ENFORCEMENT

Office of the Intellectual Property Enforcement Coordinator
FIG. 14: Three Types of National Customs Transit.
environment. Counterfeit and pirated goods are
concealed by way of false customs declarations and
“Evidence suggests that organized crime groups
frequently use FTZs to transship, label and obscure
the port of origin of illegal goods. There are
approximately 3,000 FTZs in 135 countries.”
Source: Europol (2015 Situation Report on Counterfeiting, p. 16)
Source: WCO, Transit Handbook (2014)
In-transit counterfeit and piratical goods are
less likely to be intercepted internationally by law
enforcement personnel, who target imports but who
may have limited authority to take action against goods
transiting through their territory. 56 During this often
overlooked “in transit” stage, reporting indicates that
illicit traders will:
• Engage in a “cleansing” of transport documents
in order to falsify and conceal the original point of
production/departure;
• Establish decentralized distribution centers for
counterfeit goods, often in free trade zones (FTZs),
in order to ship “cleared” goods into smaller orders
to final destination points; and/or
• Finish production, also often in an FTZ environment,
by adding counterfeit trademarks and/or
repackaging or re-labeling goods. 57
With respect to FTZs, the WEF Global Agenda
Council on Organized Crime singles out FTZs as a
significant enabler for organized crime, and compares
FTZs to offshore tax havens. 58 Several reports analyzing
the exploitation of FTZs by counterfeiters highlight the
lack of coordination between customs administration
and FTZ administration, allowing criminals to redocument
shipments by concealing the origin, contents,
and destinations of shipments. 59
In addition to the adoption of diverse trafficking
routes and exploitation of FTZs, counterfeiters employ
further transit-based concealment methods in order to
evade customs controls, adding yet another dimension
to an already complicated detection and enforcement
shipping manifests such as invoices and bills of lading.
Small products—such as counterfeit medicines in the
form of anti-malarial and anti-parasitic drugs, antibiotics,
and analgesics—have been found concealed inside
air-conditioning equipment, music speakers, and sports
balls. 60 The illicit trader often mixes and intersperses
counterfeit goods among a variety of other counterfeit
and legitimate products, or behind a false cover load,
to minimize detection. The vast diversity of illicit trade
is well-illustrated by an example of a reported seizure in
the Port of Chonburi in Thailand: there were 36 different
commodity types (e.g., watches, textiles, mobile phones)
represented in a single container, with a combined total
count of 42,068 counterfeit units. 61
Traffickers of fake products have also turned to “small
shipments,” mostly by postage or by express shipment
services, as a way to avoid detection and minimize the
risk of loss or penalties. As set forth in greater detail in
Section III.A, small shipments now represent a majority
of all IPR seizures, adding a new and troubling dimension
to securing domestic and global supply chains from
infiltration by fraudulent products.
FIG. 15: Number of Seizures of Illicit Goods by Shipment
Method (FY 2015).
Source: U.S. CBP, Office of Trade (2016)
SECTION 1
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