Landed cost, letters of credit, and the May 2026 foreign exchange reforms

What changed on 25 May 2026

In a public notice issued in Addis Ababa, the National Bank of Ethiopia removed the requirement for central-bank pre-approval on letters of credit and on CAD-on-acceptance authorisation procedures, explicitly to cut bureaucratic delay and transaction costs for importers and exporters.

That sits inside a longer sequence of foreign-exchange rule changes — the relaxation followed roughly 18 months of tight regulation — and the practical effect for an importer is shorter and less predictable lead times rather than uniformly shorter ones. Which is itself a reason to record actual lead times per supplier instead of assuming them.

What has to be in the landed cost

The invoice from the supplier is the smaller half of what a unit costs you. The rest arrives separately, often weeks apart, and usually as a single figure covering a whole shipment:

• Freight to the port and inland transport.
• Customs duty, excise where it applies, and any surcharge.
• Clearing agent fees, port handling, demurrage if it sat.
• Bank charges on the letter of credit, and the spread on the currency.
• Insurance for the voyage.

None of that is optional to include. Leave it out and your cost of sales understates, your margin overstates, and your best-looking lines are the ones with the heaviest freight.

The allocation method changes the answer

Here is where most spreadsheets quietly go wrong. Say a shipment carries two lines and 60,000 birr of freight, duty and fees to be spread across them.

Line B's unit cost moves by 28% depending on nothing more than which basis you chose. If B is priced at 420 birr, allocating by value shows a 29% margin and allocating by weight shows 8%. Both are arithmetically correct. Only one of them reflects what actually drove the freight bill.

Pick one and stay with it

Whatever you choose, consistency matters more than sophistication. Switching basis between shipments makes period-to-period margin comparison meaningless, and it is the sort of change an auditor will ask you to justify. Write the policy down, apply it to every shipment, and revisit it deliberately rather than per consignment.