The U.S. Customs and Border Protection (CBP) reported this week that the value of all seized counterfeit and pirated products for the year ended Sept. 30, 2008, was nearly $273 million, up 38% over 2007 – including a 43% increase in counterfeit electric products. The National Electrical Manufacturers Association (NEMA) reported the news on its Web site. Electrical products represented 8% of all seizures and ranked fifth among all product categories of counterfeit goods.
 
Footwear topped the list of counterfeit products, with handbags and apparel following. Counterfeit pharmaceuticals saw a dramatic increase in 2008 of 152% over 2007.
 
Last year I wrote a series of articles on the topic of counterfeits and private label risks; the most interesting fact I learned was that more and more distributors are facing lawsuits when they knowingly or even unknowingly sell a defective counterfeit product and it either does not work, or something more serious occurs, such as an injury or death.
 
In one of the articles, The Changing Face of Product Liability, I learned that anyone in the supply chain – and not just the original manufacturers – can be held liable. If end-users, such as contractors, buy counterfeits even unknowingly from a cheaper” source, they may be held liable if that product does not perform or causes injury or death. If a distributor unknowingly sold that product to them, or installed it, they can also be held liable.
 
The CEO of Legrand/North America, John Selldorff, told me that if the court in the case cannot find the manufacturer (ie, it’s a counterfeit operation in China), the distributor will stand in that manufacturer’s shoes. “If you can’t get that manufacturer to back you up, then you’re on the hook,” he said.
 
Product liability applies to any product – electrical goods to drugs, toys and other products, including medical devices. Industrial accounts for 60% of product litigation cases that one lawyer interviewed for the article sees; as are construction defects.
 
The issue extends beyond counterfeits; private label products also increase the risk a distributor takes on, especially when outsourced without proper oversight.
 
A few articles from our premium content archives that look at the risks and what you can do to protect yourself:
Mitigating the Risks of Private Label
The Changing Face of Product Liability
Counterfeits in the Supply Chain
Case Study: Distributor Holds Seminar to Inform Customers on the Risks
Going Global – Different goals, same strategy: Two distributors source overseas“