LOS ANGELES — Counterfeiters are stepping up their efforts, and footwear continues to be their product of choice: It now accounts for the largest percentage of counterfeit items seized by U.S. Customs and Border Protection.
According to U.S. Customs, for the first half of the fiscal year started Oct. 1, 2007, 36 percent of all intellectual property rights seizures was footwear, worth an estimated $40.3 million. Of those seizures, 96 percent came from China. For all of fiscal 2007, 40 percent of the seizures was footwear, up from $63.4 million in 2006 to $78 million.
While counterfeiters are getting craftier, customs officials are working diligently to catch counterfeit goods before they hit the streets. Earlier this month, officials announced at a news conference held by Todd Hoffman, U.S. Customs director at the Los Angeles-Long Beach Seaport, that the agency had a record-breaking year of increases in seized goods. There was a 50 percent rise in seizures over fiscal-year 2007, an increase in value of 148 percent.
The Los Angeles-Long Beach customs office seized 357 shipments of counterfeit and pirated goods, with a domestic value of $71.4 million. According to the International Anticounterfeiting Coalition, counterfeiting costs U.S. businesses $200 billion to $250 billion annually and is directly responsible for the loss of more than 750,000 American jobs.
Among the factors that the agency said contributed to the record seizures were new partnerships formed among several agencies, including Immigration and Customs Enforcement, the Food and Drug Administration and the Consumer Product Safety Commission. Additionally, a joint working group was created between Customs and Border Patrol and Immigration and Customs Enforcement.
Recently, Footwear News spoke with David Brener, a 22-year customs veteran and the chief intellectual property rights operations branch officer in Washington, D.C., about the state of counterfeiting and what is being done to combat the problem.
FN: Has the counterfeit footwear trade gotten better or worse?
DB: I don’t know that I can say better or worse, but we continue to seize more counterfeit footwear than counterfeit anything else. We would stress that it is an enormous challenge. There is an enormous demand and enormous profit potential. The barriers to entry are not that great, and there are a lot of smart, unscrupulous people out there looking to make a buck.
FN: What kind of footwear are you predominately seizing?
DB: The vast majority of what we seize would be athletic footwear as opposed to high fashion.
FN: What brands are you seeing?
DB: All of the big players would be victims. No one is immune.
FN: Why is footwear such a popular item to counterfeit?
DB: I don’t know that we would say that it is popular. Intellectual property rights is one of our primary trade issues. Everything is being counterfeited. If someone can conceive of it, someone can rip it off. We’re seeing counterfeit everything — from pharmaceuticals to brake parts. There’s a big demand for the name brands. We’re dealing with criminals who are looking to make a fast buck. The problem with fighting it is that it is relatively easy to do and very lucrative. It is an enormous challenge for us to try to stop it.
FN: How are you fighting it?
DB: We are trying to use a layered approach. We can’t inspect our way out of the problem. We are using targeted techniques, risk-management techniques. We’re going out on a post-transaction basis after the product arrives to go to companies and work with them to find weaknesses and correct them. When they have seminars and annual meetings, we have trade specialists there.
FN: Is the customs department developing any new programs to help address the issue?
DB: You cannot underestimate the value of the experience and training of our [customs and border patrol] officers, who have to be very good at this, where gut instinct plays a big role. But we are also working on developing a uniform template for a product identification guide. For companies that are interested, they could develop a product identification guide for their specific product, so customs officers across the country at more than 300 ports of entry could access the guide and see the information from photographs. Then [they would have] the telephone numbers and contact information [of the manufacturers], so they can get in touch with people very quickly [to report the findings]. It is scheduled to come out in 2009.
FN: How important is it to work closely with the footwear industry?
DB: One of the messages we have tried to get out is that this is a joint effort. We need the government agencies and private sectors working together. Our experience has been that when it’s the attitude of industry or importers that this is someone else’s problem, then the chances of success go way down.
FN: Has the footwear industry been involved in the process?
DB: The footwear industry has always been cooperative. They are a commodity that sees that this [problem] has severe economic consequences, in terms of severe degradation of jobs. It is an industry that has readily recognized that there is a problem and has worked with us.
FN: How are you working with footwear manufacturers to combat the problem?
DB: We have found that a lot of training is effective, especially when the manufacturer sends a representative to the front line, to the port of entry, and they work with customs officials and officers at the port to help them understand what makes something genuine and what makes it fake.
FN: Is it working?
DB: I think the numbers bear out and we’re having success. Having the manufacturer there raises awareness at the port level.
FN: What are the most popular counterfeiting methods that you are seeing with footwear?
DB: The goods are transshipped [meaning channeled through different locations to hide the final destination] or purposely mislabeled. Some are actually smuggled in the containers and not manifested. Sometimes they are manifested as a generic shoe and you don’t see a brand name. Some shoes that are delivered have a counterfeit [logo or symbol], which is covered and [not revealed until] you peel it off.
FN: What are red flags that customs officials look for at the port?
DB: The documents may not look right. They might be very vague, or poorly written, or thrown together very quickly. The genuine [company] will have a detailed description. Also, packaging [is another red flag]. Legitimate goods come in high-quality packaging. With counterfeit goods, the individual packaging looks cheap and thrown together at the last minute.
FN: Has the Chinese government been cooperative in your enforcement efforts?
DB: We are actively engaged with the Chinese and we have been engaged with them for some time. Given the cultural and language differences, the progress can be somewhat slow, but we believe progress is being made and we look forward to continued cooperation in this area. There’s no denying that [counterfeiting] is a big problem. There simply is no other way to put it. In terms of counterfeit goods of all kinds, China is the main source of concern. The government has been very involved, but it’s an ongoing process.
FN: What are some of the challenges the customs department faces when working with China?
DB: We must enforce our trade laws and facilitate legitimate trade. Much of what comes in from China is legitimate.
FN: Is it easier to catch counterfeiters at the port of origin or at the port of destination?
DB: The problem with the port of origin is that we don’t have any authority to do enforcement action in a foreign country. We can’t go to any other country and undertake enforcement operations. There are sovereignty issues. What we try to do on this side is use a layered approach where we are not simply standing at the border and waiting for the goods to show up. [We use] target-risk management and risk analysis.
FN: What can individual manufacturers do to help combat the problem?
DB: To the extent that they can gather information and get involved is a big benefit. People who are successful [at stopping counterfeiters] are people who have invested resources. The shoe manufacturer would be one of the first lines, in terms of finding out what’s going on, where the product is being made, how tight supply chains are. We encourage manufacturers to work correctively with their trade association and to work with us. Customs is part of the Bush administration’s interagency counterfeit initiative called STOP [Strategy Targeting Organized Piracy].
FN: How does prosecution play a role in this process?
DB: After Sept. 11, 2001, what used to be the customs service was split up: The criminal investigation part spun off to Immigration and Customs Enforcement. They are responsible for criminal investigations. Customs no longer has any authority. We can take the seizure, take the information and make a referral and give it to Immigration and Customs, and they can make a determination on whether to prosecute.
FN: What about knock-offs? Where do you draw the line between knock-offs and fakes?
DB: There’s no such thing as a genuine knock-off. A knock-off is a knock-off. And there’s no such thing as a genuine fake.
FN: Are there any gray areas?
DB: No, but there are gray market goods. A gray market good is a genuine good that was originally produced for production and distribution in another country. For example, it was made for Europe and it got imported without permission to another country.
FN: How important is the counterfeit problem to the government?
DB: Intellectual property rights is a big, big deal. It is on the hill all the time, and numerous pieces of legislation have been written. Stopping counterfeiting is very much a front-runner issue with both Capitol Hill and the private sector.
FN: With this being an election year, will the fight against counterfeiters continue to be a big issue under a new administration?
DB: My personal thought is that it will continue to be a big issue. The scope is so broad. It is a global problem and has economic ramifications, national security ramifications and health and safety ramifications. There is no way it would become a back-burner issue anytime soon.