Caveat emptor

Caveat emptor

The growth of counterfeit goods is one of the biggest problems facing the transport industry. GAVIN MYERS investigates.

Ever since the dawn of time, there have been those who cotton on to an idea and copy it, with the aim of either improving it or entering the arena as competition. The motor industry is certainly no exception. The industry of parts supply was a natural spin-off to vehicle manufacturing, bringing us the giants we have today; Bosch, Federal-Mogul, ZF, ContiTech, GUD – one could fill this magazine listing them all.

These parts manufacturers often supply products to the automotive manufacturers themselves as well as for aftermarket replacement. The parts are usually approved by the vehicle manufacturers as replacements and are manufactured to full original spec. Of course, the vehicle manufacturers themselves also offer Original Equipment Manufacturer (OEM) replacement parts but sometimes at a higher price. (Most times, when a vehicle is brand new, aftermarket manufacturers and retailers may not sell parts for a certain period of time.)

It’s all very legal, and very lucrative; the local automotive aftermarket parts industry supplying parts for South Africa’s growing and aging-vehicle pool. But there is a dark side.

In September 2012, counterfeit ContiTech (a division of Continental that produces parts, components and systems for the automotive industry) V-ribbed belts were discovered in a warehouse in Casablanca, Morocco, ready for sale. The belts, made from sub-standard materials in a size ContiTech does not produce, were seized and destroyed, while the retailer faces legal prosecution.

Caveat emptorAnd this is where the problem comes in; unscrupulous individuals copy designs of reputable manufactures and create parts that, on the face of it, seem identical, but in reality, are not. In brief, counterfeiting, according to the Counterfeit Goods Act 37 of 1997 and the Counterfeit Goods Amendment Act 25 of 2001, is the manufacturing of goods without the authority of the owner of any intellectual property in respect of protected goods, whether in South Africa or elsewhere, whereby the protected goods are imitated as substantially identical copies and whereby the subject matter of that intellectual property right is imitated – so that the counterfeit goods are to be confused with being the protected goods of the said owner, or those made under his or her licence.

The Acts clearly state that in no way may counterfeit goods be manufactured, imported, distributed and sold, hired out, bartered or exchanged. Yet the penalties are relatively minimal: a first offence nets a R5 000 fine per item and/or jail time of up to three years, while penalties of R10 000 and five years of jail time can be handed down for a second offence.

And so the risk is taken; the profits netted are worth the penalties – if anyone gets caught. Manufacture and sale of counterfeit parts is big business. The general consensus is that it is a growing trend, and one we should all be very worried about.

Roger Pitot, executive director of the National Association of Automotive Component and Allied Manufacturers (NAACAM) describes the situation as such: “It’s often like drugs; difficult to find the importer and distributor. The South African Revenue Service (SARS) does sometimes pick up these counterfeit parts on importation, but more often than not, they slip in as seemingly legitimate imports. They are then only spotted by experts who can identify and report them to the authorities, who then confiscate the parts.”

Twala Bocco, director for quality standards at the Retail Motor Industry Organisation (RMI), adds another dimension: “Because of the container volumes at the ports of entry, Customs officials cannot inspect each and every container passing through. Some of these parts are not regulated by the National Regulator for Compulsory Specification (NRCS), therefore they feel it is not that important to stop and inspect based on the tariff heading of the goods being imported. Some are also falsely declared by the importer.”

Pitot also raises a related problem: “Sub-standard parts, which usually fall into the safety-critical category (such as tyres, brakes and lights) are distributed by unscrupulous businesses that obtain South African Bureau of Standards (SABS) approval on good-quality samples and then import sub-standard parts.” This, he says, is particularly prevalent with parts entering from China. “On several occasions our members have purchased these parts here and either tested them or passed them on to the SABS to demonstrate they are sub-standard,” he notes.

It’s clear this is a huge and massively important problem that needs to be tackled. So what is being done? A Customs Fraud Task Team (on manufacturing and agriculture sectors), led by SARS, is looking at curbing illegal imports, under-declaration, round-tripping in exports, fraud and corruption – in an effort to curb revenue loss for the government and job losses in local industries resulting from these products.

Further, Customs and the NRCS have signed a Memorandum of Understanding (MoU) between them in order to fight this problem. “I have been told that, so far, this partnership (or MoU) is a success,” says Boco.

And how does this affect you as the consumer? “Consumers should always look for branded quality products, however, the containers/boxes can also be counterfeited and they should look out for the look-alike boxes when purchasing these parts. Ridiculously cheap parts coming out of non-branded boxes are suspect – a lot of those are substandard parts,” cautions Boco.

“Consumers should also purchase from outlets that belong to organisations like RMI, because those outlets are guided by the Code of Conduct,” he adds. And what if you do, inadvertently, purchase and fit counterfeit or sub-standard products to your vehicles? Boco says: “Section 55 of Consumer Protection Act; ‘Consumer’s right to safe, good quality goods’ covers this aspect.”

Pitot adds: “The Consumer Protection Act would protect the customer because the parts are not what they purport to be.

“But, this doesn’t help where, for example, the brakes fail and the motorist is killed!” he jokes morbidly. Caveat emptor, or let the buyer beware!

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