested an interest waiver and extended repayment terms," he said.