How US Customs sniffs out import fakes
The ``seizure room'' in the basement of the New Orleans Customs building is crammed with shirts, Radio Shack computers, Cabbage Patch dolls, even weapons. These are just the tip of the iceberg; many more confiscated imports are stored in another warehouse.
Illegal imports -- anything from knockoff Transformer robots and Jordache jeans to transshipped textiles and steel imports whose chemical makeup is different from stated specifications -- cost the United States billions in sales and tariffs and jobs.
American industry has lost between $8 billion and $20 billion in sales and 130,000 to 750,000 jobs because of cheap counterfeits or pirated items like tapes and movies, the Commerce Department estimates.
Last year, the Customs Service seized only a fraction of that amount -- $37.6 million -- for copyright and trademark violations. Counterfeit analog watches, valued at $8.9 million, headed the list, with Cabbage Patch dolls coming in second, at $5.8 million. Transformers toy robots were another big hit.
To catch such counterfeits, ``import specialists'' at the Customs Service pore over the documents filed by importers to see if there's something fishy about the country of origin or the importer's past.
For example, a couple of weeks ago Customs officials inspected a shipment of madras shirts and shorts from Jamaica. They suspected that the clothing might have come originally from somewhere like India, which has high textile quotas, and transshipped through Jamaica, which has no textile quotas. (Preliminary analysis, however, indicated the textiles were really made in Jamaica.)
Knowing in advance about any suspect shipments is made easier by the Customs Service's computer data base, which has on file the history (and past violations) of every company importing or exporting in any American port. If someone were caught bringing, say, Transformer robots into New York City and then trying to enter them through New Orleans, too, officials here would be aware of it.
``We know what the paper work looks like,'' says Samuel Smythe, a specialist on toy and watch imports. ``And we know what fakes look like,'' he says, taking off a purportedly Rolex watch that had been given to him by a lawyer for Rolex. Two tip-offs: The watch was lighter than a real Rolex (counterfeiters often compensate by putting lead in them), and the second hand moved in increments instead of the continuous sweep of a Rolex.
James Bikoff of the International Anti-Counterfeiting Coalition says the crackdown is helping some industries such as watches, toys, and apparel. In others, like agriculture, chemicals, computer software, and industrial technology, the situation is worse, he says.
He is particularly worried about cutbacks at Customs. Some 1,500 jobs may be lost there because of the Gramm-Rudman deficit-reduction measure, his coalition estimates. As a result, many companies and industries are taking matters into their owns hands, using high-tech devices and private investigators to weed out violators.
Polaroid, 3M, and others market holographic-technology products to prevent counterfeiting. A run-of-the-mill counterfeiter wouldn't have equipment to make such labels for counterfeit goods. Such technology is not being widely used, but a Polaroid spokesman says motion picture companies, the Swiss watch industry, and cosmetic companies have all used it or expressed interest.
The Motion Picture Association of America (MPAA), which says it loses more than $500 million through counterfeit videos, has hundreds of investigators around the world. They look for stores that sell videocassettes of recently released films -- or, better yet, for the companies that make the cassettes. In the US, they have six former Federal Bureau of Investigation agents on staff and 30 part time.
The situation improved somewhat for the MPAA after Congress passed the Tariff and Trade Act in 1984. The law put pressure on countries with preferential tariff treatment (mainly in Asia) to enact and enforce antipiracy laws. Since then, some of the worst violators -- Taiwan, Singapore, Malaysia, and South Korea -- have started to crack down.
At the Tokyo economic summit this week, Western leaders proposed to expand the General Agreement on Tariffs and Trade to include protection of intellectual property rights, such as copyrights on materials ranging from books and songs to computer software.
And last month the Reagan administration presented a package to Congress that would expand existing law to include technologies used in production; make it easier for companies to sue alleged violators; and allow denial of trade preferences for nations condoning counterfeiting or pirating of US goods.
As part of its trade bill, the House Ways and Means Committee incorporated some of the administration's package in the trade bill; the Senate starts hearings on trade this week.
Less publicized are goods that dance on the edges of the law. Take steel imports, which, along with textile imports, get the most scrutiny (for political reasons). If steel has more than 0.2 percent chromium, for example, it is considered ``alloyed,'' and the steel importer must pay duties for the chromium content. Often the documents state that it is just under the alloyed level.
That's when ``Sparky,'' a $50,000 mobile metal analyzer, comes in. It can be taken to the dock, test a sample (creating sparks, hence the name), and see whether the chromium content is well over or under the level, or whether it needs to be taken back to the lab for analysis.
Donald Soignet, director of the laboratory here, cannot estimate how much money the government saves by making these checks, or how much slips by. But he notes that one large shipment of petroleum products valued at $50 million to $60 million can mean the difference of a million dollars in duties.
In an era of budget austerity, collecting those millions helps. Moreover, enforcing existing quotas is more politically feasible than passing protectionist legislation to help American industries struggling to compete with cheap foreign imports.
Customs estimates that it seized $30 million worth of illegal textiles last year. In February it set up a toll-free telephone number in some Southeast states to report illegalities in textile imports, with rewards ranging from $250 to $250,000. It's given out three small rewards but has ``several active cases,'' a spokesman says.