Illicit trade in counterfeits

EDWIN Makuya.

AS WE begin a new year, it is imperative to reflect on some trade issues that have affected our country from a socioeconomic perspective.

I took time to reflect on the continued increase in illicit trade in counterfeit goods in Zambia.
The problem of counterfeit goods is a global issue adversely affecting the global economy and lives of many people. While counterfeiting is a worldwide menace, studies show it is at its worst in Africa.
In Africa, effects of counterfeit goods have impacted negatively on the socioeconomic development of many Least Developed Countries (LDCs) such as Zambia.
Despite counterfeiting being a crime in Zambia, there has been an increase in the sale of fake goods, especially in Lusaka and other major towns. Zambia’s efforts only earned it 64th position (out of 138 countries) for the protection of intellectual property (IP) rights, in the World Economic Forum’s 2016-2017 Global Competitiveness Report. The country scored 4.2 out of seven points.
From a global perspective, Zambia is a member of both the World Intellectual Property Organization (WIPO) and World Trade Organisation (WTO). WIPO is a global organisation mandated to protect IP rights for inventors and copyright owners among its members while WTO is a multilateral organisation with a mandate of regulating global trade.
In addition, the country is a signatory to the Trade Related-Aspect of Intellectual Property rights (TRIPS) Agreement of 1994 which is a multilateral agreement and also incorporates the legal provisions from the Paris Convention of 1883 for the protection of industrial property rights. Industrial property includes patents for inventions, trademarks, industrial designs and geographical indications. Therefore, Zambia has an obligation as a country to protect IP rights in its territory.
So one may ask what is a counterfeit product and how can it be clearly identified as such? A counterfeit product is a fake or unauthorised replica of the real product. Simply put it’s an imitation of the original product. The list of counterfeit goods can be infinite.
Counterfeit products can be difficult to identify and differentiate from the original products. Usually, this can only be done through product testing at a brand owner’s laboratory or an ISO accredited laboratory with sophisticated equipment. As one expert said, counterfeits are usually of poor quality, cheaper to produce and there are no import duties or taxes paid.
Zambia faces enormous problems with regards to counterfeit goods as evidenced from the past years in which Government through relevant regulating institutions seized and destroyed goods worth millions of kwacha.
In 2017, the problem grew even bigger as goods worth millions of kwacha were seized. These goods were mostly being seized at the borders and in the country and in some cases in neighbouring countries which are used as ports of entry or transit points.
The volume of counterfeit goods seized clearly indicated that more of these products had already flooded the market. Currently, it is very difficult to quantify the value of sales for counterfeit goods as this will require a detailed study to be undertaken.
Some of these goods were usually smuggled into the country through porous border entry points and across river boundaries such as Zambezi River. They are transported and distributed across borders using well-developed and largely uncontrolled informal trade routes.
In some cases the counterfeit goods enter through formal border entry points as border agencies are not able to detect whether the goods are counterfeits or in some cases through suspected corrupt practices.
The problem is that most borders lack sophisticated equipment and highly skilled personnel to detect counterfeit products. Once counterfeit goods have crossed the borders and have not been intercepted and they are distributed on the market, it becomes extremely difficult to trace them. The problem has especially been more exacerbated by Zambia’s geographical position as a landlocked country.
Counterfeit goods trade is very sophisticated and can only be combatted using effective and sophisticated means.
Most of the counterfeit goods originate from foreign countries such as China, USA, UAE and India. Zambia has literally become a dumping ground for producers of counterfeit goods. However, efforts by Zambia Police IP Unit, ZABS, ZRA and other agencies in the past years have helped to minimise the scourge and needs to be commended, although their efforts are more of reactive than proactive. This problem has to be dealt with in a proactive way.
Some key cases recorded in 2017 were the seizure and destruction of counterfeit ‘Johnny Walker’ whiskey boxes in Namibia which originated from the USA and UAE; and seizure of counterfeit ‘Bata’ shoes from a company owned by a Chinese national in Kamwala.
Counterfeiting robs inventors, trademark and copyright owners of their financial rewards from their inventions. Equally, governments lose tax revenues as a result of counterfeit goods which are usually of low value than genuine products manufactured by trademark owners or right holders.
In Kenya, a study done by the International Chamber of Commerce and Anti-Counterfeit Agency in 2013, showed that counterfeit goods worth US$835 million were sold and the resultant loss of tax revenue was an estimated US$84 million.
Zambia faces similar challenges of tax revenue losses through this scourge. Counterfeiting can lead to business closures and unemployment as genuine companies are forced to close due to this unfair trading practice.
For consumers, the risks are extremely high, too, where safety and health are concerned. For example, counterfeits in anti-malaria drugs can cause serious health effects and can be tragic. Also baby formula counterfeits can cause more harm to babies and even lead to death. The WHO estimated that annually over 100,000 deaths in Africa are linked to the counterfeit drugs.
We need to seriously address this illicit trade in counterfeit products if the country is to move in the right direction. Zambia as a member of WIPO is obligated to protect the IP rights for right owners or holder both locally and globally, and doing so will trigger increased tax revenue collections and contribute to our GDP growth. In addition to the enactment of the anti-counterfeit law, the following are some of the suggested trade policy solutions to quickly address this problem;
1. Further strengthen institutions tasked with IP protection and border control agencies. Increase funding to further enhance market surveillance and border patrols.
2. Undertake study to quantify the scale of the problem and volume of counterfeit goods sold in Zambia.
3. Like Kenya, Tanzania, Uganda, Burundi and Uganda, Zambia should implement the Pre-Export Verification of Conformity (PVoC) to Standards programme to help curb counterfeits and substandard products and also protect Zambian manufacturers from unfair competition. PVoC ensures that selected and regulated products are first inspected and tested in the exporting country and a certificate of conformity is issued prior to shipment into Zambia. PVoC ensures goods meet mandatory safety, quality and security requirements, enables international trade, avoids delays in customs and reduces potential losses from import of non-compliant products. The benefit of PVoC programme outweighs the cost.
4. Use highly-integrated approach in anti-counterfeiting enforcement. Collaborations among border agencies and regulatory authorities. Increase collaboration between Zambia’s anti-counterfeit agencies and regulators and their neighbouring counterparts in Tanzania, Mozambique, Malawi, Zimbabwe, Namibia, Botswana and South Africa. This is because these countries are used as either ports of entry, transit points or both. These agencies in the neighbouring countries can work with Zambia to seize and destroy suspected counterfeits destined for Zambia once confiscated. The cost of destruction and penalty fees should be borne by the importer and not government.
5. Increase awareness among consumers and traders on the dangers of illicit counterfeit products on both health and socioeconomic grounds.
Zambia, by protecting IP rights and combating counterfeit goods trade, contributes to an equitable and efficient IP system thereby protecting the health and safety of consumers. Also putting in place measures to protect IP rights is critical if Zambia is to attract more high levels of FDI, which will then contribute to the country’s sustainable socioeconomic growth.
The author is a business developer, strategic marketer and an international trade policy and trade law expert.

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