Counterfeit Canada

Diane Francis column Saturday Post May 6:

Counterfeit goods can legally enter Canada if they are declared due to a loophole in the country's laws.

This has upset trading partners because Canada has the most lax laws in the developed world when it comes to protecting consumers and markets from bogus goods.

"Customs officials in Canada have no power to pro-actively inspect goods to see if they're counterfeit," said Toronto lawyer Jim Holloway in a telephone interview this week. He's with Baker & Mackenzie LLP.

"There are only two situations where Customs will act: If the brand owner gets a prior court order; or if the police authorize the action," he said.

Laws in Europe and the United States are different and are better at protecting companies from counterfeiters and consumers from the effects of often-dangerous fake goods.

In the European Union and United States, trademark owners are allowed to register their trademarks with border officials. Then their laws authorize customs officers to inspect goods with those trademarks to see if they are counterfeit.

"Brand owners train customs officials as to what to look for," said Mr. Holloway.

Here Customs officials are only empowered to pro-actively look for hidden or undeclared goods. Declared counterfeits cannot be seized if declared for customs purposes.

The issue is important and more than just a case of spending money to catch fake Gucci or Ralph Lauren fashions. It's also about more than placating angry U.S. authorities, also upset with Canada's "broken borders" when it comes to the smuggling of illegal aliens, narcotics or potential terrorists.

This is an important issue for Canadian businesses. Those selling legitimate goods face unfair competition from those selling marked-down fakes. There's also the issue of public health and safety.

Recent seizures in Canada include expired baby food with counterfeit best-before dates attached, counterfeited brand=name batteries containing elevated levels of dangerous chemicals, children's stuffed toys fill with hair and fiberglass and safety boots with inadequate protection and fake safety logos.

RCMP officials have also waded into the issue amid evidence that non-existent controls on counterfeit smugglers have attracted organized crime groups, who are reaping windfalls. One estimate of this black market in Canada is as much as C$30 billion a year.

This weekend, RCMP, other law enforcement, customs, business and trade experts are to gather in Toronto to launch the Canadian Anti-Counterfeiting Network to bring attention to this issue.

"We hope the new government has a real good look at this because of growing international pressure to get its laws and enforcement regime in line," said Mr. Holloway.

The issue has gotten the attention of global watchdog, the International Anti-Counterfeiting Coalition which is comprised of the world's largest brand name companies. The Coalition has recommended that Washington's Trade Representative put Canada on its list of "priority foreign countries" such as China, Argentina and Mexico.

"This is not a victimless crime," said Mr. Holloway. "There are concerns about certain Internet drugs as a way of distributing by criminals counterfeit products into the U.S. market. This means people may be paying for placebos they think are helping them. This can cost lives."

The Washington-based International Coalition is comprised of pharmaceutical companies, computer and software organizations and luxury goods manufacturers who have substantial global counterfeit problems.

Another group that's waded into the issue is the International Chamber of Commerce which estimates that 7% of global trade involves counterfeit goods, or US$250 billion a year.

"It's unique that these groups want to shine the light on Canada," he added. "It's not because we are a hotbed of counterfeit manufacturing like Eastern Europe or China. There is some manufacturing here such as DVDs or fake drugs. But the problem in Canada is that, relatively speaking, we have some of the weakest anti-counterfeiting laws in the developed world. Frankly, our borders are porous."

Senior RCMP officials joined the private sector coalition in calling upon the government in Ottawa to legislatively give authority to Canada Border Service Agency officials to search and seize counterfeit products. They also want laws that hand out tougher sentences and stiffer fines for guilty parties. The companies want to be able to register their trademarks with customs officers as is the case in other countries.

"The reality is we tend not to see jail time. It is the exception rather than the rule," RCMP Superintendent Ken Hansen told the Post this week.