	Accelerated by E- Commerce, 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

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. The variety  of products being counterfeited has also increased, according to CBP  officials. Twenty of 47 Items Purchased from Third- Party Sellers on Popular E-Commerce Websites Were Counterfeits, Highlighting Potential Risks to Consumers

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. Changes in the Marketplace Can Pose Challenges to U.S. CBP and ICE Engage in Activities to Enhance IPR Enforcement, but CBP Has Not Fully Evaluated the Results of Its Activities

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 port- led 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. CBP and ICE Generally Collaborate on IPR Enforcement, but CBP Is Restricted in Sharing Information with the Private Sector

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. CBP officials stated that they share  information about identified counterfeits with e-commerce websites and  rights holders to the extent possible under current regulations. 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  with private sector entities. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

This testimony summarizes the information contained in GAO's January 2018 report, entitled Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market , ( GAO-18-216 ).

What GAO Found

Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector—for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online—and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).
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 port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities.
CBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes.