Industry

ATA: Counterfeiting isn’t a Victimless Crime

How much trouble and economic damage are counterfeiters doing? It’s nearly impossible to make specific calculations regarding the archery industry. However, its impact on U.S. manufacturing is enormous.
Photo Credit: Shane Indrebo

Author: Patrick Durkin

Counterfeiting will no longer be treated as a “soft, victimless crime” if the archery industry has anything to say about it as a new administration heads toward the White House.

“Counterfeiting has been a problem for many years, but it’s really taken off the past five to seven years as the internet enables counterfeiters to deal directly with consumers,” said Jay McAninch, CEO/president of the Archery Trade Association. “By some estimates counterfeiting doubled from 2005 to 2008, so you can guess where it is now, given the advances in digital communication. This is one consequence of transferring U.S. manufacturing overseas, especially to China. The ATA’s ability as a trade association to do something about counterfeiting is limited, largely because our impact is mediated by the federal government. We’re confident we’ll get more help once the Trump Administration is in place.”

How much trouble and economic damage are counterfeiters doing? It’s nearly impossible to make specific calculations regarding the archery industry. However, its impact on U.S. manufacturing is enormous.

“Some estimates by the Chamber of Commerce say counterfeiting costs legitimate companies between 5 percent and 7 percent on the low end, and 10 percent on the high end in the global market,” McAninch said. “I saw one estimate that counterfeiters cost U.S. companies over $600 billion annually in losses, and those losses were expected to exceed $1 trillion in 2015. In sporting goods alone, losses are estimated at $6.5 billion. In our industry, counterfeiting has greatly hurt many accessories, including sights, rests, broadheads, stabilizers and vibration-control products. Many products with specific engineering or design features to improve performance are being made to look exactly like the real product. Unfortunately, they don’t deliver the results that archers and bowhunters expected when they bought the product.”

Counterfeiters pay no federal excise taxes on their products, giving them a further advantage over legitimate manufacturers while depriving revenues for state and federal wildlife management. Photo Credit: ATA

McAninch said he gets some idea how the U.S. government viewed counterfeiting during the Obama Administration by analyzing this fact: The United States annually imports more than $25 billion in goods (0.05 percent), but U.S. Customs Service inspectors in recent years seized only about $125 million of those goods.

“We need trade policies that protect manufacturers from unscrupulous overseas manufacturers,” McAninch said. “The Clinton and Bush administrations took a more aggressive stance against foreign counterfeiting. I think we’ll see more emphasis on shutting down these pipelines as the new administration devotes more of our assets toward investigating and confiscating these abuses, and uses our economic leverage to ratchet down counterfeiting.”

Those investigating the counterfeiting plague find the major culprits are China, Hong Kong, India, Taiwan and Korea. They also estimate that 87 percent of the total value lost to counterfeiters originates in China, which alone accounts for 70 percent of all bogus products.

“When you look at all the numbers, you see that China accounts for roughly $9 of every $10 in lost value by counterfeiting,” McAninch said. “Unfortunately, it’s extremely difficult to enforce copyrights, trademarks and patents, and take legal actions in places like China. And it’s even more difficult if archery and bowhunting companies don’t contact their senators and congressmen to make them aware of the problem. If our representatives on Capitol Hill aren’t hearing from companies in their home districts or states, and they aren’t receiving data and details on these losses, there’s little Washington will do about it.”

McAninch encourages manufacturers to keep their trademark and copyright registrations active in all countries and markets where they sell products. “These companies must keep dotting every ‘I’ and crossing every ‘T’ wherever they do business,” McAninch said. “They must take every opportunity to protect their intellectual property. It’s a never-ending process. When you stop and think about how much time and money manufacturers must invest to protect their interests, you start realizing the many ways counterfeiting costs them money.”

Counterfeiting has greatly hurt many archery accessories, including sights, rests, broadheads, stabilizers and vibration-control products. Although these products are made to look like the real product, they don’t deliver the results that archers and bowhunters expected when they bought the product. Photo Credit: ATA

Of course, manufacturers can’t stand alongside Customs officers and postal employees to check suspicious imports. Where would they start? Counterfeiters have grown increasingly bold the past few years as they collect or photograph samples of well-known sights, broadheads, arrow-rests and other accessories. Once in hand, they reverse-engineer and manufacture knock-offs for “factory-direct” sales to retailers and consumers at prices far lower than name-brand originals.

They often sell their imitations through online retailing powerhouses like eBay, Amazon and Alibaba; as well as through direct email or traditional mail solicitations using fliers and brochures. After the products arrive in the United States, they’re often delivered directly to homes and businesses by the U.S. Mail and identified as gifts. Therefore, counterfeiters pay no federal excise taxes on their products, which gives them further advantages over legitimate manufacturers while depriving revenues for state and federal wildlife management.

“The losses caused by counterfeiters eventually hurt everyone,” McAninch. “These aren’t victimless crimes. They hurt our nation’s wildlife-management programs, and they hurt the reputations of retailers and manufacturers. When counterfeit products fail, the consumer blames the manufacturer whose product design was stolen. And when consumers take their complaint to a retailer and get rejected, they blame the retailer for not solving their problem. By the same token, when consumers claim warranty coverage from the manufacturer, the manufacturer’s brand is damaged if they deny the claim. And if they accept the claim, it increases their costs. Counterfeiting is truly a lose-lose scenario for manufacturers.”

Counterfeit products not only hurt our nation’s wildlife-management programs by evading the federal excise tax, but they also hurt the reputations of retailers and manufacturers. When counterfeit products fail, the consumer blames the manufacturer whose product design was stolen. Photo Credit: Shane Indrebo

McAninch encourages all ATA members and their industry partners and colleagues to not just absorb the losses. It’s important to document them so the ATA can present its actual costs when working with lawmakers in Washington.

But that task remains difficult. “Getting a handle on counterfeiters is like trying to squeeze a handful of water,” said Dave Parker, an ATA Board member and director of sales and strategy for Kinsey’s. “How do you get at counterfeiters, stop them, and prevent them from doing it again? And how do you not spend more than 10 times the amount of the problem itself when you try protecting your products? Those are some of the challenges we’re tackling.”

Furthermore, counterfeiting affects not only archery, but also drugs, cosmetics, luggage, watches, food products and other items. “We aren’t alone in this, which helps in some ways because the more industries hit by counterfeiters, the more it increases overall awareness,” McAninch said. “But in archery, our other big concern is safety. When you have people drawing counterfeit bows to shoot counterfeit arrows and broadheads from treestands made from inferior metals, something is bound to give at the worst possible time.”

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