Global Economy
March 27, 2013

Counterfeit share of trade: 1.7%?

By Edward Gresser

THE NUMBERS: Counterfeit goods seizures by U.S. Customs –

FY 2012 value: $1,262 million
Number of seizures 22,838
   
FY 2007 value: $197 million
Number of seizures 13,657
   
FY 2002 value: $99 million
Number of seizures 5,797

WHAT THEY MEAN:

The criminal fringe of the global economy, illustrated in two sentences:

A Yorba Linda man made his initial appearance in federal court Friday afternoon [March 15th<]following his indictment for allegedly using Craigslist to sell a variety of counterfeit sexual dysfunction medications, which he claimed to buyers were genuine. Suspicions about [the accused man, Mr. Nathan] Welter’s activities first arose in August 2011 and February 2012 when U.S. Customs and Border Protection (CBP) intercepted and seized three parcels containing counterfeit Cialis and Viagra tablets that were being shipped to Welter from China.

Background: Ten years ago, U.S. Customs & Border Patrol agents seized about 6,000 shipments of counterfeit goods, valued (in comparison to legitimate sales) of $99 million. Five years ago the totals were 14,000 shipments and $197 million; by 2012, seizures had risen to 22,838 shipments of counterfeit goods at a value of nearly $1.3 billion.

International research and comparisons likewise suggest a growing problem. The most recent study of counterfeit trade dates to 2011, done by the International Chamber of Commerce in Brussels. This estimated the 2008 value of counterfeit trade in a range from $287 billion to $362 billion. (The total included about $19 – $75 billion in digitally pirated works of music, movies, and software, with the rest unspecified but presumably divided among the types of manufactured consumer goods the Customs Service finds in its seizures.) The mid-point, roughly $325 billion, would be 1.7 percent of that year’s $19 trillion in exports. The ICC study’s authors predicted that by 2015, counterfeit trade would grow to a range of $350 billion – $570 billion. Rising U.S. Customs seizures seem to confirm their worries. So do figures from the European Union, where seizures have jumped from 40,000 in 2007 to 91,000 in 2012.

The Yorba Linda case was very typical. Like most seized counterfeits, it reached the U.S. in a small package – 9,500 of last year’s counterfeit shipments arrived by express parcel, and 8,500 by mail. Like most manufactured counterfeits, it arrived from China – Customs agents traced $906 million of the $1.26 billion worth of seized counterfeit goods back to the PRC, and another $154 million to Hong Kong. And like many other counterfeit goods – brand-name running shoes that come apart on corners, sunglasses fully permeable to ultraviolet, perfume cut with pond-water and worse, 65 shipments of mock airbags, 2,343 batches of medicine, totaling 3.7 million doses of adulterated or useless junk – it was dangerous.

FURTHER READING:

Just the facts – An arraignment in Yorba Linda: http://www.cbp.gov/xp/cgov/newsroom/news_releases/local/03122013_3.xml

Ewww – Harper’s Bazaar reports the gross ingredients and nasty side-effects of counterfeit perfume: http://www.harpersbazaar.com/beauty/health-wellness-articles/counterfeit-perfumes-chemicals-0110?click=main_sr

Data on seizures –

The Customs Service’s annual reports on counterfeit seizures, by country and type of good, back to 2002: http://www.cbp.gov/xp/cgov/trade/priority_trade/ipr/ipr_communications/seizure/

And direct to last year’s figures: http://www.cbp.gov/linkhandler/cgov/trade/priority_trade/ipr/ipr_communications/seizure/fy2012_final_stats.ctt/fy2012_final_stats.pdf

Research & Resources –

ICC’s 2011 look at the world of counterfeit trade: http://www.iccwbo.org/Advocacy-Codes-and-Rules/BASCAP/BASCAP-Research/Economic-impact/Global-Impacts-Study/

Perspective from the European Union: http://ec.europa.eu/taxation_customs/customs/customs_controls/counterfeit_piracy/combating/index_en.htm

The Food and Drug Administration on counterfeit medicine risks in the United States: http://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/CounterfeitMedicine/default.htm

The World Health Organization’s home-page for counterfeit medicine: http://www.who.int/medicines/services/counterfeit/en/index.html

And beyond the borders –

The late Chinua Achebe sadly explains (in 2007) why he had decided to live in the United States:

“I miss Nigeria very much. My injury means I need to know I am near a good hospital and close to my doctor. I need to know that if I went to a pharmacist, the medicine there would be the drug that the bottle says it is.”

All countries are targets of counterfeiters; wealthy countries with sophisticated Customs operations resist them most effectively, and poor countries least. A recent survey done by the Lancet, a U.K.-based medical journal, found about 36 percent of medicines sampled in 21 sub-Saharan African countries to fail chemical analysis, and 20 percent to be falsified. The Guardian’s obituary: http://www.guardian.co.uk/books/2013/mar/22/novelist-chinua-achebe-dies

And Moises’s Naim’s 2005 Illicit, still the best book on the criminal side of the global economy: http://www.amazon.com/Illicit-Smugglers-Traffickers-Copycats-Hijacking/dp/1400078849

*** SPECIAL NOTE/CORRECTION ***:

Please note: Last week’s trade fact mistakenly said the IMF had projection African GDP to reach $3 trillion by 2013. Not true! The $3 trillion prediction is for 2017. (We were reading from the wrong line.) Apologies, and thanks to reader CM in Canada for pointing out our error.