How Can Individual Packages–Delivered Through International Mail be Cost-Effective for Chinese Counterfeiters?

A few months ago, I was reviewing the 2018 international small mail shipment statistics put out by U.S. Customs and Border Protection (CBP), and was stunned to see the increase of small packages being mailed into the United States in the last few years.

In six years, it jumped from 150 million packages (shipped by international mail) to a staggering 502 million in 2017, and 475 million in 2018, respectively.

Here is a quote from the report:

“E-commerce sales, including those through third-party platforms, have resulted in a sharp increase in the shipment of small packages into the United States. In FY 2018, there were 161 million express shipments, and 475 million packages shipped through the international mail environment.”

(Source: Intellectual Property Rights, Fiscal Year 2018 Seizure Statistics, Prepared by U.S. Customs and Border Protection, Office of Trade, U.S. Department of Homeland Security.)

C’MON MAN!

HOW COULD INTERNATIONAL MAIL BE COST EFFECTIVE FOR CHINESE COUNTERFEITERS?

The cover story of the September 2019 issue of the Brand Protection Professional (BPP) A Practitioner’s Journal published by the Michigan State University (MSU), Anti-Counterfeiting and Product Protection program (A-CAPP) may have provided an answer.

The article is titled, “On-Line Sales of Counterfeit Goods and The Universal Postal Union: The Little Known Aggravator.”

Here are a few quotes:

“…What many people may not realize is the ability of foreign counterfeiting operations to fulfill on-line orders cheaply is facilitated by low international postage rates from China and other countries.

“…it would cost less to send a package from China to the U.S. than it would to send that same package domestically within the U.S.

“…foreign shipping costs should make it prohibitively expensive for e-commerce sales across borders.”

WHY IS IT NOT PROHIBITIVELY EXPENSIVE?

According to the BPP article, there is a treaty in place signed decades ago (by the U.S. and other participating countries) through the Universal Post Union (UPU)–an affiliate of the United Nations agency– that was intended to help developing countries by absorbing a disproportionate share of international postal fees incurred by those countries.

Amazingly—China is still listed as one of those developing countries. (Other countries include: Brazil, Russia, India and South Africa.)

Here’s another quote from the Brand Protection Professional (BPP) article:

“In one example cited in the report [United States Postal Service Office of Inspector General, Terminal Dues in the Age of E-commerce, December 14, 2015] charges for shipping packages weighing between 1.4 and 5 ounces from China to the U.S. amounted to about $1.60 per item. First Class [U.S] mail domestic rates for those same packages would come to between $2.04 and $2.22.”

WHY HASN’T THE U.S. COMPLAINED?

A few other quotes from the BPP article:

“In October 2018, the White House announced the intention of the United States to leave the Universal Postal Union because the administration believed that the UPU had not made sufficient progress to address the imbalances…”

“The UPU has scheduled a meeting for September 2019 in Geneva, Switzerland to vote on a U.S. proposal to permit self-declared rates by UPU members.”

SO, WHAT HAPPENED IN GENEVA?

According to a New York Times article published on September 25^th, “…the United States was prepared to leave the postal treaty if China continued to enjoy preferential rates. The ultimatum reflected deepening impatience in Washington with the global postal system’s failure to keep up with the market and economic changes or recognize China’s growth e-commerce market.”

“The [U.S.] administration’s primary concern has been the sliding scale of fees that allowed China, the world’s second-largest economy, to take advantage of lower rates that are available to developing countries.”

WERE CHANGES MADE?

The New York Times article indicated, “The deal struck…will allow the United States to start setting its own postal fees in July and allow other countries that received more than 75,000 metric tons of mail a year to start phasing in higher rates in January 2021.”

“The funding will help the postal union promote the use of computerized systems that provide security against shipments of drugs like fentanyl and other dangerous goods,’ said David Dadge, a union spokesman.”

(See my November 14^th blog post titled, “Chinese Counterfeit Fentanyl and the U.S. Overdose Epidemic.”)

HOW DID THE U.S. RESPOND?

The U.S. trade advisor said, “…the agreement would, ‘transform an antiquated, discriminatory system into a modern and resilient one far more prepared to meet the new demands of e-commerce.’ “

HOW DID THE U.S. PRIVATE SECTOR RESPOND?

According to the New York Times, Jay Timmons, president of the National Association of Manufacturers said, “The new system will, ‘help protect manufacturers from counterfeiters and other bad actors in countries like China, which have been exploiting a dangerous and unfair system.’ ”

FINAL THOUGHT

As we all know, it is estimated that China and Hong Kong supply 86 % of the world’s counterfeits. So, the action taken by the Universal Postal Union to amend the outdated postal fee structure—especially as it pertains to China—should be applauded by all countries.

In the meantime, brands really need to ratchet-up their investment in robust brand protection technology if they have any hope of slowing down the flood of impersonating sites mailing counterfeits to their customers.

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