Inside World Trade

Counterfeit Imports: Big Business

In these economic times, everyone is looking for bargains. So to accommodate customers and increase sales, many large retail stores offer discounted prices and special offers. But many consumers look to dollar stores and small discount stores with cheap imported products to better fit their budgets. Although these stores can offer big savings, the buyer should be aware that the products on the shelves are often not what they appear to be.

Let's say that as the ultimate bargain hunter you scour the super discount stores, dollar stores and flea markets. You purchase a Louis Vuitton handbag for less than $100 and a pair of Nike athletic shoes for just $25. At a flea market you buy a carton of Marlboro Lights cigarettes for $5 and a pair of Christian Dior sunglasses for $10. To top off your bargain hunting you stop by a dollar store and get Colgate toothpaste for .99 and an ac/dc power adapter and extension cord with the Underwriters Laboratories (UL) label for two dollars. You consider your day of bargain shopping a success, but in reality there were no bargains - only the scams of counterfeiters.

Every year millions of dollars of fake and counterfeit products are imported into the U.S. and find their way to the shelves of local retailers. By illegally copying and using patents, trademarks, and copyrights, producers of these pirated goods violate the intellectual property rights of U.S. businesses as well as threaten the health and safety of consumers. Trade in these illegitimate products is often associated with smuggling and other criminal activities, and could even be a source of funding for terrorists and rogue nations. The flood of counterfeit products into our domestic market results in millions of dollars of lost sales by U.S. businesses as fakes displace products otherwise protected by trademarks and copyrights.

Let's take a look at the products you purchased on your bargain hunting spree. The Louis Vuitton handbag sold at such a low price was most likely a fake, and could have been smuggled by someone crossing the U.S. border. In one such case, U.S. Customs and Border Protection officers discovered 23 women's handbags in a vehicle at a border crossing near El Paso. The female driver stated she had nothing to declare from Mexico until an inspection of the car revealed the handbags. The trademarks on the bags said Coach, Dooney and Burk, Gucci, Dolce Gabbana, Guess, and ESQ. Suspecting counterfeits, the officers took photos of the handbags and sent them to the registered trademark owners who confirmed that the handbags were indeed counterfeit. The bags were seized as contraband.

What about that cheap pair of Nike shoes? They were probably similar to the 8,000 pairs of Nike shoes seized by U.S. Customs at the port of Oakland this year. The shoes, valued at over a million dollars at retail, were determined to be counterfeit and were falsely described as figurines on shipping documents.

This year a large quantity of counterfeit cigarettes was seized at the port of Los Angeles with an estimated domestic value of more than $1.3 million. Customs officers discovered the cigarettes hidden behind cartons of paper napkins in a container arriving from China. The inventory revealed a total of 49,780 cartons of suspected counterfeit Marlboro and Marlboro Lights cigarettes. Lab analysis confirmed the cigarettes were not manufactured by Philip Morris USA or any of its foreign affiliates or licensees. In the past Federal agents have traced contraband cigarette trafficking to terrorists, and have intensified efforts to cut off this source of funding. They say that illicit cigarette trafficking equals drug trafficking as the method of choice to fill the bank accounts of terrorists.

The tube of Colgate toothpaste you purchased for .99 could be some of the tainted product from China which was not removed the shelf. Last year the Food and Drug Administration announced that counterfeit toothpaste with the Colgate label was found to contain Diethylene Glycol, used in some antifreeze products. The agency urged consumers to "avoid counterfeits and support regulators in their efforts to remove these products from the marketplace."

The cheap ac/dc adaptor and extension cord you bought had the UL label, so you may have assumed it was safe. However, the Underwriters Labortory and the Consumer Product Safety Commission have conducted numerous joint investigations to identify products that have counterfeit UL labels. Two years ago 600,000 extension cords from China were recalled by the CPSC because substandard insulation made them a shock hazard.

Counterfeit goods not only affect U.S. businesses but the military as well. Fake microchips have found their way into Air Force flight computers and other military computer programs. Hundreds of counterfeit computer routers from China were sold to the Army, Navy and Marines over the past four years. These have the potential for accidents as well as espionage.

According to Dept.of Homeland Security statistics for 2007, China was the country of origin for 80% of the counterfeit goods seized. Hong Kong was a distant second, with a 6% total. Footwear and wearing apparel were the two most seized goods for counterfeit violations. Handbags and electronics were the next two most counterfeited items.

What can be done about preventing counterfeiting? One thing businesses can do is record their trademarks and copyrights with Customs and Border Protection, making information readily available for the monitoring of shipments. Consumers need to stay informed on product recalls and avoid buying counterfeit merchandise. For its part the U.S. government has undertaken a joint enforcement operation with the European Union to stop the international flow of illicit goods. In this regard the Dept. of Homeland Security has established the National Intellectual Property Rights Coordination Center whose strategy is "not only to keep unsafe products out of the United States but to identify and dismantle criminal organizations behind the activity."

Frances Allday was a specialist in commercial trade with U.S. Customs and Border Protection for 25 years