Counterfeiting and Piracy in Supply Chains

May 18, 2015
Categories: Compliance, Counterfeit, Global Supply Chains, Government Procurement, IP Protection, Supply Chain

According to a recent report from the International Chamber of Commerce’s special project—Business Action to Stop Counterfeiting and Piracy (BASCAP)—fake and stolen goods impact nearly every product and service industry. BASCAP’s latest report, entitled “Roles and responsibilities of intermediaries: Fighting counterfeiting and piracy in the supply chain,” outlines how governments and intellectual property (IP) holders can focus on limiting IP infringements at multiple intermediary stages of the supply chain. With proactive solutions and established best practices, companies can help eliminate the global supply chain vulnerabilities that allow the infiltration of counterfeit and pirated products and ensure that intermediary business partners have similarly capable systems for removing such content.

In an era of growing product complexity and specialization, companies rely on a range of intermediaries to sustain international trade and remain competitive. However often these business partners can represent a significant source of vulnerability where non-genuine goods can infiltrate the products or components of even responsible companies.

BASCAP’s study identifies the critical intermediaries in the physical and online worlds—from transport operators to search engines—that play an essential role in global economy and have a responsibility to ensure legitimate supply chains. These different intermediaries can employ best practices and help protect the integrity of their operations and that of their business partners by utilizing the key insights from BASCAP’s research and other resources such as CREATe’s investigation of the health and safety risks of counterfeits in various industries’ supply chains.

The BASCAP report highlights a number of valuable lessons that cut across different types of intermediaries while emphasizing a comprehensive approach to protecting IP. The report stresses the importance of establishing and enforcing clear contract terms but notes that additional tools and processes should be utilized to make compliance with these terms part of day-to-day operations. These terms should also apply to sub-contractors and suppliers so that they can flow further down the supply chain. Although many contractual terms of service expressly prohibit counterfeiting or piracy activities there is often a gap in the full enforcement of these terms, a shortcoming that is often exploited. Nevertheless, once an intermediary company identifies the relevant risks they face, they can develop holistic corporate due diligence practices and other monitoring to prevent abuse of their services or products. The first step to curbing the misuse of supply chain channels is to “ensure accountability for behavior through identity verification.” Authenticated identification also enables intermediaries to evaluate their customers and suppliers to recognize and address abuses. This initial screening is critical, particularly among potential business partners with a greater risk profile.

BASCAP also recommends developing industry standards and codes of practice that provide frameworks which encourage responsible business actions. Industry and government standards such as the Authorized Economic Operator program for shipping or the requirements outlined in the US National Defense Authorization Act show how adoption of standards can serve as model practices for others. With clearly defined terms, identity due diligence and an established code of conduct, intermediaries are in a good position to protect their supply channels and respond to concerns effectively and efficiently.

For additional insights into reducing counterfeits in supply chains, see this CREATe blog and download our whitepaper: Health and Safety Risks from Counterfeits in the Supply Chain.

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