'Notorious' Counterfeit Markets Still Thriving Worldwide, Reports USTR

The new report includes for the first time a section on the growing role of e-commerce platforms in the import of counterfeit and pirated goods into the U.S., said the agency. “The greatest risk of importation of counterfeit and pirated goods, harming both U.S. content creators and U.S. consumers, is posed not by foreign flea markets and dark web sites but by inadequate policies and inadequate action by e-commerce companies that market and sell foreign products to American consumers,” said USTR. “Combatting piracy and counterfeits will require sustained effort by both the federal government and by companies that profit from the sale of such goods.”

Counterfeit and pirated goods "have been sold for years on street corners, in alleys, from trunks of cars, and from unscrupulous physical markets," said the report. Consumers at those locations "can discern the risk of purchasing an illegitimate good" that raises a red flag, such as poor quality packaging or substantially discounted pricing, it said. But consumers shopping online "are unknowingly exposed to counterfeit and pirated goods in settings and under conditions that make the articles appear genuine," it said. "Consumers are often shopping from the safety of their homes through mainstream online markets that provide an aura of authenticity and trust."

USTR removed Amazon's Canada and India affiliates from the notorious markets list this year, retained the British, German and French sites, and added Amazon's Italian and Spanish sites. “In some cases, online markets in the 2019 NML are not highlighted this year, but improvements are still needed, and the United States may continue to raise concerns related to these markets on a bilateral basis with the relevant countries,” the report said. “Some of these e-commerce platforms have invested significant time and resources to combat this problem and have developed innovative tools and processes along the way. Traders who traffic in counterfeit and pirated goods, on the other hand, have also evolved their tactics to evade and overwhelm the roadblocks placed in their way.”

The report praised Amazon for partnering with the federal government's National Intellectual Property Rights Coordination Center on a joint operation to prevent the import of counterfeit goods into the U.S. When Amazon was first identified as a notorious market, it said the listing was politically motivated. Amazon didn't respond to questions Friday.

Online sellers of pirated and counterfeit goods are shifting increasingly to social media to carry out their crimes, said USTR. Legitimate rights holders worry "many social media providers do not verify or vet the identity of advertisers and posters in a way that would promote offline enforcement and prevent repeat infringer accounts,” it said. "One fast, easy, inexpensive, and common tactic is to set up accounts on social media platforms and use posts or targeted ad campaigns to advertise counterfeit and pirated goods. The posts and advertisements convey authenticity by often containing the same or confusingly similar images, hashtags, and keywords used by the brand."

Products sold at U.S. brick-and-mortar stores are typically shipped into the country in "bulk cargo containers and then distributed domestically through traditional train and truck networks," said USTR. "Methods for detecting counterfeits in these bulk containers at the port of entry are well-established and effective." But products sold on e-commerce platforms, including counterfeit goods, "are increasingly shipped directly to the consumer using small packages," it said.

Overseas-based counterfeiters use international air freight, knowing the "high volume of these packages" makes them more difficult to detect, said the report. The Organisation for Economic Co-operation and Development found it's harder for authorities to detect counterfeits in small parcels than in shipping containers "because cargo containers provide customs officials with more information that can help identify counterfeit shipments," it said. The effort required of Customs and Border Protection "to seize a shipment does not vary by size of the shipment, meaning that a package of a few infringing goods requires the same resources to seize as a cargo container with hundreds of infringing goods," it said.

MPA hailed the report's "timely release," said Chairman-CEO Charles Rivkin Thursday. "This report is a stark reminder of the serious challenges faced by the U.S. film, television, and streaming industry and the broader creative community around the world. The ongoing global pandemic has presented unprecedented challenges for the industry, including putting hundreds of thousands of jobs at risk across the country."