Chinese Clothing still being imported in South Africa

Chinese Clothing Still being Imported

South Africa - April 2007

Durban - Rumours are rife in the clothing and textile industry that retailers, buyers and importers are breaking the law by continuing to import goods from China but are rerouting them through India, where “Made in India” labels are attached to the garments. The rumors surfaced while Renato Palmi – a researcher and development specialist in the clothing, textile and fashion sector was undertaking research for the Durban Fashion Council. Palmi said that he has been unable to clarify these rumors but mentioned that a number of manufacturers within KwaZulu-Natal he had spoken to mentioned this and believes there must be some truth in the rumours.

In some cases, it is believed that Indian manufacturers finish off the clothing by adding touches such as a collar or buttons, but that the bulk of the work is done in China.
The government gazetted a two-year quota system on 200 items of Chinese textiles and clothing in September last year and implemented this on January 1.

The quotas were intended to give the local industry some breathing space to become more competitive, thereby promoting local production and maintaining a sustainable source of employment and economic growth for South Africa.

A director of a large clothing manufacturer which has been forced into importing most of his goods to keep his head above water said rumours were hard to prove but that smuggling was “certainly going on”. Palmi said, "Under invoicing of imported merchandise was also accountable for the low price of imported goods."

“The prices of imported clothing are so cheap that there is no other explanation for it,” he said.
The price of clothing was expected to rise by 20 percent after the imposition of the quota system, but the director, who asked not to be named, said that, if anything, prices were even lower.

“As a result the manufacturers are in an even worse position and a number of them, including John Peter and Walpine Fashions, have been forced to close down over the past few months. CMT operators have also been going out of business left, right and centre,” he said.

However, he pointed out that retailers generally imported through a third party.
“Smuggling is a big problem because price dictates and the retailers buy the cheapest products possible, so the cheapest price becomes the market price,” he said.

The Chinese are the biggest importers into South Africa and their goods are coming through all South Africa's borders, as our neighbours have no agreements with China.
“Customs is trying to stop them but unless you go to the source or find out who people are sending the money to it is very difficult to stop,” he said.

However, there appears to be no sound basis for the rumours. A director of another local manufacturer, who also asked not to be named because of the risk of losing orders from retailers, said it was unlikely that India would complete garments that had been started in China as Indian labour was only slightly more expensive.

“It would make better sense to import the whole garment from India, legally using Chinese fabric,” he said. Cyril Govender, general secretary of the Cut-Make-and-Trim Employers Organisation (CMTEO), said the organisation had been trying to investigate the source of the rumours for the past month but had got nowhere.

Michael Lawrence, executive director of the National Clothing Retail Federation of South Africa, confirmed that there was no basis for the rumours, which he said were an inevitable part of any trade restriction.

“Members of the Clothing Federation always look to trade responsibly,” he said. “We have always asked Sars to clamp down on illegal imports and imports of substandard goods.”
Martin Deall, Edgars Consolidated Merchandise Logistics Executive, said retailers would probably use their quotas first and then place orders with local manufacturers if they hadn't found alternative sources.

“Anyone rerouting goods from China through India would be totally stupid because there are very strict rules on country of origin labelling and I don't think any big retailers would be involved in this as a country of origin certificate is required as part of the documentation process,” he said.

Hassim Randeree, president of the Clothing Trade Council of South Africa, agreed that “there was a lot of talk but no proof”. “Retailers have enough permits for their summer stock, as the smart retailers imported all their winter needs for 2007 before the end of December 2006,” he said.

“The problem will rear its head in 2008 when the year's quotas will have to satisfy the winter and summer needs for 2008.” He said there was no need for prices to rise if retailers imported from Vietnam, Bangladesh and the Phillipines, where the price of labour was even lower than in China. “The only thing that would affect pricing would be the devaluation of the rand,” he said. “Now retailers are sourcing from neighbouring countries, especially Lesotho and Swaziland, where the cost of labour is low, as well as from the old homeland areas.”

Randeree said there had been an increase in employment in South Africa's rural areas where wages were lower but not in the more highly paid metro areas.

“Sars has been able to address the issue of illegal imports to a large extent but it will never be eradicated completely because South Africa has so many border posts,” he said. “There is still a certain amount of seepage but this is not as large as before as Sars has done a tremendous job.”
He said that when the Country of Origin labelling law kicked in on April 16 all importers would have to have a Country of Origin labelling certificate and that no reputable Far East exporter would risk issuing a false certificate of origin.

by: Renato Palmi and Margie Inggs

May 2007