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U.S. Government Launches a Counterfeit Crackdown

Feb. 3, 2020
With the volume of counterfeit goods traded annually growing by 154% between 2005 and 2016, the U.S. Department of Homeland Security launches a new initiative that takes aim at those who use e-commerce as a sales platform.

In a world where online counterfeiters continue to proliferate, there’s a new sheriff in town and he means business. In a new report on Combating Trafficking in Counterfeit and Pirated Goods, the U.S. Department of Homeland Security (DHS) outlines its plan for addressing the high volume of “illicit trade” that’s eroding U.S. economic competitiveness and catalyzing “compounding threats to national security and public safety.”

Pointing out that counterfeiting is no longer confined to “street corners and flea markets,” DHS says that the problem has intensified to staggering levels. Pointing to a recent Organisation for Economic Co-operation and Development (OECD) report, it says there’s been a 154% increase in counterfeits traded internationally—from $200 billion in 2005 to $509 billion in 2016.

Similar information collected by the DHS between 2000 and 2018 shows that seizures of infringing goods at U.S. borders have increased tenfold—from 3,244 seizures per year to 33,810. 

Taking Action Now

Focused on the correlations between e-commerce and counterfeiting, DHS says these platforms are ideal for counterfeits and that they allow counterfeiters and pirates to engage large numbers of potential consumers.

For example, the International Anti-Counterfeiting Coalition (IACC) reports that the trafficking of counterfeit and pirated goods in e-commerce is a top priority for every sector of its membership. IACC’s members include 200 corporations in the apparel, automotive, electronics, entertainment, luxury goods, pharmaceutical, personal care and software sectors. One IACC member reported making hundreds of investigative online test purchases over the past year, with nearly 80% successfully resulting in the receipt of a counterfeit item.

Despite public and private effort, DHS says that the online availability of counterfeit and pirated goods is growing. “Strong government action is necessary to fundamentally realign incentive structures and thereby encourage the private sector to increase self-policing efforts and focus more innovation and expertise on this vital problem,” DHS says in its report.

Here are the 11 steps the agency is taking to combat the trafficking of counterfeit and pirated goods:

  1. Ensure entities with financial interests in imports bear responsibility
  2. Increase scrutiny of Section 321 environment (the statute that describes de minimis, or the articles free of duty and of any tax imposed on or by reason of importation)
  3. Suspend and debar repeat offenders; act against non-compliant international posts
  4. Apply civil fines, penalties and injunctive actions for violative imported products
  5. Leverage advanced electronic data for mail mode
  6. Establish anti-counterfeiting consortium to identify an online nefarious actors (ACTION) plan
  7. Analyze enforcement resources
  8. Create a modernized e-commerce enforcement framework
  9. Assess contributory trademark infringement liability for platforms
  10. Reexamine the legal framework surrounding non-resident importers
  11. Establish a national consumer awareness campaign 

Admitting that government action alone is not enough to bring about the “needed paradigm shift and ultimately stem the tide of counterfeit and pirated goods,” DHS also calls upon relevant private-sector stakeholders to adopt identified best practices (e.g., developing comprehensive terms of service agreements, better vetting of third-party sellers and indemnity requirements for foreign sellers), while redoubling efforts to police their own businesses and supply chains. 

“While the U.S. brick-and-mortar retail store economy has a well-developed regime for licensing, monitoring and otherwise ensuring the protections of intellectual property rights (IPR),” the agency concludes, “a comparable regime is largely nonexistent for international e-commerce sellers.”

The Next Steps

According to CNBC, law enforcement officials will immediately start to identify cases where counterfeit goods are being sold online, and will pursue civil fines and other penalties against these entities. The report also calls for new legislation to allow the government to seek injunctive relief against third-party marketplaces and other intermediaries dealing in counterfeit merchandise.

“There is nobody in America who can be against this,” White House Trade Advisor Peter Navarro told WSJ, “except maybe some of the e-commerce platforms who are making too much money off this problem.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.