The American economy loses $250 billion as a result of counterfeit products each year, according to a recent report. Despite the impact, only a fraction can be detected and confiscated by the government.
Approximately $1.26 billion worth of counterfeit goods originating overseas were seized by the U.S. Customs and Border Protection (CBP) in 2012. Each seizure averaged $10,450 worth of counterfeit goods. The three most confiscated items in 2012 were handbags and wallets; watches and jewelry; and wearing apparel and accessories. 24/7 Wall St. reviewed the 10 most counterfeit items seized in 2012, based on their retail value.
[More from 24/7 Wall St.: The States with the Most Homes in Foreclosure]
The value and the number of seizures changes dramatically each year due to the products sold and the success of CBP operations. The value of handbags and wallets seized in 2012 rose 142% compared to the previous year. Therese Randazzo, the director of the Intellectual Property Policy and Programs Division for the CBP, explained that CBP officials may seize knockoffs of more expensive brands in one year than in another.
The value of product seizures also fluctuate as a result of different methods of smuggling counterfeits into the U.S., which ultimately impact what products get seized.
Only a decade ago, most counterfeit goods were shipped from overseas via large containers and then sold in the country. An increase in online shopping has changed that, Randazzo told 24/7 Wall St. Now, counterfeiters are selling these items through websites and shipping them directly to the consumer, making it that much harder to track and seize. To combat the new techniques, the CBP has begun targeting and shutting down websites that facilitate these transactions.
It is important that federal enforcement agencies account for the online shift in the counterfeiting market, Lev Kubiak, director of the National Intellectual Property Rights Center said in a statement. “Attacking criminal activity at every point along the international supply chain, to include websites, manufacturers, shippers and shipping routes, border entry points, distribution networks and payment methods, is critical to” CBP and Homeland Security Investigations enforcement efforts, he said.
[More from 24/7 Wall St.: America’s Disappearing Restaurant Chains]
More of these counterfeits originate from mainland China than any other country in the world. This is due in part to the fact that China is the largest manufacturer of so many products — most of which are made cheaply. Adding to this, enforcement of intellectual property is also particularly weak in the country. Hong Kong, Singapore, India and Taiwan rounded out the top five countries of origination for counterfeits seized by CBP.
While it is an effective measure of government activity, the report fails to capture the full-scale of counterfeits in the U.S. This is because the CBP does not include seizures of items originating in the U.S., digital piracy, and counterfeits that are not seized. In the case of software piracy, for example, counterfeiting costs U.S. companies billions alone in lost revenue. However, because the CBP does not measure digital transmission, which represents the vast majority of software piracy, the scale of the theft is underrepresented.
Based on information provided by the CBP, 24/7 Wall St. reviewed the 10 most counterfeited items seized by officials based upon the manufacturer suggested retail price (MSRP). We also looked at the number of times the item was confiscated in both 2012 and 2011. We also looked at the top five countries of origination for all items seized to reflect how much of each item came from a particular country.
These are the 10 most counterfeited products in America.
> Pct. of total seizures: 1%
The federal government is holding onto a few gifts from Santa. The CBP seized $13.6 million worth of knock-off toys in 2012, down nearly 38% compared to the previous year. Approximately $10.5 million worth of toys seized in 2012 originated in China, by far more than any other country. Toys were also the most smuggled item from Taiwan in terms of value, with approximately $1.7 million worth of the items seized in 2012. Randazzo noted that a wide range of counterfeit toys have been seized, although the seizures of counterfeit bicycles have increased as of late.
[More from 24/7 Wall St.: The Worst Product Flops of 2012]
> Pct. of total seizure value: 2%
More than $26 million worth of labels and tags were seized in 2012, down nearly 80% from the $127 million worth seized in 2011. About $7.3 million worth of seized labels and tags in 2012 originated from China, while more than $3 million worth came from Hong Kong. Randazzo said she believes that the large drop in the seizures is merely due to the lower value of the labels and tags and the amount seized in each case. However, the 796 seizures where labels and tags were confiscated was up from 706 compared to 2011.
> Pct. of total seizure value: 3%
The total value of counterfeit computers and accessories seized in 2012 was more than 50% higher compared to 2011. Yet these products were only seized 833 times in 2012, down from 1,069 back in 2011, meaning that the average seizure value was much higher in 2012. More than 90% of the products seized originated from mainland China or Hong Kong, with the value totaling $18.3 million and $13.4 million, respectively.
7. Optical Media
: $38.4 million
> Pct. of total seizure value: 3%
Although it represented only 3% of the value of all seized items in 2012, optical media was seized by CBP agents nearly 2,900 times in 2012, making the product the third-most confiscated item. However, this was down from more than 4,200 seizures in 2011, when optical media was second only to clothing and accessories in terms of total number of seizures. Despite this, the $38.4 million value of the seized goods was higher than the approximately $35 million seized in 2011, indicating that the average value of each seizure was greater. Since optical media only includes tangible items such as movies or music on a CD and not digital transmission, the real scope of media counterfeits is likely significantly understated by these figures.
6. Pharmaceuticals/Personal Care
> Pct. of total seizure value: 7%
An estimated $83 million worth of pharmaceuticals and personal care products were seized in 2012, down from nearly $142 million just a year earlier. China was responsible for most of the seized counterfeit drugs and personal care items, with an estimated $46.9 million worth of products. In addition, pharmaceutical and personal care products constituted 76% of seizures of products originating in India, with an MSRP of over $5.3 million. Randazzo explained that while India has a large legitimate pharmaceutical industry, it also has a significant counterfeit industry.
> Pct. of total seizure value: 8%
The value of only five seized products in the country exceeded $100 million in 2012, and shoes marks the first of the five. The federal government seized more than $103 million worth of footwear in 2012 in nearly 1,900 seizures. While most of the footwear that was seized used to be athletic shoes, Randazzo said that knock-offs of higher end, dress shoes are becoming more common. The vast majority of footwear seized in 2012 originated in China. In fact, 10% of the total value of goods seized from the country was footwear, higher than all but two other products.
4. Consumer Electronics/Parts
> Pct. of total seizure value: 8%
Consumer electronics represented 8% of the total value of items seized in 2012 compared to 10% in the previous year. An estimated $71.5 million worth of consumer electronics originating in China were seized in 2012, comprising 8% of the total value of all items from the country. Of all counterfeit products originating from Hong Kong, consumer electronics were the most seized, comprising 1,943, or 23%, of all seized items from the country. Randazzo said that the seizure of knock-offs such as smartphones and tablets has risen exponentially in the last couple of years.
3. Wearing Apparel/Accessories
> Pct. of total seizure value: 11%
Counterfeit clothing and accessories were the most seized items in 2012, comprising more than 7,800, or about 29% of all seizures. Randazzo said that knockoff jerseys of a team winning an event such as the Super Bowl frequently get seized by CBP. The number of clothing seizures in 2012 was down from the nearly 8,100 back in 2011, which then totaled $142.3 million in retail value. Of such seizures in 2012, more than $97 million originated from China.
> Pct. of total seizure value: 15%
Roughly $187 million worth of watches and jewelry was seized in 2012, up from $173 million in 2011. The number of seizures of watches and jewelry by the CBP grew to 2,197 in 2012, up from 1,491 in 2011. The country most responsible for these counterfeit items was China, with $91.3 million in retail value seized by the federal government. In addition, 98% of counterfeit items smuggled from Singapore were watches and jewelry, with an estimated MSRP of $9.2 million. Randazzo noted that Singapore has a large jewelry industry, which naturally leads to many counterfeits originating from that country.
> Pct. of total seizure value: 40%
Handbags and wallets were by far the most counterfeited item in terms of MSRP, with the total value of the seizures up 142.2% compared to 2011. The CBP credits a portion of the large growth in seizures to “successful interagency-coordinated enforcement operations,” including Operation Market Day, which was primarily a sting operation coordinated in conjunction with U.S. Immigration and Customs. Of the approximately $511 million worth of handbags and wallets seized in 2012, more than $446 million worth originated in China.