Airline passengers bearing one-way tickets often elicit a closer look from airport security. Thus, U.S. Customs and Border Protection officials at San Francisco International Airport considered it a routine search when they stopped a man with a one-way ticket from China.
Stuffed in his suitcases were 1,500 circuit breakers, all counterfeit. According to industry experts familiar with the case, the man was a former employee of Square D, a large manufacturer of electrical components in Palatine, Ill. Officials later discovered that another shipment of one million counterfeit Square D breakers had slipped past security, spreading through the marketplace like a virus.
The bust helped throw new light on a long-running problem in the industry that is growing. The use of the Internet for commerce and equipment sourcing has greased the tracks for counterfeiters, making it easier for producers to offer a wider range of items at low prices and giving them the appearance of legitimacy.
As border watchdogs eye more consumer fakes, such as handbags, electronics and DVDs, crooks are finding low-hanging fruit in construction durables. Last year, U.S. Customs and Border Protection, Washington, D.C., nabbed $260.7 million in counterfeit goods, down slightly from 2008, a likely effect of the recession; however, overall seizures were up 180% from 2005. Of those fakes last year, $4.3 million were electrical—$3.5 million alone were circuit breakers—ranking second only to pharmaceuticals in terms of public-safety risk.
Most construction goods “are not the sorts of products that we see counterfeited,” admits Therese Randazzo, director of policy for intellectual property rights for the U.S. Customs and Border Protection. “We tend to see more consumer electronics and apparel and things like that. I can’t hardly recall ever seeing seizures of, for example, steel.” According to construction-industry experts, steel products are the most frequently counterfeited (see chart below).
Counterfeits are not just about Nike shoes and Viagra pills anymore. Today, any item found on a construction site—a steel section, electrical part, pipe fitting, pressure vessel, cement kiln, even an entire lift crane—potentially could be a fake. Those larger items are more the exception than the rule, though. “Usually, they are things that are small, that can be shipped in bulk and are used by a contractor in bulk,” says R. Edward Minchin Jr., a professor at University of Florida. He was the lead investigator on a recent Construction Industry Institute (CII) study, published in July, on counterfeit goods.
The study, “Product Integrity Concerns in Low-Cost Sourcing Countries,” relied on interviews with 187 industry experts and government leaders in China, Taiwan, Hong Kong, the United Kingdom, Pakistan, Canada and the United States. It covers two main types of fake construction goods: The first falls under the category of classic “Class B” counterfeits, which look like genuine items but are made of substandard materials (Class A is a high-quality counterfeit, while Class C is obvious junk). The other common type of counterfeit is a forged label, such as a fake Underwriters Laboratories stamp, on an untested product. Once installed, it is usually a matter of time before these fakes fail prematurely.
“A lot of people who don’t think they have a problem with counterfeit goods may be in the ‘incubation’ period right now,” Minchin says. Seventy-six percent of the U.S. interviewees reported having a problem with counterfeits in the past, and 83% of the reported counterfeits came through an approved vendor.
|Rotating Equipment Parts|
|Source: Construction Industry Institute|
No one is immune. A CII member contractor, whose name was not disclosed in the report, bought 48 Cisco network routers from an authorized distributor and installed them in a U.S government building in Germany. In 2006, 12 of the routers failed. Cisco checked them out and found that all 48 were counterfeits. The devices originally went undetected because their serial numbers were real—they were correct numbers for genuine, identical routers that had been sold, but the owners had not yet registered them with Cisco.
“When the government called in the serial numbers, everything was fine,” Minchin explains. Researchers say the distributor got greedy enough to sell the fakes. In fact, ...