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Using trade intelligence to identify counterfeiters licensing expo 2013


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When most of us think about counterfeit goods we usually conjure up a familiar image of knockoff handbags and luxury watches being sold out of a trunk in some back alley. But the reality of counterfeits is that it’s a much larger problem than most of us could have imagined. The global market for counterfeit goods nets over $600 billion annually, costing U.S. companies $250 billion/year and 750,000 U.S. jobs. The rise in overseas manufacturing in recent decades, coupled with minimal penalties for offenders has led to a dramatic increase in counterfeits in the past 20 years, with counterfeits surpassing the drug trade as the world’s largest black market activity.

Counterfeiters quite literally, counterfeit anything and everything, from consumer goods like laundry detergent and extension cords, to prescription medication, and even aerospace components sold to the U.S. defense department. Aside from the obvious economic impact to the companies that are being counterfeited, counterfeits pose a serious threat to consumer safety. Because these products are not subject to safety regulations and proper testing, they are usually manufactured as cheap as possible to maximize profits. This often means leaving out or substituting expensive material and components with subpar material that can be a serious hazard to the consumer even when used correctly. Electronics might be manufactured using less copper, causing them to become a fire hazard, while toys may be made using cheaper, lead-based paint which can be harmful to children.

In 2011, U.S. Customs and Border Protection seized over $200 million in counterfeit goods at U.S. ports and border crossings. While this may sounds like an incredible feat, it represents only a small fraction of counterfeit goods entering the U.S. each year.

With so much at stake, large brand name companies often take it upon themselves to protect their brand by identifying and prosecuting these illegal organizations for copyright and trademark infringement. One such tool at their disposal is PIERS trade intelligence. Increasingly, companies have been utilizing the detailed commodity description in PIERS U.S. import data to search for their company’s brand name among all waterborne shipments. Once they have compiled a list of all the shipments containing their brand’s name they can compare this list of shippers and consignees to the company’s list of licensed manufacturers, distributors, and retailers to look for discrepancies in their supply chain. Often times these products will be shipped and documented posing as real product to avoid detection by U.S. Customs. But while this practice may help them avoid detection by Customs, it gives legal savvy brand owners the evidence they need to prosecute these counterfeiters.

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Using trade intelligence to identify counterfeiters licensing expo 2013

  2. 2. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013THE GLOBAL COUNTERFEIT MARKET• Represents 7% of all global trade• Cost U.S. companies $250 Billion/year• Counterfeits are responsible for the loss of 750,000 U.S. jobs• Counterfeiters net $600B/year globally• Highest profit margin of any illegal trade• Up to 90% of counterfeits come from China• In 2011, U.S. Customs seized over $200 million in counterfeitgoods, representing only a small percent of U.S. imports• Profit margin on counterfeit cigarettes can net 20-1• Counterfeited medicines is a $75 billion/year market
  3. 3. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013CAUSES OF COUNTERFEITING• Minimal penalties vs. high profit margin• Overseas manufacturing with limited regulatory oversight• Global economy makes it easy for counterfeits to blend inwith legitimate trade• Internet allows counterfeiters to sell directly to consumers
  4. 4. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013IT’S NOT JUST HANDBAGS AND WATCHES• Consumer goods (high volumelow cost products)• Brand name drugs• Cigarettes• Electronics• Luxury goodsPopular Counterfeits Threat• Not subject safety regulations andproper testing• Counterfeits have been linked toterrorist organizations• Cost to a brand’s bottom line andbrand equity• Violent activity related tocounterfeit organizations
  5. 5. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013PIERS / THE JOURNAL OF COMMERCE HISTORYIn 1827, The Journal of Commerce paved the way intrade intelligence by gathering and listing goods onarriving vessels…PIERS continued this ground breaking tradition inthe 1970s as the JOC’s‚ first venture in electronicinformation services.Today PIERS is the most comprehensive database of international trade activityin the world‚ collecting and standardizing data from over 16 million bills of ladingannually for U.S. imports and exports.
  6. 6. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013ABOUT PIERS TRADE INTELLIGENCEPIERS is the most comprehensive database of U.S. import and export activity inthe world. The detailed trade data that powers PIERS database is sourced frombill of lading documents collected from U.S. Customs.Every year PIERS processes more than17,000,000 bills of lading, which translatesinto over 20,000,000 shipments annually.PIERS turns this raw data intocleansed, standardized, enhanced andvalidated data points which provide thetrusted intelligence that companies use tomake profitable decisions.
  7. 7. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013Available fields:• Shipper name & address• Consignee name & address• Notify Party name & address• Country of Origin/Destination• U.S. & Foreign Ports• HS Code(s)• Standardized Commodity Description• Quantity & Unit of Measure• Weight in MTONs• TEUs• Estimated Value• Ocean Carrier• Date of Arrival/Departure• And More!DETAILED BILL OF LADING DATA
  8. 8. June 19, 2013SPOTTING COUNTERFEITERSFAKE SNEAKER MANUFACTURING INC.123/45 NGUYEN THI MINH KHAIPHOUNG 5 - QUAN 3 - TPHCMVIETNAMCANAL ST. SNEAKERS123 CANAL ST STE 516NEW YORK, NY 10015UNITED STATESCANAL ST. SNEAKERS123 CANAL ST STE 516NEW YORK, NY 10015UNITED STATESOverseas supplier unknownto the manufacturerRetailer receiving the goods not alicensed dealer of NikeShipment lists Nike sneakers in thecommodity descriptionImport Bill of Lading
  9. 9. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013Gray Market: A market where a product is bought and sold outside of themanufacturers authorized trading channels. Most prevalent among products where theprice varies significantly from country to country.Example: A product intended for a particular market is either routed to or legally sold to adistributor in another market where the cost of that product is higher. The difference in priceoffered by various legitimate markets creates an opportunity for the middleman to obtainbranded merchandise at a discount and sell them for higher price than he would havethrough the intended distribution channel.• It is estimated that gray market diversions cost U.S. companies as much as $63 billion inrevenue• Manufacturers may lose approximately 4.5% of sales to gray marketersGRAY MARKET OVERVIEW
  10. 10. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013• Supply & Demand Imbalance• Distributor Channel Conflict• Disruptive Pricing Pressure• Revenue Cannibalization• Profit Erosion• Negative Customer Experience• Product Warranty & Safety Issues• Legal & Regulatory RiskGRAY MARKET IMPACT• Issues with warranties and returns• Gray market resellers may changepackaging or instructions or may bemissing entirely• Lack of regulatory oversight by localgovernments• Lack of quality control• Products may be mishandled ordamaged during multiple shipmentsImpact on the Brand Impact on the Consumer
  11. 11. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013IDENTIFYING GRAY MARKET ACTIVITIESLicensed U.S. Wholesaler pays $100/unit direct frommanufacturer and charges $120/unitLicensed Brazilian Wholesalerpays $60/unit from the same manufacturer andcharges $80/unitRather than spend $120/unitfrom the U.S. wholesaler, a U.S.retailer places an order from theBrazilian wholesaler at $80/unitwhich is still significantly lesseven after the additional shipping
  12. 12. June 19, 2013IDENTIFYING GRAY MARKET ACTIVITYEGYPT ATHLETIC APPARELABDEL NABI E’L RAGABI ST, ABO RADI ZONEEL MEHALLA, CAIROEGYPTFAMOUS FOOTEAR1 WOODRIDGE CENTER STE 210WOODBRIDGE, NJ 08879UNITED STATESOverseas supplier is a licensedNike distributor in EgyptRetailer is purchasing Nikeproducts on the graymarket by importing theproduct from an Egyptiandistributor rather than aU.S. distributorShipment lists Nike apparel in thecommodity descriptionImport Bill of LadingFAMOUS FOOTEAR1 WOODRIDGE CENTER STE 210WOODBRIDGE, NJ 08879UNITED STATES
  13. 13. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013• Cross-referencing import and export transactions against blacklistedsuppliers and distributors can help identify counterfeiters• Consignees that are not licensed retailers or distributors may also belikely counterfeiters• Unusual and unlikely sources of brand name products can be astrong indication of gray market activity• PIERS is the only complete database of U.S. exportshipments, allowing you to spot gray market trading from your U.S.distributorsSUMMARY
  14. 14. The Licensing Expo – Crushing the CounterfeitersJune 19, 2013QUESTIONS