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 ]

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[ Background Music ]

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