A ‘WEAK LINK’ NO MORE?
New trade deal prods Canada to stop Chinese counterfeits headed for major U.S. market
The authorities knew they had arrived in Canada — 55,000 Chinese-made, knock-off versions of ties by Gucci and the like. Then they disappeared, never showing up for sale in this country.
Finally, the ersatz designer accessories surfaced in Chicago, Miami and New York, having apparently passed through here on the way to their ultimate destination, according to a lawyer.
Experts say Canada is likely a major stopover for such counterfeit goods, a “weak link” of lax enforcement en route to the huge American market. Canadian customs officials do little now to stop their flow.
But that may be about to change, as the United States-Mexico-Canada Agreement, the new North American trade deal, requires all three countries to authorize their border guards to detain “exofficio” — without a court order — pirated goods in transit to other nations.
Combined with similar provisions in the recently concluded The Canada-European Union Comprehensive Economic and Trade Agreement, the change could usher in a new era of Canadian border guards combating counterfeit merchandise that their own citizens will likely never buy.
That would be a welcome development, say advocates for copyright-holding companies.
“A counterfeit is a counterfeit is a counterfeit,” said David Lipkus, a Toronto-based lawyer. “The end goal for the counterfeit merchandise always is to remove it from the marketplace, and the best place to do that is at the border.”
As it stands now, “Canada is seen as the weak link,” said Mark Evans, another Toronto-based intellectual-property lawyer. “I’m hopeful this is the first step … toward strengthening all of these border measures.”
But those who applaud the change set out in the tentative trade deal also say there’s no guarantee it will lead to concrete action. Despite laws that already give officials power to act in other areas, Canada has largely ignored the counterfeit problem, they charge.
Documents released in June 2017 indicated the Canada Border Services Agency had detained just 36 shipments in the two years since the current anti-counterfeit law came into effect.
By contrast, the U.S. seized 34,000 shipments of knock-offs last year alone, including almost 600 from Canada, according to Homeland Security Department statistics. Even on a per-capita basis, that is well over a 100-fold difference.
“It doesn’t seem like a very high priority for CBSA,” said Jean Pierre-Pierre Fortin, president of the Customs and Immigration Union.
The agency itself “will not speculate” on why it halts so many fewer counterfeit shipments than the U.S., said CBSA spokesman Jayden Robertson.
As for the new requirements in the USMCA, “CBSA continuously reviews its operational capacity and adjusts resources as required to carry out its mandate,” he said.
Some experts, meanwhile, express worry about possible collateral damage from in-transit interception of alleged knock-off products.
Generic drugs made in India and destined for developing countries, for instance, have been stopped in European ports as suspected counterfeits, potentially depriving developing nations of needed medicine. India and Brazil both filed complaints with the World Trade Organization in response, though Europe later agreed to stop the practice.
“That’s a real issue,” said Michael Geist, a University of Ottawa law professor and intellectual-property expert. “Where those powers exist, there’s been concern around misuse or abuse of them.”
Nevertheless, the response to counterfeiting is one of the chief reasons the U.S. placed Canada this year on its intellectual-property “priority watchlist” — a catalogue of the 12 countries it says have the worst records in the world for protecting IP. Most are developing nations, none of the others are G7 members.
“The United States remains deeply concerned that Canada does not provide customs officials with the ability to inspect, detain, seize and destroy in-transit counterfeit and pirated goods entering Canada destined for the United States,” the The Office of the U.S. Trade Representative said in a report on the watchlist earlier this year.
What’s more, the document added, there were no known criminal prosecutions for counterfeiting in Canada in 2017.
A separate USTR report recently included the East Asian-themed Pacific Mall north of Toronto among an international collection of 18 bricks-and-mortar “notorious markets” for knock offs.
The sale of counterfeit goods at the mall is “sprawling and pervasive,” while vendors appear to operate with virtual impunity, the report said. Local police did conduct a raid there this June, however, seizing an array of counterfeit items.
Current Canadian legislation lets border guards “detain” goods they suspect are counterfeit — then contact the owner of the copyright to see if they want to take legal action — but only for products headed for the domestic market or exported directly from here. In-transit merchandise was specifically exempted.
The new USMCA, if ratified, would require Canada to get rid of that exemption.
Even though it’s not a prime focus of enforcement efforts, Canada was the fourth largest source of the 34,000 counterfeit shipments seized by American authorities last year, accounting for two per cent of the total, according to Homeland Security.
Pirate exporters know American authorities scrutinize what comes across their northern border less closely than what arrives from China, said lawyer Lorne Lipkus, one of Canada’s foremost counterfeit experts.
And they know there is next to no apprehension of counterfeits in Canada, he said. Lipkus recounted the Gucci-tie case as one of many examples. “I think that Canada is a major in-transit shipment point.”
David Lipkus, Lorne’s son and law-firm partner, recalls a Montreal importer who brought in 100,000 knock-off Calvin Klein and other designer T-shirts from China, and admitted to him they were earmarked for the States.
Said Evans: “Anyone working in this field is well aware of clients in the U.S. who have seized goods … (and) the goods came from Asia, came from China, through Canada and into the United States.”