Why Coffee Beans Origin Country Trade Rules Matter in Ethiopia

Ethiopia's Coffee and Tea Authority has banned a Chinese coffee company from signing contracts with Ethiopian parties after it failed to pay local exporters, according to the outlet Capital. Two firms buying coffee for the Chinese market reportedly received goods without paying, and regulators acted to protect export earnings, which are a key source of foreign exchange for Africa's largest coffee producer.

Interest in Ethiopian beans has grown in China on the strength of floral, fruity cups, especially among pour-over drinkers who favor acidity. Buyers in that market import green coffee and roast it locally. With demand rising, the payment dispute shows how a single unpaid contract can affect the coffee beans origin country relationship and prompt tighter oversight of exporters.

Ethiopia, as Africa's largest coffee producer, is known for its coffee beans' floral and fruity aromas, and in recent years it has become highly popular in the Chinese market. However, a recent report from local media has drawn attention: the Ethiopian Coffee and Tea Authority decided to ban a Chinese coffee company from signing contracts with Ethiopian parties because it failed to pay local exporters. This incident not only reflects payment disputes in China-Ethiopia coffee trade but also highlights the importance of coffee exports to the country's foreign exchange earnings. This article will review the course of events, the companies involved, and local regulatory measures, and revisit the popularity of Ethiopian coffee in the Chinese market.

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In recent years, coffee has gradually entered the daily lives of Chinese consumers, and demand in the domestic coffee market has continued to rise. Many coffee companies choose to import green beans from major coffee-producing regions around the world, then ship them back to China for roasting and sale. With the spread of coffee culture, more and more coffee lovers have begun to learn about Africa's ancient coffee country—Ethiopia—and its coffee beans with floral and fruity aromas.

The popularity of pour-over coffee has further boosted sales of Ethiopian coffee beans. Among consumer groups that prefer acidic flavors, Ethiopian beans have many loyal fans. To meet domestic demand, many Chinese coffee companies purchase coffee beans from Ethiopian exporters and sell them to consumers after bringing them back to China.

However, about a week ago, the local Ethiopian media outlet Capital reported that the Ethiopian Coffee and Tea Authority banned a Chinese coffee company from signing contracts with Ethiopian parties. The reason for this decision was that the Chinese company failed to pay the corresponding funds to local coffee exporters, causing damage to the foreign exchange earnings of Ethiopia's coffee industry.

The report pointed out that two companies that purchase coffee from Ethiopian exporters and supply the Chinese market had already received the goods but had not yet paid the necessary funds to the exporters. Among them, LEBUNNA TRADING DMMC, responsible for supplying coffee to the Chinese market, was repeatedly pressed for payment by local exporters, but the company did not respond to requests for timely payment. This behavior not only plunged local exporters into financial difficulty but also affected the country's foreign exchange earnings.

It is reported that Ethiopia is Africa's largest coffee producer and the world's fifth-largest exporter of Arabica coffee. Coffee is one of the main sources of the country's export revenue, accounting for 30% to 35% of total export earnings. Over the past decade, China's annual coffee consumption has grown at an average rate of more than 15%, which has given Ethiopian exporters strong interest in the Chinese market and a willingness to cooperate with Chinese companies.

It has been reported that on February 1, 2024, in a letter to the local coffee exporters association, the Ethiopian Coffee and Tea Authority mentioned that LEBUNNA TRADING DMMC had changed its name to SINOCHAM HEBEI CORPORATION, and that the company was still continuing to purchase coffee from exporters without payment.

In response to the above issues, the Ethiopian Coffee and Tea Authority, under the authorization of Decree No. 1051/2009 and Regulation No. 433/2011, has the power to supervise and enforce contracts signed with foreign buyers or exporters and may take appropriate action when contractual obligations are not fulfilled.

In view of the current situation, the Authority has instructed the local coffee exporters association not to sign any contracts with companies that hinder the country's foreign exchange earnings until the National Bank of Ethiopia resolves the issue.

Image source: Internet

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