Grocery Store Distribution, Knock-off Sales, Taxation, Health and Hazzard

BUTT IN – BUTT OUT

COUNTERFEIT CIGARETTES

FLOODING THE MARKETPLACE


In a raid conducted by U.S. Alcohol Tobacco and Firearms agents, they seized more than 57,000 cartons of illegal smokes in unmarked cartons from a Queens New York warehouse. The estimated street value tops more than $3.4 million. In addition they seized more than $350,000 cash during the raid.

ATF agents estimate that between 35 to 50 percent s of the cigarettes that New Yorkers smoke are counterfeit. According to Assistant District Attorney Kathleen Rice, Nassau County New York, who headed the investigation, alleges that the counterfeit smokes contained higher than legal level of tar and nicotine. This suggests that thousands of New Yorkers are smoking hazardous and harmful cigarettes.

This is not just a New York problem, but rather is national in scope.

Is the high tax rate for cigarettes driving smokers to the counterfeit products? It obvious how entrenched the counterfeit butts are in the grocery marketplace. They look like the original smokes, yet contain harmful, non-regulated contraband, that is not inspected and approved by the USDA.

This is more than a counterfeit problem; it’s a health hazard, a tax problem and a willingness by thousands of smoker to by-pass the taxation and increased taxes imposed by local government. A cigarette smoker will smoke any cigarette available if it looks like, feels like and tastes like the original. This also impacts the companies that produce, distribute and employee thousands of Americans. The reduction of cigarette sales from the distribution network is easily identifiable. Distribution operators notice that the reduction in purchases, yet the mom & pop grocery store fronts have available cartons and packs for sale to the public.

Is the public smoker aware of the difference? Of courses they immediately know that they are paying less for the carton or individual pack. Therefore, smoker markets are contributing to the counterfeit explosion.

This points to a pricing issue; not health, not loyalty to American business manufacturers and not contributing to increased taxation. It’s more than a cigarette issue but rather a consumer issue. Protecting the consumer, whether its cigarettes, toys, or even children’s bibs finds that the production of counterfeit goods, products that have not been inspected or qualified for distribution within the United States has a tremendous impact on the American family and American business..

When is the American manufacturing community going to recognize that along with war on terror, comes a war against the American economy? Flooding the marketplace by non-traditional distributors avoiding taxes and failing to conform with inspections that protect the American population may in fact be a well planned effort to harm our economy and our American children.

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KNOCK-OFF GOODS, COUNTERFEIT PRODUCTS

KNOCK-OFF, COUNTERFEIT MARKETEERS
AN ATTACK on AMERICAN MANUFACTUERS

FOLLOW THE FLOW OF COUNTERFEIT PRODUCT

Counterfeiting of goods, from pocketbooks to wing nuts has a tremendous impact on American manufacturers and Copyright owners. It impacts the bottom line, with losses in excess of 500 million per year. It is not uncommon to find this information in corporate financial reports. Whether it’s the multi-national corporate manufacturer or the independent copyright design owner the infringement of the product design, the “knock-off”, cross over international boarders and even across American states.

The problem is not just the infringement of the design but the planned marketing of the counterfeit items. We often hear about the counterfeiters of China or Thailand as the primary source of copyright infringement, but the fact is that without a distribution network of American entrepreneurs operating in the underworld of grey market sales, logo thefts, copying of HOT products, Video Tapes of new movies and even electronic software games, the production is not only in the foreign territories but also within the United States.

During the late 1990’s a copyrighted “FISH” design was infringed by a business network operating in South Florida. The “knock-off” T-shirt designs were being sold throughout the United States, but mostly in storefronts owned and controlled by Israel businessmen. The owner of the legitimate design contracted an international law firm to seek an injunction and a Federal Court Order to seize the counterfeit designs, shirts, towels, hats and manufacturing equipment used to make the products.

In order to prove the case before the Court order was to be signed, the collection of evidence, documented by purchase of products, surveillance photo’s of the purchase and photos of the displays in the numerous storefront windows, affidavits affirming the purchases and the identity of the business entities selling the products, ownership, corporate filings, licenses, business licensing and where possible a written statement from a store owner, manager or worker confirming the product and sale of the product. Obtaining a receipt, whether it is a credit card charge receipt or a bill of sale documented with the product name and the corporate or business name of the store, is most important to meet the criteria to obtain an injunctive and seizure order from the Federal Court.

Most often this is handled by the attorney’s engaged by the manufacturers or the copyright owner. Other documents that are required is the legitimate “Patent” orders, documents and designs; or an affidavit by the designer or owner that the product has been registered as a copyright or patent and that the information is factual, the date of origination and the business name and date of incorporation, or registration.

All the manufacturing of the “FISH” knock-offs took place inside the United States. Infringed productions of the counterfeit tee-shirts were made in Ft. Lauderdale, Florida. The infringers were producing a variety of the “FISH” logos on tee-shirts, all sizes including children, beach towels and beach bags. Using automated computerized embroidery machines, with the software designs of the “FISH”, was running twenty-four seven, producing thousands of shirts a week. The distribution network was in place and storefronts from Virginia Beach to Key West, From California to New York, the shirts found their way into storefronts owned and controlled by several Israeli businessmen operating within the United States and abroad. The cash was flowing in from the sales of the “FISH”, and the owner of the “Trademark” copyright design was not seeing a penny. He had designed the “FISH” and developed a business selling millions of dollars of these shirts at seashore communities, from Hawaii to New England. This infringement had cost him an estimated 5 million annually. He wanted it stopped and spent more than a million in legal and investigative costs to obtain nothing more than an agreement to cease and desist against the infringers.

After a detailed investigation and with the authority of a Federal Court Seizure Order, the investigators in cooperation with the U.S. Marshall’s Office, Broward Sheriff’s Office and Monroe County Sheriff’s Department conducted raids of the stores and manufacturing plant. On an early morning, the Monroe County Sheriff’s Department with the cooperation of the U.S. Marshals and the private investigators closed down Duval Street, in Key West. Duval Street is the main street in Key West, Florida that tourists, vacationers, cruise ships visit and wander through the restaurants, bars and dozens of tee-shirt storefronts, buying up tourist tee-shirts. Upon closing down the street from all traffic, the investigators armed with seizure orders raided the dozens of tee-shirt stores identified as selling the product. Once inside, the manager of the store was ordered to turn over all the tee-shirts and other items with the “FISH” logo, in addition, the books, records. Computers were also seized. At two locations, in the front and back of the storefront the investigators found duplicating embroidery machines with software designs of the “FISH”.

At the same time, at 8 am in Ft. Lauderdale, the Investigators, U.S. Marshall’s and Broward County Sheriff Department entered the manufacturing plant, across and down the road from the largest Flea Market in South Florida. The machines were operating and more than fifteen employees were busy working at embroidering tee-shirts, towels and bags. They were packaging them in boxes for shipments. All manufacturing stopped instantly. All employees were identified by the Broward Sheriffs office and the Seizure Order was put in effect. In the backroom and front computer room, the software designs, computer software and computers with other knock-off items were seized. Upstairs in the management offices business records were found, in addition a room that housed thousands of “knock-off” Oakley Sunglasses were located. Oakley management was notified by the U.S .Marshals office. They would send a representative to the Marshall’s office to further their claim.

The embroidery machines were shut, the facility was sealed and locked by the U.s. Marshal’s and Broward Sheriff and the Court Order was enforced.

This story reflects just one small infringed item, that cost the manufacturer and owner millions in loss.

Little is known about the mini-warehouses throughout the United States that manufacture counterfeit products.

As a point of interest, “OVER MANUFACTURING” outside the United States of licensed products, copyright materials and patent materials is all too often common. Excessive manufacturing by the licensing production company, find the excess being transported across the oceans and traveling into Mexico, then transported into the United States by small truck shipments. In one particular matter, “EXCESS” NIKE sneakers were reaching the off-market business community. Flea Markets, discount storefronts and small shoe and sports supply stores were targets for receipt by the “excess Movers”.

The flow from China by ocean movement of container shipments destined for Mexico, winding its way across the American border into the United States and trucked to the East Coast and West Cost for distribution, finds a common practice of “OVER MANUFACTRING” by licensed manufacturers and flooding the grey market with the actual products. In this case, the Nike corporation internal security examined a sample of the sneakers to find that it was not a knock-off but the original manufactured item. This could only suggest that “over runs” were making their way by an under market of conspirators to profit off the manufactured goods. Shipments were seized, persons were identified and this particular chain of conspirators was put to a halt by Federal Orders and prosecutors. The attorney’s for NIKE took the matter to the federal court and prosecutors. It was NIKE that required it to stop. They had to deal with their licensee manufacturer in China to account for the “over runs” of the product.

“Over-Runs” is a common deceptive practice by licensees. Controlling the over-runs and the shipments of the product is up to the manufacturer and its representatives. This is not just a “CHINA” issue. While knock-offs” are infringed items, the over-runs are the responsibility of the owner of the product to insure that sales are from legitimate distributors. This requires due-diligences, surveillance and litigation to achieve control.

It’s not uncommon to find that “over-runs” are in fact the cause for a market flooded with the similar product. Street sales from street hawkers, flea market vendors and even back door garage sales often lead to “over-runs” items not knock-offs.

Seizures by law enforcement, Federal U.S. Customs or any police agency, often leads to a photo-op of the destruction of the counterfeit property. The knock-off video tape contraband seized by law enforcement agencies are often demonstrated as the steam roller grinds the knock-offs to a crushing end, taking away the opportunity for profiteers to benefit from the illegal counterfeit items. This is the price of doing business for the counterfeiters. Arrest, detention and seizure of assets greatly enhance the successful seizure of the products. The need to follow-up by arrest, seizure of assets and detention reduces participants. Sellers, transporters and movers of the product need the same attention.

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