INTELLECTUAL 

PROPERTY

CBP Can Enhance 

Information Sharing with 

the Private Sector to 

Address Changes in the 

Counterfeits Market

Statement of Kimberly Gianopoulos, Director, 

International Affairs and Trade

Testimony 

Before the Committee on Finance, U.S. 

Senate

For Release on Delivery 

Expected at 10:00 am ET

Tuesday, March 6, 2018

GAO-18-383T

United States Government Accountability Office
Letter

Page 1 GAO-18-383T 

Chairman Hatch, Ranking Member Wyden, and Members of the 

Committee:

I am pleased to be here to discuss the results of our review of U.S. 

agencies’ efforts to address changes in the market for counterfeit goods 

and their work with the private sector. Intellectual property is an important 

component of the U.S. economy, and the United States is an 

acknowledged global leader in its creation. Infringement of intellectual 

property rights (IPR) through the illegal importation and distribution of 

counterfeit goods harms the U.S. economy by stifling innovation, slowing 

economic growth, weakening the competitiveness of U.S. employers, and 

threatening American jobs.1 IPR infringement can also threaten the health 

and safety of American consumers. The Department of Homeland 

Security’s U.S. Customs and Border Protection (CBP) and U.S. 

Immigration and Customs Enforcement (ICE)—two of the many agencies 

involved in IPR enforcement—are responsible for IPR enforcement at 

U.S. borders. CBP leads enforcement activity at the border by detecting 

and seizing counterfeit goods that enter the United States through its 

more than 300 ports of entry and by assessing penalties against IPR 

infringers. CBP coordinates its efforts with ICE, which investigates IPR 

violations for federal prosecution.

My testimony today summarizes the findings from our January 2018 

report,2 which was released on February 27, 2018, on CBP’s and ICE’s 

IPR enforcement at U.S. borders. This testimony addresses (1) what is 

known about counterfeit goods entering the United States and the 

challenges they present, (2) efforts CBP and ICE have undertaken to 

enhance IPR enforcement and the extent to which they have assessed 

the results of these efforts, and (3) the extent to which CBP and ICE 

collaborate on IPR enforcement as well as ways in which they coordinate 

with the private sector in enforcing IPR.

For our report, we analyzed CBP seizure data for fiscal years 2012 

through 2016 and reviewed documents and reports from CBP, ICE, other 

U.S government entities, and international organizations. We interviewed 

CBP and ICE officials in Washington, D.C., and at selected port locations 

 1

In this statement, “counterfeit goods” refers to any physical goods that are found to be in 

violation of trademark or copyright law. 

2

GAO, Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by 

Changing Counterfeits Market, GAO-18-216 (Washington, DC: Jan. 30, 2018). 

Letter
Page 2 GAO-18-383T 

in Chicago, Illinois; Los Angeles, California; Miami, Florida; and New 

York, New York. We also interviewed representatives of IPR-holding 

companies (rights holders) and popular consumer websites that offer 

platforms for third-party sellers. We used undercover identities to 

purchase selected products from third-party sellers on popular consumer 

websites and subsequently asked the rights holders for the selected 

products to test their authenticity. More detailed information on our 

objectives, scope, and methodology for this work can be found in the 

issued report. We conducted the work on which this statement is based in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. We conducted our related

investigative work in accordance with investigation standards prescribed 

by the Council of the Inspectors General on Integrity and Efficiency.

The rise of e-commerce has contributed to a fundamental change in the 

market for counterfeit goods, according to our analysis of documents from 

CBP, ICE, and international organizations and our interviews with CBP 

and ICE officials. U.S. agencies and international organizations have 

observed a shift in the sale of counterfeit goods from “underground” or 

secondary markets, such as flea markets or sidewalk vendors, to primary 

markets, including e-commerce websites, corporate and government 

supply chains, and traditional retail stores. Whereas secondary markets 

are often characterized by consumers who are knowingly purchasing 

Accelerated by ECommerce, Changes 

in the Counterfeits 

Market Present 

Challenges to U.S. 

Agencies, 

Consumers, and the 

Private Sector

E-Commerce Has 

Contributed to a Shift in 

the Market for Counterfeit 

Goods
Page 3 GAO-18-383T 

counterfeits, primary markets involve counterfeiters who try to deceive 

consumers into purchasing goods they believe are authentic.

This shift has been accompanied by changes in the ways in which 

counterfeit goods are sold. In the past, consumers could often rely on 

indicators such as the location of sale or the goods’ appearance or price 

to identify counterfeit goods in the marketplace. However, counterfeiters 

have now adopted new ways to deceive consumers. For example, as 

consumers increasingly purchase goods online, counterfeiters may 

exploit third-party online marketplaces to gain an appearance of 

legitimacy and access to consumers. When selling online, counterfeiters 

may post pictures of authentic goods on the websites where they are 

selling counterfeits and may post pseudonymous reviews of their 

products or businesses in order to appear legitimate. Additionally, by 

setting the price of a counterfeit at, or close to, the retail price of a 

genuine good, counterfeiters may deceive consumers, who will pay the 

higher price because they believe the goods are real or who believe that 

they are getting a slight bargain on genuine goods.

According to CBP seizure data and CBP officials, the volume, variety, and 

methods of shipment of counterfeit goods seized by CBP and ICE have 

changed in recent years. CBP reports indicate that the number of IPR 

seizures increased by 38 percent in fiscal years 2012 through 2016. 

According to CBP data, approximately 88 percent of IPR seizures made 

during this period were shipped from China and Hong Kong. The variety 

of products being counterfeited has also increased, according to CBP 

officials. CBP and ICE officials noted that, while many consumers may

think of luxury handbags or watches as the most commonly counterfeited 

goods, counterfeiting occurs in nearly every industry and across a broad 

range of products. In addition, according to CBP data we reviewed and 

officials we spoke to, the methods of importing counterfeit goods into the 

United States have changed in recent years. Specifically, express carriers 

and international mail have become the predominant form of 

transportation for IPR-infringing goods entering the United States, 

constituting approximately 90 percent of all IPR seizures in fiscal years 

2015 and 2016, according to CBP data.

CBP Data Indicate 

Changes in Several Key 

Characteristics of 

Counterfeit Goods Seized
Page 4 GAO-18-383T 

In an attempt to illustrate the risk that consumers may unknowingly 

encounter counterfeit products online, we purchased a nongeneralizable 

sample of four types of consumer products—shoes, travel mugs, 

cosmetics, and phone chargers—from third-party sellers on five popular 

e-commerce websites.3 According to CBP data we reviewed and officials 

we spoke to, CBP often seizes IPR-infringing counterfeits of these types 

of products. As table 1 shows, the rights holders for the four selected 

products we purchased determined that 20 of the 47 items were 

counterfeit.

Table 1: Results from Rights-Holder Testing of GAO Covert Purchases of Four 

Frequently Counterfeited Consumer Products

Nike Air 

Jordan

shoes

Yeti travel 

mugs

Urban Decay 

cosmetics

UL–certified 

phone 

chargers

Total

Authentic 15 3 0 9 27

Counterfeit 0 6 13 1 20

Total 15 9 13 10 47

Source: GAO | GAO-18-383T

Note: We asked the rights holders for the four products to test a total of 47 items that we purchased 

from third-party sellers on five popular e-commerce websites. These results do not include one 

charger that we excluded from testing. Despite being advertised as UL–certified, the product arrived 

without a certification seal and therefore could not be tested for authenticity.

We did not identify any clear reasons for the variation among the 

counterfeit and authentic items that we purchased based on the products 

that they represented, the e-commerce websites where we bought the 

items, or the third-party sellers from whom we bought them. For three of 

the four product types, at least one item we purchased was determined to 

be counterfeit, with results varying considerably by product. 

Representatives of the rights holders also could not provide a specific 

explanation for the variation among authentic and counterfeit goods that 

we received. They noted that the results of covert test purchases can 

fluctuate depending on enforcement activities and the variety of goods 

 3

All 47 items we purchased were shipped from U.S. addresses, signifying that any items 

manufactured outside the United States were imported before being sent to us. Rights 

holders confirmed that at least a portion of the authentic versions of the products 

purchased are manufactured abroad. Additionally, according to a 2011 IPR Center report, 

most physical counterfeit goods are manufactured abroad. Final production of some 

counterfeit items, such as applying labels and packaging items, may take place after items 

are imported into the United States. 

Twenty of 47 Items 

Purchased from ThirdParty Sellers on Popular 

E-Commerce Websites 

Were Counterfeits, 

Highlighting Potential 

Risks to Consumers
Page 5 GAO-18-383T 

and sellers on a particular website on a given day. Rights-holder testing 

also showed that we purchased at least one counterfeit item and one 

authentic item from each of the five e-commerce websites. In addition, 

our analysis of the customer ratings of third-party sellers from whom we 

bought the items did not provide any clear indications that could warn 

consumers that a product marketed online may be counterfeit. For 

example, we received both counterfeit and authentic items from thirdparty sellers with ratings that were less than 70 percent positive as well 

as sellers with ratings that were up to 100 percent positive.

Rights holders were able to determine that items we purchased were not 

authentic on the basis of inferior quality, incorrect markings or 

construction, and incorrect labeling. Some counterfeit items we 

purchased were easily identifiable as likely counterfeit once we received 

them. For example, one item contained misspellings of “Austin, TX” and 

“Made in China.” Other items could be more difficult for a typical 

consumer to identify as counterfeit. For example, the rights holder for a 

cosmetic product we purchased identified one counterfeit item on the 

basis of discrepancies in the color, composition, and design of the 

authentic and counterfeit items’ packaging. Counterfeit goods may also 

lack key elements of certification markings and other identifiers. For 

example, on a counterfeit phone charger we purchased, the UL 

certification mark did not include all components of the authentic mark. 

Figure 1 shows examples of these counterfeit items.
Page 6 GAO-18-383T 

Figure 1: Examples of Some Counterfeit Items Purchased Online

The risks associated with the types of counterfeit goods we purchased 

can extend beyond the infringement of a company’s IPR. For example, a 

UL investigation of counterfeit iPhone adapters found a 99 percent failure 

rate in 400 counterfeit adapters tested for safety, fire, and shock hazards 

and found that 12 of the adapters tested posed a risk of lethal 

electrocution to the user.4 Similarly, according to a rights holder 

representative, counterfeits of common consumer goods, such as Yeti 

travel mugs, may contain higher-than-approved concentrations of 

dangerous chemicals such as lead, posing health risks to consumers. 

According to ICE, seized counterfeit cosmetics have been found to 

 4

UL, Counterfeit iPhone Adapters: A UL Technical Investigation Shows a 99 Percent 

Failure Rate (2016).
Page 7 GAO-18-383T 

contain hazardous substances, including cyanide, arsenic, mercury, lead, 

urine, and rat droppings.

Representatives of rights holders and e-commerce websites whom we 

interviewed reported taking independent action to try to protect IPR within 

their areas of responsibility. For example, both rights holders and ecommerce websites maintain IPR protection teams that work with one 

another and with law enforcement to address infringement issues. Ecommerce websites may also take a variety of steps to block and remove 

counterfeit items listed by third-party sellers. These efforts rely on data 

collected through a variety of means, including consumer reporting of 

counterfeits, rights-holder notifications of IPR infringement, and corporate 

efforts to vet potential third-party sellers, according to private sector 

representatives.

Our January 2018 report includes information on steps that consumer 

protection organizations and government agencies recommend 

consumers take to limit the risk of purchasing counterfeits online. These 

steps include, for example, buying only from authorized retailers online, 

avoiding prices that look “too good to be true,” and reporting counterfeit 

purchases.

We identified a number of key challenges that the changes in the market 

for counterfeit goods can pose to CBP and ICE as well as to the private 

sector. First, the increasing sophistication of counterfeits can make it 

difficult for law enforcement officers to distinguish between legitimate and 

counterfeit goods. Second, as the range of counterfeit goods expands, 

CBP has a wider variety of goods to screen, which requires CBP officials 

to have in-depth knowledge of a broad range of products and of how to 

identify counterfeits. Third, counterfeiters may break up large shipments 

into multiple smaller express carrier or mail packages to decrease the risk 

of losing significant quantities of merchandise to a single seizure. This 

shift toward smaller express shipments of counterfeit goods to the United 

States poses challenges to CBP and ICE because, according to CBP 

officials, seizure processing requires roughly the same amount of time 

and resources regardless of shipment size or value.

The changing marketplace also presents challenges to the private sector, 

according to representatives from rights holders and e-commerce 

websites. For example, it is more difficult for rights holders and ecommerce websites to identify and investigate individual counterfeit 

cases, because e-commerce websites face a growing inventory from a 

Changes in the 

Marketplace Can Pose 

Challenges to U.S. 

Agencies and the Private 

Sector
Page 8 GAO-18-383T 

larger registry of sellers. Tracking goods from known counterfeiters 

through various website fulfillment and delivery mechanisms is also a 

significant challenge for the private sector. Furthermore, the growth of ecommerce has accelerated the pace at which counterfeiters can gain 

access to consumers or reinvent themselves if shut down.

CBP and ICE engage in a number of activities to enhance IPR 

enforcement; however, while ICE has assessed some of its efforts, CBP 

has taken limited steps to do so. CBP’s and ICE’s IPR enforcement 

activities broadly include detecting imports of potentially IPR-infringing 

goods, conducting special operations at U.S. ports, engaging with 

international partners, and undertaking localized pilot programs or portled initiatives. CBP and ICE have collected some performance data on 

activities we reviewed, and ICE has taken some steps to better 

understand the impact of its efforts, such as creating a process to track 

cases it deems significant. However, we found that CBP has conducted 

limited evaluation of its efforts to enhance IPR enforcement. 

Consequently, we concluded that CBP may lack information needed to 

ensure it is investing its resources in the most efficient and effective 

activities. We recommended in our report that CBP take steps to evaluate 

the effectiveness of its IPR enforcement efforts; CBP concurred with this 

recommendation.

Our analysis showed that CBP and ICE interagency collaboration on IPR 

enforcement is generally consistent with the following selected key 

practices for effective interagency collaboration: (1) define and articulate 

a common outcome; (2) establish mutually reinforcing or joint strategies; 

(3) identify and address needs by leveraging resources; (4) agree on 

roles and responsibilities; and (5) establish compatible policies, 

procedures, and other means to operate across agency boundaries.5 For 

example, the agencies may leverage resources by collocating staff or 

sharing their expertise. CBP and ICE have also issued guidance and 

developed standard operating procedures to clarify roles and 

 5

GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain 

Collaboration among Federal Agencies, GAO-06-15 (Washington, DC: Oct. 21, 2005). Our 

October 2015 report listed eight practices that can enhance and sustain interagency 

collaboration. Our January 2018 report evaluated CBP’s and ICE’s collaboration on IPR 

enforcement against five of these practices, which we selected because we determined 

they were most relevant to that review. 

CBP and ICE Engage 

in Activities to 

Enhance IPR 

Enforcement, but 

CBP Has Not Fully 

Evaluated the Results 

of Its Activities

CBP and ICE 

Generally Collaborate 

on IPR Enforcement, 

but CBP Is Restricted 

in Sharing Information 

with the Private 

Sector
Page 9 GAO-18-383T 

responsibilities. CBP and ICE also coordinate with the private sector in a 

variety of ways, such as obtaining private sector assistance to determine 

whether detained goods are authentic and to conduct training.

Representatives of rights holders and e-commerce websites noted that 

information shared by law enforcement entities is critical to private sector 

IPR enforcement, such as pursuing civil action against a counterfeiter or 

removing counterfeit items from websites. In the Trade Facilitation and 

Trade Enforcement Act of 2015, Congress provided CBP with explicit 

authority to share certain information with trademark and copyright 

owners before completing a seizure.6 CBP officials stated that they share 

information about identified counterfeits with e-commerce websites and 

rights holders to the extent possible under current regulations. However, 

according to private sector representatives we spoke to, restrictions on 

the amount and type of information about seized items shared by CBP 

limit the ability of rights holders and e-commerce websites to protect IPR. 

CBP officials noted that there are legal limitations to the amount and type 

of information they can share, particularly if the e-commerce website is 

not listed as the importer on forms submitted to CBP.

Several private sector representatives stated that receiving additional 

information from CBP would enhance their ability to protect IPR. 

Representatives of one website noted that information on the exterior of 

seized packages, such as business identifiers on packages destined for 

distribution centers, would be helpful for identifying groups of counterfeit 

merchandise from the same seller. However, according to CBP officials, 

CBP cannot provide such information to e-commerce websites. 

Representatives of one e-commerce website noted that ICE sometimes 

shares information related to an investigation, but that ICE’s involvement 

in the enforcement process begins only after CBP has identified and 

seized counterfeit items. Representatives of two e-commerce websites 

stated that, because of the limited information shared by CBP, they may 

not be aware of IPR-infringing goods offered for sale on their websites, 

even if CBP has seized related items from the same seller.

According to CBP officials, CBP is reviewing options for sharing additional 

information with rights holders and e-commerce websites and is 

assessing what, if any, additional information would be beneficial to share 

 6

This authority applies only with respect to goods suspected of infringing a trademark or 

copyright that is recorded with CBP. Pub. L. No. 114-125, § 302(a), 130 Stat. 122, 149 

(2016).
Page 10 GAO-18-383T 

with private sector entities. CBP officials stated that they have not yet 

determined whether changes to the amount and types of information 

provided to e-commerce websites would require regulatory changes or 

additional legal authorities. These officials also said that they have 

discussed differences in CBP’s and ICE’s information sharing with ICE 

officials. In our report, we recommended that CBP, in consultation with 

ICE, assess what, if any, additional information would be beneficial to 

share with the private sector and, as appropriate, take action to enhance 

information sharing where possible. CBP concurred with this 

recommendation.

Chairman Hatch, Ranking Member Wyden, and Members of the 

Committee, this concludes my prepared statement. I would be pleased to 

answer any questions that you may have at this time.

If you or your staff have any questions about this testimony, please 

contact Kimberly Gianopoulos, Director, International Affairs and Trade, 

at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this statement. GAO staff who made key contributions to 

this testimony are Joyee Dasgupta, Kara Marshall, Katie Bassion, Kristen 

Timko, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina 

Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James 

Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale.

GAO Contact and 

Staff 

Acknowledgments

(102579)
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