24/09/2020

Trump administration targets e-commerce operators with broader enforcement in effort to compel companies’ help rooting out fakes

WASHINGTONThe Trump administration is moving to curb the sale of imported counterfeit goods over the internet, warning electronic commerce platforms and warehouse operators of greater scrutiny and penalties if they dont help ferret out fakes.The Department of Homeland Security is set to release a report Friday outlining its immediate actions and longer-term goals for enlisting e-commerce players to combat counterfeit products that officials say undermine U.S. technology and manufacturing, harm bricks-and-mortar retailers and endanger consumers.The new initiative, led by U.S. Customs and Border Protection and the White House, comes the same month as an initial trade agreement with China that requires Beijing to take steps against counterfeiters or risk enforcement actions that could trigger new tariffs.
The Trump administration is seeking to pressure e-commerce giants including
Amazon.com Inc.,
which increasingly hosts lucrative third-party sales on its platform, as well as financial firms, logistics services and other companies that are positioned to help stem the rising tide of counterfeits and pirated goods.
The DHS report, which was reviewed by The Wall Street Journal, says law enforcement will begin identifying cases immediately and seek all available statutory authorities to pursue civil fines and other penalties against these entities.
It also calls for new laws to explicitly permit the government to seek injunctive relief against third-party marketplaces and other intermediaries dealing in counterfeit merchandise.
This is not about any one e-commerce platformthis is about e-commerce playing by a different set of rules that simultaneously hammer brick-and-mortar retailers, defraud consumers, punish workers and rip off intellectual-property rights holders, said White House trade adviser
Peter Navarro,
who is helping lead the initiative. Its Amazon, Shopify, Alibaba, eBay, JD.com, Walmart.com and a constellation of lesser players that provide the digital hubs.
Spokespeople for Amazon,
eBay Inc.,Alibaba Group Holding Ltd.,Walmart Inc.,Shopify Inc.
and
JD.com Inc.
didnt immediately respond to requests for comment.
Amazon’s pursuit of boundless selection has led it to become a massive marketplace with millions of sellers. But has this business strategy put customers at risk? WSJ investigates how unsafe products, including children’s products and toys, have become available for purchase. Photo: John P. Campbell for The Wall Street Journal
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As part of the enforcement effort, the report says customs agents will treat domestic U.S. warehouses and fulfillment centers, such as those operated by Amazon and others, as the ultimate consignee for goods that havent been sold to consumers, giving officials power to scrutinize shipments even after they have cleared the border and moved to a regional warehouse.
U.S. officials will share information with such warehouses about counterfeit goods and request they pursue abandonment and destruction with the rights holders of any identical offending goods in their possession, according to the report.
Authorities also seek to better scrutinize fulfillment centers in Mexico and Canada that they say have long skirted U.S. trade law. They say large shipments sent to these facilities are often broken up into individual packages and shipped to U.S. consumersfree of duties and formal customs paperwork as long as the shipped item is valued less than $800.
Customers and Border Protection has existing authority to require formal entry (and the complete data set for any shipment) for any merchandise, if deemed necessary for import admissibility enforcement purposes; revenue protection; or even the efficient conduct of customs business, the report says.
E-Commerce Counterfeiting
Many online sellers of consumer goods have little incentive to comb through their transactions or shipments for counterfeits, contributing to a rising tide of fake or unsafe items. Related reading:
The U.S. and other governments say the fake-goods problem is growing as consumers gravitate toward low prices on the internet and cheap international shipping. In three blitzes last summer at international mail facilities, express-delivery hubs and other locations, customs agents found violations in nearly 14% of the 20,861 shipments that were inspected, including roughly 5% of shipments that contained counterfeit goods, according to the report.
An acceptable rate of customs discrepancies for counterfeit products and other contraband, such as fentanyl or gun silencers coming in from countries like China, would be under 1%, Mr. Navarro said.
The size of the problemand any likely solutionis growing. The incidence of infringing goods at U.S. borders has increased from 3,244 seizures in 2000 to 33,810 in 2018, according to DHS data.
Previous administrations and local law enforcement have long sought to work with the owners of legitimate patents, copyrights and trademarks to stamp out imitators, including through trade agreements. Trump administration officials are seeking to extend that approach, although it isnt clear whether they could secure more manpower or funding. Acting DHS Secretary
Chad F. Wolf
said in a statement that the private sector is critical to helping secure supply chains to stem the tide of counterfeit and pirated goods.
Companies that profit from myriad small shipments have little financial incentive to comb carefully through their transactions or shipments. Online marketplaces dont face the same legal liability as physical stores, and major changes to the legal landscape would require new legislation from Congress, officials say.
E-commerce operators say they have safeguards in place to curb inauthentic goods. The industry will continue to work with law enforcement, policy makers and industry to protect consumers from counterfeit goods, said
Jordan Haas,
trade policy director at the Internet Association, whose members include Amazon, eBay and
Etsy Inc.
The bigger e-commerce platforms say they are already working internally and cooperating with governments to address counterfeiting. Alibaba said in a news posting Wednesday that ever-improving technologies and close partnerships with brands and other external stakeholders have helped it to identify and remove counterfeit goods from its platforms.
Amazon said last month that combating counterfeit requires collaboration across the industryfrom retailers, brands, law enforcement, and government and we continue to be actively engaged with these stakeholders.
Some Amazon third-party sellers sell second-hand products as new on the sitesome even claim to sell products they found while digging through garbage dumpsters. The Wall Street Journal set out to test their claims by setting up an Amazon storefront and gathering some trash. Photo: Robert Alcaraz/The Wall Street Journal
The Journal reported last year that Amazon allowed third-party sellers to market dangerous products on its platform with limited oversight.
The Trump administration is considering adding some of Amazons overseas operations to a list of global marketplaces known for counterfeit goods, in what would amount to a public shaming of the e-commerce giant, according to people familiar with the matter.
One new tool is the initial trade pact signed this month by U.S. and Chinese officials. The agreement requires Beijing to boost the number of trained personnel to seize pirated goods aimed at exports markets, with requirements to destroy fake goods and to cooperate with the U.S. on counterfeit medicines.
Over the next six months, we expect to see a quick and dramatic reduction in the rates of counterfeits and other contraband, Mr. Navarro said, adding that absent such a reduction, the deal will be enforced accordingly.
A spokesman for the Chinese embassy in Washington didnt immediately respond to a request for comment.
Write to William Mauldin at william.mauldin@wsj.com and Alex Leary at alex.leary@wsj.com
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