From the U.S. Government Accountability Office, www.gao.gov Transcript for: Responding to Changes in Counterfeit Goods Description: We look at what's changing with counterfeit goods, and what the government is doing to keep rights' holders and Americans safe. Related GAO Work: GAO-18-216: Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market Released: February 2018 [ Background Music ] [ Kim Gianopoulos: ] Just because something looks like it's real or presents itself as authentic doesn't necessarily mean it's going to be. [ Matt Oldham: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. I'm Matt Oldham. If you've ever shopped online for products like sunglasses or handbags and come across a name-brand deal that seemed too good to be true, your instincts may have been right because growth and e-commerce is changing the way counterfeit goods are imported and sold here in the United States, leaving many consumers unaware they bought fakes. Recently, I sat down with Kim Gianopoulos, a director in our International Affairs and Trade team, to talk about GAO's new report on counterfeits and intellectual property rights enforcement. I wanted to find out, how big is this issue of counterfeit goods? Are enforcement agencies able to get a good sense? [ Kim Gianopoulos: ] It's very difficult to establish the actual population of counterfeit goods because it's an illicit trade, so there's no good measure to determine what the size of that trade is. Now, agencies such as CBP, Customs and Border Protection, and ICE, Immigration and Customs Enforcement, use seizures as a proxy to try to determine what the flow is like. And in 2016, which is the most recent data that was available, they seized over 31,000 shipments of counterfeit goods, which collectively were worth almost $1.4 billion. [ Matt Oldham: ] This idea that it's difficult to get a good sense, is that because we're seeing changes in the way counterfeits are being imported and sold in the States? [ Kim Gianopoulos: ] Absolutely. The rise of e-commerce has really been the driver, the, most of the driver behind this change in the nature of counterfeit goods. These days, counterfeiters will sell directly to consumers. It'll be an individual package that you receive on your doorstep from a particular website as opposed to materials that are shipped in large container ships and sent over via cargo ship to the U.S. There are actually three V's in a lot of the changes that we saw from the agencies. The volume of counterfeit goods has increased dramatically. The variety of goods has increased dramatically. People used to realize, oh, a purse that I purchased online for one-tenth the price, that's probably not a real purse. But now, there are so many different products, so many different consumer products that you and I purchase online all the time that are being counterfeited. And then, the third V is value. The value of the counterfeit trade has increased dramatically over the past 5 to 10 years. [ Matt Oldham: ] What makes this so difficult for them to get their hands around? [ Kim Gianopoulos: ] In our report, we identify some ways that counterfeiters can import the counterfeit materials and then repackage it within the U.S. using what looks to be authentic packaging materials so that you think you're getting something from the United States, but it's really just being repackaged here so that it presents itself as being authentic. So, the agencies themselves didn't identify any targets per se. They're just trying to do the best they can with a market that is really exploding. [ Matt Oldham: ] So I feel like I almost have to ask the question, why should the individual consumer be concerned that they may be unknowingly buying fake goods? I mean, after all, aren't they getting cheaper goods? [ Kim Gianopoulos: ] Well, there are a number of reasons to be concerned, and probably one of the first and foremost is the health and safety of the consumer. There have been a number of studies where the materials that they've gotten have been potentially detrimental to health and safety. For example, there may be lead in travel mugs. There may be rat droppings in the makeup that they're purchasing. Or some of the electrical materials may, they may get electrocuted from those materials. There have been some studies that have been done by the individual companies, the rights holders, that have shown that some of the counterfeit goods that are coming in are not only poor quality, but they may even be supporting transnational criminal enterprises or terrorist organizations because this is a way for them to increase their money flow. [ Matt Oldham: ] You mention the rights holders. What sort of role do they play in this, in counterfeit goods and intellectual property rights enforcement? [ Kim Gianopoulos: ] The rights holders actually work with CBP and ICE pretty closely on a number of different fronts. They offer training to the individuals in those agencies to try to identify these counterfeit goods as they're coming into the country. They will test some of the goods that the agency seize to ensure that they are or are not authentic so that the agencies can pursue some sort of law enforcement towards the importer or the company that's sending in the goods. They also will take actions-- the websites themselves will take actions when there are consumer reports of counterfeits that have been purchased from their websites. [ Background Music ] [ Matt Oldham: ] So we can see that when it comes to illegal activity, one of the difficulties for enforcement agencies is determining how big the issue is -- in this case, how many counterfeit goods are out there and how much they're costing legitimate businesses. I asked Kim to walk me through her team's recommendations. [ Kim Gianopoulos: ] We made a recommendation to CBP and to ICE to work together to determine what additional info they can share with the private sector in order to address this counterfeit surge of materials. We also made a recommendation to CBP that they take some steps to better evaluate the efforts they have underway. They do have some data, and ICE has done some evaluation of its work, but what we've found was they could do more to evaluate and perhaps identify some metrics that they could use to determine where their resources are best spent in an effective and an efficient manner. [ Matt Oldham: ] What's the main take-away for people from this report? [ Kim Gianopoulos: ] I think there are probably a couple of take-aways for folks. First of all, they need to realize that the breadth and type of counterfeit sales has changed dramatically due to e-commerce. And as such, consumers need to be very concerned and also to be very careful. Healthy skepticism is probably in order here when they're ordering things online. Just because something looks like it's real or presents itself as authentic doesn't necessarily mean it's going to be. They may be able to tell, may be easy to tell from the packaging and may be very difficult to tell if something like that is real or not. So just to be very cautious and know that they may be getting something that's counterfeit even if they paid a retail price. And then, also, the other take-away I would say is for, to know that agencies do have some initiatives under way that they are trying to address this tide, but there are some things they can do to do a better job. [ Backgroun Music ] [ Matt Oldham: ] Thanks for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts. [ Background Music ] [ Matt Oldham: ] For more from the congressional watchdog, the U.S. Government Accountability Office, visit us at gao.gov.