ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERECE

DEPARTMENT OF LOGISTICS AND SUPPLY CHAIN MANGEMENT

EFFECT OF CUSTOMS CLEARANCE PRACTICE ON THE LOGISTICS PERFORMANCE:

IN DEVELOPMENT BANK OF ETHIOPIA.

BY: JILAL NASRO HUSEN

ADVISOR: DR. BUSHA TEMESGEN

JUNE, 2022

ADDIS ABABA, ETHIOPIA

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 DECLARATION

Iam JilalNasroHusen, I declare that on the thesis entitled “customs clearance practice and its effect
on logistics performance: onDevelopment Bank ofEthiopia.” that ismy work and all material used
for the research work have been acknowledge.

Nameof Declared: JilalNasro

Signature ………………….Date ………………….

Name of This Thesis Advisor/ supervisor: DR. BushaTemesegen

Signature ………………Date ………………………..

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 School Of Commerce
Department Of Logistics and Supply Chain Management
The Effect of Customs Clearance Practice on Logistics Performance: In The Case Of Development
Bank of Ethiopia.

By; JilalNasroHusen
Approved by Boardof Examiners

Name ofSupervisor BushaTemesegen(Assistant Professor)

Signature…………. …………….……… ……………. …………….
Date ……………. …………….……… ……………. …………………
Name ofInternal Examiner Dr. ShiferawMitiku
Signature……… ……………. …………….……… ……………. …
Date …………….……… ……………. …………….……… ………
Name ofExternal Examiner Dr. Zelalem G/Tsadik
Signature……………….……… ……………. …………….………
Date …………….……… ……………. …………….……… ………

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 ACKNOWLEDGEMENTS

Ithankall who are helpedmetoaccomplishthisresearch paper. I thankstomyadvisor Dr.

BushaTemesgen,for hissupportonmy paper and to Dr.ShiferawMitekufor his comment of the
proposal.I wouldlike toexpressmythankstomy wife and dear friend kibreabGirma (staff members of
the Development Bank of Ethiopia) for everysupport,and encouragement to accomplish my study
successfully.

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 CONTENTS
CHAPTER ONE .................................................................................................................................. - 1 -
1.1. Background of the Study .......................................................................................................... - 1 -
1.2. ProblemStatement ..................................................................................................................... - 3 -
1.3. Research Questions ................................................................................................................... - 4 -
1.4. Objectives of the Study ............................................................................................................. - 5 -
1.5. Significance .............................................................................................................................. - 5 -
1.6. Scope......................................................................................................................................... - 5 -
1.7. Limitations of the Study ........................................................................................................... - 6 -
1.8. Organization of the Research Report ........................................................................................ - 6 -
CHAPTER TWO ................................................................................................................................. - 7 -
LITERATURE REVIEW .................................................................................................................... - 7 -
2.1. Theoretical Literature ............................................................................................................... - 7 -
2.1.1. Customs And Role Of Customs ............................................................................................ - 7 -
2.1.2. CUSTOMS CLEARANCE AND ITS DIMENSIONS ........................................................ - 7 -
2.1.3. Customs Clearance Practice .................................................................................................. - 8 -
2.1.4. Customs Clearance Practice In Ethiopia ............................................................................... - 9 -
2.1.7. Easy Customs Clearance practice ..................................... - 9 -Error! Bookmark not defined.
2.1.8. Automated Customs clearance Administration.................................................................. - 11 -
2.1.9. Customs Clearing Challenges In Ethiopia .......................................................................... - 12 -
2.1.10. Relationship Between Customs Clearance Practice And Logistic Performance ................ - 13 -
2.2. Empirical Literature ............................................................................................................... - 14 -
2.2.1. Customs Time Release ........................................................................................................ - 14 -
2.2.2. Face vet ............................................................................................................................... - 15 -
2.2.3. Physical Inspection of Goods .............................................................................................. - 15 -
2.2.4. Scrutiny of Document ......................................................................................................... - 15 -
2.4. Conceptual Framework ........................................................................................................... - 16 -
CHAPTER THREE ........................................................................................................................... - 18 -
3.1. METHODS OF THE STUDY ................................................................................................ - 18 -
3.2. Research Approach ................................................................................................................. - 18 -
3.3. Research Design ..................................................................................................................... - 18 -

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3.4. Population and Sample ........................................................................................................... - 19 -
3.5. Sources of Data Collection ..................................................................................................... - 19 -
3.6. Data Collection Procedures .................................................................................................... - 20 -
3.7. Data Analysis .......................................................................................................................... - 20 -
3.8. Validity and Reliability........................................................................................................... - 21 -
3.8.1. Validity................................................................................................................................ - 21 -
3.8.2. Reliability ............................................................................................................................ - 21 -
3.8.3. Ethical Considerations ........................................................................................................ - 22 -
CHAPTER FOUR ............................................................................................................................. - 23 -
4.DATA PRESENTATION, ANALYSIS ANDINTERPRETATION ............ …………………….- 23 -
4.1.Questionnaires Response Rate.................................................................................................... - 23 -
4.2.Demographic Characteristics of the Respondents ..................................................................... - 24 -
4.2.1.Sex of the Respondents ............................................................................................................ - 24 -
4.2.2.Age of the Respondents ........................................................................................................... - 24 -
4.2.3.Educational background of the Respondents .......................................................................... - 25 -
4.2.4.Work Experiences of the Respondents .................................................................................... - 25 -
4.2.5.Job Position of the Respondents .............................................................................................. - 26 -
4.3.Descriptive Statistics Data Analysis ............................................................................................ - 27 -
4.3.1.Frequency Report on Independent variables ............................................................................ - 27 -
4.3.1.1.Speed, Simplicity, and Predictability of Face Vet Process .................................................... - 27 -
4.3.1.2.Speed, Simplicity and Predictability of Goods Inspection .................................................... - 29 -
4.3.1.3.Speed, simplicity and predictability of document of Scrutiny .............................................. - 31 -
4.3.1.4.Risk management................................................................................................................... - 32 -
4.3.1.5.Customs Automation Systems ............................................................................................... - 35 -
CHAPTER FIVE ............................................................................................................................... - 44 -
5.1. SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ......... - 44 -
5.2. Summary of Findings ...................................................................................................... - 44 -
5.3. Conclusion ....................................................................................................................... - 46 -
5.4. Recommendation ............................................................................................................. - 48 -
REFERENCES ............................................................................................................................ - 49 -

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ABBREVIATIONS

LPI Logistics Performance Index

CCA Customs Clearing Agent

CIF Cost, Insurance and Freight

WCO World Customs Organization

ECC Ethiopia Custom Commission

ECG Ethiopian Customs Guide

L/C Letter of credit

WTO World Trade Organization

RKC Revised Kyoto Convention

DBE Development Bank Ethiopia

ECVS Ethiopian customs valuation system

EFTA European Free Trade Association

OECD Organization for Economic Co-operation and Development

HS Harmonized System

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 ABSTRACT

The drive of this study was to measure the customs clearance practice and its effects on the logistics
performance of the Development Bank of Ethiopia within factors of customs Face vet, Goods
Inspection, Document Scrutiny, Risk Management, and Automation.The numbers of target
population of this study was 75 and chooses the census sample technique. The statistical data were
tabulated by SPSS software and the output analyzed by mean, frequency, correlation, and Regression.
Descriptive and Inferential statisticswere usedfor analyze thedata. Majority of the independent
variables are correlated at P < 0.01 and at P < 0.05 level of significance and there is a strong positive
relationship between the effect of customs inspectionactivity and logistic performance with a Pearson
correlation coefficient of (r=0.802) and significance value 0.00. The study recommended that Ethiopian
customs commission should implement giving advance information for customers, Customs
procedures and practices must be consistent, transparent, and appropriate to international customs
clearance servicestandards and should be avoid redundancy of customs goods inspection and
document scrutiny/checking for a particular shipment. Furthermore, in the Risk management system,
the customs commission should give strong information to importers about risk channel categories;and
Give training for Customs employees to have adequate operational knowledge.

Key Words: Pearson correlation coefficient, face vet customs, risk channel categories, Customs
Automation Systems and Descriptive and Inferential statistics

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 CHAPTER ONE

INTRODUCTION

This study initiativewas to assess the effect of the customs clearance practice on logistics performance.
In This chapter the background of the study, statement of the problem, research question, objective of
the study, significance of the study, scope of the study, limitation of the study, and organization of the
study included.

1.1. Background of the Study

Logistics service is one of the supply chain activities that have a great influence and role on the
company's overall financial (profitability), operational, and competitive advantage. Hence, quality
logistics performance and a successful business environment have a strong relationship (McGrath,
1992). Logistics services are very critical to international trade and play an important role in the growth
and development of the local economy (Endashaw T. 2021). For competitive International trade the
quality and efficiency of logistics services can matter.Major obstacle to global trade integration is fragile
logistics infrastructure and operational processes (journal of The Asian on shipping and logistics,
2017).According to the World Bank institution, countries' logistics performance indicatorsare the
efficiency of the customs clearance process, the quality of trade and transport-related infrastructure, the
competitively price international shipments, logistics services quality, track and trace consignments,
shipments time within the scheduled or expected delivery time. According to this World Bank six
logistics performance measurement Ethiopia ranked 126th out of 160 countries. Accordingly, the
ranking of Ethiopia shows a backward spiral between 2014 and 2016, going from 104 to 126 in the rank
comparison across 160 countries. (World Bank Group, 2016).

One of the concerns in logistics is the time and cost spent to clear export and import goods by complying
with the customs regulations and procedures of the country. Reducing the time required for the clearance
of goods at customs is very important. Hence, the length of time for customs clearance practice plays a
negative or positive roll-on logistics performance. A short customs clearing time-release avoids the
serious bottlenecks that impede logistics performance. This fact can be indicating that custom clearance

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is one of factor for quality logistics service. According to world customs organization, custom
clearance is the process of accomplishing customs formalities compulsory to allow goods to enter a
country for homes use, to be exported to another country, or for another internal customs procedure
(Revised Kyoto Convention, 1999). It is practiced around the world with set of principles ranging from
general proclamation to specific directive procedure in respect to international customs law. Customs
clearance administration consider as the government service which is responsible for the administration
of Customs import and export duties and taxes. It also has responsibility for the application of other
laws and regulations relating, inter alia, to the importation, transit and exportation of goods (Revised
Kyoto Convention, 1999).

According to world customs organization and Revised Kyoto Convention (1999), Modernized Customs
administrations usually exhibit the following characteristics: Self- assessment; the use of risk-based,
full automation of transactions processing and management information support, and extensive use of
trader segmentation to implement appropriate compliance and trade facilitation strategies. Additionally,
Revised Kyoto Convention (1999), customs governing principles must be obtained transparency and
predictability of Customs actions, standardization and simplification of the goods declaration and
supporting documents. Therefore, the basis for each customs procedure or practice is customs law
(either national or international) and major factors for effective customs clearance service are
maximum use of information technology and maximum use of risk management system.

However, most under developing country, particularly, African countries customs clearance services
are fashioned by requirement of unnecessary documentary, lack of automation, ineffective use of
customs service manual procedures, deficiency on proper risk management system, lack of
transparency, predictability and consistency (ECA, 2004). Ethiopian customs practice also very much
diverted from the law and it is fashioned by the inconsistent, non-transparent and unfair valuation
computations. Efficiency of the customs tax and duty performance collection depends on customs
officerand importer ethical circumstance(GebremichaelWoldu, 2016). Hence, Ethiopian customs
clearance service quality also characterized redundancy of customs clearance documents checking and
good physical inspection service process, luck of modern customs automation system (information
technology) and risk management system.

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 1.2. Statement of the Problem

According to research conducted by Endashaw T. (2021), on the customs clearance process and its
effect on logistics efficiency; country’s logistics performance is key to a country’s productivity and it is
attractive to foreign direct investment flow. Inefficient logistics raise the cost of doing business and
reduce the potential for international and domestic market integration (World Bank Group,
2018).Ethiopian logistics is characterized by a lack of heavy truck availability, container seal problems
(seal number error, seal number unreadable, seal number breakage, Seal number in existence, and Seal
number change), TIN Related Problems, Djibouti transit Clearance Inefficiency, documentation or
Manifest related problems (such as manifest Error and Delay). Due to this logistics inefficiency/problem
importer and exporter pay Djibouti port service charge and container demurrage payment for different
ship carrier (ESLSE, 2021). Hence, the number one logistics performance quality is the efficiency of the
customs clearance process.

According to World Bank and international customs organization study report (2019), Ethiopia’s key
logistics bottlenecks are related to complex customs clearance proceduresthat Ethiopia logistics
performance highly influenced by customs efficiency. A recent World Bank ease of doing business report
(2019) also indicates that Ethiopian Import clearance and inspections required by the customs
commission wasseventy two hours and the associated cost was 120USD. On the other hand, export
clearance and inspections required by the customs commission are twelve hours. Export Clearance and
inspections required more than thirty five hours and the total exporting process takes forty seven hours
associated cost of 175USD.

According to study done by Fekadu (2013),Poor logistics planning may gradually affect the level of
expenses and implementation of effective logistics activities. Efficient and safe transport system is vital
to business success. The goals of a logistics activity provider require on-time service delivery, accurate
information storage, timely response to requests, the ability to solve problems, the fulfillment of
promises, and assisting the clients in accomplishing their objectives. Accordingly, the Ethiopian
logistics service performance is characterized by poor logistics service quality.

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This problem also shakes the logistics service performance of the Development Bank of Ethiopia
(DBE). Custom administration problems interrupt the capital goods procurement and logistics and
supply department service performance of DBE which has a very significant effect on overall company
performance. According to secondary data analysis and interview with employee/manager of DBE that
customs regulation and customs clearance process has a huge impact on lease loan service performance.
Due to this force lease finance customers are forced to pay huge interest expenses, demurrage, storage
(per container 6 up to 12 dollars), and clearance costs. That has an impact on DBE's image for not
delivering the goods on time, customer satisfaction, and paying bank loans on time (DBE, 2021).

The researcher also conducted a series of meetings and interviews with employees/managers of DBE.
They raised a series of issues related to long-time release or uncertain delays of customs clearance
processaffect lease finance import goods. Several surveys have been conducted on customs' role in
trade facilitation and control challenges, however, there are few surveyors and researchers have
undertaken related to impact of import and export customs clearance service on company logistics
performance. None of them are not considered customs efficiency's impact on the banking service
logistics performance.Therefore, the researcher inspired this gap to conduct a study and fill the gap
based on customs clearance practiceparameters; Simplicity and Predictable of Face vet, Goods
Inspection, Document Scrutiny, Risk Management, and Automation.

1.3. Research Questions

• What the customs clearance practices of Ethiopian Customs?

• What are custom practices affecting logistics performance facing the Development Bank of
Ethiopia (DBE)?

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 1.4. Objectives of the Study

To identify and explains customs clearance practices and its effect on logistic performance in the case of
the Development Bank of Ethiopia in the logistic department was the general objective of this study.
Specific Objective
• To identify the customs clearance practices of Ethiopia Customs?
• To identify the custom clearance practice and its effects logistics performance facing the
Development Bank of Ethiopia (DBE).

1.5. Significance of the Study

Thereare anumberofstudies conducted intheareas ofcustoms clearance practice

aswellaslogisticspracticeindifferentperspectives.Accordingly, the studyhas thefollowingimportance:
• Theoutcomeofthisresearchwouldhopefully help to improve Ethiopia Customscommissionservice
customsclearanceprocessefficiency.
• Thestudy willhavesomecontributiontoevaluateandimprovingLogistics Efficiencyin Development
Bank of Ethiopia.
• It will be an input for researchers who want to make further study on the topic and decision makers
to take action and develop policy.
Generally, the study will beneficial to various stake holders; it can be a source of information to
Development Bank of Ethiopia and for other peer banks wishes to improve its logistics performance.

1.6. Scope of the Study

The study focused and limited on identifying and assessing the effect of custom clearance
practice on the implication of the logistic performance related to import shipment for the
development bank of Ethiopia in the logistic department and who are located within Addis Ababa
city.The subject of this research also focused mainly on the customs clearance practice and its
effect on logistics performance that can mostly emanate from the applied custom procedures of
the Ethiopia Customs Commission.

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 1.7. Limitations of the Study

For most business, logistics is core activity. Nevertheless, Study in the area of banking service sector
related to customs clearance and logistics management practice is few. Hence, accessing sufficient
banking logistics literature material is very challenging. on the other hand‘s willingness of some
employees to full questionnaires & directors busy schedule becomes a challenging & takes long time
for responses. More of time constraint faces the researches are a major limitation of a research. To
overcome this limitation, the researcher tried to closely communicate the respondents as much as the
required data were collected.

1.8. Organization of the Research Report

This research paper has five chapters. chapter one contains background of the study, statement of the
problem, research questions, objectives of the study, significance of the study, scope of the study and
limitation. In chapter two included literature review (introduction, theoretical review, empirical review
and the conceptual framework of the study.in chapter three Research Methodology and chapter four
data presentation, analysis and interpretationincluded. The final chapter, Chapter five has summary of
findings, conclusions and recommendationsincluded.

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CHAPTER TWO

LITERATURE REVIEW

In this section theoretical, empirical literature, and finally, a conceptual framework is discussed.

2.1. Theoretical Literature

2.1.1.Customs And Role Of Customs

According to Revised Customs Convention (1999), Customs is liable for the administration of Customs
law and the gathering of customs revenue from duties and taxes. Customs should bealigning with
Government Service and it is responsible for the administration of Customs law. World Customs
Organization Report indicates that accountability of customs administrations varies from country to
country, and it is often depend on the subject of regular review. According to the world trade
organization and world customs company report, the major responsibility of Customsclearance service
administration include implementing a wide range of government policies, spanning areas as diverse as
revenue collection, trade compliance and facilitation, protection of cultural heritage, and enforcement of
intellectual property laws. Hence, Customs authorities entrusted with administering matters for which
other government ministries.

2.1.2.Customs Clearance

Broadly, customs clearance is defined as the set of national customs authority functions which include,
to processing of import and export customs declarations, assessment of origin, value, and classification
of goods, collection and processing of duties and fees, physical inspection, examination, release of
cargo, the conduct of post-clearance audits, processing of urgent consignments, administration of
waivers and exemption schemes and drawback (re-exportation) schemes (woubshet, 2017).

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2.1.3.Customs Clearance Practice

According to the world customs organization, Customs clearance means the achievement of the Customs
formalities necessary to allow goods to imported and exported under Customs procedure.Strong
cooperation with respective stakeholder or inter alia, pre-arrival permission, a separate release from
clearance, authorized trader schemes, risk management, post-clearance audit practice and effective usage
of Customs automation and ICT are the key measures to speed up the customs clearance (UNCTAD,
2008).

Customs law means such laws and regulations administered and enforced by the Customs
Administration of a Party concerning the importation, exportation, and transit/transshipment of goods
relate to customs duties, other taxes, and other charges, or prohibitions, restrictions, and other similar
controls concerning the movement of controlled items across the boundary of the customs territory of a
Party. Complex regulations, procedures, or administrative guidelines allow corrupt practices to develop
and flourish and those create a negative impact on import and export clearance procedures in the process
of facilitating legitimate trade. The elimination of red tape includes cumbersome processes that may
involve duplication of effort or unnecessary processing procedures. Hence, to make customs laws and
regulations to predictable, simple, transparent, and harmonized should adopt internationally agreed
standards including Generally Accepted Accounting Principles (GAAP); HS Tariff Convention; WTO
Valuation Agreement; and WCO Revised Kyoto Convention on the Harmonization and Simplification
of Customs is an important strategy (WCO, 2005).

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2.1.4.Customs Clearance Practice In Ethiopia

According to Ethiopian Customs Guide document (2017), Ethiopia's custom commission functions
include the enforcement of the Customs Proclamation provisions governing the import and export of
cargo, baggage, and postal articles; the arrival and departure of vessels, aircraft, and other means of
transport; goods in transit; and the governance of any goods subject to customs control, including rights
and obligations of persons taking part in customs formalities (Ethiopian Customs Guide (2017).

In Ethiopia, there are customs clearance processes to accomplish the clearance service, for instance,
importer/exporter and traders should take account of the following steps (Proclamation Number
859/2014 and Revised 1160/2019).

• Should Declarant states his intent for import by completing an online (former ASYCUDA ++ and
now ECTP) Import Declaration Form (IDF) on the Customs Server;
• Should Declarant lodges IDF with supporting documents or original supporting documents shall be
supplied to Customs: Transportation document, Invoice, Bank Permit, packing list, Certificate of
Origin; and Other relevant certificates/permits from relevant regulatory bodies.
• Traders required to complete the customs declarationsand to make sure that the declaration is fully
and accurately completed and all supporting documents.
• The customs station captures the information on Ethiopian Custom Trade Portal the face receive
and check the declaration against the document produced whether it is as per the instruction.

To obtain clearance of imported goods from ERC, two different procedures exist, depending on the
type of transport used for the goods, i.e. whether it is multi-modal or unimodal. Under multi-modal
transport, goods are transported under a single contract with the logistics company but using different
means of transport (e.g., sea and road transport). Conversely, unimodal transport only uses one means
of transportation (Ethiopian Customs Guide, 2017).

Multimodal transport service system have need of the importer must complete and submit the customs
declaration (hard copy), and the importer must pay the amount of duty and taxes, based on the self-
assessment undertaken, before submitting the declaration and Payments made by a cash payment order
(C.P.O.) (Ethiopian Customs Guide, 2017).

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 During unimodal transport service system the importer must pay the duty and taxes, and submit a
transit declaration with the ERC office of destination together with the necessary documentation for
clearance, before the start of the transit service process. The importer is required to submit the transit
official papers together with the clearance declaration and supporting documents to initiate the
clearance processes (Ethiopian Customs Guide, 2017).

necessary documents for the preparation of a customs declaration; Transportation document such as bill
of lading, air waybill or truck waybill; Invoice which describes the value of imported goods; Bank
document, i.e. L/C, CAD, confirmation of advance payment/TT, Packing list which describes how the
goods are packed during transport, Certificate of origin which describes where the goods were
originally produced, and Other documents as required, such as pre-import permits issued by regulatory
agencies and duty-free permits for investment goods(Ethiopian Customs Guide, 2017).

2.1.5. Logistics Performance In The Banking Sector

The efficiency and effectiveness of the logistics operation have a considerable influence not only on the
business performance of manufacturers but also on the customer’s perception of the quality of the
products and services provided by the plant. If inbound Material flows from the supplier are erratic; the
firm’s internal operation will not be able to sustain its production strategies without a high level of safety
stock (Bowersox, Closs, & Cooper, 2010).

The concept of logistics is the set of services that enable businesses to deliver their goods or services to
their final consumption points at the right place and time. The ability to transport goods quickly, safely,
economically, and reliably is seen as vital to the success of the business and to a nation‘s prosperity and
capacity to compete in a globalized economy. the process of planning, implementing, and controlling the
efficient, effective flow and storage of goods, services, and related information from point of origin to
point of consumption for the purpose of conforming to customers’ requirements referee aslogistics
management (Christopher, 2012).

Processes and operations such as customer responsiveness, inventory planning and management, supply
chain, transportation, warehousing, and total logistics operations are used to fulfill logistics performance
measurements. On the other hand, there are also some other main financial indicators for not only logistics
companies but also all industries. Particularly, net sales are used as one of the key performance indicators
in all industries, as in supply chain management (Beamon, 1999; Gunasekaran et al., 2001). Earnings

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before Interest and Taxes (EBIT) are also frequently used as an indicator for measuring the financial
performance of a company’s operations (H. H. Erdoğan, G. Kırbaç, 2021). Within this context, in the
logistics ecosystem, financial measurements such as customers, competitors, importers, suppliers, etc. are
vital to any organizational (like banking service) efficiency.

2.1.6. Easy Customs Clearance practice

According to Ethiopia customs commission (2019), simplicity service speed, Simplified Customs
Declarations allow a trader to speed up the logistics as some of the particulars and/or supporting
documents of the customs declaration may be omitted at the time of customs clearance. These particulars
and supporting documents will be made available within a set time limit. A simplified procedure for
clearance of goods shall consist of a procedure that allows the clearance of goods at the clearing agent’s
Business premises or another place authorized by the commission.

2.1.7. Automated Customs clearance Administration

According to IMF report (2012) on Customs Administration Reform and Modernization in Francophone
Sub-Saharan study, Diagnostic studies of customs administrations indicate that modernization should be
Enhance customs control approach and methods that includes the risk management techniques, a
suitable distribution of controls throughout the customs process, and the development of post clearance
audits. It should fit into a framework of coherent compliance and enforcement strategies and requires
staff specialization, And Implement computerization across the board.

According to international monitory fund report (2012) that indicates about comprehensive and
effective automated customs clearance system thatautomated customs practice would help to integrate
clearance steps into a secure process. Respective customs administration must focus for harmonize
implementation of the legislation and, reduce face-to-face contact, and keep track of operations in order
to fight corruption. Quality customs administration should be strengthening the customs valuation,
improving management styleand better monitoring and follow-up transit arrangements.

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Modern trading practices make it essential for administrations to provide simple, predictable & efficient
customs procedures for the clearance of goods & movement of people, tackle increasingly complicated
national, regional & international requirements to ensure compliance with national laws, international
agreements, and meet global security challenges (Revised Kyoto Convention, 1999).

2.1.8. Customs Clearing Challenges In Ethiopia

According to World Bankstudy (2016)that rankingEthiopia logistic service quality putsthe country
at166thinthe world.World Bank TradingAcross Borders(2013),while,onaverage,sub-SaharanAfrican
customsdelays are the longestinthe
world,theaveragedelayistwelvedaysintheregioncomparedwithsevendaysinLatin America;the
longestdelaysinthe regionare inEthiopia,wheretheaverage traderhasto wait morethan thirty days for
customs to clear goods. Moreover, inbigcitiesofEthiopiasmallandmediumsizedenterprises
spentalongtimeto processtheircustomsclearanceduetotheinefficiencyofthecustoms
proceduresofthecountry (World Bank, 2016).

One of the difficulties for customs clearing process in Ethiopia is the risk level given to the imported
items that subjected to complex physical control service system. Risk criteria typically include the origin
of goods, importer track record, and type of goods, trade patterns, misclassification incentives, and
shipment value. The system chooses shipments for one of the three established color-coded channels.
Green (low risk imported goods), yellow (medium risk goods), Red channel (are subject to 100 %
document and physical examination). Most of the items imported need to pass by red channel and this
study needs to study the effect of this delay on the company performance.

According to LemlemDesta(2018)studyofchallengesonimportcustomsprocedureinrelationtotrade
facilitationandcontrolin thecaseofERCAAddis AbabaKalitybranch,Riskmanagementinimportclearance
procedure consideredasa majorchallenge for import clearanceproceduresinthe branchofficedue
tolackoforganizedandup-to-dateriskdatabase, lackofproperinformationflowfor
riskprofilingpurposes,lackofcooperationwithother
departmentsintheBranchOfficeaswellaslackofcoordinationwiththenationalintelligenceunit
forthirdpartyinformationsharingforriskprofiling.Eventheprinciplesofriskmanagementin
customsproceduresproperlystatedontheProclamationNo.859/2014article6/1indicatesthatthe customs

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procedures prescribed in the Proclamation shall be applied to effect customs control in a manner
assuring transparency and accountability based on appropriate information and the principles of risk
management to conducive condition for trade facilitation, but practically risk management process in the
Branch Office highly depend on manual process rather than automation based and highly focused on
regulatory control.

2.1.9. Relationship Between Customs Clearance Practice And Logistic Performance

Competitive international trade, increasing foreign investors, and technological developments have a
great role in the rise of international trade volume that contributes to the services, workforce, and capital
faster and easier resource movement between countries. Customs Barriers For example high customs
taxes, quotas, and capital controls contribute to separate national economies. The logistics sector has
gained importance for the increase in international trade volume, the loss of the borders between
countries, and the development concept of globalization, (Miller, 2019). Now, logistics has become one
of the most important, largest, and most dynamic sectors in the world. To stand out and have
advantages, quick and timely delivery has become important for service and commodity-producing
companies (Miller, 2019).

There are six dimensions of logistic performance indicators that are the efficiency of the customs
clearance process, quality of trade and transport-related infrastructure, ease of arranging competitively
priced shipments, competence, quality of logistics services, ability to track and trace consignments and
shipments reach the consignee within the scheduled or expected time. Logistics performance pointer or
LPI also set particular aspects of international supply chains in respondents' countries of work,
including import/export, lead time, supply chain costs, customs clearance, and the percentage of
shipments subjected to physical inspection (Arvis,et al.2014). It may indicate that efficient customs
clearance service is one of the factors to logistics performance and in the context of logistics and supply
chain global structure, customs has a remarkable role. A degree of resistance to duplication of efforts in
the import and export customs declarations, inefficiencies in trade procedures with commercial
practices, and limited predictability of physically inspected in successfully moving goods across a
border within competitive time frames are vital for international logistic and customs operations.
(Andrew Grainger, 2008).

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 2.2. Empirical Literature

In most of the least developed and advanced countries, duties and taxes from importation goods
represent an important proportion of the national budget source of income. Because of this, the focus of
their Customs authority is, understandably, revenue collection. On the other hand, in advanced
countries, imports and export customs duty consider a major source of government revenue, due to this
there is an increasing focus on border security, prohibition and restrictions of import and export goods,
including those arising from free trade agreements. However, the contemporary trade toward global
free trade and the recent intensifying of global terrorism concerns have seen border security emerge as
a priority (Widdowson, 2007)

2.2.1. Customs Time Release

The study conducted in Tanzania (Musaka, 2013) concluded that Businesses in Africa perceive the
impacts of customs as mostly unfavorable a mixture of obvious and slight impediments that are felt
primarily in some interconnected ways such as storage costs for goods awaiting processing; they can be
inflated if the processing time is prolonged; Elongated time due to elongated customs clearance
processing time. Other obstacles are cumbersome regulatory systems and decentralized documentation
processes coupled with bureaucratic clearing procedures, Lack of communication between stakeholders
(importer, exporter, international trade, and customs organizations) are consider as challenge for fast
Customs Time Release.

In the Ethiopian context, a survey conducted (2011) by TeweldeBerhan on the challenges of customs on
trade facilitation revealed that there is a delay in Customs clearing and customers are dissatisfied with the
service provided. Customs delays in Sub-Saharan Africa were highest in the world, 12 days on average in
2016, but lowest in other countries like Estonia and Lithuania; which require only one day for customs
clearance; in Ethiopia, it averages more than 30 days (DebebeDessalegnSirika&TekluKassuGizaw(2016)
quoted Buyonge&Kireeva, 2008). It may indicate the complexity or ease of customs and administrative
procedures has an impact on trade on costs and time.

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According to DebebeDessalegnSirika&TekluKassuGizaw (2016), the significant predictors of the
customs clearance costs and time delay in the clearance process raise and turn directly transferred
consumers. Further, this study identified clearance delay time at Kality Customs Branch Office is four
days and it may go even up to months if a disagreement arises regarding custom clearance inefficacy
such as customs duty amount. According to this study finding Delay time in customs clearance increases
by one hour, and the customs clearance cost increases by birr forty-two at the kality customs branch
office.

2.2.2. Face vet

The face vet officer receives and checks the goods of a declaration against the document produced
whether it is as per the law stated in the proclamation or not, then accepts or rejects. Identifying risk
level, the risk level of the documents is being identified using the ECMS system to make risk-based
treatment or control (Customs proclamation no. 859, 2014 as revised by 1160/2019).

2.2.3. Customs Physical Inspection of Goods

This is conducted by the examiner to assure that the goods and conditions of the declaration are the same
with the nature, origin, quantity, and value of the goods (Customs proclamation no. 859/2014 and as
revised 1160/2019).

2.2.4. Scrutiny of Document

This is often done to control transaction legality, valuation, and tariff classification of goods based on
the following document. According to Customs Proclamation no. 859, 2014 and as revised by
1160/201 that indicate The main documents for customs clearance procedures are Import license
(license required as one of the documents for import customs clearance procedures and formalities
under specific products), Customs Declaration, Insurance certificate Bill of Lading / Airway bill,
Commercial Invoice and Packing list.

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2.2.5. Risk Management

Risk management is part of the Customs process & Customs will never catch every fraud, so it is
important to make sure that at least the major ones are kept under control. Since the purpose of risk
analysis is to allow customs to concentrate checks on high-risk areas while ensuring a fair degree of
freedom for most trade flow.Hence, it helps to accelerates clearance process and also optimizes
resources and reduces costs, for the same effectiveness (WCO, 2003).

2.2.6. Customs Automation

Modern customs clearance practice especially Automated customs tools/ service is bases for
simplifying international trade procedures. It is fact that o accelerate the clearance of goods should be
use of automated Customs systems facilitates trade through the normalization of forms and documents,
data standardization, simplification, and computerization of Customs clearance procedures (UNCTAD,
2011). Hence, it indicates the modernization of customs that is advanced information technology helps
to replace the manual processing of Customs clearance service with the computer-assisted treatment of
electronically transmitted information.

2.2.7. Conceptual Framework

The intention of this research was identify the key generic factors that affect the one of determinant
logistics performance that is custom clearance practice. Therefore, this study wasevaluation of customs
clearance service with in framework of customs face vet, goods inspection, document scrutiny, Risk
Management and Automation for Customs practice and its effect on the logistics performance.

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 Figure 1: Conceptual Framework

Customs Face vet

Efficient Logistics
Performance
Customs Goods Inspection • Clearance/transit costs and lead time
• Port costs (storage, demurrage etc.)
• Company’s image

customDocument Scrutiny • Customer satisfaction

• Company profitability
• Interest expense. (paying bank loans

Risk Management for Customs on time)

Clearance

Automation for Customs Clearance

Source: Researcher (from Different Literature)

The above figure 1 depicts the effect of best custom clearance practice and its result on logistic service
performance. Accordingly, the first column shows six major custom clearance activities/practices
which are: customs Face vet, Goods Inspection, Document Scrutiny, Risk Management for Customs,
and Automation for Customs Clearance. The second arrow column shows the result or outcome of the
application of the best customs clearance practice for logistics activities.

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CHAPTER THREE

3. METHODOLOGYOF THE STUDY

This research part included all concerns related to research methodology which are research
approach, research design, population and sampling design, sources of data collection, data
collection procedures, data analysis, validity and reliability, ethical considerations and data
analysis methods.

3.1. Research Approach

The researcher used mixed methods (quantitative and qualitative) approach in the study. In
quantitative approaches such as a review document and a questionnaire used. In qualitative
approach also used interviews as the primary source of data analysis to get the full effect of
customs clearance practice (face vet, document scrutiny, goods inspection, risk management and
customs automation) on the logistic performance of DBE.

3.2. Research Design

This study used explanatory and descriptive research design. The reason for using explanatory
type of research design is it focuses on explaining the aspects of the study in a detailed manner; it
attempted to connect ideas to understand the cause and effect of the problems and explain the
effect of customs clearance practice on logistic performance. Additionally, it is strongly related to
the nature of the problem to be studied.

Also, the descriptive research design also considered since the objective of the research seeks to
identify the relationship among variables. A number of researchers have suggest that this method is the
most appropriate to demonstrate the characteristics of existing phenomenon and to describe the
performance of customs clearance in different way. Therefore, this research followed the descriptive
and explanatory research design to describe the relationship between the independent and the dependent
variable.

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3.3. Population and Sample

The total numbers of target population of this study was 75. From this 15 questioners were
distributed tolease finance Capital Goods Logistics departmentand 30 questioners tothe
procurement department of development bank of Ethiopia. All junior, officer, senior and manager
level stuff who are working at the two departments of the company are taken. This two
department’sresponsibility is monitoring and follows up transportation, customs clearance, freight
forwarding, and foreign procurement service for lease finance customers. The remaining 30
questioners collected from all operation manager, coordinator, senior and assessors officer from
Ethiopia Shipping and Logistic Service Enterprise(which is handle/subcontractedthe clearing and
forwarding service of DBE) of customs clearing service unit. The total number employees of this
service unit aretaken.

The researcher used a Census survey and chooses the census technique since the total population
is not large; it not needs a great deal of time, money, and energy. Hence,this research was taken
sample size of 75 fromDevelopment Bank of Ethiopia Capital Goods Logistics department,
procurement department and Ethiopia Shipping and Logistic Service Enterprise of clearing and
forwarding service unit.

3.4. Sources of Data Collection

To achieve the objectives of this study, the researcher used both primary and secondary data
sources. Primary data collectedfrom methods like surveys, interviews and questioner. It is
collected with the research plan in mind, directly from primary sources. The researcher used a
quantitative primary source of data that was a survey method to obtain the needed information or
data. In these methods, the researcher used a face to face interviewee and distribute questioner.
The questionnaires developed by the researcher based on research questions and objectives. The
reason for using questionnaires is because it is inexpensive, respondents take enough time to
respond, and no bias from the interviewer that they respond freely.

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The secondary data, on the other hand, obtained from company profiles, financial reports,
published documents (customs clearance, logistics and procurement documents), literature, books
from the library, and the internet (e-books) those are May relevant to this study.

3.5. Data Collection Procedures

The researcher used a structure, semi-structured, self-administered questionnaire for the quantitative
aspect of the research methods. For a structured interview used a rigorous set of questions that do not
allow one to divert.Semi-structured interview is open, allowing new ideas to be brought up during the
interview as a result of what the interviewee says. A self-administered questionnaire completed by a
respondent without the intervention of the researchers. The use of self-administered questionnaires in
conjunction with personal interviews is getting efficient and detailed data. On the other hand the
researcher alsoused Closed-ended and open-ended questions.

3.6. Data Analysis

After collecting data from a variety of sources (questioner and Interviews) conducted converting data
into the numeric format, editing, classification, and tabulation. To make the data analysis easy, data
organized and present in the form of percentages, tables, and figures.Hence, the researcher used both
descriptive and inferential statistics. Descriptive analysis used to describe the basic features of the data
and provide simple summaries about the sample and the measures. Descriptive analyzing also in order
to summarize numeric data such as mean, frequency or physical characteristics and Textual analysis
words, either spoken or written, including questionnaire responses, interviews. Inferential statics suchas
correlation analysis or Pearson’s correlation used. The reason for using correlation analysis is to
analyze the relationship between the independent variables and dependent variable.To analyze the
relationship between the dependent and independent variables used update statistical software called
Statistical Package for the Social Science/SPSS/.

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3.7. Validity and Reliability
In this study used the validity and reliability study instrument.

3.7.1. Validity

To ensure the validity of the instrument the researcher consulted Subject matter experts (like SPSS
lecturers) andthe researcher conducted properly in the process of data collection by providing
clarification about the questions for the respondents to collect valid data throughout the data collection
time.

3.7.2. Reliability

The study usedChronbach alpha test to check the reliability of the study. Cronbach'sAlpha testis one
ofthedatareliabilitiesevaluating tests which determined toseehowreliabletheresults,
ifthesamplesizeexpanded,comparable generalizedresultsshouldbeobtained(Field, A.,2006).If the
Coefficientalpharangesvalueapproximate to0 that indicate noconsistency; for
completeconsistencyshould be Coefficientalpharangesvalueapproximate
to1.Hence,speaking,scaleswithacoefficient αbetween0.80and0.95areconsideredto havevery
goodreliability.Scaleswithacoefficientα
between0.70and0.80areconsideredtohavegoodreliability,andavaluebetween0.60and0.70indicates fair
reliability and forpoor reliabilitythe coefficientmust bebelow0.6scales. Moststatisticalsoftware
packages,suchasSPSS, willeasilycomputecoefficient(Zikmundetal,2010).
Table 1;Reliability Statistics
Factors Cronbach's Alpha No of Items
Face Vet 0.85 3
Goods Inspection 0.76 6
Customs Document Scrutiny 0.72 3
Risk Management For Customs 0.75 7
Automation For Customs Clearance 0.74 6
Total 25
Source: Own Survey and SPSS Output, 2022.

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According to the above summarized reliability statistics table result; Cronbach’s Alpha for this study
was acceptable/ good Scales with a coefficient α between 0.72 and 0.85 are considered to have good
reliability.

3.8. Ethical Considerations

This study avoided violating respondent confidentiality, changing data or creating false data to meet the
desired objective, Interpreting data from a biased perspective, omitting sections of data analysis and
conclusions, and Making recommendations beyond the scope of data collected. The researcher,
regarding the research ethics will properly acknowledged Data providers, organizations, and institutions
and the information collected from them used for the research objective and the researcher respect issues
related to confidentiality.

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CHAPTER FOUR

4. DATA PRESENTATION, ANALYSIS ANDINTERPRETATION

This chapter contains the study's findings, which are based on a review of the data collected from the
respondents and a discussion of the findings based on the literature. As stated in the previous chapter,
the primary goal of this research is to look into the effects of customs clearance practices on logistics
performance in the case of the Development Bank of Ethiopia. The data collected from the primary
source via questionnaire was processed, presented, and interpreted. This had two parts;the first part was
about the general profile or General Information of the respondents and it had six topic-related
questions. The second part was about Descriptive Statistics Data Analysis of dependent and
independent variable. It is presented in the following.

4.1. Questionnaires Response Rate

A total of 75Questionnaires were distributed. However, it has been returned only 70questionnaires.
That means the response rate is 93%. Several scholars and researcher recommended different figures
of acceptance response rate. Furthermore, a response rate of 70% is considered "very good" for further
evaluation by Rubin &Babbie (2010), With regards to this, 93% of response rate does notaffect the
reliability of the research result and almost eligible for further study.

Figure 2: Response rate in percentage

Questionnaires
Questionnaires responded Questionnaires not responded
7%

93%

Source: survey result, 2022

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 Table 2: Questionnaires response rate in particular group

Respondent in group Questionnaires

Questionnaires responded 70
Questionnaires not responded 5

Total 75
Source: Own Survey and SPSS Output, 2022

4.2. Demographic Characteristics of the Respondents

All the respondents are directly and indirectly related to customs clearance and logistic service.
Demographic Characteristics of the Respondents presented is present in following manner.

4.2.1. Sex of the Respondents

In order to collect complete data and information about the effect of customs clearance practice on
logistics efficiency, it was necessary to incorporate the respondent demography statistics in the
questionnaires. Accordingly, among the 70 respondent of customs employees 42(60%) were male and
the rest 28 (40%) were female.

Table 3: Sex of the respondents

Frequency Percent Valid Percent

Male 42 60.0 60.0

Valid Female 28 40.0 40.0
Total 70 100.0 100.0
Source: Own Survey and SPSS Output, 2022

4.2.2. Age of the Respondents

Respondents were also categorized into different age groups. As shown on the bellow table 4 the ages
of most respondents were between 26-35 years which constitute 42 (60%) of the respondents out and
19 (27%) of the respondents were between above 27 years. And those who were between 26-35 years
count only about 9 (12.9%) of the respondents.

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Table 4: Age of the respondents

Frequency Percent Valid Percent

Valid 18-25 9 12.9 12.9
26-35 42 60.0 60.0
above 35 19 27.1 27.1
Total 70 100.0 100.0
Source: Own Survey and SPSS Output, 2022

As shown on the above figure, the age of the respondent implies that the main productive age groups
were participated in the study and this is helpful in giving divergent views for the study requirements.
And it can be understood that most of the respondent are young and energetic that to help fasten
customs clearance practice and assure efficient logistics.

4.2.3. Educational background of the Respondents

Below Table 5 shows that, the majority 43 (61%) of respondents who completed the questionnaires
have first Degree, the remaining 13 (18.6%)and 13 (18.6%) of the respondents were master’s degree
holder. This figure implies that level of academic status enables more customs facilitation and the more
the higher educational level the more capability of implementing simplicity and modernization customs
clearance service.

Table5: Educational Background

Frequency Percent Valid Percent

Valid Diploma 13 18.6 18.6
Degree 43 61.4 61.4
Master 13 18.6 18.6
Phd 1 1.4 1.4
Total 70 100.0 100.0
Source: Own Survey and SPSS Output, 2022

4.2.4. Work Experiences of the Respondents

Concerning respondent work experience, 9 employee or12.9%of the respondent have less than 5years’
experience and 48.5% or 34of the respondent have 5-10years’ work experience and only 27 or 38.6%of
the respondent have above 10years’ work experience related to customs clearance and logistic service
sectors.it indicate that there is shortage of more than 10 years’ work experience that might be unable to

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understand the complexity of the business, and it may lead to cumbersome customs clearance
facilitation and affect import goods logistics.

Table 6: Work Experiences of the Respondents

Frequency Percent Valid Percent

less 5 10 14.3 14.3
5-10 year 33 47.1 47.1
above 10 year 27 38.6 38.6
Total 70 100.0 100.0

Source: Own Survey and SPSS Output, 2022

4.2.5. Job Position of the Respondents

In terms of the respondents' assigned positions in their organizations;21.4%employees are atthe junior
level, followed by officer level with 52.9%. Senior, coordinator and Department heads Job Position
accounted with 18.6%, 5.7% and 1.4%, respectively. It is evidenced that operational level employees
are more in number.

Table 7: Job Position

Job Position Frequency Percent Valid Percent

Valid Junior 15 21.4 21.4
Officer 37 52.9 52.9
Senior 13 18.6 18.6
Coordinator 4 5.7 5.7
Manager 1 1.4 1.4
Total 70 100.0 100.0
Source: Own Survey and SPSS Output, 2022

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 4.3. Descriptive Statistics Data Analysis

Customs clearance means the accomplishment of the Customs formalities necessary to allow goods to
enter in the country. This customs clearance is the main indicator of logistics performance. According to
World Bank report in 2016, customs clearance practice mainly measure in terms of speed, simplicity and
predictability. Consequently, to collect information on import customs clearance process efficiency,
questionnaires were prepared for development bank of Ethiopia Capital Goods Logistics department, the
procurement department, and Ethiopia Shipping And Logistic enterprise clearance and forwarding
service unit. To achieve this objective, five points lanker scale was used to collect data from respondents
to measure the independent variable.

Where:1=StronglyDisagree, 2=Disagree, 3=Neutral, 4=Agree,and 5=StronglyAgree.

4.3.1. Frequency Report on Independent variables

4.3.1.1. Customs Face Vet Process

In this research customs Simplicity and Predictability of face vet was taken as one of the basic
component to undertake customs clearance practice, so the researcher was tried to see that how it
determine the facilitation of the clearance practice. This variable contains three basic questions related
with basic customs Face vet system. The response of respondents statistically described under
following table 8.
Table8: Descriptive Statistics of Customs face vet
N Customs face vet Std.
o 1 2 3 4 5 N Mean
deviation
1 Advanceinformationforcustomersagai
nst the document to accept or reject. 2 11 12 32 13 70 3.61 1.054

2 Customs face vet consistent and

1 11 17 32 9 70 3.53 0.959
transparent to accept or reject the
3 Customs procedures and practices
areconsistentwith international
standards, aiming to reduce face vet 2 14 21 22 11 70 3.37 1.066
practice.
Source: Computed by the researcher from the primary data, (2022)

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According to the survey result summarized on the above table 8 that indicate the respondent response
related to customs clearance Advance ruling against the document to accept or rejectWith3.61mean
and 1.05standard deviations and it also shows that 45 percent of the respondents’ agree and 19 percent
strongly agree. It indicates in customs clearance practice there is Advancerulingto
givingadvanceinformationforcustomers.Respondent also reflected their perceptionabout Customs
predictability, consistency and transparent of declarationto accept or reject With 3.53 mean score
and 0.96standard Deviation and the respondents’ also agree and neutral, with 45%
and24%respectively. That indicates in customs clearance practice there is consistency and transparency
to accept or reject the declaration.

Similarly, employees responded relatedto the consistency of Customs procedures and practices
concerning international standards, aiming to the reduce the problemfaced in customs clearance face
vet activity With 3.37 mean and 1.07 standard Deviation and the respondents also agree and neutral,
with 31 percent and 30 percent, respectively. That indicates in customs clearance practice there are
Customs procedures consistent with international standards, aiming to improve face vet practice.

This survey result also supplemented by interview with DBE capital goods logistic and procurement
department manager and ESLSE customs clearance and forwarding service unit manager; they said
That Ethiopian customs commission giving advance information related to relevant of import goods
customs documents such as Import license,Customs Declaration,Insurance certificate and Bill of
Lading /Airway bill. They said that most of Customs procedures and practices are relatively consistent
with international customs standards that may help to reduce the difficulty in traders and contribute to
limited compliance with rules. Ultimately, giving advance information for customers and providing
customs clearance service with respect to international standards that may help to protect the
customer/importer from any customs clearance Penalties,improve trader Competitiveness and
productivity in Global market and increase countries trade and investment andsmooth functioning of
markets (Ethiopian Customs Guide,2017).

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 4.3.1.2. Speed, Simplicity and Predictability of Goods Inspection

As one of the customs clearance determinant factors goods inspection time is also included in the
questionnaire. The researcher tried to see how respondent’s personal overview. The variable contained
six questions and the response of respondents were statistically described as following table 9.

Table 9: Descriptive Statistics of Customs goods inspection

Std.
No goods inspection 1 2 3 4 5 N Mean
deviatio
Goodcanbereleasedtemporarilybyguara
1 4 25 6 31 4 70 3.09 1.13
nty
Thereareno redundancyofgoods
2 4 20 20 24 2 70 3.00 0.99
physical inspection
Importer able to choose the location for
3 4 12 20 29 5 70 3.27 1.02
goods physically goods inspection
Importshipmentare cleared
4 5 17 15 26 7 70 3.19 1.13
fromcustoms as scheduled
Thereareadditionalcostincurredduetodel
5 3 11 11 37 8 70 3.51 1.63
aysofcustomsclearanceprocess

Thereisstandardtimeforphysical
6 4 11 15 35 5 70 3.37 1.02
inspection of customsclearanceactivities

Source: Computed by the researcher from the primary data, (2022)

The above table 9 shows aboutrespondentrespond related to customs Goods

releasedtemporarilybyguarantyinorderto avoidclearanceleadtimeorgoodswaitingtimeatcustoms With
3.09 mean score and 1.13standard Deviation and most of the respondents’ also agree and disagree,
with 44 percent and 36 percent,respectively. It indicates that there is good practice respective to
releaseof customs goods byguarantyto avoidclearanceleadtime.

Respondentalso respondedabout redundancyofgoods during physical inspection With 3.00 mean and
0.99standard Deviation and most of the respondents’ also agree and neutral, with 32 percent and 29
percent, respectively. It indicates that there is relatively less redundancyphysical
inspection.Respondent respond related to location for goods inspection inspected atcustoms compound
orimportersiteWith 3.27 mean score and 1.02 standard Deviation. Most of the respondents’ also
agree and neutral, with 41 percent and 28 percent, respectively. That indicates in customs clearance
practice importer has no right to choose the location of inspection may inspect at custom compound

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and no right to inspect at importer site. Respondentalso respondedabout customs scheduledfor
inspection for good With 3.19 mean score and 1.13 standard Deviation. Most of the respondents’
also agreesand neutral, with 37 percent and 24 percent, respectively. It indicates that there is relatively
schedule inspection activity during physical inspection.

Respondent respondedrelated to additionalcostincurredduetodelaysofcustoms clearanceprocess With

3.51 mean and 1.63standard Deviation and most of the respondents’ also agree and neutral, with 53
percent and 16 percent, respectively. It indicates that in importer
incurredadditionalcostduetodelaysofcustoms clearanceprocess. employee respond about
standardtimeforphysical inspection of customsclearanceactivitiesWith 3.37 mean and 1.02standard
Deviation and half of the respondents’ also agree and neutral, with 50 percent and 21 percent,
respectively. It indicates that there is relatively standard servicetime for physical inspection of customs
clearance activities.

This survey result also supplemented by interviews with DBE capital goods logistic and procurement
department managers and ESLSE customs clearance and forwarding service unit managers; they said
good released by guarantee only for economy Authorization Company and Government organizations.
They also said there is the redundancy of physical inspection and written service standard time for
goods inspection activity but it is not applicable or realized during inspection. It is fact
that better physical inspection of items especially for manufacturing companies is essential. It may help
to reduce logistic costs and increase production capacity. According to Customs Proclamation
No.859/2014 and now in the amended Customs Proclamation no. 1160/2019 that indicate inspection of
goods should be ensuring public healthy from the imported harmful product. Further, the imported
goods examined their origin, country of export, nature, condition; quality, quantity, tariff classification,
and value of the goods are in accordance with the information furnished in the goods declaration. For
instance, a person importing medicine is required to obtain a pre-license, before the starting of the
import procedure and an import permit at the time of entry to obtain clearance. Nevertheless, this
survey result indicates that there is the redundancy of goods physical inspection; Importer could not
choose the location for goods physically inspection, due to this importer incurred additional cost.

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 4.3.1.3. Speed, Simplicity and Predictability of Document of Scrutiny

In the research questionnaire document scrutiny was included as one of the challenging area in custom
clearance practice and on logistics service performance. Target group respondents were asked; is there
no redundancies of document checking for a particular shipment, is there additional cost incurred due to
delays document scrutiny and isthere standard time for each customs clearance activities for document
scrutiny. The result is described under following table 10.

Table10:Scrutinyofcustomsdocument

No document scrutiny Std.

1 2 3 4 5 N Mean
deviation
1 There are no redundancies of 6 27 13 21 3 70 2.83 1.09
document checking for a particular
2 Thereareadditionalcostincurreddueto 2 6 22 35 5 70 3.50 0.864
delaysdocument
3 i l
Thereisstandardtimeforeachcustoms 3 13 16 32 6 70 3.36 1.022
clearanceactivities for document
scrutiny
Source: Computed by the researcher from the primary data, (2022)

The respondentswere askedtoexpresstheir degree ofconsentonthe matter of redundancies of document

checking for a particular shipmentthe mean score of their respondents is 2.83 and standard deviation is
1.09with 39 percent and 30 percent of the respondents’disagree and agree,respecivly. That indicates
there is redundancy of document checking for a particular shipment. The respondent also response
regarding additionalcostincurredduetodelaysdocument scrutiny clearanceprocess with 3.50 mean score
and 0.87standard deviation with 39 percent and 30 percentagree and neutral, respectively. It indicates
importer may incur additional cost due to delays of document scrutiny in customs clearance process.

The respondent also asked regarding about standardtimeforeachcustomsclearanceactivities for

document scrutiny and their response this matter is 3.36 mean score and 1.02 standard deviations with
46% and 23% of respondent are agree and neutral, respectively. It indicates importer not obtained
customs service activity based on standard service time.

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This survey result was also accompanied by interview that indicates in some customs commission staff,
particularly assessor officers have not enough understanding and knowledge related to customs
clearance service manual procedure. Due to this delinquent there is a redundancy of document
checking service for a particular shipment that causes for an additional cost.Ethiopia customs
commission service standard book showing customs formalities have been completed, goods may not
be kept for more than seven working days in temporary customs storage (customs commission
guide,2017). But,due to customs officers’ knowledge gap (about the customs Proclamation, directives,
and manuals), document checking is highly exposed to the subjective decision by customs officers
andsystem/ electric power break down importers complete the clearance process within a long time.

4.3.1.4. Risk Management

In this analysis customs risk management was taken as one of the factors to customs clearance practice
efficiency as described on the five measurements in the questionnaires. The researcher had tried to
review the respondents overview related to the applied risk management & whether it speed up the
clearance process which under taken by the clearing agents or not. This variable contains seven
questioners and the result is described on the below table.

Table11:Descriptive Statistics of Risk management

No Riskmanagement 1 2 3 4 5 N Mean Std.

deviation
1 Customs has strong information
and profile 2 11 15 33 9 70 3.51 1.00
forriskchannelcategories
2 Customs employees have
adequate operationalknowledge 6 15 14 28 7 70 3.21 1.15
about Riskmanagement
3 h i is efficient information
There
flow for risk profiling 6 17 14 28 5 70 3.13 1.13
4 Risk management system give
fair risk assessment 1 10 16 33 10 70 3.59 0.96
5 Risk management system helps
to speed up the custom clearance 1 4 15 37 13 70 3.81 0.86
service.

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No Riskmanagement 1 2 3 4 5 N Mean Std.
deviation
6 Risk management system
1 13 17 32 7 70 3.44 0.96
give catch every fraud.
7 Risk management system
allow customs to concentrate 2 7 17 33 11 70 3.63 0.97
checks on high-risk areas

According toabove Table11therespondentswereaskedaboutCustoms information and profile for risk

channel categories or risk based inspection (red, yellow, and green). The mean score andstandard
deviations of their response is3.51 and 1, and their agreement level is 47% and 21% agree and neutral,
respectively. Thisimpliesthatthere islack ofinformation and riskbasedinspection. Whenthere isa lackof
efficient informationflow andupdated profile database,proper implementationof riskmanagement
techniquesincustomsprocedurewillbedifficult.

According to above table 11 the respondents were also asked regarding to Customs employees’
operational knowledge about Risk management techniques related to customs clearance process, on
this point with 40 and 21 percent of the participants replied agree and neutral, respectively. Its mean
value is 3.21 and 1.15 standard deviations value.This indicates Customs employees have adequate
operational knowledge about Risk management techniques. Hence, it depicts that most of the customs
employees have adequate knowledge about risk management.

The respondents were also asked about efficient information flow for risk profiling and their response is
40 percent and 21 percent agree and disagree, respectively.Its mean value is3.13 and standard
deviations value is 1.13. It indicatesthat thereis efficient information flow for risk profiling; the risk
profile information is used as the basis for risk selectivity criteria.

The respondents were asked to express their degree of consent Risk management system give fair risk
assessment and their response value is 3.59 mean score and 0.96 standard deviation. For this point 47
and 23 percent of the respondents agree and neutral, respectively.This depicts that there is fair risk
assessment and management related tocustoms clearance process.

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The respondent also asked to express their degree of consent on Risk management system to speed up
the custom clearance service. Consequently, 52 percent of the respondent expressed their agreement
and 21 percent neutral. This is also confirmed with cumulative mean of 3.81 and 0.86 standard
divisions.This indicates that most of the respondent agreed with customs clearance practice related
Risk management system helps to speed up the custom clearance service.

Similarly, regarding Risk management system and fraud practice of customs clearance, respondents
were response with 3.44 the mean score and 0.96 standard deviation value. 46 percent of the respondent
expressed their agreement (agree) and 24 percent neutral. This depicts that there is high level of Risk
management system give catch every fraud.

Finally, The respondent also ask regarding Risk management system and its application on high-risk
areas and replies with 3.63 mean and 0.97 standard deviations with 47 percent of the respondent
expressed their agreement and 24 percent neutral. It indicates that there is strong Risk management
system focusing on high risk area.

From the interview and the open ended question, the researcher has got since most of employee have
knowledge gap related to risk management and lack of confidence they can’t make any decision by
themselves beside most of the time they don’t have the adequate amount of resource to execute their
work.According to Teklewoyni (2012), risk management is the main tool to ensure modern and effective
Customs administration which can balance trade facilitation with customs control. According to the
Ethiopia customs commission guide document (2017) indicates that Risk management's purpose is to
strike a balance between trade facilitation and controls. However, in practice or this research indicate
custom commission employee have no sufficient capacity related to risk management knowledge, and
this exposed to personal judgment rather than scientific risk management techniques.Due to a lack of
knowledge gap or strong information, efficient profiling for risk channel categories and risk-based
inspection importers may face too additional port payment and long clearance lead time.

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 4.3.1.5. Customs Automation Systems

The respondents were also asked to express their degree of consent on customs clearance practice
automation. Thisvariablecontainssix questioners which are related to efficient usage of Customs
Automation or information technology system at Customs Offices, properly supported by modern
information technology system, The new system eCMS better than ASCYDAA++,eCMS is efficiently
utilized to provide fast custom clearance practice, The eCMS system could precisely label the level of
risk and Automated Customs Systems provide timely statistics on foreign trade and revenue.
Table12:Descriptive Statistics of Customs Automation Systems

No Customs Automation Systems Std.

1 2 3 4 5 N Mean
deviatio
1 There is an efficient usage of Customs
Automation or information technology 6 12 22 25 4 70 3.13 1.05
system at Customs Offices.
2 Theimport customs clearancepractice is
properlysupported by modern 4 11 20 26 8 70 3.34 1.06
informationtechnologysystem
3 The new system eCMS (electronics customs
management system) better than
ASCYDAA++ (Automated System for 1 5 26 29 8 70 3.55 0.86
Customs Data)
4 eCMS is efficiently utilized to provide fast
customclearance practice 4 5 24 28 8 70 3.44 0.99
5 The eCMS system could precisely label the
level of risk at submission of documents 1 10 23 29 6 70 3.41 0.90
6 Automated Customs Systems provide
governments with accurate and timely 2 9 18 33 7 70 3.49 0.94
statistics on foreign trade and revenue

The above table 12 shows Respondent observation related to efficient usage of Customs Automation or
information technology system at Customs Offices. Its response is 36 percent agreed and 31 percent
neutral and confirmed with mean score of 3.13 and 1.05standard deviation. That indicatesthere is
efficient usage of Customs Automation or information technology system at Customs Offices.

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The respondents were asked to express their level of agreement related theimport customs
clearancepractice its level ofmodern informationtechnologysystem. The results show that 37% replied
agrees and other 29% have also stressed the same by replying very neutral with mean value of 3.34 and
standard division of 1.06. This implies that there is modern information technology for customs
clearance service.

The participants were also replied about the new system eCMS (electronics customs management
system) with respect to previous system ASCYDAA++ (Automated System for Customs Data).
Accordingly, 41 and 37 percent of respondent areagree and neutral, respectively. Its mean score is 3.55
and standard deviation 0.86.Itmanifests the current customs clearance system is modern and has better
with compare to former system.

The participants were also replied about the current system (eCMS) of efficient utilization to provide
fast custom clearance practice. Accordingly, 40percent and 34 percent of the participants were agree
and neutral,respectively. Its mean score is 3.44 and standard deviation 0.99. It shows the current
customs clearance system is help for fast customs clearance practice. Similarly, the respondents were
also asked about the eCMS system and risk management/ level of at submission of documents. 39
percent and 33 percent of the participants were agreed and neutral with 3.41 mean score of and
0.90standard deviation.

Concerning on the issues Automated Customs Systems provide governments with accurate and timely
statistics on foreign trade and revenue 47 and 26 percent of the respondent expressed as agree and
neutralrespectively. The mean score of their response replied on this point is 3.49 and Standard
deviation 0.94. It indicates that there is Automated Customs Systems provide governments with
accurate and timely statistics on foreign trade and revenue.

Finally, this survey result was also supplemented by Interview and secondary data analysis that
indicates the new system electronics customs management system is better than earlier Automated
System. The new system labels the level of risk at submission of documents and providesaccurate and
timely statistics for governments and other stockholder.

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However, there is a lack of efficient usage of Customs Automation or information technology system at
Customs Offices with compares to developed country’s customs services. The researcher also observed
complaints about systems failure due to power shortage. According to Customs proclamation number
1160/2019 regarding temporary goods storage time at customs warehouse from 60 days to 15
days. Due to system breakdown problem importers may incur additional port storage payments,
demurrage. Moreover, due to system problem importer customs clearance time and cost may increase.
In most of developed country due to using automated customs systems the customs clearance process
time is short. However, this survey result indicates that in Ethiopia customs clearance practice there is
inefficient utilization and facility of the clearance process. This is more related to improper implement
of the system functionality successfully as intended. These survey results also indicate there is a lack of
efficient usage of Customs Automation or information technology system at Customs Offices.

4.4. Frequency Report On Dependent Variables

Theperformanceofcustomsclearing practiceisthedependentvariableofthestudy.Respondents wereasked

to rate the pointsmentioned under thefivequestionsof performance
objectives.Eachofthedependentvariablequestionsrelatedwitheachindependent factors.
Table 13: Frequency Report On Dependent Variables
Factors N Mean Std. Deviation
face vet 70 3.50 0.85
goods inspection 70 3.24 0.76
document scrutiny 70 3.23 0.72
Riskmanagement 70 3.48 0.75
Automation Systems 70 3.39 0.74
Source: Computed bytheresearcherfrom theprimarydata,(2022)

Above Table 13 indicates the mean for each dimension is provided, with customs face vet at 3.50
mean and 0.85 standard divisions. Custom clearance performance has the predictability of goods
inspection at a mean of 3.24 and 0.76 standard division. Similarly, there is customs document
scrutiny, Risk management, and Customs Automation Systems at standard deviations of 0.72, 0.75,
and 0.74 and mean of 3.23, 3.48, and 3.39, respectively. This implies that the above-listed practices
have influenced the performance of custom clearing practice to a great level.

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 4.5. CorrelationAnalysis

Correlation describes the strength of an association between two variables. The correlation coefficient is
measured on scale that caries from +1 through 0 to -1. If the absolute value of r 0-0.19 is regarded as
very weak, 0.2 -0.39 as moderate, 0.40-0.59 as strong and 0.8 -1 as very strong correlation, but these are
rather arbitrary limits and the context of the result should be considered (BMJ, 2020). Hence,
Correlation is the degree of relationship between dependent & independent variables. It has a value
ranging from -1 to 1. Therefore, on this research, Pearson Correlation analysis is conducted to determine
the relationship between the Independent variable;customs goods inspections, document scrutiny,
facevet, riskmanagement and customs automation system.
Table 14: Correlations
Logistic face inspection document RMGT automation
Performance vet scrutiny
Logistic Pearson
1 .667 .802 .716 .765 .759
Performance Correlation
Sig. (2-
0 .000 .000 .000 .000 .000
tailed)
Face Vet Pearson
.667 1 .398 .299* .366 .333
Correlation
Sig. (2-
.000 .001 .012 .002 .005
tailed)
Inspection Pearson
.802 .398 1 .536 .479 .575
Correlation
Sig. (2-
.000 .001 .000 .000 .000
tailed)
Document Pearson
.716 .299* .536 1 .473 .391
Scrutiny Correlation
Sig. (2-
.000 .012 .000 .000 .001
tailed)
risk Pearson
.765 .366 .479 .473 1 .535
management Correlation
Sig. (2-
.000 .002 .000 .000 .000
tailed)
customs Pearson
.759 .333 .575 .391 .535 1
automation Correlation
Sig. (2-
.000 .005 .000 .001 .000
tailed)
*. Correlation is significant at the 0.05 level (2-tailed).

Source: Computed by the researcher from the primary data, (2022)

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As it can be seen at the above table14, it was clear that among all the variables there were positive
correlation between logistic performance and independent variables with a Pearson correlation
coefficient within the range of 0.299 up to 0.802 and significance value is 0.01 and 0.05.Table14
which also indicates the correlation between independent variables i.e. simplicity and predictability of
face vet(r=0.667), inspection (r=0.802), document scrutiny (r=0.716), Risk management(r=0.765) and
Customs Automation Systems (r=0.759). All are important determinants of customs clearance activity
integration and significant to show the association of organizational logistic performance.Regarding
the relationship between independent variables, the above correlation shows that majority of the
independent variables are correlated at P < 0.01 and at P < 0.05 level of significance.

The above Table 14 also depicts that as there is very strong positive relationship between effect of
customs inspection activity and customs clearance/ logistics performance with a Pearson correlation
coefficient of (r=0.802) and significance value of 0.00. Also,there is strong relationship between
custom face vet, Document Scrutiny, risk management and customs automation with a Pearson
correlation coefficient of 0.667, 0.716, 0.765 and 0.759 respectively.

4.6. Regression Analysis

The regression analysis is a way of predicting of the output variable (dependent variable) from one
predictor variable (simple regression) or several predictor variables (multiple regressions) (Andy
field, 2009). For this study used regression between customs face vet, Customs inspection, customs
document scrutiny, customs risk management and customs automation as independent variables and
customs clearance performance/logistic performance as dependent variable. In this
studyused Multicollinearity, Linearity and Homoscedastic test Of Independent Variablesregression
mode assumption. The results of the regression analysis are presented as below.

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4.6.1. Test for Regression Mode Assumption

4.6.1.1. Multicollinearity Test

The VIF values of independent variables are beyond 10, then it is suggested that further investigation
is required (Leybourne et. al 2006). So the model there is no Multicollinearity problem, because VIF
of the model approaches between 1 to 2. The value of VIF ranges between1.256 and 1.900. In this
model the tolerance of the variables ranges between 0.526 and 0.796.
Table 15: Significance and Distribution of Coefficients7
Model Unstandardized Standardized T Sig. Collinearity
Coefficients Coefficients Statistics
B Std. Beta Tolerance VIF
Error
1 (Constant) 1.008E- .000 .000 1.000
013
Face Vet .200 .000 .299 135122517.295 .000 .796 1.256
Inspection .200 .000 .268 98433720.503 .000 .526 1.900
Document .200 .000 .255 103965613.388 .000 .650 1.538
Scrutiny
Risk .200 .000 .266 104571349.128 .000 .605 1.654
management
customs .200 .000 .263 101131694.417 .000 .579 1.728
automation
a. Dependent Variable: Logistic Performance
Source: Computed bytheresearcher from the primarydata,(2022)

Based on above table 15, variance inflation factor values of each independent variable are less than 10.
These mean that the assumption of Multi-co linearity is approved. Therefore, the average VIF is 1.62. all
thevariables are in acceptable range and we can conclude that there is noMulticollinearity effect .

4.6.1.2. Linearity Test Of Independent Variables

Linearity defines the dependent variable as a linear function of the predictor (independent) variables
(Wilkinson 1975). The model must be linear in the parameters regardless of whether the explanatory
and the dependent variables are linear or not. This is because the difficulty to estimate the parameters if
they are non-liner and not known their value given with data of both dependent and independent
variable.

- 40 -
Therefore, plotting the standardized residuals against the standardized predicted values is to check the
linearity and equality of variances. From the diagram below the data distributed without any increment
or decrement. This indicates there is linearity relation between the dependent and independent
variables.

Figure 3: Tests of Linearity

Source: own survey result, 2022

4.6.1.3. Test ofHomoscedastic Of Independent Variables

According toTabachnick,Fidell& Ullman(2007),homoscedasticassumptionindicatesthat

thevarianceremainsconstantfor allobservations.Foreachof thecollectedvalueof the
predictorsthevarianceof the error termmustbe constant.Ontheother handthereare
severalconditionsinwhichthisassumptionmay not hold.So,plottingthestandardized
residualsagainstthestandardizedpredictedvaluesmayconformthelinearityandequality
ofvariances.Forinstance,thevarianceoftheerrortermmayincreaseordecrease.From
thegraphbellow,itcanbeconcludedthatthereisnohomoscedasticityproblemthepoint distributes
randomlyandno increment ordecrement has showed.

- 41 -
Figure 4: Homoscedasticity Variance

4.6.1.4. Model Summary

Below table 16shows the model summary of this study that indicates the model is fit or not. The
Adjusted R square value indicates how much of the total variation in the dependent variable, can be
explained by the independent variable.

Table 16: Model Summary

Model Summary
Model R R Square Adjusted R Std. Error of the Durbin-Watson
Square Estimate

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 1 1.000a 1.000 1.000 .00000 1.421
A. Predictors: (Constant), face vet, goods inspection, document scrutiny, Risk management and
Customs Automation Systems.
B. Dependent Variable: Logistic Performance
Source: Own Survey and SPSS Output, 2022

In this case The Adjusted R square indicates that 1.000 percent of effect on Customs clearance/logistics
performance (dependent variable) is explained by the independent variables (face vet, goods
inspection, document scrutiny, Risk management and Customs Automation Systems), which is very
good. The R value represents the simple correlation and is 1.000, which indicates a high degree of
correlation between the variables. Therefore, the Adjusted R Square is greater than 0.50 and the model
is fit to explain the dependent variables.

4.6.1.5. ANOVA TEST

The acceptability of the model from statistical perspective can be shows from ANOVA test.
Accordingly, on the below table 16 indicated that significance level of 0.000. Thatis statistical fitness
of the regression model is significant to the data.

Table 17: ANOVA

Model AmountOf Squares DF Mean F Sig.

1 Regression 22.107 5 4.421 . .B

Residual .000 64 .000
Total 22.107 69
A. Dependent Variable: Logistics Performance
B. Predictors: Face Vet,, Document Scrutiny, Risk Management , Inspection Of Gods And Customs Automation

Source: own survey result, 2022

The above table 17that indicate F value of 000 which is significant with p= 000 which is less than
0.05. This tells us that some independent variables taken together as a set are significantly related to
the dependent variable.

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CHAPTER FIVE

5.1. SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

In this chapter, the researcher presented a summary of the major findings, conclusions, and
Recommendations based on the research findings.

5.2. Summary of Findings

The main purpose of this study was to assess the Customs clearance practices &its implication on the
Development Bank of Ethiopia in logistic performance. Based on research specific objectives research
questions were developed to lead and construct the study. To answer those research questions, a
questionnaire & interviewee was employed.

Hence, to collect information on customs clearance practice efficiency, questionnaires were focused on
customs clearance face vet, goods inspection, document scrutiny, risk management, and Customs
Automation Systems. To achieve this objective, five points lanker scale was used to collect data from
respondents to measure the independent variable. Accordingly,based on the discussion of the data on
chapter four, the following summaries of findings were drawn:

• Related to response rate of the questioner andDemographic Characteristics of the Respondents;

from total of 75 distributed Questionnaires only 70 questionnairesreturned. That means the
response rate is 93%. From 70 respondents of customs employees 60% weremale and 40% were
female. Ages of most respondents were between 26-35 years and 61% of respondents who
completed the questionnaires have first Degree.
• Relater to Descriptive Statistics Data Analysis that, five points lanker scale was used to collect data
from respondents to measure the independent variable, accordingly;
From 31 up to 45 percent of respondents were reacted with agree to promising customs face vet
practice (Advance ruling against the document to accept or reject, Customs procedures and
practices are transparent to accept or reject the declaration, the consistency of Customs
procedures and practices concerning international standards)

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Respondent were responded related to customs goods inspection; customs Goods released
temporarily by guaranty With agree and disagree, 44% and 36% respectively, redundancy of
goods during physical inspection with agree and neutral, 32% and 29% respectively, location
for goods inspection With agree and neutral, 41% and 28% respectively, customs scheduled for
inspection With agree and neutral, 37% and 24% respectively, additional cost incurred due to
delays of customs clearance process With agree and neutral, 53% and 16%
respectively,standard time for physical inspection of customs clearance activities With agree
and neutral, 50% and 21% respectively, Regarding standard time for physical inspection of
customs clearance activities agree and neutral, with 50% and 21% respectively.
From 30 up to 46 percent of respondents were reacted with agree to promising customs
document Scrutiny (redundancies of document checking for a particular shipment, additional
cost incurred due to delays document scrutiny clearance and standard time for each customs
clearance activities for document scrutiny.
Respondents were asked and responded with 47% and 21%, agree and neutral respectively to
Customs information and profile for risk channel categories,with 40 and 21 percent, agree and
neutral respectively to Customs employees operational knowledge about risk management, with
40 and 21 percent, agree and disagree respectively to efficient information flow for risk
profiling,with 47 and 23 percent agree and neutral respectively,Risk management system give
fair risk assessment,with 52 percent agree and 21 percent neutral to Risk management system
helps to speed up the custom clearance service, with 46 and neutral 24 percent agree and neutral
respectively to Risk management system and fraud practice of customs clearance and with 47
percent agree to Risk management system and its application on high-risk areas.
Finally, Respondent observation related to efficient usage of information technology system at
Customs Offices is 36 percent of the respondent agreed and 31 percent neutral, related the import
customs clearance practice its level of modern information technology system show that 37%
replied agrees, about the new system eCMS 41 and 37 percent of the participants were agree and
neutral, about the current system (eCMS) of efficient utilization to provide fast custom clearance
practice with 40 and 34 percent of the participants were agree and neutral and the respondents
were also replied about the eCMS system and risk management/ level of at submission of
documents with 39 and 33 percent of the participants were agree and neutral and on the issues

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 Automated Customs Systems provide governments with accurate and timely statistics on foreign
trade and revenue 47 and 26 percent the respondents replied agree and neutral.
• According tosecondary data analysis and interview, Ethiopian customs commission has giving
advance information related to main documents for customs clearance procedure such as Import
license, Customs Declaration, Insurance certificate and Bill of Lading / Airway bill. They said that
most of Customs procedures and practices are relatively consistent as appropriate, on international
standards. good released by guaranty to avoid clearance lead time or goods waiting time at customs
warehouse only permit for economy authorization company, in some level of degree there are
redundancy of goods physical inspection ,and there is standard time for goods inspection but it is
not applicable or realized during service time.In custom clearance activity, some customs
commission staff, particularly assessor officers not enough understanding and knowledge related to
customs manual procedure. Due to this take place redundancy of document checking for a particular
shipment and it cause for additional cost. There is unnecessary import goods physical inspection or
document check without proper risk profile and due to this impact on import cargo logistics.there is
luck of efficient usage of Customs Automation or information technology system at Customs
Offices with compares to developed country’s customs service.

5.3. Conclusion

TheaimofthestudywastoidentifytheCustomclearancepractices&theirimplicationonl ogi s t ic
performanceofdevelopment bank of Ethiopia. Basedonthisstudy finding,the following conclusions are
discussed;

Regarding speed, simplicity and predictability of face vet of customs clearance practice, we
can concluded that; there is Advancerulingto givingadvanceinformationforcustomers, there
is consistency and transparency to accept or reject the declaration and there are Customs
procedures consistent with international standards, aiming to reduce face vet practice.
Regarding speed,simplicity and predictability of Customs goods inspection of customs
clearance practice, we can concluded that; there are released goods byguarantyto
avoidclearanceleadtime, there is relatively less redundancyofgoods during physical
inspection, importer has no right to choose the location of inspection, there is relatively
schedule inspection activity during physical inspection, importer

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 incurredadditionalcostduetodelaysofcustoms clearanceprocess and there is relatively
standard service time for physical inspection of customs clearance activities,
Regarding speed,simplicity and predictability of document scrutiny of customs clearance
practice, we can conclude that; there is redundancy of document checking for a particular
shipment, importer may incur additional cost due to delays of document scrutiny in customs
clearance process and importer not obtained customs service activity based on standard
service time.
Regarding to Risk management Respondent response; Customs employees have adequate
operational knowledge about Risk management techniques, luck of efficient information
flow for risk profiling, there is fair risk assessment and management related to customs
clearance process, there is high level of Risk management system give catch every fraud And
strong Risk management system. From the interview, the researcher has got since most of
employee have knowledge gap related to risk management and lack of confidence.
Respondent responded about Effective implementation of modern customs automation; there
is efficient usage of Customs Automation or information technology system at Customs
Offices, there is modern information technology for custom clearance service and majority of
them disagreed that it’s not difficult to obtain accurate and timely statistics on foreign trade
and revenue easily.
• According to the questioner, secondary data analysis and interview with clearing agents and as
Discussed in summary part that generally indicate most of Customs procedures and practices are
relatively consistent as appropriate, on international standards. good released by guaranty only
permit for economy authorization company, There is standard time for goods inspection but it is
not applicable or realized during service time, some customs commission staff, particularly
assessor officer have not enough understanding and knowledge related to customs manual
procedure and due to this there is redundancies of document checking and unnecessary import
goods physical inspection and there is luck of efficient usage of Customs Automation or
information technology system at Customs Offices with compares to developed country’s
customs service.

• Ingeneral,itcanbeconcluded thatthe combinationsof thefiveindependentvariableshavean

impactandaffectedthelogisticperformance.Thus,Pearson Correlation analysis is conducted to

- 47 -
 determine the relationship between the Independent variable; that concluded that there is strong
positive relationship between customs clearance efficiency and goods physical inspection
process.

5.4. Recommendation
Based on the above conclusions, the researcher suggests the following points as credible
recommendations to the problem.
 The study that has pointed out, the customs face vet activity has significant effect on
Performance of the customs clearance and development bank of Ethiopia. So, the researcher
recommends that Ethiopia customs commission should implement giving advance information
for customers, Customs procedures and practices must be consistent and transparent and
appropriate on international standards against the document to accept or reject. Sinceit has
potential to improving logistic performance.
 Speed, simplicity and predictability of customs goods inspection activity role is a significant
effect on the performance of development bank of Ethiopia. So, the customs commission should
give more attention togoods inspection activity. The development bank of Ethiopia should use
an effective follow up system for inspection process of customs thathelps to avoid redundancy
of goods physical inspection.
 Ethiopia customs commission shouldbe avoid redundancies of document During Document
scrutiny, it helps to save importer from additional cost incurred due to delays document scrutiny
andthe customs commission also more focus in standard time for each customs clearance
activities for document scrutiny.
 The Risk management has significant effect on the customs clearanceactivity and logistics
service performance of the development bank of Ethiopia. So, the researcher recommends that
Ethiopia customs commission (ECC) should give information for importer about risk channel
categories (red, yellow, and green), give training for Customs employees to have adequate
operational knowledge about Risk management techniques andrelated to customs clearance
practice. ECC Should more attention for simplified way of assigning risk for imported items
and better to reduce the physical inspection of items especially for manufacturing companies
when they import raw materials, it will save the delay in customs clearance process, and more
give attention for Risk management system to catch every fraud.

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  The last variable of the study is Customs Automation Systems; according to the finding
Customs Automation Systems has statistically significant effect on customs commission of
Ethiopia and logistic performance of the DBE. To overcome the problems of ineffective use of
customs automation system, Customs Commission should properly supported by modern
information technology system.

REFERENCES

- 49 -
Wondwosen M. 2020; the Effect of Customs Regulations and Customs Clearance Process on Company
Performance in the Case Of Nestle Waters Ethiopia S.Co,addis Ababa ,Ethiopia.
Endashaw T. (2021),“The impact of customs clearance process on logistics efficiency: The case of
Modjo customs branch office in Ethiopia.
Bahru M., 2019; Challenges of customs clearing and their implication on international trade, Addis
Ababa, Ethiopia.
DebebeK. and TekluK. 2016: the Effects of Procrastination on Customs Clearance Cost: The Case of
Kality Customs Branch, Addis Ababa, Ethiopia.
Republic Of Turkey Ministry Of Trade, 2018: Facilitating Trade: Improving Customs Risk
Management Systems, Turkey.
Simachew M. (2021); Effects of Logistics Activities on Performance of Commercial Banks of Ethiopia
inBahir Dar District in Ethiopia.
Abel G. 2017:Logistics Management Practice inAwash Bank S.C, Addis Ababa, Ethiopia.
Gallardo J. (1997). “Leasing to Support Small Businesses and Microenterprises”, World Bank Policy
Research Working Paper 1857, USA; Washington D.C.
Ethiopian Revenue and Customs Authority, 2010: Customs procedures and Techniques for trader,Addis
Ababa, Ethiopia.
Ethiopian Customs commission. Ethiopian Customs Guide (2017), Ethiopia: Addis Ababa.
Council of Ministers Regulation No. 60/199. Customs Clearing Agents Council of Ministers
Regulation, Ethiopia: Addis Ababa.
United nation convention trade development, 2011. Use of Customs automation systems, No. 3,
Geneva, Switzerland.
Council of Ministers Regulation No. 108/2004. Customs Clearing Agents Council of Ministers
Regulation, Ethiopia: Addis Ababa.
World Bank’s Logistics Performance Index (LPI) and drivers of logistics performance (2015).Lauri
OJALA Turku School of Economics, Finland and DilayÇelebi Istanbul Technical University, Turkey.
BahruMuktar (2019).challenges of customs clearing and their implication on international trade in
Ethiopia, Ethiopia: Addis Ababa.
Ethiopia shipping and logistic enterprise (2020), operation procedure manual, Ethiopia: Addis Ababa.
Busha T. (2021), Customs Clearing and Freight Forwarding, Ethiopia: Addis Ababa.

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Sintayehu A. (2019), the opportunities and challenges of lease financing service in development bank
of Ethiopia,Ethiopia: Addis Ababa.
Getie A. (2021), Article Review Guideline and research proposal, Ethiopia: Addis Ababa.
World Bank (2018), World Bank Logistics Performance annual report, USA; Washington D.C.
Essete G. (2019), the Effect of Customs Clearing Process on the Performance of Custom Clearing
Agents in Addis Ababa, Ethiopia: Addis Ababa.
Huan M.2015: Human Resource Capability and Internal Customer Satisfaction and its effecton the
Organizational Effectiveness, Yunlin, Taiwan.
Addis Ababa Chamber of Commerce (2009), The Management of Commercial Road Transport in
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WCO, 2018, time release study guide

World Bank, Customs modernization hand book, 2005

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Essete,G. (2019) The Effect Of Customs Clearing Process On The Performance Of Custom Clearing
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Woldu,G. (2016),The Current Practice of customs valuation of Imported goods at the Ethiopian
Customs (ERCA): a case oriented Study, Addis Ababa University, Ethiopia:

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 APPENDIX

Addis AbabaUniversity
School Of Commerce
Logisticsand Supply ChainManagement

Questionnaire

DearRespondents

First, I would like to thank you for giving me your precious time and I am JilalNasro and conducting
a study entitled “The Effect of Customs Practices on Logistics Performance: the case of
Development Bank of Ethiopia as partial fulfillment for a master of art degree in logistics and supply
chain management program. Beyond academic purposes, the result of the study will help to provide
certain information for the logistics sector.

Therefore, your support to fill out this questionnaire is extremely valuable to accomplish this study.
The researcher also assured you that all answers you provide will be kept in the strictest
confidentiality and utilized for the above-mentioned entitled academic study only.

Thank You

Part I:General Information

Put tick(√)markin the appropriateanswer box. (Bracket)

1. Gender Male( )Female( )
2. Age 18 -25 ( ), 26-35 ( ), above35 ( )
3. Educational background
Below12 ( ), Certificate( ), Diploma( ), Degree( ), Masters( ), PhD( ), other specify ( ),
4. Serviceyear
Lessthan 5years ( ), 5-10 years( ), above 10 years( ).
5. Job Position __________________________________
6. Service year on the above job position __________________________________

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PartII: Efficiency of customsclearancepractice
Please indicate your consent by using a tick mark (√) the number that best represent how you feel about
the effect of customs clearance practices on logistics performance.

No 1. face vet Strongly Disagree Neutral Agree Strongly

Disagree Agree

1 Advanceruling(givingadvanceinformationforcusto
mers) against the document to accept or reject.

2 Customs procedures and practices are predictable,

consistent and transparent to accept or reject the
declaration

3 Customs procedures and practices are consistent

as appropriate, on international standards, aiming
to reduce face vet practice.

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N 2. goods inspection Strongly Disagree Neutral Agree Strongly
o Disagree Agree

1 Goodcanbereleasedtemporarilybyguarantyinorde
rto
avoidclearanceleadtimeorgoodswaitingtimeatcust
oms warehouse.

2 Thereareno redundancyofgoods physical

inspection

3 Importer able to choose the location for goods

physically goods inspection

inspected (atcustoms compound orimportersite)

4 Importshipment and good inspections are cleared
fromcustoms as scheduled

5 Thereare additional cost incurred due to delays

of goods inspection custom clearancepractice

6 Thereisstandardtime for goods inspection

N 3. document scrutiny Strongly Disagree Neutral Agree Strongly

o Disagree Agree

1 There are no redundancies of document checking

for a particular shipment.

2 Thereareadditionalcostincurredduetodelaysdocume
nt scrutiny

3 Thereisstandardtimeforeachcustomsclearanceactivi
ties for document scrutiny

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 No 4. Riskmanagement Strongly Disagree Neutral Agree Strongly
Disagree Agree
1 Customs has strong information and profile
forriskchannelcategoriesorriskbasedinspection
(red,yellow, and green)
2 Customs employees have adequate
operationalknowledge about Riskmanagement
techniques
related tocustoms clearance practice
3 There is efficient information flow for risk
profiling
4 Risk management system give fair risk
assessment
5 Risk management system helps to speed up the
clearance practice
6 Risk management system give catch every
fraud.
7 Risk management system allow customs to
concentrate checks on high-risk areas

8. How do you evaluate the current Risk Management practice applied at Customs in general?

___________________________________________________________________________________
___________________________________________________________________________________
________

N 5. Customs Automation Systems StronglyD Disagree Neutral agree Stronglyag

o isagree ree
1 There is an efficient usage of Customs Automation or
information technology system at Customs Offices.
2 Theimportclearancepractice is properlysupported by
modern informationtechnologysystem
3 The new system eCMS (electronics customs
management system) better than ASCYDAA++
(Automated System for Customs Data)
4 eCMS is efficiently utilized to provide fast
customclearance practice
5 The eCMS system could precisely label the level of risk
at submission of documents
6 Automated Customs Systems provide governments
with accurate and timely statistics on foreign trade
and revenue

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7. What are the common challenges in relation to custom automation system? Does it facilities &
speed up the clearance time?
___________________________________________________________________________________
___________________________________________________________________________
11. If you have any comment, please mention it here.
___________________________________________________________________________________
___________________________________________________________________________________
________________________________________________________________________________
Thank you very much!

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Interview
1. Howdoyouevaluatecustoms clearance practice with respect of facilitation support
yourlogistics service performance?
2. Is customs clearance service implementing efficient customs clearance to reduce transit time
in terms of face vet, good inspection and document scrutiny?
3. Iscustoms clearance service implementingsimplified and modern customs clearance
procedure?pleasemention them
4. Is thecurrent automation systemsufficient to support and makethecustomsclearance
performance?
5. What arethemajor sources of delays ofcustomsclearancepractice?Pleasespecify?
6. How do you evaluate the risk management to support clearance practice by identifying risk level of
the goods being immediately cleared?
7. Anythingthatyou want to add about customsclearance practice? Please, specify?

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