Trains ferrying fakes from China to EU should be 'on radar'

Counterfeiters could exploit the rail links between China and the EU to further their trade in fake goods, a new report has revealed as an emerging threat.

According to the latest situation report into counterfeiting and piracy in Europe – published by Europol and the European Union Intellectual Property Office (EUIPO) – maritime shipping containers are still the main transportation method for counterfeits arriving in the EU from Asia but the long-distance cargo trains from China "offer a possibility for quick and relatively cheap transportation of goods and could be abused by criminals".

The report, which intends to update policymakers, practitioners, businesses and the general public on the current counterfeiting and piracy landscape in the European Union, builds on the observations of the 2015 situation report and offers insight into some of the emerging counterfeiting and piracy trends that have developed since 2015.

Although shipping containers are a cheap and largely preferred option for counterfeiters, transportation can take up to six weeks, while Beijing to London by train, a distance of nearly 12,000km, only takes 18 days, about half the time of maritime consignments.

In January 2017, London became the 12th European city to be directly linked to China by freight train and there are currently 39 lines connecting Europe with 16 Chinese cities, all offering freight services.

The report notes that external border seizures for the rail route are still low – just 12 in 2014 and two in 2015 – but it claims that some fake goods would benefit from not being delayed by maritime shipping.

Indeed, Europol and EUIPO expect that trains may become more frequently used in the future. "The rail solution would appear to be a logical choice for many counterfeit consignments… Rail connections could offer concrete advantages to international intellectual property right-infringing criminal networks, and should be kept on the radar."

It adds: "As rail freight services between the EU and China become more numerous and efficient, and China develops its Belt and road transport infrastructure, which are planned for the coming years, it is thought likely that increasing numbers of IPR-infringing consignments may arrive at the eastern EU external borders by train from where, if they are not intercepted, they could then travel throughout Europe."

Counterfeit and IPR-infringing goods had an overall impact on EU imports to the tune of up to 5 per cent in 2013, amounting to approximately €85bn.

The report also notes other emerging threats. For instance, counterfeit goods are increasingly distributed via online marketplaces, and products sold on the internet are usually distributed in small parcels via postal and express freight services, often directly to customers. Europol and EUIPO expect the range of fake goods sold online to broaden and for social media to play an increasing role in advertising fake goods.

Digitalisation of trading and transport systems is also expected to bring new opportunities for criminals. "The more widespread use of electronic bills of lading may be increasingly exploited by criminals and lead to other risks such as hacking or e-theft," the report says.

Europol and EUIPO also believe that criminal groups will continue to take advantage of the Darknet.

Meanwhile, the report notes that the online dissemination of protected content is an issue with illegal television broadcasts posing a further challenge for enforcement authorities, while fraud also continues to be rife and closely connected to acts of digital piracy.

"IPR crime and the criminals associated with it are fluid in nature and many of the threats and situations detailed in this report are developing on a daily basis. The overarching conclusion however, is that in all areas of IPR crime, complacency or acceptance at any level would be ill-advised."

The report also echoes a recent OECD/EUIPO report, which revealed that China remains the key country of provenance for counterfeit goods, with Hong Kong acting as a transit point for goods originally manufactured in China.

The current situation report notes that EU-based criminals rely predominantly on manufacturers based abroad, but then organise importation, transportation, storage and distribution of the counterfeit goods within the EU.

But Europol and EUIPO also note there are active counterfeit manufacturers within the EU, which is facilitated using fake labels and packaging imported from outside the EU and is often orchestrated by organised crime groups. For instance, Turkey has been linked with Bulgaria and Belgium through trade in counterfeit labels, tags and stickers, which facilitates internal manufacture.

Organised crime groups appear to be on the rise, the report says. It notes the concern that attention is moving away from IPR crime to focus on other organised crime but it claims OCGs linked to IPR crime are often poly-criminal, and are also engaged in other crimes, such as drug trafficking, excise fraud, human trafficking and money laundering, with document fraud and corruption facilitating criminal activities in this area.

"Criminal groups will continue to exploit all possible legal loopholes in order to carry out or expand their illicit activities. They stay informed of legislative developments and adapt quickly to changes in the environment. Any future change in legislation or trade agreements may have an impact on the dynamics of this crime area," the report says.

In addition, IPR crime is expected to become more complex and diversified.

The report acknowledges that enforcement authorities in the EU still face constraints and challenges such as the need to co-ordinate cross-border investigations and tackle new technologies that criminals are using to hide their locations and activities. This coupled with low infringement penalties may be preventing effective policing and enforcement, it says.

"In all aspects of IPR crime enforcement, there is an identified and ongoing need for enhanced cooperation and education amongst all stakeholders and intermediaries to ensure that the fight against such criminality and its effects becomes more cohesive and well informed."

It adds: "This update should facilitate and support the activities of national authorities and EU institutions related to IPR enforcement. It is intended to improve understanding of the current scope and impact of IPR infringements on the EU and to form a basis for decision-making and the exchange of information on IPR infringements between relevant bodies and institutions."