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GAO: Customs-private sector collaboration would help fight counterfeiting

The U.S. Government Accountability Office recommended that customs officials share more information with private sector companies to help combat what it said is a rise of counterfeit goods entering the U.S. as a result of the growth of e-commerce.

In a 55-page report to the Senate Finance Committee released Feb. 27, the Government Accountability Office, or GAO, said that undercover testing of products purchased online found that nearly half of the products were counterfeit, which it says is part of the growing evolution of the virtual black market.

The GAO said the changing face of retail and shift to more online spending has made it harder for U.S. Customs and Border Protection, which seizes goods at the border, and U.S. Immigration and Customs Enforcement, which investigates alleged violations, to deem what is counterfeit or not.

As a result, the agency suggested that customs officials not only step up their efforts to detect and enhance intellectual property rights enforcement, but also work with the private sector and allow for more free flow of information. Citing private sector officials, the GAO said restrictions on the agency's information-sharing limit the ability of the private sector to better enforce and prevent counterfeit products.

Customs and Border Patrol agreed with the recommendations, according to the GAO.

"Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights," the GAO wrote. "Sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives."

For the report, the GAO purchased 47 products from "popular consumer websites" with U.S. shipping addresses that included shoes, travel mugs, cosmetics and phone chargers from third-party sellers, 20 of which were found to be counterfeit. Of the nine YETI Coolers LLC brand travel mugs purchased, six were counterfeit, while all 13 Urban Decay Cosmetics LLC products were found to be counterfeit, according to the report.

Nine of the 10 phone chargers purchased were authentic and all 15 pairs of Nike Inc. Air Jordan brand shoes were genuine, the report said.

The agency cited health and safety risks for consumers knowingly or unknowingly purchasing counterfeits, especially personal care and health products and consumer electronics that can cause skin, hair, eye or other bodily damage.

Customs and Border Patrol seized $1.38 billion worth of counterfeit goods in fiscal 2016, according to the GAO report, and, according to the U.S. Trade Representative's Office, imports of counterfeit and pirated physical products account for roughly half a trillion dollars, or approximately 2.5% of global imports.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, said in a statement that the committee, which has jurisdiction over international trade policy, plans to hold a hearing analyzing the report.

"This report highlights an alarming ratio between authentic and counterfeit goods purchased online," Hatch said. "The rise of e-commerce and online marketplaces has brought countless benefits to job creators and consumers around the globe, while at the same time increased threats to intellectual property protection and consumer confidence and safety."