MEMO/05/364

Brussels, 11 October 2005

Counterfeiting & piracy: Frequently Asked Questions

(see also IP/05/1247)

What has the Commission adopted today?

The Commission has adopted a Communication outlining an Action Plan containing operational actions aimed at enhancing the efficiency of customs authorities in their response to counterfeit and piracy. The Action Plan focuses on the current legislation and its implementation, on an enhanced partnership with economic operators and on the promotion of cooperation with third countries.

What does the Action Plan propose?

The Action Plan proposes a number of concrete operational initiatives which would improve the implementation of our policies and legislation in the field of counterfeit and piracy in particular through customs actions. For an improved response by customs an increased dialogue with business is necessary, as well as increased cooperation with our trade partners. The proposed actions would substantially strengthen anti-counterfeit controls by Customs.

Does the Action Plan also look into how to cut-off production, distribution and sales of counterfeited goods?

This is a strategic plan for short term action. It focuses on the role of customs at external borders. It proposes improving the operational performance of customs when seizing counterfeited and pirated goods. It also underlines the importance of the Customs Information System (focused on investigations) which by increasing the impact of controls helps to cut off distribution networks. It also looks into the importance of a broader approach that goes beyond seizure and aims at stopping production, distribution and sales of counterfeited and pirated goods. This requires, of course, that different policies and types of actions complement each other.

When would all the measures that the Commission proposes in its Action Plan take effect?

In the very near future. The business-customs working group and the Task Force of Member States' customs experts could start work this year. Other actions such as the new electronic information transmission system and the memoranda of understanding with major trade representatives are envisaged for 2006. The actions to reinforce international co-operation would take place in 2006 and beyond.

What improvements to EU legislation might the proposed business-customs working group consider?

In the first place, business operators point out that many Member States do not have in place procedures to ensure the quick destruction of counterfeit goods, even though new Community legislation (see IP/03/1059) allows this. This means that businesses acting in some Member States face costs which deter them from taking action against counterfeiters, particularly where small quantities are involved. They also claim that there are not sufficient legal deterrents in place to prevent travellers from importing low volume personal use items which may be counterfeit. A further legislative concern relates to the attribution of costs. Businesses currently take responsibility if consignments are stopped without due justification, whereas they think that more of the onus should be placed on the wrongdoer rather than on the right holder.

What will the new electronic system of secure, real-time transmission of information entail and when will it take effect?

The proposed new Community Risk Management system would be based on the existing Risk Information Form (RIF) which is exchanged rapidly between customs authorities so as to raise the awareness of the offices concerned about a potential irregularity. A special sector will be created to link counterfeiting specialists to enable them to exchange in minutes details of new fakes being discovered and get this information immediately to major customs posts and risk centres around the Community.
We will also be looking as part of our e-Customs initiative to see how we can enable business to transmit information on their products and new fraud trends quickly and easily to EU Customs posts.

How do counterfeit seizures in 2004 compare with previous years?

• The seizure of 103 million counterfeit and pirated goods represents an increase of more than 12% compared to 2003 and almost 1000% compared to 1998.
• The number of customs operations involving fakes more than doubled to 22,000 by comparison with 2003.
• The 4.5 million foodstuffs intercepted in 2004 represented an increase of over 200% compared to the 2003 figure of 1.5 million
• Almost 900,000 pharmaceutical products were seized, representing an increase of more than 45% on 2003
• The figure of 7.8 million textile seizures was 102% greater than that of 2003
• Seizures of miscellaneous products such as ink cartridges grew by more than 900% compared to 2003
• Textiles seizures grew by 102% compared to 2003.
• Toys and games seizures amounted to more than 18 million objects, 47% more than the seizures in 2003.
• Customs seized more than 41 million packets of counterfeit cigarettes in 2004, an increase of more than 25% over 2003

Where did the counterfeit goods come from?

China, and more widely Asia, remains the main source of the counterfeits intercepted in Europe. But transhipment is a growing concern. Fraudsters break routes to disguise the origin of the goods. Countries generally regarded as low risk by customs, such as Japan and the US, are becoming high risk due to transit and transhipment traffic in fakes. Internet sales are also an increasing problem, with more than 30% of the postal seizures made by customs in 2004 coming from this source.

What co-operation initiatives exist with the sources of the counterfeit goods?

An EU agreement with the China on customs co-operation and mutual administrative assistance (see IP/04/599) is an important step forward in the fight against fraud and counterfeiting. Furthermore, the EU is organising an increasing number of customs training programmes in conjunction with its economic partners, particularly in the area of risk analysis and legislation. Customs Co-operation Agreements are envisaged or are already being negotiated with certain other countries such as India, Japan, members of ASEAN, Mercosur and Pakistan.

It is very good that an agreement has been signed with China but what about its implementation?

There will be a first Joint Customs Cooperation Committee in November that will be opened by Commissioner Kovács. IN addition, the Chinese authorities have recently invited the European Commission and EU Member States' experts on counterfeit to participate in joint operations in China. Pilot project on smart and secure trade lanes with China are under development. There is a Commission Working Group on Intellectual Property Rights that is currently engaged in Dialogue with China. In addition Mutual Administrative Assistance between the EU and China is under development.

Why is it necessary to combat counterfeit and piracy?

Counterfeit undermines every economic sector – industrial, literary and artistic. According to studies carried out by the OECD in 1998 and by the International Chamber of Commerce in 1997, counterfeit accounted for 5-7% of world trade (i.e. approximately 250 billion euro per year) and was responsible for the loss of 200,000 jobs in Europe. That was a year in which the customs administrations seized around 10 million counterfeit and pirated goods at the EU's external borders. The figure for 2004 stands at more than 103 million fake goods, a 1000% increase.

The World Economic Forum in 2003 estimated the cost of counterfeit and piracy at 450 billion euros annually.

But in addition, with the increase in recent years of counterfeit medicines, surgical equipment, toys, household goods, food and drink, this activity is presenting a growing health and safety risk for EU consumers.

Counterfeit also increases the risk of serious tax losses to governments in both producing and consumer countries as counterfeiters operate almost entirely in the black economy.

Some fakes pose other serious risks to society: examples include false or blank passports, identity cars, marriage certificates and driving licences which may be used to support illegal immigration or threaten security.

Why is the trade in fakes increasing?

One reason is the high profits and comparatively low risks in terms of penalties involved for criminal organisations.

Fake DVDs are a good example: profits are higher than for an equivalent weight in soft drugs while the penalties if detected are much lower.

Another reason is that the increasingly sophisticated industrial production capacity in certain countries (particularly China) has provided the fake industry with a massive opportunity.

These trends have been reinforced by the growing interest of organised crime in taking a share of these high profits. Consignments often contain not only counterfeit products but also other illegal goods such as illicit drugs. Terrorist groups have also been linked to counterfeiting activities. Counterfeiting provides criminals with a useful means of laundering their criminal proceeds.

Is the seizure of counterfeit products only a matter for customs authorities?

Customs have a prime role in stopping the international movement of fake goods; in fact that are responsible for approximately 70% of all seizures made globally.

Customs are also the only enforcement agency assigned with a specific mission under the World Trade Organisation's Trade Related Intellectual Property Rights (TRIPS) Agreement.

However, it is clear that co-operation with other actors needs to be enhanced if the counterfeit problem is to be kept under control. It is for this reason that the present Action Plan focuses on improvements in co-operation with business and with customs authorities in third countries.

But it is also important not to lose sight of the need for close co-operation between law enforcement authorities.

What are the current Community legal instruments and initiatives aimed at combating counterfeiting and piracy?

In the customs area, the most relevant instrument is an EU customs regulation (1383/2003/EC) that entered into force on 1 July 2004 (see IP/03/1059), as implemented by regulation 1891/2004/EC. It gives customs authorities increased powers to intervene where goods are suspected of infringing intellectual property rights.

Directive 2004/48/EC (the "Enforcement Directive) (see IP/04/540) will require all Member States to apply from 2006 effective, dissuasive and proportionate remedies and penalties against those engaged in counterfeiting and piracy and so create a level playing field for right holders in the EU.

A proposal for a Directive of 12 July 2005 (see IP/05/906) would align national criminal law provisions against infringements of intellectual property rights and piracy and improve European co-operation in this domain.

In November 2004, the Commission adopted a strategy for the enforcement of intellectual property rights in third countries (see IP/04/1352).

Annex II - Breakdown of the number of articles seized by
origin of goods, expressed as % - (EU) 2004
54%
7,5%
3,5%
3%
3%
2,5%
2%
24,5%
0%
10%
20%
30%
40%
50%
60%
China
Taiwan
India
Hong
Kong
United
Arab
Emirates
Gambia
Romania
Others
Origin Country
%
[Graphic in PDF & Word format]

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