From the U.S. Government Accountability Office, www.gao.gov Transcript for: U.S. Customs and Border Protection's Effort to Combat Counterfeit Goods Description: Counterfeit goods not only infringe on intellectual property rights, but can also harm the U.S. economy and threaten consumers' health by exposing them to potentially unsafe materials. U.S. Customs and Border Protection is the agency tasked with protecting consumers and U.S. markets from these goods. However, the CBP faces a growing number of counterfeit threats. We talk with GAO's Kim Gianopoulos--an expert on intellectual property and counterfeit goods and a director in our International Affairs and Trade Team--about her new report on this issue. Related GAO Work: GAO-20-692, Intellectual Property: CBP Has Taken Steps to Combat Counterfeit Goods in Small Packages but Could Streamline Enforcement. Released: October 2020 [Intro Music] [Kim Gianopoulos:] CBP should take steps to develop a streamlined enforcement approach to counterfeit goods and small packages. [Holly Hobbs:] Hi and welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office--I'm Holly Hobbs. Counterfeit goods not only infringe on intellectual property rights, but can also harm the U.S. economy and threaten consumers' health by exposing them to potentially unsafe materials. U.S. Customs and Border Protection is the agency tasked with protecting consumers and U.S. markets from these goods. However, the CBP faces a growing number of counterfeit threats. Today we talk with GAO's Kim Gianopoulos--an expert on intellectual property and counterfeit goods and a director in our International Affairs and Trade Team--about her new report on this issue. Thank you for joining us, Kim! [Kim Gianopoulos:] Thanks for having me today, Holly. [Holly Hobbs:] So Kim, can you give us some examples of what sort of counterfeit goods are we discussing here? [Kim Gianopoulos:] Well Holly, we focused on counterfeit goods in small packages. The kinds of things that you and I might purchase online and have delivered right to our homes. What they're looking at is--you go on Amazon and you order bedsheets, let's say. You're ordering something and it's coming from overseas--China, or Taiwan, or Hong Kong, or wherever--and that package is just that one item and it's just for you. It's very difficult for CBP to review all these items that are coming onesies and twosies to see if they're counterfeit. They may open packages that have 3 or 4 hoodies in them and find that--like, it's supposed to be an NBA-approved hoodie, which would normally be $50 bucks, and it's an incredibly awful knockoff [laughs] that people are paying $50 bucks for thinking they're going to get the real thing. [Holly Hobbs:] And it sounds like you're saying that knockoffs aren't just coming from a few countries, that it's a global problem? [Kim Gianopoulos:] They're coming from everywhere, and in some cases--it's interesting that, the work we did on the last report is that sometimes they will be sent into the U.S. without any labels on them. And then the country will send over a package with all of these fake Nike labels, or Adidas or Gucci or whatever it might be. And then there is some facility in the U.S. that affixes the fake labels onto the fake goods and sells them in the U.S. [Holly Hobbs:] So, what is Customs and Border Protection doing to combat counterfeit goods? [Kim Gianopoulos:] CBP's approach for combatting counterfeit goods can be broken down into two main steps. First, they identify suspicious packages coming into the U.S. using a risk-based approach called targeting, which uses data about incoming packages to identify which ones should be set aside for further examination. These packages are examined to determine whether they contain anything illicit, including counterfeit goods. CBP began a pilot in January of this year to obtain additional data on small packages to better identify and target high-risk shipments. And then second, if counterfeit goods in these packages are identified, CBP uses processes called seizure and forfeiture to remove these goods from the flow of U.S. commerce. In general, once CBP has completed seizure and forfeiture of a counterfeit good, it destroys that good. [Holly Hobbs:] Are there challenges that CBP faces when trying to prevent these goods from entering the U.S.? [Kim Gianopoulos:] CBP has a number of challenges and one of the biggest ones to stopping counterfeit goods is the high-volume of small packages that are coming into the U.S., especially in recent years. Their current processes really aren't set up to address the difficulties that this volume presents. Officials told us that they are legally required to use the processes of seizure and forfeiture for counterfeit goods. But these processes--they're very time and resource intensive. For example, they can take as long as 120 days and must be applied to each individual good. [Music] [Holly Hobbs:] So it sounds like Customs and Border Protection has a strategy for combatting counterfeit goods. But that a volume of counterfeit goods are still making their way into the U.S., threatening our economy and potentially the health of consumers. Kim, your report discusses counterfeit items as a growing problem. Can you help us understand how big of a problem this is? [Kim Gianopoulos:] It's actually very hard to know the true size of the counterfeit market because it's a measurement of illicit goods, and that's never precise. One way to think about the size of the market is that in fiscal year 2019, CBP reported processing approximately 1.8 million small packages per day. Of course, some unknown number of those contained counterfeits. CBP has reported significant increases in the number of packages coming into the U.S. by international mail or express carrier in just the last few years. In those cases, it's a tripling or doubling of volume respectively, just since 2013. Despite this increase in volume, CBP staff resources and processes have not changed significantly. And then, as far as value, in fiscal year 2019, CBP reported seizing counterfeit goods with a total manufacturer's suggested retail price of up to $1.5 billion if those goods had been authentic. [Holly Hobbs:] And did we make any recommendations to CBP on this issue? how it could improve its approach for combatting counterfeit goods? [Kim Gianopoulos:] Yes. We made one recommendation. We said that CBP should take steps to develop a streamlined enforcement approach to counterfeit goods in small packages. This is particularly important given the increased number of these packages and the limited resources available to deal with them. We also encouraged CBP to consider assessing the feasibility and impact of such steps, including any potential cost savings. [Holly Hobbs:] Kim, last question--what's the bottom line of this report? [Kim Gianopoulos:] Basically, CBP is trying to address an increasing number of small packages containing counterfeit goods that are being sent directly to consumers, primarily as a result of the rise of e-commerce. We believe CBP should take steps to improve its approach through streamlining its processes where possible to help address this concern. [Holly Hobbs:] That was Kim Gianopoulos discussing her new report on efforts to combat counterfeit goods. Thank you for your time, Kim! [Kim Gianopoulos:] Thanks for having me, Holly. [Holly Hobbs:] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts. 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