Increasingly when authorities seize counterfeit products, they donate them to a local charity to sell for profit, however this practice has faced criticism from both rights holders and officials governing bodies. The problem is more complex than it would first appear.
Counterfeit goods account for 10% of worldwide trade - that’s $500 billion dollars annually according to the World Customs Organization. Not only can these products pose health and safety risks to the public but there is an increasing link between the illicit trafficking of counterfeit goods and other serious organized crimes.
Europol has warned that counterfeiting is an attractive avenue for organized crime to “diversify their product range” while proceeds from other crimes also feed into the production and distribution of counterfeit goods. So what happens to these goods, worth millions of dollars, which are seized by customs officials each year? Well, in most cases they are destroyed.
How are counterfeit seizures disposed of?
In 2011, customs authorities in the European Union (EU) seized some 115 million articles (a 15 % increase on goods seized in 2010) ranging from sunglasses, bags, and shoes, to medicines, electronic devices, batteries, refrigerants and pesticides. Over 75% of these goods were destroyed reports the World Intellectual Property Organization (WIPO). While in the Netherlands, European-anti counterfeit non-profit REACT works to recycle 95% of all counterfeit goods seized there, in many countries seized goods end up incarcerated or in landfill sites. The proper destruction and disposal of these items, particularly hazardous materials, is not only costly but has a severe environmental impact.
But while it continues to be an expensive and challenging operation to stop counterfeits reaching the market, some good is coming from those items which are confiscated by officials in the UK. Regulations adopted in 2009 by HM Revenue & Customs allow intellectual property owners - the brand manufacturers - ten days to decide what to do with fake goods seized in the UK. After this period the goods are released and in most cases donated to charities.
Charities are putting counterfeits to good use
UK Charity HIS Church was one of the organisations to push for this practice and has worked over the years to convince almost all of the British Trading Standards authorities to hand over seized fake goods to them. The charity collects and rebrands the goods before distributing the fake designer clothes to over 250 charities and shelters across the UK. They have even benefited from donations across Europe including 1,600 counterfeit Tommy Hilfiger jeans from Belgium.
Amanda Ado, director of the London Spires Centre for the Homeless told the BBC, "People who are sleeping rough rarely get anything that is brand new, or rarely get anything that feels like it's been given specifically for them. Getting something like this raises their head and makes them feel a bit better about themselves."
His Charity has also received industrial sewing machines which were seized from illegal counterfeit operations and are now using them to re-brand the clothing before it is distributed. The donation of seized goods is now common practice across the UK. In 2014, Police Scotland handed over £315,000 worth of fake designer clothing which had been confiscated over a number of years in Glasgow. With the support of the brands involved the clothing was passed on to a local charity who then sent the items to those in need overseas.
This practice has removed the logistical challenges and expenses involved in storing seized goods while awaiting court decisions, then the further costs involved in disposing of them properly, not to mention the environmental impact of filling landfill sites.It can be costly and technically complex to dispose of confiscated goods and “minimizing the environmental impact of disposal requires specialized facilities, expertise and high levels of stakeholder collaboration” reports WIPO. Donating counterfeit goods, as opposed to disposing of them, really seems like a win-win in offering a solution which is both environmentally and socially responsible. Customs authorities in China and the Philippines have also adopted the practice and frequently supply charities with goods after they have been seized.
Views mitigated of counterfeit donations to charities
But not everyone has supported this idea. The US, which in 2013 seized more than $1.2 billion worth of counterfeit and pirated goods at or within its borders according to World Trademark review, actually brought in anti-counterfeiting law in 2006 which stated that fake goods must be handed over to the federal authorities to be destroyed. The law was enacted following Hurricane Katrina when the government distributed, from its many warehouses filled with seized goods, unlicensed clothing and bedding to those worst affected by the storm. However not everyone agreed with the charitable act since permission had not been sought from the rights holders. Writing in The Vanderbilt Journal of Transnational Law, Kristina Rae Montanaro wrote, “In its act of charity, the federal government sacrificed the rights of trademark holders”. While she noted that “common decency” suggested that rules could be broken in a disaster, she also wrote that high-priced clothing brands did not want knockoffs of their products being worn by poor people and having spent millions on advertising to be associated with ‘shelter chic'.
Perhaps a more sympathetic argument against the donation of counterfeit goods concerns the safety of those articles seized. A report by the United Nation Drug and Crime Organisation stressed that counterfeit goods and fraudulent medicines can pose serious risk to public health and safety, stating that with no legal regulation consumers are at risk from unsafe and ineffective products including items containing toxic dyes and unregulated chemicals. Therefore rigorous testing needs to be carried out to ensure all articles meet health and safety standards before they can be donated to welfare organisations, and this in turn brings a cost.
However if the required tests are carried out and the items deemed to be of an acceptable standard, should brands voice issue with their trademarks being used outside of their control? While customs officials continue to fight the import and trading of counterfeit goods, working with the brands involved and donating these goods to charity offers a low-cost and sustainable solution to the thousands of counterfeit articles seized each year.