Are You Importing Products? Be Careful About Parallel Imports
The Government recently announced in its 2020 Budget paper that duty on motor vehicle imports will be reduced by about 60%. The reasoning - to make vehicles more affordable to Papua New Guineans. Whether Papua New
The Government recently announced in its 2020 Budget paper that duty on motor vehicle imports will be reduced by about 60%. The reasoning – to make vehicles more affordable to Papua New Guineans.
Whether Papua New Guineans will jump at the opportunity to buy “affordable” vehicles remains to be seen but there is a genuine concern for Papua New Guineans to understand what they’re getting themselves into, particularly on parallel imports.
Parallel import issues isn’t limited to vehicles and the article republished below is a helpful reminder to understand that affordability should also be weighed against quality and other important consumer risks. If you’re considering importing or even already importing big ticket products, you really need to know about parallel importing.
Parallel Importing and the risks
Several years ago, when I was flatting while studying at the University of Canterbury in Christchurch, my flat-mate asked me whether parallel imports were legal in Papua New Guinea. At the time, I had absolutely no idea what parallel imports were and thought it was something to do with importing fake products. Although I eventually found out what parallel imports were, it didn’t really hit me about how critical an issue it was until I faced a real-life problem raised by a client.
So, let’s take a look at what parallel imports are and discuss some of the issues you should be aware of.
What is Parallel Imports?
Parallel imports (sometimes referred to as grey market goods) are genuine branded products imported into Papua New Guinea (and other countries) and sold within the market without the consent of the owner of the brand/trademark in that market.
Parallel imports are not counterfeits or fake products. These goods are manufactured by or under license by the brand owner and end up in a market different from that intended by the brand owner.
At the date of this piece, parallel imports are not illegal in Papua New Guinea.
Let me give you a simple example on parallel imports.
A local importer (let’s name it Wantok Imports Ltd) imports a variety of goods including non-alcoholic beverages. Through its own market research, it finds that it can buy genuine Pepsi branded canned drinks from a Malaysian supplier at a cheaper price than that offered by the authorized Pepsi agent. Let’s name that local agent Paradaiso Beverages Ltd. Wantok Imports Ltd imports the Pepsi branded canned drinks from the Malaysian supplier and subsequently sells them at a cheaper price in comparison to locally authorized Pepsi agent Paradaiso.
The trademark owner of Pepsi may have only intended that the Pepsi drinks manufactured in Malaysia only be sold in Malaysia but as can be seen from the above example, those drinks have found their way into Papua New Guinea without the consent of Pepsi.
So, what’s the big fuss about parallel imports?
Glad you asked!
For suppliers like Wantok Imports, parallel imports offers them an opportunity to supply genuine branded products. It gives them a positive reputation by supplying big name products.
But that’s not all.
The above example clearly shows that Wantok Imports Ltd can also sell these genuine branded products cheaper than that offered by licensed local agents like Paradaiso. Wantok Imports can participate more competitively through its lowering of prices and ultimately gain market share and increase profitability.
And what about us consumers, what’s in it for us?
The offering of cheaper prices on parallel imports has the potential to generate competition. The more competitive a market, the greater the chance of prices of goods being lowered. Consumers are the winners in this situation.
Is that all?
Parallel imports broaden the availability of products to consumers. They increase the variety on the shelves enabling consumers to have a wider choice by price and product type. In situations where there is only one supplier of genuine products, that supplier has the power to control the variety and of course the price.
So, is buying parallel imports the preferred choice for consumers?
There are risks involved in purchasing parallel imports and the best example I can give is in the automobile industry.
If you buy a vehicle through a parallel importer, the chances are they will require a down payment or a deposit. If you pay the deposit and the parallel importer goes bust before delivering the promised vehicle to you, you’re at risk of losing a substantial amount of money.
Authorized dealers like Ela Motors (for Toyota), PNG Motors (for Mazda) and Boroko Motors (for Nissan) have a reputation not just for delivering but providing the best quality.
The other thing to note for parallel imports is that some products are specifically made for specific markets. Toyota might release a new version of the Hilux specifically for Singapore road conditions. It might also release a similar version but slightly modified to suit the potholed and rugged PNG road conditions. If you buy the Singapore version through a parallel importer in PNG and face mechanical problems, there’s a good chance you won’t find genuine parts in PNG because that particular model is only for the PNG market. Of course, you can settle for non-genuine parts but how long will that last or what other problems will you face with it?
That’s not to say that you should not deal with parallel importers at all, but if you do you need to be aware of the risks involved. Scan parallel importers thoroughly to ensure that it has the ability to deliver and find out what other features or support services they can offer after the sale. If you’re dealing with a very expensive product, considering these issues is critical.
Reputation is not the only concern for consumers
That’s right. There’s more to it.
Authorized dealers normally offer after sale support, genuine spare parts, warranty and replacement agreements. The same cannot be said of parallel importers.
Here’s one more example.
Let’s say you purchase a Konica bizhub 4700P printer from an unknown supplier and something goes wrong with it. You take it to Remington, being the authorized dealer for Konica printers and (assuming that Remington’s policy is to only fix Konica printers sold by them and other authorized dealers) Remington refuses to fix it on the grounds that the printer was not purchased from an authorized dealer. You find yourself with an expensive printer that doesn’t work and there’s no one to fix it. You can take it to a wantok who has some knowledge on fixing printers but that will be no match to having it fixed by a licensed dealer, then there’s issues of getting the correct parts from a reputable supplier in a timely manner and so forth.
Last I heard, The Department of Trade and Commerce, which is responsible for creating a policy framework for parallel importing has not created such a framework. Be that as it may, parallel imports are on the shelves or yards in PNG and it’s important to understand as a consumer the pros and cons of parallel imports. I suppose the more expensive the product is, the greater the caution you should take. Simple steps like confirming whether or not there is warranty, replacement agreements, after sales support and all that kind of stuff is important to consider prior to purchasing.