Billion Dollar Jewelry Fraud
August 01, 24
Customs officers at the Port of Louisville, in Kentucky, USA, seized three shipments of counterfeit jewelry in a 24-hour period last month.
The goods had been fraudulently branded with Louis Vuitton, Hermes, Gucci, Dior, Prada, Bvlgari, Van Cleef and Arpels, Cartier and other high-end trademarks and would have been worth just over $10m if genuine.
These were significant seizures for the Customs and Border Protection (CBP) officers. But the sad truth is that they were just a drop in the ocean.
The total "if genuine" value of fake jewelry and watches seized across all US ports last year was just over $1bn.
That's way higher than any other category of counterfeits (handbags and wallets were second at $659m, apparel and accessories third at $451m), and accounts for almost 40 per cent of all counterfeit seizures.
During the 2023 financial year officers at the 328 ports of entry (land, air, and sea) seized over 438,000 counterfeit jewelry items.
But that could be only a small fraction of the fake goods that are successfully smuggled into the US and then purchased by consumers.
CBP officers say they inspect around 0.5 per cent of incoming shipments - express consignment, mail and air cargo transportation - based on their analysis of the electronic manifests from shippers, together with intelligence and tip-offs.
But they won't be drawn on the proportion of shipments that evades their checks and gets through undetected.
For the criminals who despatch counterfeit goods it's still a hugely profitable venture. Even multiple seizures don't deter them.
In the case of the Port of Louisville seizures, all three shipments were uninsured, and imported under "de minimis regulations" - commonly referred to as Section 321 - which permit the entry of tax-free merchandise with a retail value under $800.
"With the rise in e-commerce and small packages, illegal actors are taking advantage of the unprecedented volume of e-commerce shipments entering the US and the opacity of global supply chains to introduce illicit goods into the country," the CBP said.
It estimates nearly 90 per cent of the shipments coming into the US are now entering as low value shipments claiming the de minimis exemption.
The vast majority of all counterfeit and watches that are seized - 92 per cent according to the CBP - come from China and Hong Kong.
"Trade in these illegitimate goods is associated with smuggling and other criminal activities, and often funds criminal enterprises," said a CBP spokesman.
The illicit trafficking of counterfeit goods provides the criminals with an additional source of income and a way to launder money.
In addition, the cash they raise can be channeled towards producing more fake goods or other illicit activities.
They're cheap to produce, and despite being illegal they're in high demand.
The materials are low quality, the packaging often looks fake and the workmanship is poor.
The CBP has a lab to certify fakes, but it's often all too obvious, even to the untrained eye.
So with vast profits to be made, what's to deter the criminals behind the counterfeits? Not too much.
The CBP has legal powers to fine culprits the equivalent of the "if genuine" manufacturer's suggested retail price (MSRP) for the first offense and double for subsequent offenses.
With that in mind, I guess the gangs in China and Hong Kong aren't planning on giving up any time soon.
Have a fabulous weekend.