Imports and the Grey Market

Lot of press recently to do with the importing of products into the building industry that do not meet the standards required and have resulted in some huge costs to rectify. How these products slip through the various agencies and regulatory authorities really does beggar belief.

Although any non-conforming product is an issue, it is particularly a concern in regard to the electrical industry. In a highly regulated, licensed industry that prides itself on having some of the highest standards in the world, how inferior imported cable was allowed to be sold is truly appalling. Electricians must be licensed and face substantial fines if they are found guilty of substandard workmanship. Given the onerous regulatory requirements that they work within, it would seem only appropriate that they can be expecting products they purchase be compliant to Australian Standards.

If electrical contractors were to buy directly from overseas and fail to check compliance, then they would be responsible under Australian Competition and Consumer Commission rules. The supply chain for this industry is very mature and has a number of well-established electrical wholesalers providing products to the electrical industry. These wholesalers also tend to buy from Australian suppliers of either local brands or imported brands. This is where the fundamental flaw within the supply chain happens. A local supplier may source product that is non-conforming and does not meet Australian Standards from overseas and there is very little onus on them to provide any certifications on their products.

The incident with the cable is not isolated but is of a magnitude that has not happened before. To cost to fix this issue across the suspected 40,000 affected homes in Australia is in the order of $AUD80M dollars. So, who is responsible for letting this product in? This question has certainly become the subject of much discussion within the electrical industry.
Not only is the direct importing of non-compliant products an issue, as highlighted above, but so too is the sourcing of product via the ‘grey market’. This differs from the cable as it is the supply of branded product outside the authorized supply channels. However, with the prevalence of copied products from shoes, jewelry and iPhone’s; it was inevitable that more specialized knock off products from other markets would emerge.

Although the faulty cheap import products can cause short term pain for local companies, these grey products force local authorized suppliers to treat many existing customers with suspicion unless every product can be tracked back to being supplied through themselves. They also force many businesses to have to reduce price and margins to compete against products they are supposed to the sole agents for. Reducing costs often mean not being able to offer the same level of service that existing customers are used to.

The world is changing, and these issues look set be here for many years in to the future. One will require greater vigilance from those bodies that are assigned to regulate compliance of standards, whilst the other is a deeper issue for many businesses and there is no real short-term answer. Whatever happens in the future, it will be imperative that not only no lives are lost but that local businesses can survive through these times.