Substandard Imports Risky for Industry

The current global economic trend compels nations to focus more on deploying their resources where they have better competitive advantage. They should become involved in cross-border transactions of goods, services and resources. Transactions of economic resources include capital, skills and people for international production of physical goods and services, such as finance, banking, insurance and construction.
This cross-border transaction of goods and services in spite of its advantages has its limitations. It involves high risk based on the prevalence of unethical business practices. For example, it has been reliably reported that between 1980 and 2009, Africa accrued over 1.2 trillion dollars in direct losses and lost earnings to a lethal combination of business malpractice, organised counterfeiting and institutional corruption. This figure amounts to over 34pc of continental gross domestic product (GDP).
Though there are legal provisions and well-established institutional mechanisms to control the import of substandard products, such products are flooding the Ethiopian market. Despite the effort of Ethiopian regulatory authorities to control the import of substandard counterfeit products, it has not stopped. Unethical businesspeople still manage to bring substandard products, produce fake inspection certificates and get away with it.
Regardless, I could not find any study that shows how much loss Ethiopia incurs from its total domestic revenue annually. But it is estimated that up to 75pc of all items in a given sales outlet are either sub-standard or wholly counterfeit.
Ethiopia’s free market economy, globalization, capitalism, laxity on policy and poor enforcement of law have fuelled the prevalence of substandard goods in the market. Due to these factors, the country has turned out to be a safe haven for cheap substandard products. No wonder there is a boom market for imported substandard goods and used goods that mingle with and often overwhelm the market for new and standards goods.
The problems of substandard goods in the market have been with us for a long time now. If they continue to remain unattended, unsafe and unreliable products can cost our country billions of Birr each year, in replacement costs for products that do not last as long as they should. Such costs also compensation for injury, death or damage to property. As a result of this, Ethiopia like many countries around the world, needs to implement and enforce robust regulatory practices to ensure that products imported, sold and used within our country are safe.
To curb the influx of substandard imports, various countries worldwide have been taking different measures. One such measure is the pre-shipment (or pre-export) Verification of Conformity to Standards (PVoC) – a conformity assessment process used to verify that imported products conform with requirements of applicable standards before shipment to a destination country. Conducting PVoC does not mean abandoning the Destination Inspection (DI), though.
DI is conducted where necessary either to verify the work of PVoC agents or to check the quality of goods not covered by PVoC. Application of these schemes goes together with utilization of laws governing the quality of imported goods. The law provides that traders caught selling or off-loading substandard products should be severely punished, while such goods are confiscated and destroyed.
The countries currently using PVoC include Angola, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Cameroon, Central African Republic, Comoros, Republic of Congo (Brazzaville) and the Democratic Republic of Congo (Kinshasa). Many other countries, including countries in the first world, use the system.
Ethiopia adopted a compulsory pre-shipment inspection scheme for all goods destined to Ethiopian customs territory under a proclamation promulgated in 1999. This scheme, which established a system for the inspection of imported goods in the country of origin, was primarily targeted to curtail corrupt deals with foreign suppliers and Ethiopian importers along with the need to ensure proper enforcement of the laws.
Importation of cheap, substandard and low quality goods has led to the loss and subsequent closure of several local manufacturers. The demand for tough control of substandard products flooding local markets therefore appears to have prompted government to re-institute the pre-shipment inspection scheme back in 2006.
In just two years following the end of a compulsory pre-shipment inspection scheme and the untimely departure of the contracted company, government partially reversed its policy decision. Therefore, it was decided that Chinese products shipped to Ethiopia, without making any exceptions, were subjected to a pre-shipment inspection by a governmental body called China Entry-Exit Inspection & Quarantine Bureau (CIQ).
In comparison with the previous scheme, this agreement is marred with lots of unresolved issues. Unlike the pre-shipment scheme established in 1999, this mandatory scheme was territorially limited to goods shipped from China to Ethiopia, with no indication of the types of goods undergoing or exempted from inspection.
Though the pre-shipment inspection was reintroduced, its implementation was haphazard and inconsistent. For example, for all goods from China, importers should have CIQ certificates. On the contrary, the pre-shipment inspection requirement from other countries are clearly classified under products subjected to mandatory regulation regime. Besides, there is no clearly practiced pre-shipment inspection; for some products, destination inspection is possible, while for others it should necessarily have a certificate.
The current global business trend shows nations are taking strong measures to protect their markets from the import of substandard and counterfeit products. For example, very recently, Kenya, following the expansion of its pre-import verification programme, has decided all imports destined to Kenya must pass through the pre-import inspection. Zimbabwe also introduced a consignment based conformity assessment programme for the category of products to protect the entry of substandard and counterfeit products.
Ethiopia also needs to follow suit and should implement a verification of conformity programme to ensure the safety and health of its public. This is vital to protect the environment and to safeguard its growing industries from being paralyzed by the importation of substandard counterfeit products.