Counterfeiting

Counterfeits are products that illegally attempt to imitate or replicate another product that is trademarked, copyrighted, licensed, or otherwise protected by law. The purpose of the imitation, or forgery, is to defraud the customer while generating profits and avoiding taxation. Counterfeiting not only violates intellectual property rights and laws but also creates health, social, and economic harms. Counterfeit goods are a growing illicit revenue source for criminal networks, organized crime, and terrorist organizations. Counterfeiting of currency is the most well-known form of counterfeiting, but almost anything can be counterfeited, from high-tech military parts to household extension cords. Some of the more common counterfeit goods are pharmaceuticals, designer clothes and accessories, computer products, software, DVDs, and cigarettes.

There are two types of counterfeiting, deceptive and nondeceptive. Deceptive counterfeiting occurs when consumers are not aware that they are purchasing a counterfeit item. Consumers believe that they are purchasing a genuine automobile part, medication, household appliance, toothpaste, or bottle of detergent. Consumers, and possibly retailers, are defrauded through the misrepresentation of the product as being legitimate. Counterfeit products can and do make their way into legitimate supply chains, and retailers can be unaware that the items are fraudulent. Other times, retailers are aware that they are selling counterfeit products and do so to increase revenues.

In nondeceptive counterfeiting, the buyer and seller have a reasonable suspicion that the items are not legitimate. Often, these items are sold below market price, distributed via street sellers or the Internet, and the quality of the item is noticeably lower. Common examples of nondeceptive counterfeiting are fake designer purses, knockoff watches, and bootleg DVDs. In nondeceptive counterfeiting, consumers are not only willing participants but create the demand and can be promoters of the illicit trade. A common motivation for purchasing nondeceptive counterfeits is the cost of the legitimate item; consumers believe that the legitimate product is overpriced or they cannot afford it.

Counterfeits are often produced in one country, smuggled, and distributed in another. Counterfeit currency is known to have been produced in North Korea, Colombia, and the Russian Caucasus. China, India, Vietnam, Russia and the former Soviet republics, and countries in Latin America, the Middle East, and Africa are known to have significant counterfeit production. However, all regions—including North America and Europe—produce counterfeits. The United States and Europe tend to be destination markets for counterfeit luxury goods, [Page 151]whereas counterfeit pharmaceuticals are more likely to be distributed in developing countries.

Common smuggling practices include hiding illegal products within legal shipments; attaching patches, labels, and plastics to conceal the illegality of the product; and shipping the components separately and assembling the counterfeit in the destination country. For example, a counterfeiter might hide the trademark by affixing a plastic film on the item. Once the item clears customs, the film is removed and the trademark or logo is revealed. Alternatively, counterfeiters may ship the items separate from the printing die or logo appliqué.

Counterfeiters and their products are a threat to health and public safety. Counterfeiters produce fake branded and generic medications, which can contain toxic ingredients or only trace amounts of the declared active ingredient, if any. Medications to treat cancer, malaria, tuberculosis, HIV/AIDS (human immunodeficiency virus/acquired immune deficiency syndrome), hypertension, bacterial infections, pain, and erectile dysfunction are common targets of counterfeiters. These counterfeit medications can lead to death, prolonged illness, proliferation of diseases, or drug resistance. Air travelers and the public are put at risk by counterfeit parts installed on aircrafts. The Federal Aviation Administration estimates that on a yearly basis 520,000 installed airline parts are counterfeit. Often, these parts do not meet industry standards. Counterfeit beauty products and perfumes put consumers at risk because they can contain toxic chemicals, antifreeze, urine, and bacteria. Counterfeit cigarettes increase medical harm because they contain increased levels of harmful chemicals, carcinogens, and toxic metals, such as arsenic, cadmium, lead, and thallium. Furthermore, counterfeits are often produced in unregulated factories with unsafe and unsanitary working conditions. Enslaved and child labor may be used as well.

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