In 1997, U.S. Customs and Border Protection (CBP) began a nationwide program targeting electrical merchandise with counterfeit Underwriters Laboratories Inc. (UL) certification marks being imported from Asia. That first year yielded about 220 seizures of counterfeited electrical merchandise, totaling more than two million products. Between 1997 and 2005, the CBP has made about 1,000 seizures, totaling almost 6 million electrical products.
According to Doug Geralde, director of corporate audits and investigations for CSA International in Toronto, the worldwide trade in counterfeit products is growing and includes electrical and other construction products, such as extension cords, power strips, hand tools, computer power supplies, decorative lighting, night lights, portable fans and lamps, and dry cell batteries, which made the Top 10 list of the most-seized products in the United States in 2004.
“Counterfeiters typically imitate products that have a reputable brand image built by the legitimate manufacturer,” Geralde said. According to a study conducted in the late 1990s by the Organization for Economic Co-operation and Development (OECD) in Paris, about 5 to 7 percent in global trade is in fake goods, totaling $350 billion a year.
“The problem of criminals attempting to steal the intellectual property of manufacturers is not limited to any one industry,” said Darren Pogoda, staff attorney for the International Anti-Counterfeiting Coalition Inc., Washington, D.C.
In addition to the trademark owner, victims of counterfeiting include consumers who may unknowingly purchase counterfeit electrical products, governments that lose tax revenue, companies that lose sales and end-users who are in danger because of the substandard production value of the counterfeited product.
In its broadest sense, the presence of counterfeit electrical products on the market is a two-fold problem involving both intellectual property rights (IPR) violations and public health and safety issues.
“There are a number of trademark owners in the electrical industry whose products have been counterfeited. UL has been very involved in working with law enforcement since the issue became apparent in the late 1990s,” said Mark Goins, CBP’s international trade specialist at the Los Angeles Strategic Trade Center.
Where are they?
In most cases, counterfeited electrical products come from developing countries. In North America, a great number of them come from Asia, the largest source is China.
“Developing countries do not usually have the infrastructure of intellectual property and enforcement laws found in Western Europe and North America, making those places a fertile ground for counterfeiters,” he said. The other side of the equation is those people and groups that are interested in purchasing brand-name products for less.
“These individuals and groups contribute to the problem by being willing to deal with unauthorized distribution channels and counterfeiters,” said Clark Silcox, counsel for the National Electrical Manufacturers Association (NEMA), Rosslyn, Va.
Although counterfeited electrical products infiltrate virtually all aspects of the marketplace, they are most prevalent in discount retail stores, where they can be mixed in with legitimate products. They also appear in flea markets, at nonmainstream retailers and wholesalers, and in street stalls.
“In some cases, counterfeited electrical product have been found in the electrical distribution channel,” said Silcox, adding that big-box stores and large retail and distribution chains don’t seem to share this problem.
“Large, nationwide retailers have done an excellent job of recognizing the problem and are building extra checks into their procurement processes to avoid counterfeit electrical products and stop them at the source,” said Goins.
Stopping the flow
Enforcement begins at the port of entry into the United States, either at the seaport where CBP examines containers, at land border crossings or at airports.
“Some high-risk merchandise is headed for electrical supply houses, but more is headed for the high-volume, low-priced non-name brand retail stores,” said Goins.
UL has developed a strategic partnership with U.S. Customs Service and other enforcement agencies around the world and has been quite successful in stopping a great deal of counterfeit products from entering the country.
“Nineteen billion legitimate UL marks appear on electrical products each year and our zero-tolerance policy toward counterfeited UL marks has led to an aggressive program for seizures, investigations and prosecutions of the offenders,” said Brian Monks, director, anticounterfeiting operations for UL.
The organization trains law enforcement personnel in recognizing authentic UL marks, works with government agencies both in the United States and abroad to develop stricter enforcement, and partners with other organizations and anticounterfeiting groups to develop and share the best strategies to battle counterfeiting.
U.S. Immigration and Customs Enforcement (ICE) and the FBI investigate cases of counterfeited products, while the Department of Justice is responsible for prosecution.
“Customs is responsible for checking incoming products at U.S. ports of entry and can seize and detain products that bear counterfeited trademarks or certifications,” said Silcox.
On the private side, manufacturers and certification organizations can get injunctive relief from the courts for cases of counterfeiting, or they can ask federal agencies to investigate.
In addition, some local and state legislatures and police forces work to stop the flow of counterfeited products, while consumers, according to Monks, can be suspicious of extremely low prices and shop at reputable retailers and distributors.
Two other recent government programs include the establishment of the National Intellectual Property Rights Coordination Center (IPR) and the Strategy Targeting Organized Piracy (STOP!) program. The IPR is a multiagency center responsible for coordinating a unified response regarding IPR-enforcement issues with particular emphasis on investigating major criminal organizations and those using the Internet to facilitate intellectual property theft.
Developed during the past year, the STOP! Program is designed to halt the traffic in fake goods and help small businesses secure and enforce their rights in overseas markets.
As a member of the STOP! program, the CBP is responsible for improved targeting of counterfeit shipments, developing best practices for detecting IPR violations and exchanging information on international IPR enforcement with such organizations as Interpol and the World Customs Organization (WCO) as well as with foreign governments.
In 2003, NEMA established an Anti-Counterfeiting Committee to develop programs to help the electrical industry combat the rise in counterfeited products. The committee is currently supported financially by 12 of NEMA’s 54 product sections and is made up of both nonprofit organizations such as UL and companies in the electrical industry.
“We expect that number to grow as NEMA members learn more about the increasing number of product categories that are affected by counterfeiting,” said Silcox.
The primary goal of the committee’s program is to help NEMA members understand the extent and impact of counterfeit products on them. The committee’s specific objectives are to help people understand how to protect their intellectual property rights through education and training programs, inform the public about counterfeit electrical products by investigating and reporting counterfeit activity, exchange information with other organizations concerned about counterfeiting, and work with law enforcement and public officials to address the problem.
The best way for electrical contractors to get involved in stopping the flow of counterfeit electrical products is to be aware of and to understand the problem.
“The first line of defense is knowing the fair market value of legitimate products that comply with performance and safety standards and to resist the temptation to purchase products priced much less,” said Geralde. The second line of defense, he added, is to continue to purchase products only from reputable distributors or retailers.
“If the product doesn’t feel or look right and you believe it may be counterfeit, contact the manufacturer, the supplier, UL or even U.S. Customs,” said Monks.
Electrical contractors need to recognize the value of buying from reputable dealers and help bring attention to the problem. The specific ways to identify a counterfeit product include whether it looks “different” or faulty, if its origin cannot be traced, if it does not have paperwork or instruction manuals included in the packaging, or if the UL mark is not on the shipping carton.
Goins suggests electrical contractors contact UL if they have questions about counterfeited products.
“If a member of the public becomes aware of potential counterfeiting activity, they should contact the IPR Center, which will evaluate the issue and decide whether to refer it to law enforcement for further investigation,” Goins said.
Counterfeit products mean lost sales to the contractor as well as a loss of reputation, loss of customer confidence, and the cost of participating in the criminal investigation. The loss to the end-user, however, can be even greater and includes property damage, injury or death.
“For the consumer, the best-case scenario is having a product that doesn’t work properly because it doesn’t meet certification and safety standards,” said Pogoda.
There are a number of resources available to contractors that can be used to get help in identifying and dealing with counterfeit electrical products. NEMA’s Web site (www.nema.org) has useful links to industry organizations, federal government agencies and anticounterfeiting programs of certification laboratories. Contractors can also rely on their relationships with their distributors and the product’s manufacturer in fighting back against counterfeiting.
“Anything that looks too good to be true probably is, and UL can help verify the product’s authenticity,” said Goins.
Even with the successes current programs have had in reducing counterfeited products from entering the market, more needs to be done. The anticounterfeiting programs of organizations such as NEMA and UL are increasing the public’s and industry members’ awareness of the problem, working with law enforcement, lobbying legislatures to increase penalties, negotiating with international organizations and governments to increase detection activities, and developing consistent reporting mechanisms.
“To help solve the problem, electrical contractors need to be willing to participate in the process of investigating and eliminating counterfeit products,” Monks said. EC
BREMER, a freelance writer based in Solomons, Md., contributes frequently to ELECTRICAL CONTRACTOR. She can be reached at 410.394.6966 or email@example.com.