Tag / Import

by Mike Poverello

When will the AfCFTA be customs-ready?

Picture: Grayomm @ Unsplash.com

The negotiations to finalise the tariff schedules and rules of origin (RoO) of the African Continental Free Trade Area (AfCFTA) are taking place during the last two weeks of January 2022. Senior Trade Officials (STOs) and the AfCFTA Council of Ministers (COM) will then meet to confirm the results or to decide the outstanding issues. Once the State Parties have agreed on the content of these important Annexes to the AfCFTA Protocol on Trade in Goods, they must be adopted. This is the responsibility of the African Union (AU) Assembly.[1]

Trade in goods under AfCFTA preferences can then begin among the State Parties presently trading with each other under most-favoured-nation (MFN) rates. (Non-State Parties will first have to accede to the AfCFTA Agreement in terms of Article 23 of the AfCFTA Agreement.)

Those State Parties that are members of Regional Economic Community (REC) Free Trade Areas (FTAs), Customs Unions (CUs) and other trade arrangements will continue to trade under existing preferential arrangements.

Article 19(2) AfCFTA Agreement provides that

“… State Parties that are members of other regional economic communities, regional trading arrangements and custom unions, which have attained among themselves higher levels of regional integration than under this Agreement, shall maintain such higher levels among themselves”.

Article 8(2) of the Protocol on Trade in Goods adds the following:

“… State Parties that are members of other RECs, which have attained among themselves higher levels of elimination of customs duties and trade barriers than those provided for in this Protocol, shall maintain, and where possible improve upon, those higher levels of trade liberalisation among themselves”. 

However, there is also the practical requirement that the AfCFTA regime must be “customs ready”. It means that the tariff books of individual State Parties and of CUs such as the Southern African Customs Union (SACU), and presumably the East African Community (EAC) and the Economic Community of West African States (ECOWAS), need to be updated. AfCFTA columns will have to be added to these tariff books in order to ensure the new preferences will be enjoyed when customs officials and border control agencies clear goods under this new trade arrangement.

The updating of a tariff book normally happens through national legislative procedures such as the promulgation of a Government Gazette. Customs and other border officials can only act in terms of domestic legal instruments granting them the necessary powers. Trade agreements are not self-executing.[2]

The importation and exportation of goods entail detail procedures involving customs clearance. Customs clearance is the procedure of procuring permission, through its customs authority, to either take goods out of its territory (export) or have goods enter its territory (import). Failure to provide the correct paperwork will mean that goods cannot clear customs and enter the market of the country of destination.

The customs authority of a country is the administrative agency responsible for collecting tariffs and for controlling the flow of goods into and out of a country. Depending on local legislation and regulations, the import or export of some goods may be restricted or forbidden, and the customs agency enforces these rules. The customs authority is different from the immigration authority, which monitors persons who leave or enter the country, checking for appropriate documentation, apprehending people wanted by international arrest warrants, and impeding the entry of others deemed dangerous to the country. A customs duty is a tariff or tax on the importation or exportation of goods.

The approach taken by the World Customs Organisation (WCO) is to improve the security of borders, without unduly hindering legitimate international trade. The WCO initiative focusses on the entire international trade supply chain, rather than restricting customs’ interest to that aspect of the international trade transaction, when goods move across a border. The basic principle underpinning its work is to create an international mechanism for Customs Administrations to gain access to relevant information relating to international trade well in advance, for the purposes of risk management and risk assessment.[3]

The AfCFTA is a free trade agreement (FTA). This is an agreement between States that removes tariffs and other restrictions on goods which are traded between the State Parties, according to the applicable RoO. The main difference between a customs union and a free trade agreement is that even where zero (or reduced) tariffs are part of an FTA, extra bureaucracy is needed to take advantage of those tariffs. Exporting under an FTA means companies have to comply with a complex set of rules (known as preferential rules of origin) to prove that goods only come from countries who have signed up to the FTA and that such goods have been produced or manufactured in accordance with the applicable RoO. For a customs union, once the common external tariff has been paid for a product then it is in “free circulation”. Traders only have to prove the common external tariff has been paid on goods or parts they have used. This is easier to demonstrate than proving the origin of imported goods.

Source: Authored by Gerhard Erasmus, TRALAC, 24 Jan 2022

[1] Art 22 AfCFTA Agreement.

[2] Constitutional systems based on monism, may provide otherwise but will have other requirements to ensure that the executive branch of government respects the powers of the legislature.

[3] https://www.osce.org/files/f/documents/a/6/24649.pdf

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by Mike Poverello

Pakistan Customs Joins TradeLens

By joining the blockchain-underpinned platform TradeLens, Pakistan Single Window is supporting Customs in modernizing its import-export documentation through a safe & secure, paperless, digital solution to strengthen its controls against trade-based money laundering.

On 20 December 2021, On behalf of Pakistan Customs, the Pakistan Single Window Company today signed an agreement with TradeLens, a blockchain-underpinned logistics platform supported by 5 of the 6 largest ocean carriers globally, to digitize import-export documentation of the containerized cargo moving in and out of the country. Pakistan’s international trade ecosystem is being rapidly transformed through the introduction of technology driven initiatives led by the Pakistan Single Window and the country’s authorities recognize the potential benefits of digitizing supply chains for efficiencies, enhanced transparency, and data-driven decision making.

Advisor to the Prime Minister on Finance and Revenue Mr. Shaukat Tarin added, “Joining the TradeLens platform is allowing us to enhance our ecosystem in a way that all the involved stakeholders get access to a transparent and secure platform that makes processes more efficient.”

Cross-border containerized supply chains are some of the largest and most complex business ecosystems in the world today. It is not uncommon for 30 independent parties, 100 people and up to 200 exchanges of information to be connected to a single shipment. With increased complexity comes increased cost. Shippers or beneficial cargo owners (BCOs) need consistent, auditable and immutable data from multiple sources to effectively manage their supply chains.

The authorization to sign the collaboration came from the PSW Governing Council chaired by Mr. Shaukat Tarin. The Chief Executive Officer of PSW Aftab Haider formally signed the agreement with Irtaza Hussain, the Regional Head of Network for TradeLens at IBM.

PSW integration with TradeLens will help Pakistan Customs and other trade regulators to improve their operational efficiency and create value through the blockchain platform. The immutability of Blockchain-underpinned document information is important in the identification of illegal activities, as well as, improving the smooth operation of legal trade.

Marvin Erdly, Head of TradeLens at IBM. commented “The growth of the TradeLens’ network is evidence that participants from all across the supply chain ecosystem can derive significant value through digital collaboration.  Pakistan now joins an increasing number of connected Customs Authorities on the TradeLens platform exploring innovative solutions to enhance global trade access and enhance process efficiencies for all involved”.  

TradeLens is a neutral platform brings together data from the entire global supply chain ecosystem including shippers and cargo owners, 3PLs and freight forwarders, intermodal operators, customs and government authorities, ports and terminals, and several ocean carriers. This data allows TradeLens and its network partners to modernize manual and paper-based documents by replacing them with blockchain-enabled digital solutions. It also allows the network partners to provide their customers with deeper visibility into the entire journey for their cargo from origin to destination and reduce uncertainty allowing for better planning and reduced inventory costs. TradeLens welcomed it’s first network member in Pakistan, Al-Hamd International Container Terminal, earlier this year.  

Source: TradeLens, 28 December 2021

by Mike Poverello

Blockchain – introducing Customs to the Global Supply Chain, earlier

Picture: Dadiani Fine Art

Customs authorities are age-old institutions whose missions have been subject to numerous changes over time. Historically, the main role was to levy customs duties, which, in other words meant collecting resources for the benefit of local authorities. Today, customs performs many other functions, from securing national borders, recording import and export trade and prevention of fraud and illegal trade activity.

From the customs authority’s perspective, there is a constant focus on finding innovative technology and new methods and techniques to become more effective on risk assessment and inspection of the goods circulating across their borders. At the same time, customs authorities must examine the consequences these changes will have on trade, avoiding the creation of additional burden and obstacles for industries and entities involved in the exchange. Adopting flexible technology is often key for meaningful strategic transformations.

More quality data with accuracy and speed

Each country has its own policies for operating border control when goods arrive or depart from their territory. Most of these policies work from systems built off a central repository, powered by data collected from different sources. Time and effort are often spent in sorting and cleansing data from these various sources but disconsonant data can still create confusing outcomes when analyzed.

While globalization gives an incentive to operate in an open market, the increased amount of trade activity also conceals illicit activities that must be supervised by customs authorities, such as tax evasion, drug traffic or smuggling. It is in the best interest of the entire industry to cooperate, allowing data sharing to flag the early recognition of risky trade transactions.

Receiving data related to the supply chain activities prior to and during the transportation process can assist authorities, supporting them to pinpoint risky elements on international trade. Data validation across various trade and transportation documents allows authorities to manage detailed risk assessment processes and is enhanced with access to earlier and more granular information.

Providing government authorities with access to upstream transport data is one of the features of TradeLens. On the platform, customs authorities have access to data related to their countries from the moment a booking is placed with a carrier. Updates on documents from different data sources and transportation milestones are shared in near real-time.

Additional data is not only a way to make sure that accurate risk assessments are being made, but it can also help decrease the burden placed by the bureaucracy related to importing or exporting goods. Increasing the accuracy of the inspection of goods, can enable authorities to focus their resources on the most important targets and improve trade documentation processing for reliable shippers, truckers and carriers. Enhancing global trade and the upstream exchange of information can drive growth and prosperity for the entire ecosystem.

Doing more with less

While many technologies and platforms exist in the marketplace, organizations are often constrained by limited public resources that must be utilized wisely. TradeLens does not aim at replacing existing systems but enhancing them with additional data from the supply chain. The TradeLens Platform provides a forum for authorities to run pilots and test innovative solutions in a true end-to-end shipment lifecycle.

In order to contribute to the logistics operations of the entire ecosystem, customs authorities can send notifications related to their inspection and release activities to TradeLens. This information will be made available in near real-time to all the players involved in the shipment and permissioned to see the data.

Several countries have already started using TradeLens to improve their access to valuable information that will in turn support their mission goals:Indonesia, Ukraine, Saudi Arabia, Thailand, Jordan and Azerbaijan.

Source: TradeLens, 28 May 2020

by Mike Poverello

New Zealand Customs – announces new laws concerning the importation of Tobacco Products

When you import or bring tobacco products into New Zealand, you must comply with New Zealand laws. You must pay all relevant taxes on your imported tobacco at the border.

From 1 July 2020, tobacco products, tobacco leaf and tobacco refuse will become prohibited imports and you will be required to have a permit to import these products.

Permits are approved and issued by Customs. That means if you want to send someone in New Zealand any kind of tobacco product including as a gift, you will have to apply for a permit.

Also from 1 July 2020 you cannot receive any tobacco products through the international mail. Tobacco must only be imported using a freight forwarder, the fast-freight courier system or as bulk sea or air cargo. You will still be able to use New Zealand Post’s international courier service.

Customs will issue a permit to established importers for one year from 1 July or the length of time a manufacturer holds a licence to manufacture tobacco products. Other importers will need to apply for a permit.  Permits will be issued free of charge. 

From 1 July 2020, any tobacco products, leaf or refuse imported without a permit will be seized and destroyed. Customs will send a written notice to importers confirming the seizure and destruction of the tobacco products, leaf and refuse. In the unlikely event of the product being seized and destroyed in error (for example, when the person had a valid permit to import), the importer will be entitled to compensation for the customs value of the products.

A permit is not required to import cigars, cigarillos, water-pipe tobacco, chewing tobacco, snuff and snus.

Passengers arriving into New Zealand with tobacco do not need a permit and individual duty-free tobacco limits are unchanged. More information about duty-free limits and FAQs are available to download.

Source: New Zealand Customs Service, 22 May 2020

by Mike Poverello

Update to SARS Customs requirements under COVID-19

Visit the SARS Customs & Excise Webpage for an update on Customs import and export requirements under COVID-19.

The update can be accessed at this link!

Source: SARS, 19 April 2020

by Mike Poverello

Law firm cautions – Multiple Contracts can be Confusing

contractLaw firm Shepstone and Wylie cautions traders to be well aware of the legal considerations to be taken into account when negotiating an international trade transaction.

When importing or exporting goods, a trader is inclined to conclude a transaction on terms that place the least possible obligations on the trader concerned.

There are a number of separate (albeit related) agreements which form part of an international trade transaction e.g.:

  • Agreement of sale
  • Agreement of carriage
  • Insurance contract
  • Letter of credit or some payment agreement

Under the contract of sale, the main obligations are the effecting of payment on the part of the importer, and delivery of the agreed thing on the part of the exporter. The manner of delivery, passing of risk, obligation of insurance and carriage depend on the terms to which the parties have agreed.

Sale agreements usually deal with the rights and obligations of the parties by reference to Incoterms. Devised and published by the International Chamber of Commerce, Incoterms are at the heart of world trade. Incoterms are standard trade definitions most commonly used in international sales contracts.

The “E” & “F” terms are most onerous for the buyer. Such terms, however, allow the buyer to control the carriage and insurance and should reflect in a lower purchase price for the goods.

The “C” and “D” terms are less onerous for the buyer, but result in a higher purchase price and the seller arranges the carriage, and in most instances, the insurance.

While it is tempting to look for the least onerous incoterm, it may not always be a wise choice if it leaves the party exposed either under the other agreements, or due to consequence that were not considered.

A few commercial benefits to concluding a sale agreement based on Incoterms that obligate a party to bear the cost of insurance and carriage are:

  • An ability to negotiate a lower price or higher purchase price for the goods, depending on whether the party is a seller or a buyer; and
  • If the party has a good relationship with or a preference for a certain service provider, the party is able to obtain insurance or carriage services on terms and conditions more acceptable to it.

A vital consideration when negotiating an international trade transaction access to legal redress if things go wrong (and they often do in trade).

It is important to ensure that a party has a proper understanding of the agreed terms, including both the legal and commercial considerations. A party’s risk must also be considered against the full suit of contractual obligations in order to ensure:

  • The rights and obligations under the different agreements are compatible; and
  • Obvious benefits under one agreement do not pose risks under another.

Legal advice is always desirable in circumstances where a trader feels he does not have a full appreciation of the legal implications of the international trade transactions he is seeking to enter in to. Source: Shepstone & Wylie Attorneys – Quintus van der Merwe

by Mike Poverello

Namibia Launches Trade Portal

Namibian Trade PortalThe Namibia’s Ministry of Finance and Namibia’s Customs & Excise, in partnership with the U.S. government has recently launched a powerful new tool to increase and facilitate cross-border trade. The “Namibia Trade Information Portal” is a web-based platform that provides an authoritative “one-stop shop” of readily accessible trade, customs and compliance information. It is designed to significantly reduce the time and effort required for local and international traders to access current information and documentation required for doing business. The portal is the culmination of many years of collaboration between government of Namibia agencies and ministries and the U.S. government, working through the U.S. Agency for International Development (USAID) Southern Africa Trade Hub Project.

In his keynote address, Minister of Finance Calle Schlettwein said that the Trade Portal reflects the commitment of the Namibian government to build a “robust, knowledge-based society” through various modernization projects. However, he cautioned that the portal must be kept up-to-date if it is to be sustainable and relevant.

“For this reason, I strongly appeal to my fellow and counterpart ministers to designate focal points in their ministries who shall administer and avail timely updates, preferably online transmission of such information to our designated team in the Ministry of Finance who will, in turn, keep the portal updated,” Schlettwein said.

According to Namibia Trade Information Portal’s project manager, Melannie Tjijenda, the portal will save people time when they enquire about trade-related matters, so they will no longer be sent ‘from office to office.’

“International traders will now know how they can invest in Namibia,” she said, adding that this will save money on expenses like phone calls.

Tjijenda said the fact that most government websites are not regularly updated will not be the case with this portal. “When something changes, we will update it” she said, further pointing out that they have a team of content managers who will be checking and updating the content on regular basis. Source: The Namibian/USAID

by Mike Poverello

Zimbabwe’s manufacturing firms insist on ban of import of second hand clothes

2nd hand clothingZimbabwe’s manufacturing firms want government to consider banning the import of second-hand clothes as part of reforms to protect the local industry, Parliament heard on Tuesday.

Used clothes have flooded the domestic market, compounding the woes of a local textile industry on the verge of collapse. Industry experts say Zimbabwe has a market for 80 million garments but only 20 million of those are locally manufactured. Almost 90 percent of imported new clothes are exempt from duty because of regional trade agreements, analysts noted.

Confederation of Zimbabwe Industries (CZI) national council member Jeremy Youmans told a parliamentary portfolio committee on industry and commerce that industry requires access to long-term capital, as well as clarity on the indigenization and empowerment law among other measures to compete on the same terms with foreign companies that have established a foothold in the country.

“Second hand clothing in South Africa is banned, if they catch (anyone selling) they will burn it. Maybe that is something we need to consider,” Youmans said.

“As a clothing industry certainly, we have always said we don’t want to stop it because that clothing is being donated to some people who cannot buy clothes themselves.

“The problem is that they are not going to those people, they are going into our markets and somebody is buying those clothes, it’s a very difficult situation.”

He added that the revival of the cotton industry would be key in boosting capacity of the country’s textile industry.CZI vice-president Sifelani Jabangwe said Zimbabwe should improve its business climate to become competitive by doing away with bureaucracy which drives the cost of doing business.

“One of the challenges is that in order to comply with being formally registered, we have to be registered with a number of bodies depending with the nature of the business and they charge licence fees,” he said.

“When you add up these costs, individually they seem to be so low but when you add them up just to be formally operational it is actually a significant cost to the extent that this causing other businesses to close down.”

by Mike Poverello

Feature – Côte d’Ivoire Single Electronic Window for Trade

Ivory Coast SEW2As Customs and Border regulatory authorities ramp up their commitment to international agreements, such as the WCO Revised Kyoto Convention, SAFE Framework of Standards and the more recent WTO Trade Facilitation Agreement, more countries will offer a single point of entry through which traders, international carriers and logistics providers can access and comply with the resident customs and other government regulatory regimes.

The concept of a Single Window is borne out of the fact that traditional import/export and related regulatory requirements pose a barrier to market entry for international goods. There are many derivatives of Single Window in operation globally. Perhaps the best resource for this can be found on the UNECE’s interactive Trade Facilitation Implementation Guide webpage. One can navigate to the case studies page to read up on a country-by-country experience on various trade reforms including Single Window developments.

Côte d’Ivoire (Ivory Coast) is one of many African countries who have introduced Single Window as a facilitation measure whereby international trade can interface with Customs in a number of ways. It consists of a web-based trade portal (operated by Webb Fontaine) which interfaces with AsycudaWorld (AW), Côte d’Ivoire Customs’ management system. The portal allows traders to key-in advance import/export information within an electronic document called TVF (Trade Virtual Folder). Customs declarations are then subjected to tariff classification  and valuation, thereafter routed for commercial/risk assessment and revenue accounting on AsycudaWorld, or Sydam World as it is known in Côte d’Ivoire.

Commercial banks use the TVF within the Single Window to endorse the settlement of each import; the Ministry of Commerce subsequently authorizes the overall transaction through the system.

The Single Window provides an entry point for traders and supply chain operators to accomplish various Customs formalities such as –

  • Customs Declaration processing – allowing importers and exporters to electronically file clearances.
  • Manifest operations – used by all carriers to upload their XML manifests and register the same through the trade portal directly into AsycudaWorld. The facility also allows the amendments of waybills (e.g. excess and shortages) and automatically synchronizes the operations with the AW system. The Port Authority IT systems, including the Port of Abidjan and the Port of San Pedro, automatically receive and integrate the manifests submitted by carriers.
  • License module – allows traders to request import/export licenses (regulatory permits) that are later on approved online by the relevant ministries. Each license comprises a list of regulated products, quota allowable amount based on a predefined scheme (gross mass, net mass, FOB, Unit of measurement or unlimited quota). Further developments will include the automatic write-off of license quota by declarations using the Declaration module.

Source: Webb Fontaine

by Mike Poverello

Mexico – Recognising WCO Policies and Standards in the wake of Organised Crime

Port of Lazaro Cardenas Mexico [www.puertolazarocardenas.com.mx]

Port of Lazaro Cardenas Mexico [www.puertolazarocardenas.com.mx]

At the beginning of May the Mexican authorities detained the 73,700 dwt Jian Hua with this following on from the earlier seizure of 119,000 tonnes of iron ore in storage at the port.

At the end of April the Mayor of Lazaro Cardenas was arrested and accused of kidnapping, extortion and links to organised crime and in November last year federal troops took over the security and customs functions at the port of Lazaro Cardenas and remain in charge today.

The main aim of these measures is to eradicate the influence of the violent criminal organisation the Knights Templar, whose base of operations is the south western state of Michoacan where the port of Lazaro Cardenas is located.

Knights Templar, through the corruption of customs and other officials, has been using the port of Lazaro Cardenas for the extensive import and export of illegal drugs. The iron cargoes are one of many ‘business diversifications’ by the cartel but as the Jian Hua shipment proves are illegal in that the documentation associated with this cargo showed production at a mine that is not yet authorised for legal operation.

For years the state of Michoacan has basically been lawless and the area around the port of Lazaro Cardenas has been a battleground between the various drug gangs with the Knights Templar being in ascendancy since 2010.

Since, however, the entry of federal agencies into the state, and notably the Mexican navy into the port of Lazaro Cardenas, the influence of Knights Templar has gone into severe decline. The cartel has basically lost control of its biggest business. They have also felt the wrath of a public uprising, the sharp end of which are armed vigilantes backed by federal forces.

The optimistic view is that the port of Lazaro Cardenas will become ‘clean’ again with the demise of Knights Templar and the arrangements it had with other drug cartels. The negative view is that another cartel will step into Knight Templar’s shoes and the port will again find itself under external control and home to illegal activities.

Short steps

The lesson here, as independent organisations such as Control Risks emphasise, is that it is a few relatively short steps before a major port gateway can be comprehensively penetrated by criminal organisations. The conditions that created an opening for Knights Templar are not unusual in Latin America in Control Risks’ view.

For these reasons, and many others associated with port efficiency, it is very important to have secure and professional agencies active in ports that are specialists in security and border management. It is also important to realise in this context that considerable assistance is available from external agencies such as the World Customs Organisation (WCO) to establish the proper controls and security checks. Further, that it is often only by the use of independent agencies or organisations that comprehensive experience and know-how can be deployed to achieve this – the arms’ length approach which can circumvent internal corruption.

If corrupt elements are in place there will inevitably be resistance to change but an external agency forcing the pace of change, based on global experience, will play a major part in overcoming such elements.

Taking the WCO as an example, among other things it functions as a forum for dialogue and exchange of experiences between national Customs delegates. The WCO offers its members a range of conventions and other international instruments, as well as technical assistance and training services provided either directly by the secretariat, or with its participation. The secretariat also actively supports its members in their endeavours to modernise and build capacity within their respective national Customs administrations.

The WCO’s efforts to combat fraudulent activities are also recognised internationally. The partnership approach championed by the WCO is one of the keys to building bridges between Customs administrations and all the stakeholders in the transport chain. Source: Port Strategy

by Mike Poverello

Importing and Exporting in the absence of Customs Registration

Import exportAs of May 10 2013 an amendment to the South African Customs and Excise Act (91/1964) published in Government Gazette 36433, concerns an increase to the threshold for importation and exportation in the absence of customs registration.

General Registration Code 70707070 may be used by a party that is not registered as an importer or exporter with the South African Revenue Service, but wishes to import or export goods, provided that the following requirements are met:

  • The goods have a value of less than R 50,000 per consignment, subject to a limitation of three such consignments per calendar year;
  • The goods are declared for home consumption (ie, consumption or use in South Africa) or temporary import or export;
  • The importer or exporter is a natural person located in South Africa; and
  • The importer or exporter states its identity number or taxpayer reference number on the customs declaration form.

Traders should not confuse the above with the withdrawal of the General Registration Code from use by importers and exporters at land borders, which occurred during the course of 2012. In this regard refer to Rule Amendment Government Gazette No. 35178

by Mike Poverello

Parallel imports in South Africa – Some sound advice

newTyres_m_mThe following article was penned by lawfirm Edward Nathan Sonnenberg and featured on Lexology.com. It was reported recently that bikers had protested outside Parliament about proposed measures which would have the effect of making life very difficult for those businesses who are involved in the parallel importation of motorbikes. The report did not make it clear exactly what the proposed measures comprised, but it did suggest that they involved special testing of bikes that are brought into the country by parallel importers, together with some system of issuing certificates for such bikes. Measures that, the report suggested, would not only require parallel importers to raise their prices, but might even put them out of business altogether, leaving authorised suppliers as the only source of motorbikes in the future. Amongst the protesters were the Parallel Importer of Motorcycles Traders Association of SA and Cosatu, which said that it was worried about job losses.

So just what are parallel imports, or ‘grey goods’ as they are sometimes known? Well, a foreign manufacturing company will normally appoint an authorised distributor for its product in South Africa. That distributor is then responsible for sales of the product, after-sales service and, of course, marketing, advertising and all those other good things that go into brand-building. A parallel importer is someone who buys that same manufacturer’s product in another country and imports it into South Africa for resale. The reason why the parallel importer bothers to do this is quite simple- the product is often so much cheaper abroad that the parallel importer can undercut the authorised distributor and still make a profit.

Needless to say the authorised distributor does not like the parallel importer, because the parallel imports threaten the authorised distributor’s business. The manufacturer generally doesn’t like the parallel importer much either – not only does it have to deal with complaints from an unhappy authorised distributor, but it also has no control over what the parallel importer does with the brand. But can the manufacturer or the authorised distributor actually do anything to stop the parallel imports?

Parallel importation is certainly legal under trade mark law. That’s because Section 34 (2) (d) of the Trade Marks Act provides that a trade mark registration is not infringed by ‘the importation into, or distribution, sale or offering for sale in the Republic, of goods to which the trade mark has been applied by or with the consent of the proprietor.’ This makes perfect sense if you bear in mind that a trade mark is essentially an indicator of origin, and that trade mark law is basically there to ensure that there is no consumer confusion. In the case of a parallel import, the consumer gets exactly what they expected, namely a product that was made by or under the control of the company that owns the trade mark – contrast this with the situation where the consumer buys a rip-off or counterfeit, where they get something very different from what they expected.

There is a proviso to this, and that is that the parallel importer must be quite open about the fact it is not an authorised distributor. That’s because Section 25 (2) of the Consumer Protection Act provides that ‘a person who markets any goods that bear a trade mark, but have been imported without the approval or licence of the registered owner of that trade mark, must apply a conspicuous notice to those goods in the prescribed manner and form.’

So, if you’re a parallel importer you should be OK provided that you make it clear that you are not the authorised distributor of the product. But there are other legal matters to consider, and the first of these is copyright. Copyright might be an issue where the product that’s being imported bears a trade mark that consists of more than just a name, but also something that could be described as an artistic work – this might be a logo, or it might simply be a stylised form of a name. There was a case a number of years back where a foreign manufacturer successfully used copyright law to stop parallel importation of cassette tapes. But it was an extraordinarily contrived thing: time to concentrate hard…

The Copyright Act provides that copyright is infringed where someone imports an article into South Africa in circumstances where they knew that the making of that article would have been an infringement if the company that made it had in fact made it in South Africa. To use this provision, the cassette tape manufacturer had to go through a number of hoops: it had to assign the South African copyright in the label to the authorised distributor; it then had to warn the parallel importer that it was importing articles that – had they been made by the manufacturer in South Africa – would have infringed the authorised distributor’s copyright; finally when the parallel importer ignored the warning (probably because it didn’t understand it!) it could sue for infringement. There has, as far as I’m aware, never been another case like this and one wonders whether – in an age where intellectual property law is considered in the light of constitutional and competition law and policy – the same result would be achieved if a similar case ever went to the highest court.

Finally it’s worth remembering that, in the fairly rare event of the product that’s imported being covered by a patent or a design registration, there may well be an issue. Section 45 of the Patents Act says that a patentee has the ‘right to exclude others.. from importing the invention’, whereas Section 20 (1) of the Designs Act says that the owner of a design registration has the right to exclude ‘other persons from …importing … any article included in the class in which the design is registered and embodying the registered design.’

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by Mike Poverello

Traders can’t interpret Terms

incoterms2The lack of knowledge to interpret international terms of trade (INCOTERMS) is to blame for the high cost of doing businesses among importers and exporters, the secretary general of the Uganda Shippers Council. Many importers do not understand international terms of trade such as Cost and Freight, Free on Board and Cost Insurance and Freight (CIF), yet in Uganda, taxation is done based on CIF.

“This means that a Ugandan trader who is importing or exporting goods has to pay freight costs in the East African region, whose headquarters are based at Mombasa, in addition to cost of goods, insurance and freight charges for the goods,” explained Kankunda, Secretary General of the local shipper’s council..

“If a Ugandan trader is able to understand these terms, then they will be in position to secure a local shipping line and pay a slightly lower cost compared to paying from the country where the goods are coming from.”

Kankunda was speaking at a three-day workshop on INCOTERMS for importers and exporters from the East Africa region. The training was aimed educating international traders best practices in handling INCOTERMs and other international freight transactions. It is expected to contribute to reducing the cost of cargo handling and shipment along East African corridors by enabling importers and exporters to efficiently apply proper commercial terms and practices.

Kankunda said the application of inappropriate commercial terms, insurance policies and inefficient processing of various trade transactions when importing or exporting goods are some of the causes of the high cost of doing business in the region. It is estimated that transport costs make up 30% to 40% of CIF value of imported goods in East Africa, compared to about 5% to 10% in other regions. Source: AllAfrica.com