AS GOVERNMENT takes steps to curb Chinese imports, tax analysts and legal experts say the growing trade in pirated and counterfeit goods from that country is threatening SA’s economy, the competitiveness of local companies and the livelihoods of workers.

It is estimated that thousands of counterfeit goods enter SA’s harbours every day, ranging from electronic equipment and DVDs to clothing and tobacco, stealing market share from legitimate local manufacturers and contributing to thousands of job losses.

Duane Newman, a director of indirect tax at Deloitte, says counterfeit goods make their way across SA’s borders in a number of ways.

“These include smuggling, undervaluation when declared to the authorities, or not being properly declared. False declarations are made in terms of tariffs and goods may be diverted to SA while in transit to other states.”

At certain harbours, importers declare that the goods are coastwise carriage, ie local, and have already been cleared, to evade the payment of duties, he adds.

The South African Revenue Service (SARS) and the border police have three pieces of legislation they can use to combat counterfeiting: the Customs and Excise Act, the Merchandising Marks Act and the Counterfeit Goods Act.

Newman says that the challenge with counterfeit goods is that they are often very cheap, with no royalties paid to the brandholder. From a customs valuation perspective this is problematic, as the authorities cannot act if the low price declared is the actual price that the importer paid for the goods.

Newman says the use of scanners by customs officials is not a substitute for a physical search, especially when counterfeit goods are imported.

“SARS has a very long border to police. It is not possible to patrol all the borders and examine all goods.”

Newman says SARS has to apply risk-profiling to identify high-risk importers.

SARS spokesman Adrian Lackay says customs officials process about 2,4-million import transactions annually, which makes it impossible to examine all imported goods.

Customs apply an examination rate of about 5%, which is above the average international rate, he says.

Lackay says goods may be manifested for Botswana, Lesotho, Namibia or Swaziland but may find their way back into SA.

Lackay says that customs has to cover all other areas and responsibilities, which include the collection of duties, the detection of drugs, and anti-smuggling operations.

He says that when authorities come across counterfeit goods, the goods are held under the Customs and Excise Act.

Samples are then drawn (one of each brand and type), which are sent to the lawyers of the particular trade marks involved.

Confirmatory affidavits are obtained from the attorneys and warrants are obtained from a magistrate to seize the goods. They are then removed to a counterfeit goods depot.

Although counterfeiting is a criminal offence under the Counterfeit Goods Act, heavy penalties are seldom instituted. For instance, the highest fine imposed by a court has been R600000.

Lackay says the law needs to be reviewed and brought into line with the model provisions of the World Customs Organisation.

Eric Levenstein, a director at Werksmans Attorneys, says intellectual property rights are increasingly being recognised worldwide as a valuable asset worth protecting in the asset base of a company. Failure to properly recognise intellectual property as an asset will affect the bottom line of a company, result in lost revenue and affect the organisation’s reputation, he says.

“When one views the increasing levels of copied products being imported into SA and its neighbouring states, the continued influx of such goods could cause severe damage to a company’s ability to trade effectively and profitably.”

Newman says that in SA there is talk about strengthening partnerships with the private sector and customs. This can be seen in the various programmes the private sector has been working on to train customs officers to identify counterfeits.

Last year Finance Minister Trevor Manuel said customs was “refining and improving its accreditation scheme to offer preferred clients privileged status with certain benefits — typically electronic (paperless) customs clearance”.

Says Newman: “I understand that this scheme is in the process of being revamped and will be in line with global initiatives such as the Approved Economic Operator, recommended by the World Customs Organisation. If this programme is implemented in SA, it could provide significant benefits to companies regarding the global movement of their products.”