American consumers love bargains. But that zest for getting a coveted product at the lowest price also has an economic downside: It creates a giant opportunity for the scads of shady operators – especially from China – that pump out counterfeit versions of the real thing.
U.S. companies hundreds of millions of dollars a year in sales from products that are counterfeited overseas and shipped to America. The problem’s exact scope isn’t entirely known because most of these products are never seized and, therefore, the federal government can’t get an accurate measurement of the economic loss.
To get a better handle on just how extensive counterfeiting has become, 24/7 Wall St. reviewed data from the U.S. Homeland Security Department’s Customs and Border Protection unit, the federal agency charged with enforcing intellectual property rights (IPR) in the country.
The CBP does so by seizing products that infringe the originals’ copyrights and patents. According to the agency, “The theft of intellectual property and trade in fake goods threatens America’s economic vitality and national security, and the American people’s health and safety. Trade in these illicit goods funds criminal activities and organized crime. The first notable aspect of the data is the astonishing level at which China takes advantage of the U.S. markets. Some estimates by economists say 8 percent of China’s GDP comes from counterfeit goods, from software to designer clothing.
Here are the 10 product categories, in descending order, that lose the most money to counterfeit goods.
Value: $99.8 million
Percent of Total Seizures: 38 percent
Just under $100 million worth of counterfeit footwear was seized entering the U.S. in 2009, by far the greatest amount of any product. By value, 98 percent of counterfeit footwear originated in China. This was the fourth year that footwear was the top commodity seized.
2. Consumer Electronics
Consumer electronics, such as cell phones, digital music players and cameras, made up 12 percent of all seizures worth nearly $32 million. China produces most of these electronics, with approximately $18.5 million worth of seizures originating from there. Consumer electronics are also the most popular illegitimate product coming out of Hong Kong, second only to China.
Anyone who has walked down a major New York City street has had the opportunity (or several) to buy a fake designer handbag. The CBP seized $21.5 million worth of counterfeit handbags, wallets and backpacks. China exported $19.5 million of these goods.
There was only slightly less apparel seized than handbags, wallets and backpacks. The amount exported from China is also similar, worth $17.9 million. Counterfeit apparel is most often made to resemble designer fashion brands such as Polo Ralph Lauren.
Although counterfeit watches are readily available in the U.S., more than $15.5 million worth of watches and watch parts were seized in 2009. The majority of these items (just over $7.9 million in value) came from Hong Kong. The industry is flooded with replicas of every Rolex model available, as well as Panerai and Omega models.
Over $12.5 million worth of computers and components was seized coming into the U.S. in 2009 – almost double the amount taken the year before. It’s a growing issue that causes several problems for consumers: Counterfeit computers and parts can work poorly, corrupt a user’s data or even blow up. According to the Alliance for Gray Market and Counterfeit Abatement, up to 10 percent of all high-tech products sold worldwide are counterfeit.
In 2008, just under $6 million worth of media, including compact disks and DVDs, was seized entering the country. In 2009, that jumped to just over $11 million. Approximately half of these goods came from China. Counterfeit media is often referred to as “bootleg” media, and is widely available in street markets and for purchase on the Internet.
Slightly more than $11 million worth of pharmaceuticals were seized in 2009, most of which came from China. Pharmaceuticals also accounted for the majority of all counterfeit goods coming from India, making up 86 percent of goods originating from that country. Pharmaceuticals were the top commodity presenting “potential safety or security risks” according to the CBP. Pharmaceuticals account for 34 percent of all the items in this security risk category, which also includes electrical articles (power cords, lights) and critical technology components (networking equipment, semiconductor devices).
Counterfeit jewelry has a huge market in the U.S. In 2009, approximately $10.5 million worth of fake jewelry was seized. One popular means of counterfeit jewelry distribution is through online auction sites. Tiffany & Co. lost a lawsuit against eBay this past September regarding the sale of counterfeit Tiffany jewelry on its site.
10. Toys/Electronic Games
Of the $5.5 million worth of toys and electronic games that were seized in 2009, just under $4.9 million came from China. Counterfeit toys have the potential of being extremely dangerous. Some are made with poisonous materials, such as lead, and others can malfunction and hurt children, such as electronic toys that overheat or even explode.