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When most of us think about counterfeit goods we usually conjure up a familiar image of knockoff handbags and luxury watches being sold out of a trunk in some back alley. But the reality of counterfeits is that it’s a much larger problem than most of us could have imagined. The global market for counterfeit goods nets over $600 billion annually, costing U.S. companies $250 billion/year and 750,000 U.S. jobs. The rise in overseas manufacturing in recent decades, coupled with minimal penalties for offenders has led to a dramatic increase in counterfeits in the past 20 years, with counterfeits surpassing the drug trade as the world’s largest black market activity. Counterfeiters quite literally, counterfeit anything and everything, from consumer goods like laundry detergent and extension cords, to prescription medication, and even aerospace components sold to the U.S. defense department. Aside from the obvious economic impact to the companies that are being counterfeited, counterfeits pose a serious threat to consumer safety. Because these products are not subject to safety regulations and proper testing, they are usually manufactured as cheap as possible to maximize profits. This often means leaving out or substituting expensive material and components with subpar material that can be a serious hazard to the consumer even when used correctly. Electronics might be manufactured using less copper, causing them to become a fire hazard, while toys may be made using cheaper, lead-based paint which can be harmful to children. In 2011, U.S. Customs and Border Protection seized over $200 million in counterfeit goods at U.S. ports and border crossings. While this may sounds like an incredible feat, it represents only a small fraction of counterfeit goods entering the U.S. each year. With so much at stake, large brand name companies often take it upon themselves to protect their brand by identifying and prosecuting these illegal organizations for copyright and trademark infringement. One such tool at their disposal is PIERS trade intelligence. Increasingly, companies have been utilizing the detailed commodity description in PIERS U.S. import data to search for their company’s brand name among all waterborne shipments. Once they have compiled a list of all the shipments containing their brand’s name they can compare this list of shippers and consignees to the company’s list of licensed manufacturers, distributors, and retailers to look for discrepancies in their supply chain. Often times these products will be shipped and documented posing as real product to avoid detection by U.S. Customs. But while this practice may help them avoid detection by Customs, it gives legal savvy brand owners the evidence they need to prosecute these counterfeiters.
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USING TRADE INTELLIGENCE TO IDENTIFY COUNTERFEITERS
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
PRESENTED BY:ALIET MARTINEZ, DIRECTOR OF CLIENT DEVELOPMENT
PIERS / THE JOC GROUP INC.
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
THE GLOBAL COUNTERFEIT MARKET• Represents 7% of all global trade• Cost U.S. companies $250 Billion/year• Counterfeits are responsible for the loss of 750,000 U.S. jobs• Counterfeiters net $600B/year globally• Highest profit margin of any illegal trade• Up to 90% of counterfeits come from China• In 2011, U.S. Customs seized over $200 million in counterfeit
goods, representing only a small percent of U.S. imports• Profit margin on counterfeit cigarettes can net 20-1• Counterfeited medicines is a $75 billion/year market
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
CAUSES OF COUNTERFEITING
• Minimal penalties vs. high profit margin
• Overseas manufacturing with limited regulatory oversight
• Global economy makes it easy for counterfeits to blend in with legitimate trade
• Internet allows counterfeiters to sell directly to consumers
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
IT’S NOT JUST HANDBAGS AND WATCHES
• Consumer goods (high volume low cost products)
• Brand name drugs• Cigarettes• Electronics• Luxury goods
Popular Counterfeits Threat• Not subject safety regulations and
proper testing• Counterfeits have been linked to
terrorist organizations• Cost to a brand’s bottom line and
brand equity• Violent activity related to
counterfeit organizations
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
PIERS / THE JOURNAL OF COMMERCE HISTORY
In 1827, The Journal of Commerce paved the way in trade intelligence by gathering and listing goods on arriving vessels…
PIERS continued this ground breaking tradition in the 1970s as the JOC’s‚ first venture in electronic information services.
Today PIERS is the most comprehensive database of international trade activity in the world‚ collecting and standardizing data from over 16 million bills of lading annually for U.S. imports and exports.
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
ABOUT PIERS TRADE INTELLIGENCEPIERS is the most comprehensive database of U.S. import and export activity in the world. The detailed trade data that powers PIERS database is sourced from bill of lading documents collected from U.S. Customs.
Every year PIERS processes more than 17,000,000 bills of lading, which translates into over 20,000,000 shipments annually. PIERS turns this raw data into cleansed, standardized, enhanced and validated data points which provide the trusted intelligence that companies use to make profitable decisions.
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
Available fields:•Shipper name & address•Consignee name & address•Notify Party name & address•Country of Origin/Destination•U.S. & Foreign Ports•HS Code(s)•Standardized Commodity Description•Quantity & Unit of Measure•Weight in MTONs•TEUs•Estimated Value•Ocean Carrier•Date of Arrival/Departure•And More!
DETAILED BILL OF LADING DATA
June 19, 2013
SPOTTING COUNTERFEITERS
FAKE SNEAKER MANUFACTURING INC.123/45 NGUYEN THI MINH KHAIPHOUNG 5 - QUAN 3 - TPHCMVIETNAM
CANAL ST. SNEAKERS123 CANAL ST STE 516NEW YORK, NY 10015UNITED STATES
CANAL ST. SNEAKERS123 CANAL ST STE 516NEW YORK, NY 10015UNITED STATES
Overseas supplier unknown to the manufacturer
Retailer receiving the goods not a licensed dealer of Nike
Shipment lists Nike sneakers in the commodity description
Import Bill of Lading
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
Gray Market: A market where a product is bought and sold outside of the manufacturer's authorized trading channels. Most prevalent among products where the price varies significantly from country to country.
Example: A product intended for a particular market is either routed to or legally sold to a distributor in another market where the cost of that product is higher. The difference in price offered by various legitimate markets creates an opportunity for the middleman to obtain branded merchandise at a discount and sell them for higher price than he would have through the intended distribution channel.
• It is estimated that gray market diversions cost U.S. companies as much as $63 billion in revenue
• Manufacturers may lose approximately 4.5% of sales to gray marketers
GRAY MARKET OVERVIEW
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
• Supply & Demand Imbalance• Distributor Channel Conflict• Disruptive Pricing Pressure• Revenue Cannibalization• Profit Erosion• Negative Customer Experience• Product Warranty & Safety Issues• Legal & Regulatory Risk
GRAY MARKET IMPACT
• Issues with warranties and returns• Gray market resellers may change
packaging or instructions or may be missing entirely
• Lack of regulatory oversight by local governments
• Lack of quality control• Products may be mishandled or
damaged during multiple shipments
Impact on the Brand Impact on the Consumer
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
IDENTIFYING GRAY MARKET ACTIVITIES
Licensed U.S. Wholesaler pays $100/unit direct from manufacturer and charges $120/unit
Licensed Brazilian Wholesalerpays $60/unit from the same manufacturer and
charges $80/unit
Rather than spend $120/unit from the U.S. wholesaler, a U.S.
retailer places an order from the Brazilian wholesaler at $80/unit
which is still significantly less even after the additional shipping
June 19, 2013
IDENTIFYING GRAY MARKET ACTIVITY
EGYPT ATHLETIC APPARELABDEL NABI E’L RAGABI ST, ABO RADI ZONE EL MEHALLA, CAIROEGYPT
FAMOUS FOOTEAR1 WOODRIDGE CENTER STE 210WOODBRIDGE, NJ 08879UNITED STATES
Overseas supplier is a licensed Nike distributor in Egypt
Retailer is purchasing Nike products on the gray market by importing the product from an Egyptian distributor rather than a U.S. distributor
Shipment lists Nike apparel in the commodity description
Import Bill of Lading
FAMOUS FOOTEAR1 WOODRIDGE CENTER STE 210WOODBRIDGE, NJ 08879UNITED STATES
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
• Cross-referencing import and export transactions against blacklisted suppliers and distributors can help identify counterfeiters
• Consignees that are not licensed retailers or distributors may also be likely counterfeiters
• Unusual and unlikely sources of brand name products can be a strong indication of gray market activity
• PIERS is the only complete database of U.S. export shipments, allowing you to spot gray market trading from your U.S. distributors
SUMMARY
The Licensing Expo – Crushing the CounterfeitersJune 19, 2013
QUESTIONS
