Counterfeiting of auto parts faces industry scrutiny and government enforcement action

A July raid by agents from the San Francisco Field Office of the U.S. government’s National Intellectual Property Rights Coordination Center (NIPRCC) resulted in the confiscation of these counterfeit auto parts. Photo from NIPRCC.)

“If they see a demand they’ll start making it. If something is really hot it’s up everywhere,” Antonelli notes. “We’ve seen people copy a lot of these products, but they don’t have the same parameters” as those produced at a legitimate factory OEM quality factory. “At current labor rates and increased complexity of repairs, there is often more overall confidence with an original part.”

Counterfeiters are attracted to the profits that can be generated with a minimal chance of being detected. “They figure ‘this is a gravy train,’” he says, urging aftermarket business owners to resist the dangers engaging in this type of illegal conduct despite the lure of cheaper pricing. For a given dicey part, “If I can save 20 percent, I’m only saving 10 bucks; do I want to risk that?”

Knowing your seller is a good technique for avoiding counterfeit parts, especially when making offshore purchases. “If it’s got a (mainstream) manufacturer’s name on it but you’re getting it from some weird source – beware,” says Antonelli . “Be cautious around ‘white box’ as well” to mitigate the prospect of obtaining an anonymously produced sub-par part.

“If you’re buying from overseas be invested in it,” he suggests. “Go over there – more than once. It takes time, but get to know them. The alternative is to work closely with a trusted N.A. based global sourcing company that has already made that investment and developed the relationships.  Don’t be enticed by offshore trading companies.  They aren’t the manufacturer and their source of supply is rarely consistent. ”

A study by Frost & Sullivan estimates that automotive suppliers lost $45 billion to counterfeiting worldwide in 2011, and the economic value of pirated products is expected to double by 2022.

“Trafficking counterfeit merchandise/products, which often have unknown ingredients or are constructed with substandard materials, pose a significant public safety and national security risk,” says Jerry C. Templet Jr., deputy special agent in charge at the Homeland Security Investigations (HSI) office in San Francisco and Northern California.

“Additionally, the entry of illicit products into the commerce of the U.S. negatively impacts legitimate U.S. businesses,” he says. “Consumers should also know this isn’t a victimless crime. There is a variety of criminal activity funded by these illicit monetary gains.”

The list of auto parts seized by customs officials includes airbags, brake pads, wheels, seat belts, oil and air filters, control arms, windshields, bearings, steering linkages, ignition coils, microchips, spark plugs, solenoids, clutch housings, crankshafts, diagnostic equipment, suspension parts and oil pumps, reports Chris Caris, administrator of the Automotive Anti-Counterfeiting Council.

More commonly known by its A2C2 acronym, the council “is composed of 11 of North America’s leading vehicle manufacturers that have agreed to collaborate and work together to eliminate counterfeit automotive components that could harm U.S. consumers,” according to Caris.

Forming the organization “was a significant step toward protecting the American consumer as well as our members’ respective brands,” he explains. “The member companies of A2C2 work together to identify and eliminate counterfeit auto parts that could harm U.S. consumers. We also partner with investigators, law enforcement and prosecutors to support criminal cases when warranted.”

In August A2C2 officials joined with several other organizations, including the Automotive Aftermarket Suppliers Association (AASA) and its Intellectual Property Council (IPC) at a special Intellectual Property Forum held in Dearborn, Mich.

“Intellectual property protection in the automotive aftermarket has never been more important, yet we have never organized a cross-industry effort to combat the myriad issues surrounding IP,” observes Chris Gardner, AASA senior vice president. The event involved sharing “best practices about intellectual property protections” while working to “identify new strategies for cost-effectively fighting problems.”

Forum participants included lawyers, brand managers and marketing & business development executives from the Specialty Equipment Market Association (SEMA), the National Automotive Service Task Force (NASTF), the American Bearing Manufacturers Association (ABMA), Battery Council International (BCI) and the National Intellectual Property Rights (IPR) Center.

Also present were representatives from online sales outlets such as Amazon, eBay and Alibaba along with an assortment of government officials plus Tamara Rabenold, a private investigator who is CEO of Vaudra International.

The U.S. Department of Commerce has launched an initiative to stem the tide of counterfeit goods, including auto parts, notes Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association (MEMA).

“MEMA and our member companies have been developing and maintaining relationships with the major online platforms in order to address the growing presence of counterfeit parts,” says Wilson in comments submitted to the Commerce Department. “At present, consumers have no way to be certain that a product they are buying online is genuine. To help rectify that, marketplaces and brand owners must work together so that genuine products can be offered to the consumers.”

Wilson further contends that “manufacturing and trafficking of counterfeit motor vehicle parts and components are serious and growing problems. MEMA takes the issue of counterfeit motor vehicle parts and trademark theft very seriously. In addition to the economic impacts of counterfeit motor vehicle parts, the continued proliferation, importation and dissemination of counterfeit parts pose a significant risk to public health and safety. Counterfeit parts put consumers at risk when they do not perform as intended or fail, leading to brake failure, engine failure, vehicle fires or other catastrophic consequences.”

Stepped-up enforcement of anti-counterfeiting activity “has been a top legislative priority for SEMA,” says President & CEO Chris Kersting. “Lawmakers have taken an important step in helping combat the scourge of counterfeiting. Our industry is all about innovation, technology and quality. Counterfeiters rob our companies of those valuable assets.”

Kersting recounts that “over the years SEMA members have registered an increasing number of complaints about counterfeit products and illegal knock-offs.”

Too good to be true
The proliferation of counterfeit auto parts is increasing, according to the National Intellectual Property Rights Coordination Center (NIPRCC), which is led by HSI, an enforcement arm of ICE, U.S. Immigration and Customs Enforcement.

Working in close coordination with the Department of Justice Task Force on Intellectual Property, NIPRCC uses the expertise of its 23-member agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to intellectual property theft.

“Law enforcement has identified a trend of counterfeited parts that is growing at an alarming rate,” says NIPRCC’s Bruce Foucart. “At best these parts will not perform as well as authentic parts. At worst, they can fail catastrophically with potentially fatal consequences.”

Foucart points out that “it’s imperative that the public, as well as the industry, protect themselves from the possible safety hazards of these parts.” Preventive strategies include:

• Do business only with reputable repair shops or the manufacturer’s repair network.

• Stay informed about the sources of parts you are purchasing or installing – do basic research.

• Beware of “too good to be true” prices that are well below those of competitors.

• Use caution when purchasing auto parts on the Internet that are shipped from other countries or are sold at very low prices.

Marlon Miller, H-S-I Detroit special agent in charge, lauds automakers such as Ford for their close scrutiny and cooperation in apprehending counterfeiters. “When we disrupt criminal organizations who introduce inferior and potentially faulty auto parts into the marketplace, we ensure the safety of American drivers.”

“The collaboration between both organizations is paramount in order to successfully prevail against criminal activity of this kind,” adds Mike Warwood, a Ford parts marketing manager.

Nailing fraudulent internet operations selling counterfeit parts is a particularly prime goal of enforcement efforts. “Seizing these websites that allegedly sell trademark-infringing auto parts helps to stem the flow of faulty products being introduced into the economy,” Miller emphasizes. “Homeland Security Investigations will continue to aggressively target and dismantle operations that blatantly disregard intellectual property rights.”