Shipping & Logistics

Why laws remain a weak link in counterfeits battle

Counterfeit

KRA staff destroy counterfeit alcohol in April 2015. FILE PHOTO | NMG

Summary

  • Increasing trade in counterfeit and contraband goods in East Africa has remained a major problem due to porous borders and lack of strict implementation of anti-counterfeit laws.
  • Kenya, Uganda and Tanzania are yet to fully align their national laws with the East African Community Anti-Counterfeit Act, a regional instrument adopted in 2013.
  • In Uganda, efforts to combat counterfeits reportedly suffered a setback in early 2018 when the government withdrew a 2015 anti-counterfeit goods Bill from Parliament, arguing that existing laws were sufficient.

Increasing trade in counterfeit and contraband goods in East Africa has remained a major problem due to porous borders and lack of strict implementation of anti-counterfeit laws.

Failure to implement laws against fakes has particularly reduced the ability to detect counterfeit smuggling in and out of the regional countries.

Kenya, Uganda and Tanzania are yet to fully align their national laws with the East African Community Anti-Counterfeit Act, a regional instrument adopted in 2013.

In Tanzania, the Merchandise Marks Act, in force since 2008, was amended in 2010. In Uganda, efforts to combat counterfeits reportedly suffered a setback in early 2018 when the government withdrew a 2015 anti-counterfeit goods Bill from Parliament, arguing that existing laws were sufficient.

Besides the need to harmonise legislation, the three countries can draw valuable lessons from neighbouring Rwanda and Ethiopia, where stringent laws have helped reduce counterfeit medicines.

Kenya is a regional hub for trade and its ports are a gateway for international trade for neighbouring countries such as Rwanda, South Sudan, Uganda and the eastern Democratic Republic of the Congo. These countries rely heavily on the Port of Mombasa for imports.

Kenya has taken a step in implementing Anti-Counterfeit Recordation Regulations. With data from the national baseline survey on illicit trade indicating that production and trade in counterfeits currently cost the country over $900 million annually in tax revenue, the country beginning July 1 this year will not allow any product to be imported or exported without their Intellectual Property Rights (IPR) being registered.

Stakeholders concur that the country still needs to do more to control and prevent counterfeit and other forms of illicit trade.

"Smugglers are using unofficial routes, small boats and motorcycles to ferry contraband and unaccustomed goods in Kenya after the Kenya Revenue Authority (KRA) introduced stringent measurers at different port of entry,” said KRA Southern Region coordinator Joseph Tanui in an earlier interview.

“KRA is planning sensitisation campaigns targeting border communities to change their attitude and perception towards taxation which is the main driver of economic growth."

He said KRA is working closely with security agencies to eradicate counterfeit and nab the smuggling cartels to reduce losses of revenue.

The Kenyan Anti-Counterfeit Authority (ACA) has commenced rolling out the IPR recordation process which will assist the agency intercept goods believed to be counterfeit, either at points of entry or in the market.

The regulations also make provision for the filing of a complaint with the ACA, which would result in criminal prosecution of any party dealing in counterfeit goods.

“It is an offence to import into Kenya goods whose IPRs have not been recorded with ACA. All recorded IPRs shall be accorded proactive protection against counterfeit imports in accordance with the provisions of the ACA,” said ACA in the notice to the public.

To ensure compliance, ACA announced that no IPR agent will be eligible to perform any functions with ACA from July 1 2022, unless they are registered by the authority.

The significance of this new regulatory requirement is that the ACA has taken a proactive approach in fighting counterfeits through the recordal of intellectual property rights.

Prior to recordation of IPRs, brand owners bore the burden of monitoring goods sold in the Kenyan market and thereafter reporting any counterfeits to the ACA. The Recordation of IPRs will therefore significantly contribute to combating counterfeit trade more so from the border entry points.

Once the ACA completes the recordation process, it will begin to enforce the penalty provisions of the Anti-Counterfeit Act, 2008 on persons who are not compliant.

The ACA is still developing modalities on rolling out the security device which would essentially be an anti-counterfeit security device. The ACA would issue the security device to an importer of goods bearing a recorded trademark.

The IPR agents are not only required to record their IPRs but importers are also tasked with ensuring IPRs relating to imports are declared. Failure to adhere to this requirement will result in non-compliant importers being prosecuted as well as penalised.

The penalty for a first-time offender is three times the value of the prevailing retail price of the goods while a subsequent offender will be penalised five times the value of the prevailing price of the goods.

According to ACA, a first-time offender is also liable to an imprisonment term not exceeding five years while a subsequent offender’s imprisonment term is a maximum of 15 years and the penal consequence is in addition to the ACA seizing and forfeiting for destruction the non-compliant imported goods.

According to the Organisation for Economic Co-operation and Development (OECD), China is the top producer of fake goods globally. Given the strong trade ties between China and the region, there are clear risks to local economies.

East African countries continue to suffer from counterfeits which range from household products such as toiletries, foodstuffs and chemical products to cell phones and other electronics.

The Kenya Association of Manufacturers (KAM) estimates that Kenyan manufacturers have been losing at least 40 percent of their market share to counterfeiters the same percentage Uganda recorded in the 2021 research by the Economic Policy Research Centre (EPRC) which indicated Ugandan businesses felt that they suffered due to unfair competition from counterfeiting and cheap substandard products.

Similarly, a recent research report by the Confederation of Tanzanian Industries (CTI) found that the majority (92 percent) of the 17 companies interviewed indicated a 10-30 percent market share loss, as well as a loss of annual turnover due to the counterfeiting of their products. As a result, the Tanzanian government faces significant losses in tax revenue.

Despite measures taken by governments, counterfeit goods continue to pour into East African markets.

The problem is compounded by a lack of awareness among consumers, particularly regarding existing, relevant legislation which means that consumers do not generally know their rights, differentiate genuine and counterfeit thus easily being exploited by criminal syndicates.

There is further need for cooperation among East African states, not only to harmonise national legislation with regional instruments but also to enhance controls along porous borders and combat corruption.

Ugandan authorities admit that counterfeiters are taking advantage of weak surveillance, which is attributed to inadequate capacity to monitor all the country’s border points. For instance, only 19 out of Uganda’s 160 border entry points regularly check for counterfeits and contraband items.

[email protected]