In 2016, the U.S. Department of Homeland Security reported that the number of seizures of counterfeit parts increased 83 percent and that the value of those seizures increased 66 percent from 2015. The growing threat of counterfeit parts was visible last year at a few of the automotive industry’s most prominent events: AAPEX and SEMA.
During the events, which coincide in Las Vegas each November, a number of copyright and patent infringements occurred during AAPEX, which resulted in an isolated number of repeat offenders being asked not to return to the show. During SEMA, two Chinese aftermarket parts company booths were seized by U.S. Marshals.
Counterfeit parts are a growing threat in the automotive industry, according to Bill Hanvey, president and CEO of the Auto Care Association. In October, the Auto Care Association wrote to the Office of the U.S. Trade Representative to relist the Chinese e-commerce site, Alibaba, as a notorious site for its sales of counterfeit parts.
Hanvey sat down with Ratchet+Wrench to discuss the counterfeit threat and what it means for shops.
What prompted the Auto Care Association to contact the Office of U.S. Trade Representative?
The notorious markets list is an annual trade report that is put out by the U.S. Trade Representative every year. It’s a list of both online and physical marketplaces that facilitate or engage in copyright, piracy, or trademark/counterfeiting. Every year, they solicit comments from the public. We wrote the letter in response to complaints from our members about the online distribution of counterfeit parts.
If you look at our comments, we called for specifically Taobao, one of Alibaba’s platforms, to be put on the list. As a result of our filing—and I’m sure a number of other filings—Taobao was named a notorious market and placed on the list. The report was released at the end of 2016. This report is not a legal finding, it’s a report based on public comments. The significance of it is that it puts pressure on the U.S. and Chinese government to crack down on counterfeit parts. The report makes some recommendations, based on best practices, to the companies that are on the list and gives ideas on how they can crack down on the issue and address our concerns.
What is the danger of counterfeit parts?
I think it’s twofold. One, it’s a safety issue. These counterfeit parts may not meet quality or safety requirements and they pose a danger to the public. They also hurt our industry’s image. They put out the message that aftermarket parts are not reliable. Second, it’s an economic threat to our industry.
What is the Auto Care Association doing to combat this?
At AAPEX, we have a zero-tolerance policy on intellectual property (IP) infringement. We have a very detailed IP policy that we share with our exhibitors. Our show management is on site and we work with our exhibitors to resolve any claims of IP infringement. Exhibitors that are found in violation face severe consequences. They are either banned from coming back to the show for a certain number of years or their booth is shut down. We’ve had to shut down booths before. During AAPEX 2016, the IP office received 31 complaints from seven companies on claims of patent infringement and unauthorized trademark usage. Our IP counsel investigated all complaints and disputed products were voluntarily removed or confiscated. Sanctions for IP violations were imposed by show management on a case-by-base basis. We urge our supplier community to walk the floor to ensure that any light product categories are being represented appropriately. It’s incumbent on them to walk the floor to ensure that their products are safe and not being counterfeited. If they do see an instance, we urge them to go to the IP office.
What would you say the prevalence of counterfeit parts is?
I would say that there has been a lot of crackdown on counterfeit parts recently with governments working together and cooperating on the issue, but with the ease of e-commerce platforms and being able to set up shop online, the issue will probably grow. It’s on the entire supply chain to know where your parts are coming from.
Are there certain signs that shop owners should be on the lookout for when it comes to making sure they’re not purchasing counterfeit parts?
I think aside from the obvious, like the packaging not being identical to the propriety brand, our recommendation is to buy parts from a reliable source. In some cases, counterfeiters are very clever and can create good counterfeits, so you can’t always rely on visuals. If you see a deal that’s too good to be true, it probably is. If you see something that is suspect, contact the Auto Care Association or another agency and let them know. Most repair shops should be alright as long as they are purchasing parts from a reputable source.
How can shop owners be sure that they’re staying on top of this?
Shop owners need to be aware of new threats, in terms of counterfeit parts, and associations can help with that. I think the main thing is collaboration between the various industry associations to confront this. Associations that are more geared to the shop level can provide educational campaigns for shops that provide them with the tools and the data that they need.