Sars action on counterfeit goods raises industry eyebrows

Accusatory fingers are being pointed at SA Revenue Service (Sars) customs, alleging that they may be guilty of breaking a law that they themselves are empowered to enforce. The accusation was that customs, at a State Warehouse auction just held in Durban, was selling counterfeit brandname goods in a lot including Armani, Chanel, Playboy and Versace clothing. There was a condition attached to the sale – that the goods had to be exported off the African continent. This doubtful deal was first brought to FTW’s attention by an industrialist who had attended the sale as a buyer, and only wanted to be described as “a law-abiding citizen”. He said that he had examined the clothing, and was certain that some of the items were not genuine brand-name items. This, he added, was further confirmed in discussions with a lawyer who specialises in intellectual property rights (IPR). “That being the case,” said the law-abiding citizen, “customs is effectively continuing the counterfeit goods supply-chain, first of all started by the original importer of the illegal goods.” But neither the identity of that original importer nor the agent(s) who had acted to clear the goods was available. A simple reason, the lawyer told FTW. Apparently all intellectual property right holders (IPRH) who wish customs to seize and detain goods that are alleged to be counterfeit must register with Sars. They also usually set a minimum quantity threshold above which customs will act. In this instance, the lawyer added, the quantity of counterfeit clothing fell below that threshold, and the IPRH had therefore not applied for a warrant for customs to seize and detain, and the identity of the importing/clearing parties is not recorded nor disclosed. “We do not receive any such information unless the goods are seized on a warrant,” he said. “As far as we understand, some of these items were genuine, and the importer failed to pay the duty or disappeared before the goods were cleared. “But some of them are very definitely counterfeit, although in such a small quantity as to not exceed the minimum quantity threshold.” But, when asked for his impression of Sars putting these counterfeit items up for public auction and demanding “export off the African continent”, he described himself as “stunned”, and added that he was strongly of the opinion that this contravened the Counterfeit Goods Act, No 3 of 1997. In terms if Section 15 of that act, it states that: “Goods that are counterfeit goods, may not – (a) Be in the possession or under the control of any person in the course of business for the purpose of dealing in those goods; (b) Be manufactured, produced or made except for the private and domestic use of the person by whom the goods were manufactured, produced or made; (c) Be sold, hired out, bartered or exchanged, or be offered or exposed for sale hiring out, barter or exchange; (d) Be exhibited in public for purposes of trade.” “But,” said the lawyer, “although I disagree, Sars holds the strong view that it has the right to auction off the goods to try to recover the unpaid duties on the goods, and it has been doing this for some time.” Our law-abiding citizen was equally bemused at Sars perpetuating the sale of these counterfeit goods in SA. He said that he saw nothing wrong with Sars selling genuine goods on which the duty had not been paid and Sars wanted to recover, but was adamant that counterfeit goods should be destroyed. And, as he only wanted to buy such clothing for shredding the material, he felt he offered the best answer to the problem of the counterfeit items – giving Sars a payment towards the payment of the duty, yet effectively destroying the counterfeit brand-name clothing. He based this logic on the guidelines to customs on Section 15 of the Act – based on a Sars policy document – which says: “In the event of such goods being earmarked for destruction and if all customs formalities have been complied with, it would not be necessary for customs to intervene in the destruction of such goods in any way.” However, although the lawyer agreed with our buyer, and fought to have his reasoning accepted by customs at the sale, he failed to convince them, and the goods were auctioned under the “export outside the African continent” condition. “Whereas I was offering to destroy the counterfeit clothing, it seems to me that customs is just wishing the problem onto some overseas country,” the buyer said. “That’s just our customs passing on the problem to another country’s customs authorities.” And this act is just adding to what is already a major problem for overseas countries. For example, last year the European Union (EU) customs seized almost 115 million fake designer products compared with just over 100m in 2010. The retail market value of the goods suspected of violating intellectual property rights (IPRs) represented the equivalent of nearly R14 billion, according to the European Commission (EC). In total, 73% of all IPRinfringing goods originated in China. Despite efforts to get a comment from Sars customs, FTW was unable to find anyone able or willing to speak about the matter, although we would welcome a response. We would also welcome your comments. Email joyo@nowmedia.co.za INSERT ‘Sars holds the strong view that it has the right to auction off the goods to try to recover the unpaid duties on the goods.’ CAPTION Real or counterfeit? Condition of sale was that goods had to be exported off the African continent.