a new report released by government accountability office showes a high ratio of

counterfeit goods being sold, especially on-line. today senate finance committee held a hearing to address ways to protect consumers from counterfeit products because some of the items sold had been found to be harmful. this hearing is an hour. we will come to order. i would like to welcome everyone here today. we will discuss count are fitting and immerse and what steps to protect consumers. i would like to make an important announcement about the president's proposed tariffs on steel and aluminum. set aside just for a moment all

of the legitimate concerns about trade wars, failure to target the source of steel and aluminum and disproportionate affects. these are not a tax on other countries but on consumers. who would be forced to pay additional 25% on steel and 10% on aluminum. there would be a reduced impact of millions of dollars that many companies recently pledged to spend here in america. truly there is a better way to address china he a actions than to impose a new across-the-board tax on u.s. consumers and businesses three short months after we pass comprehensive tax reform. we can and we should do better.

i will send the president a letter later today emphasizing just that. i would like to turn to the important issues to address in this hearing. it is no secret i have felt and i think others feel the same way, that property rights protect consumers. properly enforce trade mark for example lets a customer know who made a product and where to go for information about it. we were all encouraged by the trade act of 2015, a. >> well as umatiimmigration and customs enforcement. that along with the new intellectual property center were designed to help agencies collaborate, coordinate and take down perpetrators.

and because there are frequently hiblgu hib hiccups with the gnnew lawses, there is a broad investigation at how the trade facilitation and enforcement is being implemented. as they started their investigation, gao quickly began to realize that e-commerce generally was causing major issues for cpb and i.c.e. due to advancement in on-line purchasing. the agencies forced to adopt new tactics work more closely together. and build up public-private partnerships. those have all been changes for the good and however asking gao to continue their investigation until specifically that the problem of counter fits on some of the most improminent plat forms. as part of this process gao made purchases from five major e-commerce plat forms and after using relatively narrow criteria

gao received at least one counterfeit and one legitimate good from each of the plat forms. in the end, 20 of the 47 items they purchased were counterfeit. the results were telling. on the whole this investigation started a path of discovery and on that path we noticed that there are far more issues than we had initially anticipated. today's hearing represents a combination of those initial findings. and while we are not going to be able to fix this all at once, i'm hoping to at least discuss some of the meaningful steps we could take in the near future. near term. but before we get to that i wanted to talk more about what we found with part of the research.

as part of research, many counterfeit product are hazard to our children and families and economy. with i.c.e. and cpsc, finding numerous instances of count are fit product with major health and safety issues. these issues included contact lenses that contain dangerous bacteria, cosmetics that have chemicals that can cause harmful health effects when applied, phone charges and batteries with thrmal run-off issues. and even detective air bags. dw gaos found with popular marketplaces count are fitters have greater access to the market and can easily sell their phony product directly to consumers. they are sold as genuine and so long as count are fitters make the product ip diting wishable

on the outside, most consumers have noticed a difference, or never noticed a difference, excuse me, and because typical red flags for consumers are difficult to notice. and this is even true when the counterfeiters create new colors or designs of more famous products. and in one recent instance the u.s. attorney's office and the northern district of mississippi successfully prosecuted a case against bobby rogers, jr. mr. ronlers agers add fairly el scheme in place. he would order product, use alternate addresses, powder kout items and resell them as third party on-line. as he did this he would represent goods as you a theptic, sometimes even with licensed modifications.

the sheer volume of his scams were something. when his complex were raided authorities seized 2 it 00 pieces of counterfeit drinkware but it doesn't end there.2 it 0 pieces of counterfeit drinkware but it doesn't end there.it 00 pieces of counterfeit drinkware but it doesn't end there.t 00 ps of counterfeit drinkware but it doesn't end there. 00 pieces of counterfeit drinkware but it doesn't end there.00 pieces of counterfeit drinkware but it doesn't end there. as lab reports came back, the colors tested for lead, 20 times the amount allotted. for all we know there are children around the country sipping watter with dangerously high levels of lead because of mr. rogers. slade, he is just one among many, many perpetrators buying counter fits and facilitating sales of them through ee-commere plat forms. we have heard from rights holders like yetti whose products have been counterfeited in these schemes.

who responded strongly to address these problems. yetti issued a statement making it clear that they were expanding quote significant resources to protect their consumers, unquote. i asked unanimous consent that the full yetti statement as well as similar statements by other rights holders be entered into the appropriate place in this record. i don't want to steal too much of their thunder but one of the reasons we invited ul here today, is to let them give us a broader perspective on the seriousness of these issues. that's just one example of 1 of 400 counterfeit apple adapters,

and this is just one of the studies ul performed. i think everyone here, both members in the audience will be stunned but not only the breadth of product being counterfeited but also the incredible volume. this goes beyond dollars and cents these companies invested to develop and market their products which let's be clear, is enormously important to our economy not to meng the well-being of american consumers. we aren't just talking about devalued investments, we are talking about lead on children's drinkware. homes burning down. consumers injured from hygiene and cosmetic prod ugts. air bags not inflating properly and who knows what else. it is my hope we can all agree that today that counterfeiting, the counterfeit products pose an immediate and significant risk to american's health and safety.

i hope we can take it seriously to better track intellectual methods. i'm interested in talking specifically about sharing e-commerce platform data contained in invoices and on packages with rights owners as well as learning from and improving cpb's program. american consumers are relying on us to get this right and we need to work together and with the appropriate officers of cpb, i.c.e. and other agencies to make sure we do. with that, and i'm very happy to turn to my colleague and partner, senator wyden, for his remarks. >> thank you very much, chairman. you commented on the steel and aluminum issue. i would like to start with brief

comments on that as well. the fact is on the steel and aluminum issue, the president has inflicted a punishing year of uncertainty on the american economy. and this uncertainty has harmed our workers, american workers, who need and deserve good paying jobs. moreover, even as of this morning, it is still not clear that the president understands the central problem which is dealing with chinese overcapacity of steel. so he has had practically one salvo a day with respect to trade. one day he is looking at tariffs, the next day he is looking at in some way intertwining his steal policy with the north american free trade agreement.

i just want -- [ inaudible ] right out of the gate with real con kwenes from american workers and american families and they deserve better. with respect to this hearing, committee will be discussing the challenge of protecting consumers from counterfeit goods. and i am glad that this discussion is taking place. it is long overdue. i also hope this committee will soon hold hearings on the trump administration's varied activities, including steel and aluminum investigation in potential tariffs. north american free trade act negotiations and investigation of china under section 301.

any discussion of this issue has to begin by the last few decades, internet has transformed virtually every corner of the american economy. i stated some time ago, in this room, that the internet is now the shipping lane of the 21st century. and that is a far cry from the kind of trade discussions that took place for decades in this room. children now take it for granted when it is in effect a miracle of modern commerce that a small business in my home state of oregon, 3,000 miles from washington, d.c., can reach consumers essentially anywhere at any time. no longer does expanding your customer base mean investing solely in bricks and morter. wild thing, a portland clothing

company founded by women run by women, two stores in portland. but what is really driving sales is on-line opportunities. on-line sales. full 70% of their business happens on-line. that's where we are seeing the growth. this is a company that has seized the opportunity to sell around the world via the internet and it now has 25 employees. but the fact is, any time there is significant economic change, let alone the kind of transformative activity thattant n internet has brought, you get new challenges with the upside. that includes the chance that when you buy something on-line, there's a chance it could be a fake. it is up to the government to make sure that counter fits isn't stuck in the 25th century.

you are no longer talking about the person selling fake purses out of their trunk. you are talking about illegitimate product passed on, on even the most savvy street-wise consumers. and often, they are mixed right in with the genuine products that our people want. many of those fakes pose serious dangers. make-up, food, beverage containers, could be made with dangerous chemicals. electronics can pose a fire hazard. toys that are unsafe for kids. the number of small packages coming into america has surged and the fact is customs and border protection has to step up and play a major role in identifying counter fits and stopping them before they enter the marketplace.

unfortunately, so far, we get a sense that customs and border protection is just too often playing catchup ball tracking these fake products down. after conducting a recent study of this exact issue, government accountability office recommended set of policy updates to have customs and border patrol work more closely with the private sector. those recommendations include expanding customs and bored protection authority to notify on-line sales plat forms when they have products on their hands that might be fake. now you may hope that that would just set wheels in motion and this would result in the policies being in place. but customs and border patrol has responded to this audit by claiming it would take until this upcoming september to determine if additional authority was actually necessary. and for the last few years, the committee has put a lot of sweat equity into the policies that

have strengthened the enforcement of our trade laws and have done more to protect the american consumer and the american worker. the chairman and i offered the trade enforcement act of 2015 that put in place important new tools for customs and border protection to detect and prevent counter fits. including sharing information about counterfeit imports with the rights holders. so in preparation for the hearing, committee staff from both sides sat down with customs to dig into the issue. my staff asked, and i quote here, does customs and border protection need more authority to crack down on the rip-off artists and counterfeiters. the agency said they don't know. when asked when they would know, they said they didn't know when they might know.

so as we begin this hearing it is certainly unsettling that it is not possible that a bipartisan basis to get a straight answer on a matter like this from the agency that is central to america's ef frort tekt our consumers from counterfeit goods. so this morning i will give the agency one more try to answer those questions. let me say that getting this right isn't going to be as simple as putting a few more policy tools in the agency's kit. year after year administrations have fallen short in hiring enough officers, blue uniforms, to fulfill the critical need of protecting our consumers and businesses from illegal and unfairly traded goods. this agency's got a tough job working with other law enforcement agency he and foreign governments to go after the source of the problems.

if the administration is focussed solely on hiring an army of border patrol agents, i don't see how that is going to help them build their capacity to deal with the counterfeit challenges. so the congress and administration need to ensure that the agency has the resources it needs to combat counterfeiters and there is actual follow-up. this is simply way to protect american families from harmful products. we need to make sure we are fully mobilized to stop the rip-off artist fromunder are cutting the american brand. that's really their objective. to undercut the american brand. so getting this right to reflect the realities of the modern economy is, in my view, what this hearing is all about. mr. chairman, as usual, i look

forward to working with you. >> thank you, senator. i would like to extend, both of us, would like to elf textend a welcome to each of the witnesses today. thank you all for coming. first we will hear from miss kimberly gee pop louse from international affairs of the government accountability office. she has received a meritorious service award and team work award.

[ inaudible ] prior to joining customs ms. smith worked at department of treasury and on capitol hill. she was honored in 2017 with a distinguished executive presidential rank award, highest award in civil service. ms. smith holds bachelor and masters degrees in economic from r rutgers university and the federal executive institute. next to speak is mr. jim jaholski. director for the office of imprt

surveillance at u.s. consumer safety commission.ei. director for the office of imprt surveillance at u.s. consumer safety commission.. director for the office of imprt surveillance at u.s. consumer safety commission. he started in july 2000 with office of compliance and field operations. at that time he focused on regulations regarding fireworks and cigarette lighters. jim later joined import surveillance in 2008 and served as deputy director prior to assuming the role of director in march 2017. finally, mr. terrence r. brady, president of underwriters laboratories inc. will testify. mr. brady was appointed to his new position just last week. but was just recently serving ul as vice president and chief commercial and legal officer. prior to joining ul, mr. brady was an associate and partner for 27 years in the chicago office of winston and shraun llp.

he graduated from dartmouth with undergraduate and law degree from notre dame law school. i want to thank you all for coming and being here with us today and for testifying today. ms. gee nop louse we will begin with you and your opening remarks. >> thank you, mr. chairman. chairman hatch, ranking member widen and members of the committee thank you for the opportunity to be here today to discuss our recent work on intellectual property rights.

[ inaudible ] second, i'll discuss the nature of efforts that customs and border protection and immigration and customs enforcement have undertaken to enhance ipr enforcement. and finally, i will cover some of the ways in which cpb and i.c.e. coordinate with the private sector in enforcing ipr. the rise of e-commerce contributed to fundamental change. in the past you may have expected to find courter fit purses or watches on a street corner or flea market. these goods may have been shipped to the united states on a cargo ship in bulk and were priced significantly below

retail. now, many people shop on-line. many goods come to counterfeit. this practice is no longer limited to high-end goods. these on-line purchases are sent to buyers in individual express packages rather than shipped in bulk to u.s.-based distributors. this makes it very challenging for consume irs as well as cpb to identify counterfeit goods. as part of our review, we purchased 47 items covering four different types of consumer goods including nike air jordan shoes, yetti travel bugs, urban decay cosmetics and ul certified phone charges from five different popular e-commerce web sites. we looked for itemsized as new brand name items and sold by highly rated third party sellers. of 47 items, 20 were count are fit as determined by rights holders themselves. it could be difficult to tell if

an item is counterfeit. for example these are three yetti mugs we purchased on-line. the two silver mugs look identical. feel the same. same weight. but if you look at the bottom, you will see that one of them has misspellings on the words. for example, austin, texas and it says mede in china instead of made in china. and this ought pink mug, also seems to be authentic except, well yeti doesn't make hot pink mugs. so you wouldn't know that unless you were aware of that issue with regard to yeti. in our full report we have a number of ways for consumers to take steps to avoid purchasing counterfeits on-line. to enhance ipo enforcements, we found that cdp and i.c.e. engaged in a number of activities. special operations at u.s.

ports. engage with international partners. and undertake localized programs or initiatives. however, cpb has conduct a limited amount of evaluation of efforts. and may therefore not have the information it needs to be as effective and as efficient as possible given our current resource restrain not viernment. we recommended that cpb take steps to evaluate effectiveness of its ipr enforcement efforts and agency agreed with our recommendation. with regard to the private sector, we found that cpb is restricted on the amount and type of information that seized items that it can share. this restriction limits the ability of rights holders and e-commerce web sides to protect ipr. after 2015, certain information with trade mark and copyright owners before completing a

seizure. however, cpb officials told us there are legal limitationes to the sharing. for example cpb cannot share information from the exterior of seized packages. this could help web sites identify groups of counterfeit merchandise from the same seller. we recommended that cpb assess what information would be helpful to share with the private sector and take appropriate action to enhance information sharing where possible and cpb agreed with this recommendation. this concludes my opening remarks. thank you for your time and i'm happy to answer my questions you might have. >> thank you very much. we now turn to you. >> this is an honor to appear today to discuss cpb's enforcement of intellectual property rights and our effort to keep count are fit goods that pose a threat to the health and safety of american consumers from entering u.s. commerce. as america's unified border

agency cpb enforces nearly 125 laws and regulations on behalf of 49 federal age sin possess p this morning i would like to give you the challenges we see in the current trade environment. the trade facilitation and trade enforcement act of 20 1r5 treng thenned and expanded cpb's authority to enforce our nation's trade laws while facilitating lawful international trade. the trade enforcement act provided significant cost savings opportunities for u.s. businesses and consumers by raising the threshold from $2 it 00 to $8 will 00. which allows relatively low value goods to be brought into the united states free of duty and with reduced information requirements.

the higher threshold helped with increased just-in-time packages. over the past five years, the volume of international air express shipments has increased nearly 50%. and in the postal environment small packages have increased by over 200%. this rise in small packages altered the dynamic of the trade environment and cpb's ability to enforce intellectual property rights. cpb targets for a variety risks and takes action when it finds a problem. in fis tal year 2017, cpb seized over 34,000 shipments of counterfeit goods, and 8% over the previous year and very consistent with the trend that we have seen over the last ten years. approximately 16% of these seized goods such as cosmetic,

electronics answe electronics and toys, cause threats to consumer health and safety. we are currently enforcing more than 18,000 copyrights and trade mark records. rights holder collaboration through recording, sharing and strengthening is essential to identify and counterfeit products. cpb regularly discloses information to the rights holders to verify a product's validity if we think it bears a counterfeit mark. this envision is continuing to expand with the recent announcement of the first partnership arrangement under the ipr enforcement donations acceptance program. and in which proctor & gamble donated testing devices to help cpb quickly determine the authenticity of its product. combining the trade enforcement

and intelligence capabilities of cpb and 12 other federal agencies protect the american public from unsafe imported products. ctacts efforts led to 24 p seed urs of unsafe product in 2017. two months ago, cpb and cpsc targeting resulted in officers at the port of los angeles seizing a large incoming shipment of toy building blocks for trade mark infringement. these counterfeit toys were also found to violate the federal hazardous st hazardous substance acts for lead and smart parll parts. we are concerned about the volume in small shipments where 90% of seizures were made last year and have been working with inner agency and private sector partners to address those risks. building on our experience in the clear mandate provided by congress and tiftia to develop

an inner agency approach, we have developed a draft joint import safety rapid response plan. we will use this plan and follow on inner agency exercises to coordinate the management of incidents that present a safety risk to u.s. consumers and businesses. in anticipation of future e-commerce growth and to manage threats in this environment, cpb is releasing a comprehensive e-commerce strategy. which is critical for guiding our approach to enforcing intellectual property rights and enforcing import safety. while supporting a vibrant and competitive sector of u.s. international trade. we will work closely with all segments of the e-commerce community and our partner government agencies to identify information sharing and other opportunities and pursue any necessary policy regulatory or statutory changes. chairman hatch, ranking member widen and distinguished members of the committee, i look forward to working with you to build on

these efforts and thank you for the opportunity to testify today. i'm happy to take any questions that you might have. >> well, thank you, so much. mr. jaholske, we turn to you. >> thank you for invite meg to discuss the u.s. consumer product safety commission's important role in pro democraticing consumers from health and safety hazard involving imports and counterfeit goods. before i begin i should note these comments are those of cpse staff and they have not been reviewed or improved by and may not reflect views of the commission. i especially appreciate the opportunity to appear before you today as this year marks the tenth anniversary of the creation of cpse's import surveillance program. cpse was established by congress in 1972 and is the federal

regulatory body charged with protecting the public from unreasonable risk of injuries or death associated with consumer products. we are rel toughly small agency with 545 full-time equivalent and $125 million annual budget however we have jurisdiction over thousands of consumer product, vast majority of which are imported into the united states. since the improvement of 2008, the strengthen the relationship with u.s. border protection and potentially noncompliant unsafe imported product, cpse put investigators at largest ports of entry to work side by side with cpc staff. currently we have 30 investigators stationed at 20 of the largest ports in the country. despite our relatively small size within and fiscal year 2017, cpsc investigators at the port screened more than 38,000

dwis stink products arriving in the united states and stopped approximately 4 million nonclient or hazardous units from reaching consumers. to prioritize and organize high risk shipments, we have our own risk assessment methodology. ram is combined with cpse data to risk shipments under cpsc's jurisdiction. we also have cpsc staff stationed at commercial targeting and analysis center to coordinate with other government agencies to address import safety hazards. cpsc has a part-time presence at international property rights coordination center where we exchange information with 22 partner agencies that may help us target potentially nonclieing and has orderozardous products. we would not be able to dot critical work of intercepting

high risk products before reaching consumers without assistance of in support of dhs and cpb. although cpsc's primary focus is targeting product that violate requirements we do encounter property rights violations. many investigators are former officers and import specialist and are trained to identify issuees. as a result, cpsc staff is able to often identify possible violations in the course of their normal duties. when cpsc identifies a potential issue we refer the issue to cpb because they have the authority to efficiently seize the product. on case by case basis, we will also test that an ipr product for compliance with cpsc mandatory standards or to determine whether they are otherwise hazardous.

cpsc and cpb collaborate d on many times, including holiday lights, cell hoverboards. althou although cpse have large ports of entry, many are imported through direct to consumer sales over e-commerce platforms. volumes of these shipments and limited amount of data required when the shipment requires in the united states makes targeting difficult. with cpse small size and limited resour resources, we couurrently do no have investigators when they arrive other than jfk airport. however, they will continue to evaluate staffing model to identify efficient ways to potentially target products shipped to consumers. thank you for the opportunity to

share my remarks. i'm happy for any questions you may have. >> thank you very much. mr. brady, we'll continue on with you. >> as new president i'm honored to share before you today counterfeit goods and to offer our perspectives on the challenges facing ip rights holders in this evolving global market. ul is a global independent safety science company that has championed safety for nearly 125 years. our 14,000 professionals around the globe are guided by our mission, to promote safe living vie environments for people every where. we use research to meet every evolving safety challenges. we partner with manufacturers, retailers, trade associations, and regulatory authorities, internationally, to provide solutions to address the risks

of increasingly complex global supply chains. ul takes counterfeiting very seriously. our product is our brand, our mark, which are built on foundation of trust. when us consumers see our ul marks, they noah independent third party has determined that the manufacturer has demonstrated compliance with safe performance or other standards. unfortunate the counterfeit they misappropriate our name and marks to try to legitimateize the goods they sell. too often consumers are unwitting victims of counterfeiting. they may suspect their cheap bag is a knockoff, but many are unaware other categories are frequently counterfeited. as the chairman noted in 2016 we

partnered with apple to do the dangerous chargers like this small device. in a controlled test program, our engineers tested 400 counterfeit a dap tears berg ul remarks and the results were shocking. over all failure rate exceeded 99% and all but three prevented shock risks. 12 were so poorly made they pose a direct risk of electrocution. in 2017, we conducted over 1,200 investigations around the globe resulting in the seizure of 1.5 million individual products. let me give you a couple of highlights. in terms of e-commerce the focus of this hearing, we collected intelligence more than 5,000 online listings cross different po platforms with over 5,000 listing of ul counterfeit products. we work with the platforms to

remove the listings and take appropriate actions against the sellers. as a result, law enforcement se seized estimated flash lights, head lamps, and hoverboards h based on information ul provided, dhs seized approximately 3, 200 safety labels and power a dap tears valued in excess of $200,000. and we partnered with the los angeles sheriff department to seize hoverboards and 2200 lose labels that the counterfeiters could stick on. they were marked as wheelbarrows. total seizure was valued over $1.5 million. finally they cooperated with authorities on many other investigations resulting in

seizures on lithium batteries and fake life jackets in peru including for children. my written testimony includes much more statistics than time permits but they underscore the counterfeits extends to many product categories in countries. in our 22-year history in this fight, we have deployed multi dimensional strategy based on three tenets, education, enforcement, and partnership. we work with our clients, law enforcement, customer officials and others to stem the proliferation of counterfeit. the traditional are amplified in this border less world of e-commerce. as was noted, online shipping has become an online direct to consumer sales has made it much harder for law enforcement cuss temps officials to fight. because the counterfeit of $1 million are far less than $1

million of drugs. and as shippers go direct to consumers rather than risking entire cargo container, this becomes very, very difficult. this is a challenge that legitimate platforms have to work on together. thank you for the opportunity to testify today. ul welcomes the opportunity to work with you in the fight against counterfeits. and i welcome any questions the committee may have. thank you. >> well, thanks to all four of you. your testimony is really riveting and it's got to concern every american citizen, so we appreciate you taking the time to be with us today. and we appreciate the work you are doing. and hope that you step it up even more. mr. joholske, in your report you recommend two recommendations to cdp. can you explain what factors make it difficult for websites and rights holders to address the problems of counterfeits,

and then reiterate why you feel the suggested changes will help address those concerns? >> thank you, mr. chairman. >> there are a number of things changing the e-commerce today. you could probably boil it down into three vs. volume of goods each of us has talked about to some degree where the number of shipments has tremendously exploded over the past several years. so it's very difficult to focus in and find counterfeit goods on individual by individual shipment basis. there is it also the value of those goods. the value has tremendously increased. i believe miss smith talked about the seizure rate that has taken place and that's one factor you can look at to determine how well seizures or how well enforcement is taking place. and then, finally, the there is the variety. the variety of goods that are being counterfeited these days has exploded.

everything from yet i tumblers to kitchen sinks, soi it's not something that a consumer could target as easily in the past. so our recommendations focus in on two of the things the agencies can do to try to improve their processes. first of all, in working with the private sector, while tftea did allow cdp to share more information, there is more restrictions on sharingment and when we spoke to folks from the private sector, they appreciationed some concerns about their efforts to try to shut down these counterfeiters and the amount of information they needed in order to target their efforts as well. and they thought that could be improved. and then, secondly, in looking at the evaluation that could be done for these activities, certainly in limited budget environment, we all want, federal agencies, we all want to put our money in the right places so we can do the most

good. and weep encourage cdp to take additional steps to evaluate the activities it has under way in order to address some of these koufrting activities so they can put their money in the best places. >> well, thank you. miss smith p as we have heard from gao, they are on the underlying things. in your written responses you agreed with their written recommendations to explore opportunities for better information sharing with the private sector. what steps do you plan to take to implement these recommendations? >> senator, we think both of the recommendations were very productive for us to focus our efforts. the scope of the challenges, as the other witnesses have laid out, is tremendous. and one of the things we have done to address gao

recommendations is to charge our coact e-commerce working group to work with us to work through which information would be valuable to share and who it should be shared with. as you pointed out, tftea provides us good authority to share through proper promulgated regulations and our intent is to address the issue of information sharing through additional regulatory framework. the other thing that we have done to address some of the challenges that gao identified, is to develop and release today an e-commerce strategy to help us focus our efforts. and we look forward to work wg you and our colleagues here at the table to understand exactly where we can make the greatest impact. >> well, thank you so much. mr. brady, ul has invested interest in billions of individual products bought and sold each year. and as such, you have an

important and valuable perspective, as i see it in all of this. what steps do you, as a company take to protect your intellectual rights? and what can u.s. agencies do better to assist you in your efforts? >> thank you, mr. chairman. as i noted earlier, our own product is trust, trust consumers place when they see our mark. so we fight very hard to protect that trust. because it's consistent with our 125-year-old mission of helping to create save living and working environments for people every where. so our team is small but mighty and therefore wie depend on public private partnerships to help continue this fight against counterfeit. what we need is relevant time and transparent intelligence. because we rely on civilian criminal enforcement procedures. beyond seizure and destruction, we pure suf criminal and civil cases against counterfeiters. if we bring stale data to the

l.a. count sheriff they can't do anything with t so we need realtime intelligence sharing, and we are happy to share with government agencies what we find. we would like to reciprocate in that transparency and to keep the data fresh. because intelligence goes stale very quickly. and these criminals quickly change their websites, their email addresses, their physical location, methods of shipment, they move fast, and we together with government need to work faster. >> thank you. senator wyden. >> thank you very much. i want to thank you the channel. let me start with you, miss smith. as i indicated, to me what's going on is the ripoff artist, counterfeiters are trying to under cut the american brand. so this is really high stakes stuff. and i want to ask you the two questions that our staff asked your staff.

and the first one is a yes or no answer so we are clear on this. does the agency need more authority to crack down on the counterfeiters, the ripoff artists? just yes or no. do you need more authority because the staff asked it, and you all wouldn't give us a direct answer. so i want to give you the chance yes or no, do you need more authority? >> yes. >> thank you. so that is good to finally have that on the record. when will will you be able to give us the details with respect to exactly what it is you need? because, as you know, the staff asked you, do you need more authority, couldn't get an answer then. you now have given us an answer to your credit. and then they asked, can you tell us when we will get the

details of what you need in this area and how you would like to proceed so we can up our game to be tougher on these counterfeiters. when will we get that? >> senator, i think we should start the conversation now. but what i would recommend is that we gather the information about what data is available and who it should come from and who it should be provided to from our private sector participants in the coact e-commerce working group. i think it's important to have the private sector perspective reflected. as you know, coact, very important intermediary provided for in tftea, and i would like to suggest that they work for several months so that we can come back to you as they are working and walk through what the recommendations are from the private sector. >> now, you said we need time to

have this conversation. we have been having this conversation for what feels like longer running battle than the trojan war. it has gone on a long, long time. we know who the people are. the platforms. we know about the rights holders. i would like a date. and i think you moved again in encouraging way. can we say within 60 days you said you want to have this discussion with the relevant private sector parties, all for it, can we have a commitment today that you will layout for us what it is you are prepared to do in terms of this authority? and you'll talk with the private parties. within 60 days of today? >> sir, i'll do my best to meet that 60-day benchmark. >> good. let me turn now to the question of priorities and get your

thoughts on this. i understand that the agency is moving to hire 5,000 border patrol agents here in the next five years and 2,000 officers. now, i have supported billions of dollars in terms of security at the borders. and i'm prepared to do what it is going to take to ensure that we protect the american people. as you know, illegal crossings are now at a historic low. so how are we going to do it if we are putting twice as many people on this question of yet more agents at the border as we are in terms of getting the people we need to up our game in terms of the counterfeiters? how are we going to do it when the balance seems so out of

whack? >> senator, i think, as you've worked with us over many years, to look at the very diverse portfolio of cdp mission to make sure we have the right people on the border, whether they are wearing green uniforms, blue uniforms, or tan uniforms. you've also been very supportive of us in making sure we have the expertise on the trade side. as you know, the president's budget in fiscal year 2018 asked for 140 new positions to implement hit. and i think the combination of hiring those with trade expertise as well as those with border security responsibilities is a big challenge for cdp. >> you are being very diplomatic, and i'm going to let you off the hook. >> thank you, sir. >> i think you get my sense. i think the priorities are way out of whack when you have twice

as many people in this area where the evidence shows that illegal activity is going down, as opposed to what we are dealing with here. and you are going to have -- you described it as a challenge. i think the priorities are out of whack and we need to get them straightened out. one last question for, i believe this will be for mr. brady. mr. brady, what i think you basically said, and i'm going to direct the staff to look into it, you basically said that the ripoff artists given the penalties may in effect just say, hey, this is just the cost of doing business, let's rip people off, the penalties aren't that meaningful compared to the amount of business that we can rack up by doing all this, you know, counterfeiting, and just moving online quickly and ripping people off. that's pretty much what you are saying, right? >> that's exactly correct,

senator. >> would you recommend to the chairman and i that as part of this effort we beef up the penalties given what you have said that it may, in effect, just be being treated as part of the cost of doing business? >> yes, senator. we would recommend that something that's very fertile and important area to look into. we see evidence from, for example, the la prosecutors that counterfeiters get out very quickly and go right back to business the same day. they are trying civil suits against these people because they don't know how to manage civil suits but they are jail house lawyers and can get tout with a slap on their wrist today. >> i'm way out of time. can you furn irrelevant to the chairman and me your thoughts penalties that would ensure this was not a cost of doing business, could you furnish that to us? >> our plesh suasure. >> thank you, mr. chairman.

>> senator isaacson. >> i was in the real estate business for a long time before i came to congress, mr. joholske, and have watched over the years increase of sales over internet during christmas time. i think now about 20 to it 2 of sales are made via the internet and not by people going and buying them which has exponentially sales over the internet, is it comparable product line other times of the year? >> you know, senator, we didn't take a look at the growth of e-commerce per se. we were focused on the challenges associated with e-commerce as it relates to counterfeits. and as i said in my statement, it's very difficult when you are going online and looking at a photo of an item to determine whether or not it's real. you may go into a store and be able to pick it up and see if it's a different weight or different color or something like that. but what some counterfeiters do

is take the photo of the actual item and they put it online, even though they are giving you something that's counterfeit, and may not resemble that photo you've seen online. >> and produce a knockoff and se sell it to you? >> absolutely. or sometimes what they do is import them without lablts and import the labels separately and put the labels on in the united states. >> both ways are a problem for us, that's for sure. >> absolutely. >> miss smith, i have a habit of reading the resumes of people come before us to find out a little about them. it seems you may be the person to answer this question that chairman hatch asked you. it says you did the rank award is that right? >> yes, sir, sir. >> only less than 1% and recognized your achievement in cd to protect the american consumers? >> yes, sir. >> you ought to write the

blueprint then? >> we are working on it, sir. >> in that particular situation you did respond to the question asked by the chairman you need more authority. what authority specifically do you need more of to do your job? >> sir, i believe that the authority request will touch on several things. the data we can share and who we can share it with. i this i as mr. brady noted the penalties and other civil enforcement actions we can take in this air why are also an important thing for us to consider and talk b the specifics i'd like to consult with both our other government agency partners and with the private sector to make sure that we are hitting the mark with it. but we will do that fairly quickly. >> are part of the problems anti-trust rules and regulations? just outs of curiosity? >> that has not been raised to us as issue. >> but big enough problem in our country that we should

enforcement so allow us to be able to enforce it. >> we will do that. >> we appreciate you all being here today. and thank you for all the good work that do yyou do. >> thank you. >> senator from louisiana. >> miss smith, when a vendor is flagged as a possible seller of counterfeit goods, does that trigger an examination of their entire business, for example, with other possible offenses like trade base money laundering? >> senator, we do, once we have identified a particular business entity as a risk, we do try to take a broad based approach to looking at all of their business activity. we have some challenges, because oftentimes they will disappear, and we need to find them through either corporate officers or other targeting information. we are also looking to make sure that when we see a pattern of conduct from one business entity, that we look for that same pattern of conduct with

similar types of businesses. >> now, that leads to my next question. data analytics is being used by many to winnow out and find that needle. sounds like you would start out, is it from china or hong kong, but then you can pair it down, i presume. is that being done? >> yes, senator, it is. but i think we can do more. there are amazing developments around predictive and listics. cdp has used a number of tools over the years to target risk. but i think sort of the next frontier is applying some of these innovative technologies to find that needle in a hay stack. >> our office has been trying to figure out how well our agencies work together on trade base money laundering. and i always point out it's estimated cartels move $110

billion a year from the united states to mexico. but we only confiscate best as we can tell about $7 billion. now, senator wyden spoke of the cost of doing business, we are only getting 5% of the $100 billion. what would you say is the cooperation with both agencies tracking money launl derring and other issues related to that and this panel? >> senator, i think it's good the cooperation. >> i heard from others off the record it's very bad. that it's siloed and that there is not the cooperation between agencies required for it to be effective. and i'm not accusing you but it begs the question if we are only moving so much. >> i think this area is a very complex area. trade based money laundering is

not -- is a fairly sophisticated version of trade violation. i think it behooves us to take a whole of government approach, both from a criminal perspective and a civil perspective, and applying the information that we can get from our intelligence agencies to both recognize and share that information to ensure that we are going after in realtime. >> i sep all that conceptually. i guess what i'm probing for is what i'm hearing off the record it's not occurring now. how do we make that occur? >> i think by your message today, your question today, to identify that as a high risk area that the congress is interested in. and then i think what we do is

pull together those key agencies, whether it be i.c.e. or the department of treasury to focus on trade based money laundering with mandate to share information hand take aggressive action. >> does anybody else on the panel have anything to offer on this particular topic? okay. i think i saw mr. grady so even though he's from ul i thought he had a thought on it. >> senator, no, nothing to offer at this time. >> okay. thank you, sir. let's see what else my interests lie in. using are current data and l analytics, are you able to small shipments through the mail, u.s. postal shipments or larger shipments going through fed x or ul, ups, et cetera? >> yes, sir, we are. we get very good advanced electronic data in the express

courier environment. >> what about usps? >> we are getting better. i think the advanced electronic data we are seeing is not what we would like. >> so when you say better, that's a very elastic term. it could be from 1% to 2% which would be 100% improvement. but in terms of that it's pretty lousy. upss what sort of illegal or counterfeit goods do you feel that you are detecting when it comes to usps? >> we are getting advanced electronic data on approximately 50% of small packages in the postal environment now, which is significantly up. it represents data from 30 countries, which is significantly up from what we got five years ago. >> it sounds like hong kong and china are the ones that really matter. >> yes. >> so to what degree are you getting that from hong kong and china? >> we are getting all of the electronic, advanced electronic

data from china. and hong kong, if you give me just a moment, yes, hong kong as well. >> so are we seizing illegal, illicit counterfeit goods from those areas? >> yes, we are seizing counterfeit goods. we are also focused on things like fentanyl. >> so what percent of the, my last question, thank you, mr. chair, what% of the counterfeit ill illicit goods coming usps you feel you are compensating, 5%, 10%? >> sir, i don't have an answer to that i think that's what jao has asked us to look at we'll try to get that going forward and get that estimate. >> thank you. i yield back. >> senator from new jersey. >> thank you for having this hearing. the united states is trusted recognized brands, most ones in demand, ones that command the best prices, and therefore the

must vulnerable to knockoffs that's why protecting our reputation and investment is so important. four years ago families in businesses in new jersey garage contacting me about the increasing prevalence of counterfeit goods available for purchase online. particularly fake prom and wedding dresses. and it's a significant industry in new jersey but also significant to the people who end up at their wedding with something they totally didn't expect. this regent report confirms what i've been hearing from so many of moo i constituents. now the trade facilitation and trade act that congress passed in 2016 contained language that i authored with the chairman to raise the enforcement priority for fake products, specifically those shipped as gifts to avoid customs duties and detection. so miss smith i know there has been a line of questioning on this. but i know cdp has been working 0en this issue. but i'm still unclear how the agency has implemented that language. does a package marked as a gift

that originates from a business address in a country like china, which is one of the worst offenders, which is documented by cdp and other sources major source of counterfeit trigger any red flags? has the screening process changed since the passage of the trade enforcement and facilitation act? >> senator, i think what we have done is to focus our targeting efforts in this area with specific targeting rules around gifts. as you note, which are identified as small packages, or other areas like household goods that can be generic description. but may contain outfront goods as counterfeit goods. >> i think it's important for the representatives of the fashion industry and folks that your constituents are looking to

buy safe legitimate goods from is to work with customs and border protection to record their marks, to ensure that we know exactly what legitimate product looks like, and we are working with that company to provide training to our officers and product information. and we would be happy to work with you and your staff. >> my question is are you using an algorithm? what are you using to actually flag something that is, quote unquote, a gift? and is is the preferred vehicle by which these counterfeit goods come to the united states? >> so we do have targeting algorithms, we call them rules, which knit together a variety of risk factors, both the description of the goods as gifts, along with the high risk countries that they may come from, china, hong kong, and then additional information that we have about specific business entities, manufacturers, shippers, carriers that may have brought previously counterfeit

goods into the country will also be renetted in the targeting algorithm. >> did the gao examine this for counterfeit goods as opposed to larger shipments? and if you did, what did you find? >> well, our work while we did purchase 47 items and found 20 of them counterfeit, we did talk with cdp and icpep as far as their efforts. we also put out a report where we looked at some of the differences between cdp receives from the usps facilities as opposed to express mail and found that the amount of information that they received from usps was significantly less because they are not required to put as much information that would be sent ahead of time to cdp. so cdp is limited in its ability to respond as opposed to say the express mail carriers where they

are required to submit more information to cdp ahead of time. >> is there a suggestion by how to meet that challenge? >> well, one of the things we recommended in this report was k kpd acdp and i.c.e. to work together in order to address some of these counterfeit shipments. because some of the shipments coming within the united states. in fact all 47 of the items we purchased were shipped from u.s. addresses so they wouldn't have been able to use the chinese or hong kong address as a flag, because that's not where it was sent from to the consumer. >> one last question. >> sfloenator, if i could interrupt, he'll be the last questioner. i want to thank you everyone from being here t we'll see what we can do to back you up and help you. >> thank you, mr. chairman. one last question. on search engines, it seems to

me that some online search engines and other websites aide and a bet these counterfeiters by failing to police the use of copyrighted imagery on online adds and may have some responsibility. it seems online sellers may have prescreen and reject those that may be illegal. in fact, i've heard some search engines will continue to display those same companies advertisements. in other words, some sellers of online ads may be continuing to receive advertising fees from companies they know to be breaking the law. so search engines like google and other sellers of online ads are unwilling to filter these illegal advertisements, i hope when i look forward to working with the economy to this threat

to american businesses. i wrote google a letter last year, but i still haven't had a response. so the question for any of our witnesses, in what ways should we look to cooperate with search engines and those who sell online advertising to make it more difficult for counterfeiters to reach their target audience? are there ways to share additional information with these company toss make it easier to crack down on counterfeit ads? anybody have insights into that? >> nor, from ul perspective and shift to individual shipments from overseas to directly u.s. home, we think the most important thing is to prevent that shipment in the first place, prevent the purchase in the first place. so therefore we think it's critical to shut down these people who are offering fake goods so the purchase never happens in the beginning. once that little envelope leaves and heads to constituent in your state, it's very, very hard for

the authorities to intercept it. so i this think stopping the purchase in the first place by shutting down these bad websites is very important. >> we'll look forward to -- miss smith? >> i just wanted to support what mr. brady said. and, also, reiterate that we think that the platforms, the marketplaces have to be part of the solution. they are sort of a new business entity for us that has popped up over the last couple of years. and i think we as a government community need to consider what their role, what their information is, and what the expectations for them should be. >> well, we look forward to following up on those. yes, miss gianopoulos? >> and i'll address it from the other end as far as consumers. if a consumer receives a product counterfeit, the websites we spoke with were anxious for those consumers to report it back to the website so they can take some action. if they don't know the consumers are purchasing counterfeit items on their websites, ditz

difficu it's difficult for them to do something about. so as part of recommendations suggested we received from cpsc and others, we suggest consumers report those items promptly. >> and they take it out of organic search, which is a good thing but keep the advertisements on. so you are drawing revenue from counterfeit sites. so if you take out the search, you take out the advertisement as well. so thank you for being here and answering questions today. colleagues who have written questions are asked to submit them by the close of business next friday march 16th. and with that, this hearing is adjourned. thank you very much.

sunday night on q&a, former

u.s. border patrol agency francisco talks about his book, the line becomes a river, a memoir of his experiences and what he learned about immigration system since leaving border patrol. >> the woman was pregnant. they were lost for three days. they were drinking filthy water from cattle tanks. and they made it to a village and the border patrol got called and i was the agent who was supposed to take them in. and i started talking with them, and it turned out that this pregnant woman had grown up in iowa and she spoke perfect english. and she was a school teacher in iowa. and i think her husband saw that we were talking, and that we had a connection, and he sort of leaned over at one point and said, hey, man, can you just, can we skip the whole, you know, arrest and deportation thing? can you just drive us back to the border and let us cross back

into mexico? you know, be a brother? and, you know, i didn't hess tachlt i said no. this is my job. you know, i can't do that. and i took them in. and but what i remember about that encounter is i remember asking their names. and i remember introducing myself to them. and i remember wanting to remember them because i had this connection and i wanted to hold them in my mind chb. i wanted that woman to be safe and for their child to be safe. and then a couple hours later, i went back out on patrol. i was sitting in my car. and i had completely forgotten their names. and the reason that encounter sticks with me so much is because i think that's the first step in the humanization is for getting what makes someone an individual. >> sunday night at 8 eastern on c-span q&a. >>hi