Trying to see Grey Goods in Black and White

What are grey goods? Grey goods (or parallel imported goods) are original products of established brands which are purchased by importers from a foreign country, possibly to be sold in South Africa. Such goods may be imported without a letter of authority or the permission of the brand-holder or owner of any intellectual property (IP) in respect of the goods.

Provided that the importer complies with the Consumer Protection Act (“the CPA”) and the Trademarks Act (“TMA”), grey imports are legal. The CPA states that the importer must take active steps to notify the consumer that the grey goods are not covered by any warranty or guarantee associated with the licensed brand-holder/authorised distributor by placing a notice on each item stating that, “NO GUARANTEE OR WARRANTY WILL BE HONOURED by any authorised importer of such goods.”

The risk of parallel importing branded products is that they are likely to be stopped by either the police or Customs to ensure that they are not counterfeit.

In terms of the Counterfeit Goods Act 37 of 1997 (“the CGA”), any interested person may lay a complaint with an inspector relating t-o a consignment which is suspected to contain counterfeit goods. The inspector will enter the premises where the goods are stored in order to conduct an investigation of the goods by categorising each item in a detailed inventory.

The Customs authorities and police may also rely on section 113 of the Customs and Excise Act 91 of 1964[1] which allows goods to be stopped to ensure that they are not counterfeit. If goods which are suspected to be counterfeit are seized following a complaint under the CGA, or in terms of a decision of any authority acting of its own accord, the goods must be removed to a counterfeit goods depot for storage. At this stage a notice is sent to the complainant advising them that they have three days to lay a criminal charge against the importer. If no criminal proceedings have been instituted against the importer within that three-day period, then, in terms of Section 9(3)(b) of the CGA[2], on the fourth day the goods should be released to the importer/the person specified on the notice.

Unfortunately, the abovementioned procedure can take several weeks or even months before the goods are released. This is because the strict time constraints are only implemented once a seizure has been made.

We believe that the authorities and brand-holders should not be in a better position during an investigation than they are once goods have been determined to be counterfeit. The CGA clearly envisages that matters should be dealt with on an expedited basis.

In the Airports Company South Africa SOC Ltd v Imperial Group Ltd & Others[3] case, the Supreme Court said the following regarding the approach that should be adopted when interpreting old legislation:

“It thus seems to me inconceivable that the legislature could have intended such a result. In that regard the legislation does not say what was obviously intended to be said. I am thus satisfied upon the construction of the provision and upon authority, as also the purpose of the legislation and the absurdity of the consequences to which a literal interpretation would lead, that the language of s 2 does not really express the intention of the Legislature.”

In addition, the Supreme Court, in the Commissioner, SARS v Trend Finance (Pty) Ltd 2007[4] Case, spoke of steps being taken within a reasonable period of time in light of the unnecessary continued deprivation of another’s property and went on to say that:

“There is no sufficient reason for the continued deprivation of the property once the purpose for the deprivation (to investigate whether the property is liable for forfeiture under the Act) is no longer justified, and the continued deprivation would accordingly be arbitrary as meant by s 25 of the Constitution… I therefore conclude that once a reasonable period of time for the necessary investigation has elapsed, the Commissioner has no further right to retain either the goods or provisional payments made to secure their release.”

It appears that an unfortunate trend has developed in terms of which the authorities and brand-holders allow an unacceptably long period to pass during the initial investigative phase. Such delay can result in the importer suffering considerable financial prejudice as a result of substantial storage and demurrage costs, interruption of business and potential breach of delivery times under sale and supply contracts.

We believe that there needs to be a balancing of rights and obligations during this process as well as a competent review of the period allowed under the CGA for goods to be stopped pending a decision as to whether or not the goods shall be seized.

[1] Section 113 of the Customs and Excise Act 91 of 1964

[2] Section 9(3)(b) of the Counterfeit Goods Act No. 37 of 1997

[3] Airports Company South Africa SOC Ltd v Imperial Group Ltd & Others (1306/18) [2020] ZASCA 02

[4] Commissioner, SARS v Trend Finance (Pty) Ltd [2007] SCA 59 (RSA)