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May 8, 2002 | 1515 IST
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'Cheap' Chinese imports dent sales of originals

Sambit Saha

Importers of Chinese gift items and novelties in the country are facing severe competition from a section of traders who offer low-quality Chinese products into Indian market at throw-away prices.

"Such products not only hurt importers of genuine Chinese items by being priced lower, they also deceive gullible consumers in terms of quality," industry sources said.

These traders, mostly regional, source products like cameras, torches, watches, sunglasses, hair driers from some south-east Asian free ports (mainly Hong Kong and Singapore) and dump them in India.

Such items give a bad name to Chinese products as most of them stand at the bottom of performance parameters, the sources said.

These traders primarily buy items from middlemen and traders based in Hong Kong. The middlemen get the "rejected" quality items from Chinese manufacturers.

"There is another way by which one can get the products cheap. One can under-invoice imported items so much that, even after Indian Customs slap enhancement on them, they would be cheaper than products procured from mainland China from original manufacturers with proper invoicing," sources added.

In this strategy, Hong Kong based re-exporters (middlemen) play an important role. As Chinese exporters do not encourage under-invoicing of gifts and novelties, Hong Kong traders buy them with proper invoice.

However, while selling them to Indian traders, they under-invoice, which is sometimes as low as mere 20 per cent of the original price.

In India, gift and novelties imports attract 30 per cent basic custom duty, 16 per cent countervailing duty and 4 per cent special additional duty.

All these add up to 56 per cent on the landed price. With lower invoicing, importers make profit even after paying for enhancement and re-exporters' margin. The government loses out on revenue collection.

However, it is a fact that government agencies are wary of such imports from free ports like Hon Kong, Singapore, Dubai as traders can produce only a re-export certificate of origin as against certificate of origin. Corporate houses, who use Chinese products for promotion, are also wary of sourcing from these traders.

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