I will be signing copies of my novel The Counterfeit Detective this Sunday at the Brooklyn Book Fair. I will be sitting at the Mystery Writers of America (MWA) booth from 4:30 to 5:30 p.m.
The U.S. Customs and Border Protection (CBP) and Customs Enforcement (ICE) agencies conducted 34,143 seizures of counterfeit goods that violated intellectual property coming into the United States from abroad in 2017. This increase may be due in part to increased man power and enforcement by these agencies and represent a ten percent increase from 2016. The estimated value of the goods seized is $1.2 billion. Apparel headed the list of goods seized, especially luxury brands like Channel, Louis Vuitton and sportswear. One of the largest seizure came as the result of the arrest of a New York-based man named Su Ming Ling who had been under investigation for four years for selling $250 million in fake sportswear. Ling fraudulently posed as a representative by use Internet domain names and email addresses that resembled those of real U.S. businesses.
Two New Jersey residents were arrested for operating a rogue Internet mail order pharmacy. The rogue site was identified following the overdose death of a victim in Boise, Idaho, on or about March 17, 2017. The victim’s computer showed that he had repeatedly ordered painkillers from the rogue website, and that he had wired thousands of dollars to a bank account in connection with these purchases.
Law enforcement subsequently discovered that this bank account was being used by the defendants. Bank records showed that this bank account and several others had received over $750,000 in apparent narcotics proceeds, and that the defendants had withdrawn hundreds of thousands of dollars in cash from these accounts, and had also used these bank accounts to pay for costs associated with the drug distribution operation, including the costs of shipping controlled substances.
The defendants were charged on July 7th with conspiracy to distribute controlled substances, including oxycodone, hydrocodone, and more than 40 grams of the fentanyl analogue U-47700, distribution of controlled substances over the Internet, and conspiracy to commit money laundering, in connection with a large-scale drug distribution operation purporting to be an online pharmacy.
In its annual report, Burberry’s reported destroying $37.8 million in unsold inventory. The total of goods destroyed by Burberry over the last five years is more than $150 million. Burberry is not the only luxury brand that destroys unsold inventory.
To be fair, there can be practical reasons for destroying inventory. For example, H&M, the Swedish fashion company, is struggling with an inventory of unsold clothes worth $4 billion—and this is a contributing factor dragging down profits by 28% in the first half of 2018.
Rather than destroy the unsold inventory, a remedy would be to remainder the goods—sell in quantity to jobbers and discount wholesalers. However, this involves loss of control and this is precisely why luxury brands destroy the unsold inventory—they don’t want the goods, which includes apparel, accessories and fragrance—to wind up in the hands of counterfeiters or to be sold as gray market or to be offered on the Internet at a steep discount.
However, destroying so much unwanted goods, comes at another cost—outrage from environmentalists, shareholders, and the public who don’t approve of the practice.
South Korea has a reputation as a leading counterfeiting country along with China in Asia. In 2012, South Korea confiscated 57,005 counterfeit goods domestically, up from 5,363 in 2006.
The market for fakes in Korea is driven by a ‘counterfeit street culture’—a fake fashion world where hard to find designer brands are counterfeited and sold on the street corners. It’s a real ‘in thing’ in Seoul, the 5th wealthiest city in the world, which is emerging as a fashion capital in Asia. Seoul is young and tech savvy. K Pop is a South Korean style of pop music that incorporates many different music styles including Latin, hip-hop and traditional Korean.
I will be giving a Workshop Presentation [“The Business Crime of the 21st Century”]in Atlantic City at the New Jersey Association of Counties (NJAC) On Thursday, May 10th.
NJAC members are elected officials: County Clerks, Sheriffs, Surrogates and their guests.
Governor Phil Murphy will be a keynote speaker.
A raid by Jamaican police on two stores in downtown Kingston that were operated by six Chinese nationals, five men and a woman, who were taken into custody for selling counterfeit apparel, included well-known brands like Adidas, Nike,and Louis Vuitton, worth an estimated $400 million.
Seizures of counterfeit goods are on the rise in Jamaica. So far $600 million in counterfeit goods have been seized in April alone. Last year, the Jamaican Counter Terrorism and Organised Crime (C-TOC) Branch seized $1.9 billion worth of fake goods.
LAPD recently raided 21 businesses and seized an estimated $700,000 worth of counterfeit cosmetics. Six of the owners were arrested while the rest received cease-and-desist orders. An analysis showed the fakes had bacteria and human and animal feces.
The bust in Santee Alley netted makeup similar to such popular brands as Urban Decay, NARS, MAC, Kylie Cosmetics by Kylie Jenner, and others. The products look almost identical to high-quality eyeshadow, lipstick, and mascara but, authorities say, their prices should have raised eyebrows. Police were tipped off after consumers complained of skin rashes.
It’s possible . . .
In Friday’s Wall Street Journal (3/16 page A6) there’s an article that quotes a White House official and other sources that hint that $30 billion in tariffs and trade sanctions may be imposed on Chinese imports in an effort to end Chinese requirements that U.S. companies doing business transfer technology to Chinese firms. [China has been long been cited as a notorious pirate of trade secrets.]
This article followed an interview on Sunday’s Fox Business Network with Trade Council Director Peter Navarro [sometimes referred to as the ‘trade czar’] who said action on China’s intellectual property theft would come soon. He referenced a plan the United States Trade Representative Robert Lighthizer will be releasing shortly to address the issue head on.
What could trigger everything is the Special 301 Report that is expected to be released by the USTR. This is published in late February or March and it is prepared by reports submitted by U.S. business concerning problems involving intellectual property. It should be published the last week in March and would likely trigger the Section 301 investigation that was initiated by the USTR August, 2017, especially if China is identified as a Priority Foreign Country List. A list of tariffs and trade sanctions would be drawn up to be imposed if China does not meet U.S. demands. China would retaliate with a list of its own and the result would be a trade war similar to what happened in 1994.
Will history repeat itself?
I wrote a chapter on the 1994-1996 trade dispute with China in my book Trademark Counterfeiting, Product Piracy, and the Billion Dollar Threat to the U.S. Economy (1999, 2001 Praeger). It’s a great resource to read if a trade war erupts between the U.S. and China