Ethiopia has taken a significant step to implement the African Continental Free Trade Area (AfCFTA) by issuing Council of Ministers Regulation No. 574/2025. This new regulation, published on July 14, 2025 in the Federal Negarit Gazette, operationalizes Ethiopia’s tariff reduction commitments under AfCFTA. In practical terms, it establishes how import duties on goods from other African countries will be gradually reduced or eliminated, in line with the schedules agreed to by AfCFTA member states. The move is a follow-up to Ethiopia’s ratification of the AfCFTA Agreement in 2019 (via Proclamation No. 1124/2019), ensuring that the treaty’s promises are implemented in domestic law.
In this post, we provide an informative summary of Regulation 574/2025 and discuss its business impact in a neutral, factual manner. The target audience includes clients, legal professionals, policymakers, and the general public – so we’ve kept the language accessible while covering the key points. We’ll also explain how this regulation relates to the 2019 ratification proclamation, and include a handy table of the tariff reduction schedule (Categories A, B, and C) for clarity.
Background: AfCFTA and Ethiopia’s Commitment
Ethiopia is one of the countries participating in the AfCFTA, a continent-wide free trade area aiming to progressively eliminate tariffs and other trade barriers among African nations. To recap the timeline: AfCFTA was signed in March 2018, and Ethiopia ratified it in March 2019 through Proclamation No. 1124/2019. That proclamation was essentially Ethiopia’s legal commitment to the AfCFTA treaty. It authorized the government – specifically the Ministry of Trade (now Ministry of Trade and Regional Integration, MoTRI) – to take steps to implement the agreement domestically.
Under AfCFTA rules, each country must establish a Schedule of Tariff Concessions – basically, a plan listing which tariffs will be cut and on what timeline. Ethiopia’s schedule needed approval at the African Union level. In fact, the AU heads of state approved Ethiopia’s tariff schedule in February 2024, which clarified how Ethiopia would categorize its imports and phase out tariffs. Following that approval, Ethiopia’s Council of Ministers moved to issue the implementing regulation.
Regulation No. 574/2025 is the domestic legal instrument that makes AfCFTA tariff concessions operative in Ethiopia. It was issued in accordance with Proclamation 1124/2019 (the ratification law) — linking the new rules back to the authority granted by Parliament — and aligns Ethiopia’s tariff regime with the AfCFTA requirements. In short, Proclamation 1124/2019 was the “green light” to join AfCFTA, and Regulation 574/2025 is the roadmap for reducing tariffs as promised.
Key Provisions of Regulation 574/2025
Regulation 574/2025 is a detailed document, but its core purpose is straightforward: to implement the negotiated tariff reductions on goods traded under AfCFTA. Here are the key components of the regulation:
Tariff Reduction Categories and Schedule
One of the most important aspects is how the regulation classifies goods into three categories for tariff cuts. This follows the AfCFTA modalities agreed by member states:
- Category A: Covers the majority of tariff lines (at least 90% of all product lines). Tariffs on these goods are to be reduced in equal annual installments over 10 years, starting from January 1, 2021, until they reach zero by year 10. In other words, by 2030 these goods will be duty-free under AfCFTA.
- Category B: Covers a smaller set of sensitive products (up to 7% of tariff lines). Tariffs on Category B goods will be reduced in equal steps over 8 years, starting later (from January 1, 2026) and hitting zero by the eighth year (which would be 2033). These are products Ethiopia is liberalizing more slowly.
- Category C: Covers the excluded or highly sensitive goods (at most 3% of tariff lines). These goods are exempt from tariff reduction – meaning Ethiopia will not cut tariffs on these under AfCFTA, so the normal import duty (MFN rate) remains in force for them.
The regulation formally adopts these categories and specifies the timeline. Annexed to the regulation is the “Free Trade Area Tariff Schedule,” essentially a table showing the tariff rate for each year of the implementation period for Category A (and presumably an outline for B). To illustrate how Category A works, the table below shows a simplified example of tariff reduction:
Table: AfCFTA Tariff Reduction Categories for Ethiopia (Reg. 574/2025)
Under this framework, Ethiopia commits to liberalize roughly 97% of its tariff lines over time (Category A + B), while keeping a small exclusion list (Category C). The regulation makes clear that Category A reductions are already in effect from 2021 – meaning that by the time the regulation was issued in 2025, several rounds of annual cuts for Category A should have technically occurred. Indeed, the AfCFTA Schedule is given retroactive effect to January 1, 2021 in the regulation. (However, as we’ll note later, the regulation also states there will be no refunds for duties paid before it came into force.)
For a concrete example: if an imported product fell in Category A and had a 20% tariff in 2019 (before AfCFTA), the schedule would reduce it by equal parts each year until 2030. According to the annexed table, it would be 18% in 2021, 16% in 2022, 14% in 2023, … down to 0% by 2030 . Similarly, a product with a 5% base tariff would go to 4.5% in 2021, 4.0% in 2022, etc., reaching 0% by 2030 . Category B items will follow a similar linear path but starting later (2026). Category C items see no reduction at all under this scheme.
It’s important to note that these cuts apply only to goods originating in AfCFTA member states (and meeting the rules of origin criteria discussed below). Goods from non-African countries (or African countries that haven’t reciprocated) continue to be charged the standard tariff rates.
Implementation Mechanism and Conditions
Regulation 574/2025 not only provides the schedule of tariff rates, it also lays out how these concessions are to be applied and monitored:
- Goods Eligible for AfCFTA Tariff: The reduced “Free Trade Area Tariff” applies only to imports from AfCFTA member countries (referred to as “Member States” in the text) . The Ministry of Trade and Regional Integration will issue a list of which countries’ goods are eligible – essentially those that have also started implementing AfCFTA and accord Ethiopia reciprocal concessions. This ensures Ethiopia only gives the AfCFTA rate to countries that are participating and up-to-date on their side.
- Category A vs B in practice: Initially, only Category A goods get immediate tariff reductions under this regulation. The regulation says tariff cuts outlined in the schedule “shall apply exclusively to goods classified under Category A” at first. Category B and C items are to be treated separately: the Ministry of Finance is empowered to identify which goods fall under B and C and to notify when their reductions will start. Since Category B’s start year is 2026, presumably the Ministry will announce the phased reductions for those as that date arrives. Until then, Category B goods likely remain at their normal rates (Category C of course, stays at normal rates indefinitely). The regulation also contemplates that if Ethiopia and a partner country later negotiate moving an item from one category to another, the Ministry of Finance can implement that change by notification.
- No disadvantage vs. MFN tariff: An interesting point – if Ethiopia’s standard tariff (MFN rate) for a product is ever lower than the AfCFTA rate, then imports from AfCFTA countries will simply pay the lower standard tariff. In other words, the AfCFTA concession will never force a higher duty than the normal rate. Conversely, if the standard tariff is lowered but later rises above the AfCFTA-scheduled rate, the customs will revert to charging the AfCFTA (lower) rate for AfCFTA-origin goods. This clause ensures that AfCFTA partners always get the best available rate (either the preferential rate or the normal rate, whichever is lower).
- Rules of Origin Compliance: To qualify for the reduced AfCFTA tariffs, goods must meet the AfCFTA rules of origin. Regulation 574/2025 explicitly states that goods will get AfCFTA tariff benefits “only if they meet the rules of origin and other conditions specified in the Agreement, particularly those in Annexes 2 and 4 of the Protocol on Trade in Goods”. This means an importer needs to provide a valid certificate of origin showing that the product sufficiently originates within an African member state. If a product doesn’t meet the origin rules or the importer lacks the paperwork, it will be charged the normal tariff (Standard Tariff Rules) despite being from Africa. This places responsibility on traders to ensure compliance with origin criteria (e.g., local content thresholds, processing requirements) to benefit from duty cuts.
- Customs Procedures: The Ethiopian Customs Commission is tasked with helping implement this. It will issue certificates of origin for Ethiopian exports under AfCFTA and verify certificates presented for imports. Customs will collaborate with other stakeholders to enforce the rules and have to set up procedures to manage the new tariff regime. Essentially, Customs becomes the gatekeeper for verifying that any import claiming the AfCFTA rate is legitimate.
- Safeguards and Adjustments: The regulation authorizes the government to make adjustments as needed:
- The Ministry of Finance can correct any errors in goods descriptions or HS classifications in the schedule and align them with the international HS system updates. This is important for keeping the schedule accurate over time.
- The Ministry of Finance will also announce the tariff cuts each year as they are applied, to facilitate awareness and implementation. For example, each year’s updated rates for Category A (and eventually B) should be published for transparency.
- If Ethiopia and a partner agree to shift a product between categories or otherwise amend the schedule, the Ministry of Finance will update and notify authorities to implement that.
- There is a provision allowing the suspension of AfCFTA tariff benefits for a partner country’s goods if that country isn’t complying with the rules. Specifically, if a Member State fails to comply with the origin provisions (Article 3(7) referenced) or other conditions, the Ministry of Trade and Regional Integration can request suspension of concessions, and the Ministry of Finance can suspend that country’s tariff concessions under AfCFTA for Ethiopia’s imports. This acts as a remedy in cases of serious non-compliance or fraud.
- Effective Date: The regulation stipulates that it becomes effective one month after publication in the Gazette (so mid-August 2025). However – and this is crucial – it then says “notwithstanding that one-month rule, the AfCFTA Tariff Schedule is effective as of January 1, 2021”. This backdating acknowledges that, ideally, Ethiopia’s tariff cuts should have begun with the rest of AfCFTA in 2021. In practice, Ethiopia hadn’t yet issued the implementing law until now, but this clause is a way of saying we are treating the schedule as if it were in force from 2021. The implication is that from now on, customs must apply the current-year reduced rates (e.g., the 2025 rate for a Category A good, rather than the original tariff). The regulation also explicitly notes that any duties paid before it came into effect won’t be refunded. So importers cannot claim back the higher tariffs they paid in 2021-2024 before these rules were operational. Going forward though, they will benefit from the lowered rates.
Interaction with Other Import Charges (Surcharges and Levies)
Import duties aren’t the only charges on imports in Ethiopia; there are also a 10% surtax (surcharge) and a 3% Social Development Levy in recent years. Regulation 574/2025 addresses how these will be treated for AfCFTA trade:
- The existing import surcharge (10%) under Regulation No. 133/2007 will continue to apply to goods from AfCFTA countries in general. However, for Category A and B goods, this surcharge is to be gradually reduced in line with the tariff schedule. It even says the surcharge “shall be fully exempted from the year when \[the tariff] is scheduled to reach full exemption”. In simpler terms, the 10% surtax will phase out for AfCFTA goods as their tariffs phase out. By the time a Category A good hits 0% duty, it will also stop incurring the 10% surtax entirely. This prevents the surcharge from undermining the tariff concession over time. (Category C goods presumably keep paying the full surcharge since their tariffs aren’t cut.)
- The Social Development Levy (SDL) introduced by Regulation No. 519/2022 (a 3% levy on imports) will not apply at all to Category A and B goods once the AfCFTA agreement is in force for those goods. The regulation states “any duty, including the Social Development Levy… shall not apply to goods classified under A and B after the date of entry into force of the \[AfCFTA] Agreement.”. This is an important point for importers: qualifying AfCFTA goods not only get duty reductions, but also will eventually be free from the extra 3% levy. Essentially, as soon as Ethiopia starts applying AfCFTA rates (which, by this regulation, is now), Category A and B goods should no longer be subject to the SDL. This makes them cheaper than they would be otherwise by removing that additional tax. (Category C goods would presumably still pay the SDL, since they’re not “after entry into force” of any tariff exemption – they have no tariff exemption.)
- No Retroactive Refunds: As mentioned, the regulation includes a clause on non-refundability. Any taxes or duties paid on imports from member states prior to the regulation’s effective date cannot be refunded. This is basically to avoid a scenario where businesses say, “Hey, since the schedule was effective in 2021, I overpaid duty in 2022, give me a refund.” The government is drawing a line: past is past, but going forward, the lower rates apply. So, importers benefit prospectively, not retrospectively.
Overall, these measures ensure that the full benefit of AfCFTA preferences will be felt on eligible goods, because not only the base customs duty but also the additional import charges get eliminated in tandem. By the end of implementation, a Category A or B product from an AfCFTA country will pay zero customs duty, zero surtax, and zero SDL – truly duty-free treatment – whereas today it might still incur some of those (until the phase-out catches up).
Business Impact and What to Expect
The implementation of AfCFTA tariff concessions in Ethiopia carries several implications for businesses, investors, and the economy. Here’s a breakdown of the impacts on different stakeholders and some considerations:
- Lower Import Costs for African Sourcing: For Ethiopian importers and manufacturers, one immediate benefit is the prospect of cheaper inputs and goods from African countries as tariffs decrease. Goods that qualify under Category A already should be entering at a tariff rate lower than the pre-AfCFTA normal rate (since we are effectively in year 5 of the reduction schedule by 2025). These rates will continue to drop each year. For example, if you import raw materials from an AfCFTA country that had a 30% tariff normally, in 2025 you’d pay only ~18% under AfCFTA (assuming year 5 of the schedule, per the example above), and this will go down to 15% in 2026, 12% in 2027, etc., until 0% in 2030. This progressive reduction can improve profit margins or allow cost savings to be passed to consumers. It also incentivizes Ethiopian companies to diversify suppliers and consider African sources where they might not have before, since the tariff barrier is coming down.
- Export Opportunities and Competitive Access: Ethiopian exporters stand to gain reciprocally as other African countries remove tariffs on Ethiopian goods. Proclamation 1124/2019 and now Regulation 574/2025 made Ethiopia an active participant in AfCFTA, which means Ethiopian-made products in Category A should enjoy duty-free access in other African markets by 2030 (and many sooner than that). Firms in sectors like agriculture, textiles, manufacturing, etc. should prepare to take advantage of growing access to a continental market of 1.3 billion people. One practical facilitation is that the Ethiopian Customs Commission will issue Certificates of Origin for exporters – local businesses should obtain these to prove their goods meet AfCFTA origin criteria so that their customers across Africa can import them duty-free. Over time, as tariffs vanish, Ethiopian products will be more competitive in African markets (no extra import tax there), which could boost export volumes and attract investment into export-oriented industries.
- Compliance is Key (Rules of Origin): Businesses must be aware that the tariff cuts aren’t automatic for every import from Africa – documentation and product origin matter. Companies importing from AfCFTA countries will need to ensure their suppliers provide the proper certificate of origin so that Customs applies the AfCFTA rate. If the product doesn’t meet the AfCFTA origin rules (for instance, if it’s mostly made in a non-African country and just trans-shipped through an African state), it will not get the discount. This might involve adjusting supply chains to increase African content. Similarly, Ethiopian producers who want their goods to count as “African origin” in other markets may need to source inputs regionally or add sufficient local value. Training logistics staff on AfCFTA customs documentation and keeping careful records will be important for companies to fully benefit.
- Competitive Pressure and Adjustment: While consumers and importing industries benefit from lower tariffs, some domestic industries will face increased competition from imported African goods as duties drop. The phased approach (Categories A and B) is designed to give time to adjust. Category B includes products that likely have domestic producers needing a few extra years of protection – these won’t see cuts until 2026 and only gradually after that. By 2026, we can anticipate more foreign competition in those sectors as tariffs start falling. Companies in those areas should use the lead time to improve efficiency or differentiate their products. The smallest set, Category C, is goods that remain protected (no tariff cuts), possibly because they are ultra-sensitive sectors (for example, certain staple foods or industries critical to livelihoods). For those, Ethiopian tariff policy isn’t changing under AfCFTA, so domestic companies remain shielded, but note that other countries, in turn, likely excluded those from their concessions too – meaning Ethiopian exporters in those Category C areas won’t get new access either.
- Regional Value Chains: In the bigger picture, AfCFTA implementation could encourage regional value chain development. With Ethiopia reducing tariffs on African intermediate goods, local manufacturers might find it advantageous to source components from, say, Kenya or Egypt rather than from overseas, to save on duties. Conversely, manufacturers elsewhere in Africa might source from Ethiopia for the same reason. The gradual elimination of tariffs could make African-made products more cost-competitive relative to imports from outside Africa (which still face Ethiopia’s normal tariffs). This shift could foster greater intra-African trade volume and economic integration. Businesses should keep an eye on new partnership or market opportunities within Africa that open up due to these changes.
- Administrative Adjustments: From a practical standpoint, businesses will need to stay updated on annual tariff rate changes. The Ministry of Finance is expected to announce updated rates each year for Category A (and later B) goods. For example, on Jan 1, 2026, a Category A tariff might drop another notch. Importers and customs brokers will have to apply the correct rate at the time of clearance. It’s wise for companies to consult the published AfCFTA tariff schedule (which might be available via MoTRI or Customs) to know what rate to expect for your product in each year. Additionally, as noted, certain taxes like the Social Development Levy are waived for eligible goods, so importers should ensure those are not erroneously charged on AfCFTA-qualifying imports after the regulation’s effect. This might involve informing logistics departments or clearing agents about the new rules.
- Policy Stability and Government Support: The issuance of Regulation 574/2025 signals that the Ethiopian government is committed to the AfCFTA process and is putting in place the domestic legal framework to support it. For policymakers and observers, this is a positive development toward regional economic integration goals. It will be important that the government continues to play an active role – for instance, by providing guidance to businesses, ensuring Customs is well-trained in the new rules, and engaging in the AfCFTA committees to address any issues (like cases of non-compliance or disputes). The regulation has built-in flexibility (through Ministry of Finance and MoTRI powers) to correct and adjust as needed, which is good. Businesses can have some confidence that the tariff reductions, once in force, will remain and indeed reach zero on schedule barring extraordinary circumstances.
In sum, Regulation 574/2025 is largely good news for companies trading with Africa. It reduces costs and formalities in the long run and creates opportunities for expansion. That said, companies must align their operations to the AfCFTA requirements (especially origin criteria) to actually reap the benefits. As tariff walls come down, competition may intensify, pushing local firms to step up efficiency — but consumers and competitive exporters stand to gain significantly.
Relationship Between Reg. 574/2025 and Proc. 1124/2019
It’s worth explicitly clarifying how Regulation No. 574/2025 and Proclamation No. 1124/2019 are connected, as they are two legal instruments, six years apart, dealing with AfCFTA:
- Proclamation 1124/2019 was the act of Ethiopia’s Parliament that ratified the AfCFTA Agreement. By passing that proclamation on 5th April 2019, Ethiopia gave AfCFTA the force of law domestically, but in broad terms. It acknowledged Ethiopia’s obligations under the treaty and empowered the executive (notably the Ministry of Trade) to carry them out. Essentially, it was a framework law saying “we are part of AfCFTA”. It did not contain specific tariff schedules or customs procedures; those details were left to be handled by regulations and directives. The proclamation did mandate that the responsible organ (initially the Ministry of Trade and Industry) implement the agreement.
- Regulation 574/2025 is issued by the Council of Ministers under the authority of that proclamation (and Ethiopia’s domestic law that allows regulations to be passed for implementation of proclamations). In fact, the regulation explicitly cites Proclamation 1124/2019 as its legal basis – the Council of Ministers enacted it “in accordance with Proclamation No. 1124/2019 ratifying the AfCFTA Agreement…”. So, Reg. 574/2025 is a direct execution of the mandate that was created by Proc. 1124/2019. The proclamation opened the door for AfCFTA rules, and the regulation now walks through that door with concrete rules.
- Another way to see it: Proclamation 1124/2019 made Ethiopia a contracting party to AfCFTA, and thereby Ethiopia agreed to, for example, reduce 90% of tariffs over 10 years, etc. But until the new regulation came, a trader couldn’t go to Ethiopian Customs in 2021 and demand the AfCFTA rate – there was no internal mechanism. Now, with Regulation 574/2025, Customs does have the instructions and schedule needed to give effect to those tariff cuts. The timing was such that Ethiopia took a few years (2019–2024) to finalize details before kicking off implementation.
In summary, Proclamation 1124/2019 is the parent law that ratified the AfCFTA treaty, and Regulation 574/2025 is a child law that actually implements one of the treaty’s main components (tariff concessions) in practice. They are part of a hierarchy: the proclamation had the approval of the legislative branch, and the regulation is an instrument by the executive branch to fulfill the proclamation’s objectives. Without 1124/2019, the regulation would have no foundation; without 574/2025, the promises of 1124/2019 wouldn’t materialize on the ground. The regulation reinforces that relationship by mentioning the proclamation in its preamble and aligning all provisions with what Ethiopia agreed to in the AfCFTA framework.
Conclusion
Ethiopia’s Council of Ministers Regulation No. 574/2025 is a major milestone in the country’s integration into the African Continental Free Trade Area. In neutral terms, the regulation translates Ethiopia’s AfCFTA commitments – as per the 2019 ratification law – into actionable rules on tariffs, ensuring that around 97% of goods traded with AfCFTA partners will become duty-free over the coming decade. It establishes clear categories (A, B, C) and timelines for tariff reduction, with Category A goods already enjoying reduced rates and headed to zero by 2030. The regulation also smartly addresses implementation details, from requiring proof of African origin for goods to get the preference, to phasing out Ethiopia’s own import surcharges in parallel, to empowering ministries to manage the process and adjust as needed.
For businesses, the immediate effect is the unlocking of new cost savings and market opportunities under AfCFTA. Importers sourcing from Africa can import at reduced duty (and should check updated rates each year), while exporters can more confidently access other African markets knowing the legal structure is in place for reciprocal tariff cuts. Over time, consumers may see the benefits of wider competition and possibly lower prices on some goods as tariffs fall. The broader economy stands to gain from increased intra-African trade and investment, as the AfCFTA’s promise is to boost trade among African nations by removing the long-standing fiscal barriers.
Of course, the changes will roll out gradually and will require awareness and adaptation. Companies must ensure compliance (proper documentation for origin) to utilize the preferences. Some local industries will need to innovate and improve competitiveness in light of a more liberalized African market. The government will need to continue providing clarity – for instance, publishing which countries’ goods are eligible (as mutual agreements firm up) and any sector-specific guidelines.
In the relationship between the 2025 regulation and the 2019 proclamation, we see Ethiopia’s commitment coming full circle: what was a high-level policy decision in 2019 has become operational reality in 2025. This progression underscores Ethiopia’s dedication to the AfCFTA vision of a single African market. For stakeholders – whether they are foreign investors evaluating the Ethiopian market, local entrepreneurs planning expansion, or policymakers monitoring regional integration – the enforcement of Regulation 574/2025 is a clear signal that Ethiopia is open for freer trade within Africa and is aligning its trade regime with continental norms.
Moving forward, all involved parties should keep an eye on the implementation of these tariff reductions and make sure to capture the benefits. Businesses may want to consult with trade experts or professionals to navigate the specifics of tariff classification, origin rules, and compliance as the AfCFTA journey progresses. With the regulatory framework now in place, the next steps will be all about execution and making the AfCFTA’s opportunities a reality on the ground in Ethiopia.
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