Fake goods cases exploding statewide

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Fake goods cases exploding statewide

CASHING IN ON FAKE GOODS

Ohio and U.S. law enforcement has dramatically increased seizing counterfeit items that has become a $1 billion indusrty.

2008 2009 2010 2011 2012
OHIO
Seizures

34

55 1,768 1,397 1,767
Value $1.1 million $519,554 $14.2 million $7.1 million $13 million
U.S.

Seizures

14,992

14,841

19,959 24,792 Not available

Value

Not available $2.1 billion $1.4 billion $1.1 billion Not available

SOURCE: National Intellectual Property Rights Coordination Center

Note: Period covers fiscal years and values are manufacturers suggest retail prices

Seizures of counterfeit and pirated goods in Ohio have skyrocketed in recent years, and the flood of fake goods into the marketplace is a serious threat to commerce and the health and safety of consumers, experts said.

Customs officials in the state were responsible for 1,767 intellectual property rights seizures in fiscal year 2012, 52 times as many as in 2008, according to U.S. Customs and Border Protection. The retail value of the goods was $13 million, up from $1.1 million four years earlier.

The rising number of confiscations reflects a growing black market, which has thrived in recent years because of new international trade arrangements and e-commerce, experts said. Consumers can now purchase fake goods online directly from manufacturers in China and other foreign locations.

Unsafe and ineffective fake products are also sold at corner stores, flea markets and other establishments across southern Ohio. Authorities said piracy and counterfeiting deprives American companies and workers of revenue, funds organized crime and endangers the lives and health of consumers.

Counterfeiting generates hundreds of billions of dollars in sales across the globe, and it accounts for between 5 to 7 percent of all trade, according to the International Chamber of Commerce. The activity is one of the fastest growing economic crimes in the world.

In Ohio, there are signs the crime is on the rise.

Officials with Customs and Border Protection executed 1,767 intellectual property rights seizures in fiscal year 2012, which ended in August. Authorities confiscated more than $13 million in goods.

That compares to 34 seizures of $1.1 million in goods in fiscal year 2008, and 55 seizures of $519,554 in goods in 2009. The number of seizures in the state rose dramatically starting in 2010.

“The reason why there are more seizures is because there are more counterfeit goods,” said Daniel Chow, a law professor with Moritz College of Law at the Ohio State University. “And of course the number of shipments seized only represents a tiny fraction of what actually makes it into the United States.”

Across the nation, seizures by customs officials increased to 24,792 in fiscal year 2011, up from 19,959 the previous year. The number of seizures increased from 3,586 in 2001.

Seizures of counterfeit and pirated goods has surged since China joined the World Trade Organization in 2001, which allows anyone in the country to export goods, Chow said. Prior to that, only state-owned enterprises could export goods, he said.

Shipments from China

About 80 percent of counterfeit and pirated goods seized by customs officials originate from China and Hong Kong.

While U.S. customs agents are seizing more shipments, the average value of the shipments has declined, said Karl Moosbrugger, the supervisory import specialist with Customs and Border Protection for the area port of Cleveland.

This partly reflects a significant increase in counterfeit shipments through mail and express courier services, he said. Mail and express delivery shipments are high volume but low value. U.S. seizures through express consignment operators more than tripled between 2007 and 2011, and mail seizures increased by more than 20 percent.

A lot of the growth in mail and express consignment seizures stems from more websites selling counterfeit and pirated goods directly to consumers. Anyone with Internet access has the capability of purchasing knock-off products, and they can buy fake goods directly from manufacturers overseas, Moosbrugger said.

“The (Internet) is an avenue for a lot of people to get involved in that type of business,” he said.

But although a growing number of consumers are purchasing counterfeit goods directly, most shipments confiscated by authorities are larger and commercial. The goods are not intended for personal use. They are meant to be sold.

Counterfeit goods line the display tables and shelves at some flea markets, corner stores, “mom and pop” businesses and street vendors across Ohio.

Earlier this month, the last of four defendants in a massive criminal operation in Dayton pleaded guilty to conspiracy. The men, who worked at Five Pillars Market in Dayton View, were caught buying and selling thousands of dollars worth of counterfeit Nike shoes, Polo shirts and other clothing items, authorities said. In September, a West Carrollton business owner pleaded guilty for criminal activities that occurred at Inn Between Carryout in Moraine. While working at the store, he was caught buying and selling lots of fake Nike shoes, Chanel wallets, Coach purses and other bogus goods, police said.

Monroe police routinely raid booths at Trader’s World for selling counterfeit products. They seized more than 2,100 counterfeit NFL jerseys in 2010. They seized more than 1,000 Fox and Monster branded shirts, hats, jewelry and decals.

Knock-offs are often cheaply made, and quality control is nonexistent.

“In my experience, there is never a counterfeit as good as the original,” Chow said. “But quality matters more in some areas than others.”

Chow said fake shoes and handbags may just fall apart. But poorly made medicines, perfumes and colognes, automotive and industrial parts and electronics and electrical equipment can be dangerous.

Authorities in New Jersey this month discovered thousands of bottles of fake Heinz ketchup after the products exploded and attracted bugs.

On Oct. 10, the National Highway Traffic Safety Administration issued an advisory warning about counterfeit airbags.

Officials said fake electrical cords and lights are commonly found at flea markets and swap meets across Ohio.

Anything could have been put in the ketchup. Counterfeit airbags are at risk of malfunctioning and failing to deploy. Electrical cords and lights often contain inadequate amounts of copper, which can melt and lead to fires.

“People will procure lamps at a flea market thinking they are safe, but when they take them back home, the wiring may not be sufficient and a fire starts due to an electrical overload, and it can kill an entire family or children,” said Bob Baer, assistant special agent in charge for Homeland Security Investigations in Ohio.

Sales of fake products take sales away from legitimate businesses, and the proceeds often benefit organized crime, officials said.

Consumers often can tell whether a product is counterfeit by its price and where it is sold.

Luxury purses and handbags do not cost $50, and they are not sold on street corners or non-chain gas stations.

“The attention to detail and the manufacturing of the products is subpar all around,” Baer said.

Baer said major retailers, such as Walmart and Target, do not sell counterfeit goods.

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