The European Union Intellectual Property Office (EUIPO) and the Organisation for Economic Co-operation and Development (OECD) has recently published a new report titled “Mapping the Real Routes of Trade in Fake Goods.” The report uses data collected from 10 different industries, notably ones that span a wide range of IP-intense, tradable goods such as foodstuffs, cosmetics, and B2B products such as computer chips and spare parts.

According to the report, the combined trade of fakes in these sectors alone make up more than half of the total estimated trade in fake goods. The aim of the report was to make sense of the complex routes that are commonly used in the global trade of counterfeit and pirated goods.

The report finds that trading in counterfeit and pirated goods has grown rapidly in the past few years in both scope and magnitude. Always deeply problematic for manufacturing businesses (and in the case of pharmaceuticals, aircraft parts and car parts, potentially lethal because of their inferior quality) EUIPO and the OECD now conclude that counterfeits have extremely negative consequences for economies and society. Remarkably, the report concludes that systemic counterfeiting erodes the rule of law and affects citizens’ trust in their government, which can pose a threat to political stability.

The report notes that those entities which engage in the trade of counterfeit products have developed to the point of having their own systems and protocols. Accordingly, these players use complex routes with intermediary points when shipping their infringing products. The report reveals that these intermediary points have several purposes:

A.) to facilitate falsification of documents in ways that camouflage the original point of departure; B.) to establish distribution centres for counterfeit and pirated goods, and C.) to repackage or re-label goods.

A key finding is that local enforcement authorities may attempt to stop the importation of counterfeit goods, but will be unable to intercept goods in transit because of extra-jurisdictional limitations on their powers.

Most Common Routes and Regions in the Counterfeit Trade

Out of the ten sectors that were analysed, nine of them have China as the largest producer of counterfeit goods. This is not news: despite Chinese authorities active efforts to assist foreign IP rights owners, the size of Chinese industry makes this very problematic. The most common locations being used as key transit points include the UAE, Saudi Arabia, and Yemen, which are used for transporting counterfeit products to Africa. Counterfeit products bound for the European Union are more likely to pass through Albania, Egypt, Morocco, and Ukraine. When it comes to fakes bound for the United States, the most common transit point is Panama.

The report states that smaller items that consist of ten or fewer items are usually transported through courier services and regular post, and that these small shipments together make up more than 43% of all counterfeit goods shipped in 2013.

The report notes that data collection is crucial when it comes to policy discussions between individual governments or discussions at a regional level. Finally, the report calls for more in-depth analysis for the development of efficient enforcement and gorvernance frameworks in the role of free trade zones in transhipments, a closer look at the detection problem posed by small shipments, and a deeper probe into the economic features of provenance economies, including the quantitative relationship between the intensities of counterfeiting and indices of free trade, quality of governance, and public sector integrity.