The
Global Counterfeit Business
TIN the Philippines, the sale and
distribution of pirated and counterfeit goods has long
been a concern not only for authorities but also for
the countries' major trading partners. The US in particular
has always been vocal about the rampant and uncontrolled
piracy of motion pictures, sound recordings, musical
compositions, business applications, computer programs
(including those for entertainment software), books,
shoes, clothing apparels and fashion accessories. Of
recent years, even consumer electronics, auto parts,
golf clubs and medicines have been the subject of knock-offs.
The Rise of Counterfeits. Recent reports indicate that
the global counterfeit is really growing out of control.
The World Customs Organization (WCO) has estimated that
around 7% of international merchandise trade, or US$517
billion in 2004, involve counterfeit products. In many
instances, the counterfeits are so excellently made
that even experts have a hard time differentiating the
bogus from the genuine. To address these concerns, many
companies are spending more on stopping these counterfeits.
To give an idea how the counterfeit business has become
global, here are just a few recent incidents. In October
last year, fake Hewlett Packard inkjet cartridges worth
US$1 million were found in Brazil. A year and a half
ago, Pfizer reportedly had to withdraw some 16 million
tablets of the cholesterol-lowering drug Lipitor from
store shelves nationwide upon confirmation of fake tablets
available in the market.
In China, Chinese police conducted raids, confiscating
everything fake, from auto parts and luxury goods and
even fake Viagra. Accordingly, products with a well-known
brand will likely have a fake version - fake Sony PlayStation,
Marlboro, Calloway golf clubs, Honda motorcycles, Louis
Vuitton bags, car fenders and many more.
Supply Chain for Counterfeits. Experts say there has
been a massive increase in counterfeits in the last
five years. The production and sale of fakes is no longer
a national concern but a global scourge. While the source
of counterfeits comes from everywhere, it is estimated
that at least 30% of fake and pirated goods comes from
China. Counterfeiters have accordingly become sophisticated
that production and sourcing of raw materials are diversified
across borders. Two years ago, New Balance USA sued
its former contract manufacturer in China for selling
unauthorized productions that have been sold in Europe
and in Australia.
In August last year, Philippine police authorities reportedly
raided a cigarette factory in Pampanga and discovered
a production base for fake Mild Seven and Davidoffs
for export to Taiwan.
There is no doubt that there is big money in counterfeits.
In fact, trade in counterfeits is said to be as profitable
as illegal drugs, except with lesser risk. With big
profit, counterfeiters are getting more entrenched and
global. Some of them are of course fly-by-night operators.
Others, however, are legitimate and licensed manufacturers
who run extra productions for sale in the black market.
In the Philippines, we now have that ubiquitous "export
overruns" in our flea markets.
Tighter Border Control. Philippine customs authorities
are normally wary of China-made products not only for
their low value and poor quality but also because of
possible counterfeits. In fact, products coming from
China are almost always categorized as a "red lane"
shipment, which would require the physical inspection
of the importation.
As early as December 2002, local customs authorities
have already recognized the need to enhance border procedures
not only to conform to international standards but more
importantly, to address the growing concern of legitimate
business against counterfeits. Specifically, customs
issued CAO 6-2002, amending CAO 7-93, which provided
the definition of fakes or counterfeits as prohibited
importation, the protection of trademarks, patents and
copyrights, and the creation of a unit specifically
to address the concern on counterfeits. The regulation
also resulted in the provision for a registry on those
trademarks and the like, which can be the basis for
interdicting suspect importations for possible seizure.
New Rules on Import Licenses. A recent development in
the customs front is the issuance of CMO 32-2004, which
now requires importers to strictly comply with the Import
Commodity Clearances (ICC) / Mandatory Product Certification
issued by the Bureau of Product Standards, Department
of Trade and Industry (DTI-BPS) for products that accordingly
affect the life, safety and health of people and their
environment. The issuance of the order seems to have
come with the rise in consumer complaints against counterfeit
products resulting in accidents and damage to life and
property.
An Integrated Approach. With their financial muscle
and global network, counterfeiters normally just transfer
their production base to another country when authorities
start cracking the whip. In addition, counterfeits,
wherever produced, will always attract traders out to
make a quick turnaround. While border control is one
way of reducing counterfeits, governments must realize
that efforts must be made both in the country of origin
and the country destination. Focus must be trained on
countries used as transshipment points, considering
that transshipped goods are normally subject to less
scrutiny by customs authorities. In the domestic market,
implementation of the rules must be strictly imposed.
Failing that, counterfeits will become more rampant,
to the detriment of consumers and legitimate business.
So next time you buy your auto part or your medicine
while wearing that fake US$20 Rolex, make sure you buy
only from authorized or reputable outlets.
The author is an international trade and customs consultant,
and a licensed customs broker. He is also a regular
lecturer on logistics, customs and international business.
Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
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