Chinese authorities seized thousands of fake Louis Vuitton, Loewe, and Kenzo bags and garments and arrested more than 30 people in connection with a counterfeit ring that they had been investigating for over a year. The Shanghai-based group had sold a mass of counterfeit goods that would have been worth $15 million if authentic and sold at retail, according to Chinese state news agency Xinhua. Compared to
Law enforcement in China say that they began investigating last year after receiving a tip that inauthentic handbags – bearing some the biggest names in fashion – were being offered for sale on the Tencent Holdings-owned mobile messaging app WeChat. Xinhua reports that this week’s bust follows from related arrests in the southern province of Guangdong and eastern Jiangsu early this year.
Despite strong words from the Chinese government in recent months about the treatment of non-native intellectual property rights, the vast majority of the world’s counterfeiting – the knowing and deliberate use of another party's federally registered trademark (brand name, logo, etc.) or one that is “substantially indistinguishable” from another party’s mark on the same type of goods or services for which the other party has registered the mark – continues to take place in China, which consistently holds the title of the “counterfeit capital of the world.”
As Reuters noted on Wednesday, the recent bust of the counterfeit operation “highlights the challenge faced by brands in China, whose products, such as cosmetics, and even automobiles, run the risk of being copied.”
Meanwhile, for almost 9 months, the U.S. has been embroiled in a multi-hundred billion dollar trade war with China over the Eastern Asian nation’s treatment of American intellectual property. While the bilateral discussion as to how China will meet U.S. demands that it curb its practice of forced technology transfers and that it work harder to enforce the rights of non-native intellectual property are said to be coming close to the finish line, the number of counterfeit goods being shipped from China to the U.S. is growing.
“Counterfeit goods cost the U.S. economy an estimated $600 billion a year, or 3 percent of the U.S. gross domestic product,” Steve Shapiro, the unit chief for the FBI's intellectual property rights unit, told CNBC, and the trade is not slowing. In fact, “shipments from China are including an ever-increasing number of counterfeit items,” says Frank Russo, the port director for Customs and Border Protection at John F. Kennedy International Airport in New York.
Growth in the number of counterfeit-containing packages entering in the U.S. is in large part thanks to the fact that many counterfeit sellers are swapping traditional, large-scale methods of transportation, such mass-shipping via container ship, in favor of smaller-scale methods. To be exact, they are looking to the mail – and express couriers, such as UPS, FedEx, and DHL – to send smaller qualities of goods. Due to the influx in volume of shipments and the small size of the individual shipments, themselves, many counterfeit shipments are evading detection by Customs agents.
The change in the manner of shipping reflects a larger pattern at play in terms of how consumers are actually purchasing fakes. Instead of buying counterfeits by way of traditional vendors, such as those on domestic street corners or at flea markets, e-commerce platforms like as Amazon and messaging apps like WhatsApp enable consumers to purchase fakes directly from the source in China, and have single items shipped to their homes, thereby leading to a surge in single-item shipments of counterfeits.
The number of annual sales of counterfeit goods is growing, as well. A new report – entitled “Trends in Trade in Counterfeit and Pirated Goods” – from the European Union Intellectual Property Office’s Observatory and the Organisation for Economic Co-operation and Development this month reveals that sales of counterfeit and other infringing goods on the international stage increased to as much as $509 billion for 2016, amounting to 3.3 percent of the world’s total trade.
The report states that “while counterfeit and pirated goods” – such as those in commonly targeted categories like “common consumer goods, (footwear, cosmetics, toys), IT goods (phones, batteries) and luxury items (fashion apparel, deluxe watches)” – originate from virtually all economies in all continents, China and Hong Kong continue to be by far the biggest origin.”