On Monday, March 5th, the U.S. Customs and Border Protection (CBP) announced that it, along with U.S. Immigration and Customs Enforcement (ICE), had seized a record number of counterfeit and pirated products which violated intellectual property rights last year. Collectively, CBP and ICE seized a total of 34,143 shipments of goods during 2017’s fiscal year, an increase of 8 percent over the total number of counterfeit shipments seized during 2016. About 90 percent of the shipments seized were in the express carrier and international mail environments. According to the law enforcement agencies, the total estimated manufacturers’ suggested retail price (MSRP) for the genuine versions of those good reached $1.2 billion.
Cooperation between CBP and ICE also led to a total of 457 arrests during 2017. Additionally, ICE obtained another 288 indictments with 242 convictions related to IP crimes. Nearly half of all counterfeit seizures (48 percent) were for infringing goods which were sent from China. The 16,538 Chinese shipments seized by CBP and ICE would have had a total MSRP value of $554.6 million if the goods were genuine. The nation responsible for the second-largest total of seized shipments of counterfeits was Hong Kong; that country was responsible for 13,357 seized shipments, 39 percent of all such seizures, with a total MSRP value of $386.2 million. The full statistics on counterfeit seizures indicate that third-place India was only responsible for 1 percent of shipments seized.
This news on China as the single largest source of counterfeit goods shipped to the United States comes as the U.S. government is pursuing an investigation into deceptive IP practices in China. The investigation, authorized under Section 301 of the Trade Act of 1974 and conducted by the office of U.S. Trade Representative Robert Lighthizer, will likely shed light on how such a large number of counterfeit goods are being shipped by Chinese entities to consumers in America. It could also uncover evidence substantiating claims of the enforcement of joint venture tech transfer rules which violate China’s obligations as a member of the World Trade Organization (WTO). Interestingly, last year also saw Chinese IP courts hand out the largest ever damages award for trademark infringement in that country, so it appears that the Chinese government is willing to turn a blind eye to counterfeits being sold by domestic firms to other countries while also signaling stronger IP enforcement activities within China.
“The illegal importation and distribution of counterfeit goods not only threatens the economy, but also presents significant health and safety hazards to consumers and funds international criminal organizations involved in forced labor, drug trafficking and other illicit activities,” ICE Deputy Director Thomas D. Homan was quoted as saying in a press release on the news. This is a viewpoint which is reinforced by the fact that 12 percent of all counterfeit goods seized were health, safety and security-related merchandise. Such counterfeits put consumers at increased risk of harm than they would be subject to had they purchased the genuine versions of those goods. Of the health, safety and security products seized during 2017, 34 percent of such goods were personal care items, followed by sunglasses, which accounted for 31 percent of such counterfeit goods. Pharmaceuticals only accounted for 6 percent of health, safety and security goods seized in 2017; the previous year, pharmaceuticals, which was combined with personal care goods, accounted for 64 percent of all such counterfeits.
The largest category of counterfeit goods seized was apparel and accessories, accounting for 15 percent of all seized goods. Although apparel and accessories accounted for the largest percentage of actual goods seized, such counterfeits only accounted for 6 percent of the total MSRP value of seizures. Watches and jewelry accounted for $460 million worth of counterfeit goods, 38 percent of the total MSRP value of goods seized. Handbags and wallets followed in second, accounting for nearly $235 million in MSRP value, or 19 percent of the total value of seizures. In the handbag industry, commentators have noted that counterfeit production often happens in the same factories where genuine handbag articles are also fabricated. Consumer electronics ($85 million MSRP, 7 percent of total) as well as labels and tags ($81 million MSRP, 7 percent of total) followed in third- and fourth-place, respectively.
Despite the historic level of counterfeit seizures, it seems that government law enforcement agencies could do even more to support anti-counterfeiting measures. In early March, the U.S. Government Accountability Office (GAO) issued a report which found that the CBP could do more to increase its collaboration with private sector companies by sharing more information on seized items with rights holders and e-commerce websites. In response to the GAO report, CBP officials indicated that the agency required more authority from Congress on data exchanges in order to step up its enforcement efforts.
One major avenue for counterfeit goods to enter the United States is through e-commerce platforms, including and perhaps especially some of the largest and seemingly most-reputable platforms operating today. This February, federal investigators from the GAO also reported on the availability of counterfeits on e-commerce platforms including Amazon, Walmart, eBay, Sears Marketplace and Newegg, finding that each of these platforms enabled investigators to purchase at least one counterfeit good. Amazon in particular has been dealing with a lot of heat recently regarding counterfeits. In early March, Portland, OR-based electronic accessories firm Elevation Lab publicly complained about Amazon’s seeming unwillingness to take down counterfeit accessories from its site. These concerns echo a complaint filed last October by German automaker Daimler AG which filed suit in California federal courts alleging that Amazon has been complicit in the sale of counterfeit Mercedes-Benz parts including counterfeit parts which were very defective.
To engage consumers on the health and economic concerns posed by the purchase of counterfeit goods, the CBP reached an estimated 97 million travelers during 2017 with the agency’s “The Truth Behind Counterfeits” public awareness campaign. Advertisements developed for this campaign are designed to educate the public on the potential dangers of counterfeits, including the possibility that such purchases support criminal activities.