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Will Holidays Exacerbate the Chaos of Fashion Counterfeits?

One night in September, U.S. Customs and Border Protection (CBP) officers in Louisville seized five shipments containing counterfeit designer apparel that was worth more than $1.1 million.

Starting at midnight on Sept. 23, CBP officers in Louisville ended up seizing five shipments of handbags, wallets, shoes, purses and other apparel. One shipment contained 30 totes bearing Louis Vuitton banding, four Dior-branded handbags and two bags with Gucci labels affixed. Another parcel had Chanel, Dior and Balenciaga-branded items, while additional parcels contained 200 purses that look like YSLs, and another shipment bore 366 bags resembling Louis Vuittons.

The final shipment was a box filled with Louis Vuitton wallets. All items were evaluated by an import specialist, who often works with representatives of the brands and who determined that these were counterfeit items.

These counterfeit goods originated either from Hong Kong or United Arab Emirates, CBP said. The goods were destined for Houston; Los Angeles and Glendale, Calif.; Dorado, P.R., and New York City. If these items were real, their manufacturer’s suggested retail price (MSRP) would have totaled $1.13 million.

“This just goes to show you, night after night, our CBP officers are doing everything we can to protect the U.S. consumers from being conned into buying cheap knock-offs,” said Thomas Mahn, port director for Louisville. “These seizures totaled over 700 items and it is because of the great work of our officers.”

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In a separate recent incident, CBP officers assigned to the Los Angeles International Airport (LAX) cargo operations, in coordination with import specialists from the Consumer Products and Mass Merchandising and the Apparel, Footwear and Textiles Centers of Excellence and Expertise (CEE) seized 7,170 counterfeit high-fashion products arriving via express air cargo from China. Established in 2016, the CEEs represent CBP’s expanded focus on “Trade in the 21st Century” by aligning with modern business practices, focusing on industry-specific issues, and by providing tailored support to special trading environments. They were created standardize practices across ports of entry, facilitate the timely resolution of trade compliance issues nationwide, and strengthen critical agency knowledge on key industry practices.

The officers seized 2,175 counterfeits including hundreds of items apiece of Louis Vuitton, Chanel, Dior, Fendi counterfeit, Versace, and Gucci sandals, in addition to knockoff Dior cross-body handbags, fake Louis Vuitton counterfeit clutches, ersatz Gucci purses and wallets and 1,100 scarves sewn to resemble Louis Vuittons. If genuine, the seized merchandise would have had an estimated MSRP of $4.9 million.

CBP officers discovered the counterfeit goods while conducting an enforcement exam on a shipment of 198 boxes that arrived on July 14. The shipment, falsely manifested as “Plastic Office Supplies,” was a clear attempt to evade U.S. law.

“Counterfeit products have an enormous impact on the American economy by eroding the competitiveness of American workers, manufacturers and innovation,” said Carlos C. Martel, CBP director of field operations in Los Angeles. “CBP commits substantial resources to detect, interdict and seize goods that infringe intellectual property rights laws.”

Intellectual property rights (IPR) protection is a priority trade issue for CBP. For the first and second quarters of fiscal year 2020, CBP seized more than 13,600 shipments of counterfeit goods with an estimated MSRP of over $730 million, nearly on par with 2019 figures. Similar to the previous two fiscal years, wearing apparel was among the most-seized products.

In terms of trading partners, the majority of the value, or about $1 billion, for all seized counterfeit goods in the period was shipped from or transshipped through China or Hong Kong, according to CBP.

In fiscal year 2019, CBP and partner agency Homeland Security Investigation (HSI) seized 27,599 shipments containing IPR violations with an MSRP of an estimated $1.5 billion had the goods been genuine.

Watches and jewelry represent 15 percent of all IPR seizures and continue to top the list of all seized IPR materials. Watches and jewelry are also the top product seized by total MSRP, with seizures valued at over $687 million, representing 44 percent of the total. Wearing apparel and accessories are second with seizures estimated to be valued at more than $226 million.

China was the primary source for seized counterfeit and pirated goods, accounting for 83 percent of all IPR seizures and 92 percent of the estimated MSRP value of all IPR seizures.

Counterfeit products have an enormous impact on the U.S. economy by eroding the competitiveness of workers, manufacturers and innovation.
A shipment falsely manifested as “Plastic Office Supplies” was a clear attempt to evade U.S. law.

With the rampant importation and proliferation of counterfeit goods, despite CBP efforts, the upcoming holiday season portends increased activity, according to a new national study from Red Points, a brand intelligence specialist.

Red Points said counterfeit commodities available on illegitimate websites and sold in underground outlets multiply the illegal profits of smugglers and traffickers. Consumers are tricked into believing they are buying an original product at a significant discount.

The study from Red Points, conducted in September, outlined how imperative it was for brands to approach Black Friday and the 2020 holiday shopping season with heightened awareness of the threat of counterfeits and illegitimate sellers infiltrating trusted e-commerce channels.

This Black Friday will be unlike any other and will almost certainly set precedence for how retailers approach Black Friday, holiday sales events and door-buster deals well beyond the pandemic, Red Points said.

Amid a global health crisis, shoppers have reasons to avoid jam-packed stores and crowds, but still expect to snag deeply discounted merchandise, the study said. With the expected domination of online shopping this holiday, retailers must take all precautions necessary to safeguard their brand reputation.

“At a time when businesses are looking to recoup recent losses, ensuring brand protection will be essential to protecting retailers’ bottom line this holiday shopping season,” said Daniel Shapiro, vice president of strategic partnerships and brand relationships at Red Points. “Many shoppers are feeling financial strain induced by the pandemic. As a result, consumers will be more budget conscious this year, making it more likely they’ll turn to counterfeiters, which can be devastating for brands.”

Counterfeiters and infringers pose a monetary and reputational threat to brands and e-commerce platforms, the study noted. Although counterfeits are not the fault of the brand, people are less likely to give brands a second chance after purchasing a counterfeit product, as indicated by survey results. Twenty-six percent of respondents have purchased counterfeits on Black Friday and only 20 percent said they would use a counterfeit product after finding out it was fake.

More than half of respondents claimed they would ask for a refund and nearly 50 percent who have bought fakes would write cautionary reviews about where they purchased it from. More than 40 percent of respondents would complain to the original brand and 25 percent of respondents think removing counterfeits should be done by the brand.

CBP has established an educational initiative to raise consumer awareness about the consequences and dangers that are often associated with the purchase of counterfeit and pirated goods. Information about the “Truth Behind Counterfeits” public awareness campaign can be found at cbp.gov/FakeGoodsRealDangers.