NEW YORK (MainStreet) The value of counterfeit goods entering the U.S. nearly equals the dollar value of illegal drug trade. In 2012, the U.S. Customs department seized nearly 23,000 shipments of counterfeit goods, valued at $1.26 billion. But that's just a drop in the bucket of the estimated value of goods that cross international borders projected at $250 billion by the Organization of Economic Cooperation and Development (OECD) back in 2007. The problem has grown exponentially since then.
Not only do such rip-off products undermine the profits and intellectual properties of American businesses, they are often unsafe. The cheap knockoffs, especially toys, often contain high levels of lead and flimsy parts that pose choking hazards to children.
For eight years, a New York couple has been importing tens of thousands of unsafe toys from China part of a ring of nine individuals involved in the scheme. Chenglan Hu, 52, and Hua Fei Zhang, 53, of Bayside, N.Y., pleaded guilty to the charges last week, finally closing a case that has shuttered one sprawling operation trafficking in hazardous consumer goods.
The couple agreed to forfeit $700,000 and more than 120,000 unsafe children's toys. Three luxury vehicles and six bank accounts had previously been seized. Authorities said the defendants attempted to stay one step ahead of law enforcement by using "a continuously shifting series of corporate entities."
"For eight years, the defendants lined their pockets while putting at risk the health of our children by smuggling dangerous and copyright-infringing toys into the United States," said U.S. Attorney Loretta E. Lynch. "Today's guilty pleas signify the end of this dangerous pipeline from China. We will continue to be vigilant and prosecute those who would smuggle dangerous and unlawful items into our country and neighborhoods."
"The defendants in this case endangered thousands of American children by manufacturing for sale counterfeit toys made with unsafe amounts of lead and other hazardous chemicals," said Special Agent in Charge James T. Hayes Jr. of Homeland Security Investigations. "HSI focuses its efforts to protect intellectual property, first and foremost, on those counterfeit goods that present health and safety hazards to consumers."
From July 2005 through January 2013, Hu, Zhang and others operated from a storefront and warehouse in Ridgewood, N.Y., as well as other locations in Brooklyn and Queens, importing shipping containers loaded with hazardous toys. The knockoffs included popular children's characters, including Winnie the Pooh, Dora the Explorer, SpongeBob SquarePants, Betty Boop, Teenage Mutant Ninja Turtles, Power Rangers, Spiderman, Tweety, Mickey Mouse, and Pokémon -- as well as movie-themed merchandise such as "Cars," "Toy Story" and "High School Musical."
The International Chamber of Commerce (ICC) estimates the value of counterfeit goods globally will exceed $1.7 trillion by 2015. That represents more than 2% of the world's total economic output and costs 2.5 million jobs.
--Written by Hal M. Bundrick for MainStreet