Flood of illegal imports puts trade deeper into red. US jobs lost, company reputations damaged, study by House shows

A two-year study by House investigators charges that billions of dollars' worth of counterfeit, substandard, and even dangerous goods are being dumped on American markets by overseas manufacturers. These goods range from bogus auto parts and imitation name-brand items like Apple computers to drugs that violate US trademarks and patents. Their sale here, the US House study says, can sometimes threaten the health and safety of American consumers.

Further, violations of US trademarks and patents are costing thousands of American workers their jobs, and reducing sales of US companies around the world.

The investigative staff estimates, for example, that $12 billion a year in sales of automotive parts are being lost worldwide. That amount represents some 210,000 jobs. The United States, with $54 billion a year in sales, is the world leader in the auto-parts industry, and its parts are the most-copied by counterfeiters. So lucrative has this illegal trade become in many kinds of goods that it has attracted the growing attention of organized crime.

The House study was conducted by the subcommittee on oversight and investigations. The subcommittee is part of the House Committee on Energy and Commerce.

Subcommittee chairman John D. Dingell (D) of Michigan says: ``The scope and variety of these activities demonstrate that many importers have absolutely no respect for our law.''

Mr. Dingell noted that the illegal foreign trade practices include ``smuggling, counterfeiting, deliberate misdescription and undervaluation of merchandise, industrial espionage, and false declarations to avoid charges of dumping.''

The House study concludes that this wide range of activities is substantially worsening America's balance of trade problems with other nations. Last year's trade imbalance with the rest of the world was $123 billion; that could rise to about $150 billion in 1985, US trade sources estimate.

One of the most serious problems for American companies is the direct copying of their products by foreign companies, which then sell those goods to customers outside the US.

When the copy is a good one, American companies in effect lose the business. When the copy is one of poor quality, then the reputation of American companies is damaged in those countries where they are sold.

Testimony before the subcommittee over the past two years has shown that some of the best-known names in US industry are victims of these machinations. Among those copied illegally: Apple computers; Calvin Klein clothing; videogames such as Donkey Kong, Pac Man, and Centipede; General Electric vacuum tubes; Chevron agricultural fungicide; and Nike running shoes. Bogus, substandard transistors have even turned up in US military equipment, such as Hawk missiles.

The ``pirates' choice'' when it comes to computers, the House study found, is the Apple II. Look-alike copies of the Apple II began appearing in the Far East in 1982. Within a few months, some of these counterfeits, most assembled in small workshops, began arriving in the US. Later the counterfeiting effort mushroomed, and large firms began churning out Apple copies by the thousands.

Stopping these counterfeit Apples at the US border is not as easy as one might think. Importers found that just removing the semiconductor chip with the Apple software on it was enough to get it through customs. Then the chip is reinserted once the item is in the country.

The study concluded: ``The decision by the Customs Service not to detain computers designed to run Apple software unless they actually contain infringing chips has created a hole in the regulations large enough to drive a truck full of counterfeit computers through.''

What can be done? The Dingell study makes 20 major recommendations. Among them: new laws to ban entry of goods from foreign companies convicted of at least three violations of US import laws; establishment of a special federal task force to fight customs fraud; and greater pressure on other governments to crack down on counterfeiting.

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