Fakes and knockoffs: a very real problem

Counterfeit brand-name articles have been flooding the market for decades. However, the battle against these products is becoming more and more effective.

For decades counterfeit brand-name articles have been flooding the market. The battle against these products remains problematic because supply lines keep changing and criminals keep getting smarter. Nonetheless government and the business community together have arrived at a better way of dealing with the issue, according to customs officer Benno Drenth and Bjorn Grootswagers, a representative of the interest group REACT.

The impact of the traffic in counterfeit items is quite considerable. As Grootswagers explains: “While we lack exact figures, the economic damage comes to between two and seven percent of world trade. The production of these goods is a very lucrative business for criminal organisations. The producers don’t pay any attention to safety regulations or employ the right kind of materials, they just use the cheapest stuff available. Naturally they don’t have anything to do with the guarantee claims –those go to the brand owner.”

Dangerous goods
Drenth, manager of the Dutch Customs team for Intellectual Property Rights (IPR), points out the safety risks of counterfeit products, which can reach enormous proportions. “The opinion of the average person is something like: ‘Well, it’s not legal, but what’s wrong with a cheap little T-shirt?’ Actually, it is not harmless at all. There is clothing in circulation treated with chemicals which can give you real burns. And you really don’t want to use the fake razor blades that we’ve intercepted. They would cut you up. Or the illegal toothbrushes. The originals are made according to various safety regulations in a sterile environment. You don't have that guarantee if you buy a fake. The brushes are often blue. There are different ways of giving them that colour, and some are a great deal worse for your teeth than others.”

“And on top of that you have to realise that with such a purchase you are keeping a whole industry in knockoffs going”, Grootswagers adds. “There’s an entire world of organised crime hidden in the background, with gangs that are also guilty of promoting child labour, dealing in weapons, prostitution and drug smuggling. Consumers really ought to stop and think and consider their own responsibility.”

Tackling illegal trade effectively
Dutch Customs regularly intercepts suspicious products. If after consultation with the relevant parties these goods turn out to be counterfeits, then Drenth’s team goes into action. “If we find knockoffs –whether with passengers, in cargo or at a courier company – we make sure they are not released into free circulation and instead contact the brand owner. But in order to do our job well we need information. Think here of information about security or authenticity features, the way in which things are packaged, the locations of factories and warehouses, transport routes, and so on. That’s why we work so closely with the business community and with REACT.”

The organisation REACT is active in many countries and represents more than 250 brand owners. “If as rights holder you want Dutch Customs to intercept counterfeit articles you have to submit an application”, Grootswagers explains. “With that document, which is valid for one year, you supply Customs with product information. What sometimes makes it so difficult to tackle illegal trade in counterfeit items effectively is that businesses decide themselves what they share. One rights holder deals with this in a different way than another, giving out only the minimum necessary out of fear that information will end up in the hands of competitors.” According to Drenth they have no reason to fear this: “Only a restricted group of customs staff – including our IPR experts – has access to this information, which is safely stored in a secure database. The experts – stationed around the country – are our real eyes and ears. As national expertise centre for intellectual property rights we fall under Customs region Groningen, and from that northern province we can’t see for example what kind of fakes are passing through the port of Rotterdam.”

Cutting supply lines
The question of what to share and what not to share is very important, as Grootswagers says. “Some companies work with one producer, others have hundreds. There are businesses who bring out one collection a year, others change every six weeks. In the case of the last situation extensive product descriptions are overkill. Too much detailed information is counter-productive. You want to prevent customs officers from opening shipments to check whether that little blue sticker is in the right place. Knowledge of distribution networks is much more useful. So, for example, I know a company that only produces in South Africa. If a shipment of their goods arrives from China, then you know that it has to be counterfeit.”

Capacity and costs also play a role, Grootswagers continues. “Intercepting small shipments takes a lot of effort on the part of Customs. And if we carry out a controlled destruction of a lot for a client under supervision of Customs, the client pays for it. Therefore companies sometimes take the conscious decision to let it go into circulation. We try to convince them to register their intellectual property rights and to take action after all. Because those few packages are usually part of a really huge flood of knockoffs. In many cases it turns out that there’s a Facebook-account behind products intercepted by Customs, and behind that a brick-and-mortar shop is often hidden. If you can put that out of commission then you also terminate the traffic in counterfeits. Recently, together with Customs and the Dutch Fiscal Information and Investigation Service, we carried out an action which resulted in the cancellation of 1,500 accounts on social media. This didn’t completely eradicate the problem, but we scored a couple of good hits.”

Fidget spinners and FIFA merchandise
A good approach to dealing with counterfeit trade also means being able to react to trends. Drenth: “Indications of any fad are always plotted against information in the database. Is the information we have current? Can we set up new profiles? In the past the Ice Watch was an example of such a craze. At the moment we are seeing smaller shipments of fake name-brand shoes, Rolex watches, radio-controlled cars, and naturally fidget spinners.
Grootswagers: “In addition, you have to try to look ahead. Before a World Cup, for example, we go and talk to FIFA. What kind of merchandise will be launched? Where will it be made? We pass this information on to Customs so that they can be prepared and put together a profile on it.”

Customs also invests in collaborations, Drenth adds. “Our work is not limited to issuing decisions or sharing our findings with companies who have registered their intellectual property rights with us. Of our own accord we try to establish contact with brand holders who have not yet done that themselves. And we also inform them about our close ties with REACT. In addition, we organise annual training sessions with brand holders for our IPR experts, and where necessary we keep in touch with other authorities such as the police. All that we come to know we share with REACT. We really supplement each other in the network.”

From sea and air cargo to parcel post
Grootswagers whole-heartedly agrees. “Before you used to hear the complaint that Customs wasn’t intercepting anything. If I called Groningen, then it turned out that counterfeits were in fact being caught. Only the brand holders had not been informed, although it had been legally settled. Thanks to more intensive contacts this happens much less often now. We also share tips about supply channels and about counterfeits that have been intercepted abroad. You have to stay on top of things because the criminals are getting smarter all the time. If one plant has been put out of production then they often have a back-up location. What’s more, distribution networks are changing. Before most of the traffic came in by sea or air cargo, but now you order directly from AliExpress.nl. It’s true that the amount per shipment is much smaller, but the total volume is still the same. And it is impossible for Customs to check all those separate shipments. But by supplying them with specific information we can increase the chance of interception considerably.”

EU legislation on counterfeit items
The European Anti-Counterfeiting and Anti-Piracy Regulation governs the confiscation of goods by customs administrations due to infringement of intellectual property rights (IPR), for example for suspected infringement of a registered trademark, model or patent. Those who register their IP rights with Dutch Customs are quickly informed regarding any possible infringement.

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