parts & materials committee “introducing a2c2” · parallel import (gray market) parts use...

Parts & Materials Committee“Introducing A2C2”

Presented by:Chris Northup

Chris Caris

July 25, 2017 – Chicago, Ill.

Charter

The mission of the CIC Parts & Materials Committee is to identify the issues and challenges related to the parts, materials and technologies utilized in today’s vehicles –including the effect they have on the collision repair process – and to identify and offer solutions where possible.

Our members represent numerous industry segments with wide-ranging viewpoints but are working jointly to improve the overall quality of the repair process for the industry and vehicle owners alike.

PARTS & MATERIALS COMMITTEE

July 25, 2017 - Chicago, Ill.

Presenters

Jon Ruttencutter – Homeland Security Investigations

Andy Forsythe – Nissan (A2C2 President)

Larry Benitz – FCA

Joe Cammiso – Toyota

Jason Kosofsky – Ford

PARTS & MATERIALS COMMITTEE


Put the Brakes on Fakes

National IPR Coordination Center

The IPR Center Mission: To promote national security by protecting the public’s health and safety, the U.S. economy, our war fighters, and to stop predatory and unfair trade practices that threaten the U.S. and global economy.

The IPR Center is a collaborative effort of 23 federal and international partner agencies

National Security

The Economy

Health &

Safety

Defense Readiness

Collectively:

Operation Engine Newity

In 2009, the automotive industry contacted the IPR Center regarding an emerging health and safety threat from the illegal sale and distribution of counterfeit automotive components. In response, the IPR Center created Operation Engine Newity.

Operation Engine Newity encompasses threats to health and safety posed by counterfeit automotive, aerospace, rail, and heavy industry components.

The program relies upon a robust relationship with industry and other government agencies.

AirbagsWheels

Addresses the threat to health and safety posed by counterfeit:• Automotive• Aerospace• Rail• Heavy machinery components

Bearings

Aircraft Parts

• As a result of our work with industry, ICE HSI opened 35 cases, leading to 12 criminal arrests, 16 indictments and 15 convictions. There were 130 seizure incidents were worth an estimated $5.59 million MSRP

• Our investigations have shown that every part that goes into a vehicle – whether it is interior or exterior – is a prime target for counterfeiting, including smart keys, air bags, fuel filters, window shields and tires.

• Data shows that 85-95 percent of all counterfeit goods are coming from China or transshipped to Hong Kong or to other countries.

We try to tell the consumer to make sure they are buying Genuine parts. They should be from a reputable distributor that can be confirmed with the manufacturer.

Consumer health and safety is our top concern.

www.iprcenter.gov

• Public facing complaint tool

• March 2016: implemented a new form for reporting and electronic filing

• All intel is uploaded monthly and is searchable.

OverviewCollision Industry Conference

July 25, 2017 – Chicago, Ill.

Industry Definitions

OEM Parts Designed and tested by OEM to meet strict performance and

safety specifications

Aftermarket Parts Marketed as direct OEM replacement

Parallel Import (Gray Market) Parts Use OEM trademark or trade name

Authorized OEM supplier for another region

Counterfeit Parts OEM trademarks applied without their consent

Illegal in the U.S.

Not regulated – no testing or quality standards

Potential risk to public health & safetyJuly 25, 2017 - Chicago, Ill.

Impact of Counterfeit Automotive Parts

• Auto Care Association estimated total U.S. retail parts sales of $143 billion in 2015.

• Frost & Sullivan estimated that auto suppliers lost $45 billion to counterfeiting worldwide in 2011.

• A 2016 report by the Organization for Economic Cooperation and Development estimated the value of international trade in counterfeit & pirated products at $461 billion in 2013, or as much as 2.5% of all international trade—an 80% increase since OECD’s 2008 report.

• OECD estimates that number could reach $991 billion by 2022.

• A Frontier Economics study last year estimated the total economic value of counterfeit & pirated products (not counting film, music, software) at $710 - $917 billion in 2013; will jump to $1.5 - $1.95 trillion by 2022.

The Problem


A2C2 OVERVIEW

Background

2014 - First informal meeting in November at SEMA/AAPEX

2015 - Quarterly meetings & monthly conference calls

2016• Group incorporated as a 501(c)(6) non-profit corporation

• First president and board of directors were elected

• Subcommittees established for planning, e-commerce & Law Enforcement training

• Members gave final approval to Mission Statement, Guiding Principles and Key Activities


Automotive Anti-Counterfeiting Council, Inc.


A2C2 Overview

Mission Statement

Collaboration among automakers and their partners that will strive to eliminate counterfeit automotive components that could harm U.S. consumers.

Guiding Principles

1. Promote consumer awareness of safety and other concerns surrounding counterfeit automotive components.

2. Promote consumer satisfaction with genuine automotive components.

3. Encourage active participation by all shareholders.

4. Foster open communication.


A2C2 Accomplishments

Meeting and Working with IPEC – March 2016

Met with the U.S. Intellectual Property Enforcement Coordinator (IPEC) within the Executive Office of the President

A2C2 presented the potential dangers to health & public safety caused by counterfeit auto parts

A2C2 asked for and received more support from the federal government

Counterfeit auto parts were included in IPEC’s 2017-19 Joint Strategic Plan, with content created by A2C2



U.S. Intellectual Property Enforcement Coordinator’s 2017 –19 Joint Strategic Plan on Fighting Counterfeiting Includes Automotive

Engine and Drivetrain Spark plugs can overheat and may lead to fire; oil filters can cause sudden engine failure

Glass Improper glass may not adequately protect passengers from projectiles during normal driving conditions Body and Structural Vehicle

hoods designed without crumple zones may penetrate the passenger compartment in a crash

Brakes Have been found to be made of grass clippings and saw dust

Wheels Compromised structural integrity by cracking after hitting a pothole at just over 30 mph

Airbags Have been found to improperly deploy, or not deploy at all

Suspension System These parts made of substandard materials have shown higher rates of failure

Headlights and Taillights Low-quality materials and improper sealing may lead to moisture intrusion and damage causing failure or malfunction

Source: a2c2


Working with E-Commerce Platforms

Group meetings held with Amazon (Nov16) and ebay (Jan17)

• Single point of contact established for each

• Both educated on several counterfeit prevention methods and potential dangers of counterfeit auto parts

• Both worked with A2C2 to combat alleged counterfeit automotive components, and have agreed to continue working together

• Fostered information sharing and open communication

Amazon has modified prohibited listings to include airbags and covers; Alibaba now prohibits airbags July 25, 2017 - Chicago, Ill.


19 Training Sessions

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City LocationWashington DC IPR CenterLong Beach, CA Port of Long BeachOrlando, FL HSI OfficeAnaheim, CA NACE ShowLos Angeles, CA Los Angeles AirportCleveland, OH Port of ClevelandColumbus, OH HSI OfficeCincinnati, OH DHL FacilityLouisville, KY AUSA OfficeMemphis, TN HSI OfficeDetroit, MI FCA OfficeLas Vegas, NV AAPEX ShowSan Diego, CA HSI OfficeSalt Lake City, UT HSI OfficeSeattle, WA HSI OfficePittsburgh, PA NCFTATampa, FL HSI OfficeHouston, TX HSI OfficeNew Orleans, LA HSI Office

Scheduled


A2C2A Partnership in Action


A2C2 in Action

Case Study #1 – Sacramento, Calif.

A2C2 member provided lead to LE and the other A2C2 members

Multiple A2C2 members investigated and identified potential counterfeit violations with links to other ebay sellers

Confirmed link to three other ebay vendors


A2C2 in Action


A2C2 members conducted test buys and confirmed counterfeit

Lead packages referred to Sacramento HSI Field Agent

A2C2 members provided affidavits and declarations to agent

Search warrant issued and A2C2 members supported


A2C2 in Action


Over 1,200 airbag components & 400 emblems seized

Six OEMs participated in the validation process

Estimated damage = $1.25M


A2C2 in Action

Case Study #1 – Sacramento, Calif.U.S. Attorneys » Eastern District of California » News

Department of Justice

U.S. Attorney’s Office

Eastern District of California

FOR IMMEDIATE RELEASE

Wednesday, May 31, 2017

Antelope Man Pleads Guilty to Selling Counterfeit Airbags Online SACRAMENTO, Calif. — Vitaliy Fedorchuk, 28, of Antelope, pleaded guilty today to five counts of

mail fraud for an international scheme to sell counterfeit airbags via eBay and other internet sales

sites, U.S. Attorney Phillip A. Talbert announced.

According to court documents, between June 23, 2014, and July 27, 2016, Fedorchuk offered for sale

airbag modules, covers, and manufacturer emblems at his eBay online store, redbarnautoparts.

Fedorchuk falsely advertised that the counterfeit airbags were original equipment from major

automobile manufacturers such as Honda, Fiat, Chrysler, Nissan, Toyota, GMC and Ford. During the

scheme, Fedorchuk sold hundreds of counterfeit airbags and obtained more than $95,000.

According to the plea agreement, all airbag parts Fedorchuk sold through his online store were

counterfeit. Each identified automobile manufacturer informed law enforcement that the specific

airbag items (including covers and emblems) are not sold individually. The items are sold as part of

an airbag assembly to authorized dealers. Additionally, due to the significance and importance of

airbag functionality and potential for loss of life or injury, such new airbag items are not sold on eBay

and must be purchased through an authorized dealer. The authentic airbag covers and modules

contain distinctive manufacturer markings that include the date of production. All airbag related

items sold by Fedorchuk failed to contain such distinctive markings.


A2C2 in Action

Case Study #2 – Buffalo, N.Y.

A2C2 member conducted a test buy from a seller on ebay

Lead referred to IPR Center

A2C2 members notified


A2C2 in Action

Case Study #2 – Buffalo, N.Y.

Additional A2C2 member conducted test buy and confirmed counterfeit product

All airbags were improperly packaged & shipped

CBP targeted and stopped new shipments of suspect airbags; multiple OEMs confirmed counterfeit and provided declarations

IPR Center completed research and referred lead package to HSI Buffalo

Search warrant executed; 31 airbags seized covering six OEMs


A2C2 in Action

Case Study #2 – Buffalo, N.Y. U.S. Attorneys » Western District of New York » News

Department of Justice U.S. Attorney’s Office Western District of New York

FOR IMMEDIATE RELEASE Monday, October 24, 2016

Two Men Charged With Importing And Selling Counterfeit Airbags CONTACT: Barbara Burns PHONE: (716) 843-5817 FAX: (716) 551-3051

BUFFALO, N.Y. -- U.S. Attorney William J. Hochul, Jr. announced today that Raymond Whelan, 47, of Cheektowaga, NY and David Nichols, 66, an American citizen living in China, were charged by criminal complaint with entry of goods by means of false statement, trafficking in counterfeit goods, and conspiracy to traffick in counterfeit goods. The charges carry a maximum penalty of 10 years in prison and a $2,000,000 fine.

“Those who traffick in counterfeit merchandise harm not only legitimate businesses but they potentially put the lives of consumers at grave risk,” said U.S. Attorney Hochul. “For this reason, we will continue to vigorously prosecute all violations pertaining to trademarks and consumer safety.”

“Counterfeit automotive safety components put the driving public at great risk,” said ICE-HIS Special Agent in Charge James C. Spero. “A counterfeit airbag has the potential to deployand injure a vehicle’s occupants or worse, not deploy after a serious accident.”


A2C2 in Action

Case Study #3 – China Success Guangzhou

• The defendant received a fixed-term imprisonment of 2 years, 6 months without suspension of sentence, and was fined CNY 80,000.

Changzhou • Two defendants were convicted of counterfeiting registered

trademarks (Art. 213 of Criminal Law) and received the following punishments:

Crime NameIllegal Business

Turnover(CNY)

Fixed-Term Imprisonment Suspension Sentence Monetary Punishment

(CNY)

Crime of Counterfeiting Registered Trademarks (Art. 213)

230,4853 years None 200,000

3 years 5 years 200,000

.

A2C2 in Action

Passage of Additional Counterfeit Airbag Laws

... a person who manufactures, imports, installs or sells any device with the intent to replace an airbag knowing that the device is counterfeit and does not meet federal safety requirements is guilty of a fourth‐degree crime. A fourth‐degree crime is punishable by up to 18 months imprisonment, a fine of up to $10,000 or both.

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Passed

Laws Passed in 15 States to Date

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Passed in 2017

A2C2 … More Than Just Airbags


A2C2 in Action

Many Other Cases in Recent Years …U.S. Attorneys » Eastern District of Washington » News

Department of Justice U.S. Attorney’s Office Eastern District of Washington

FOR IMMEDIATE RELEASE Wednesday, November 13, 2013

Moxee Man Sentenced to 31 Months in Federal Prison for Selling Counterfeit Airbags on e-Bay Spokane – Michael C. Ormsby, United States Attorney for the Eastern District of Washington, announced that Jason Jordan, age34, of Moxee, Washington, was sentenced after having pleaded guilty in June, 2013 to Conspiracy to Traffic in Counterfeit Airbags. United States District Court Chief Judge Rosanna M. Peterson sentenced Jordan to a 31month term of imprisonment tobe followed by a 36 month term of court supervision upon releasefrom Federal prison. Chief Judge Peterson also ordered Jordan topay approximately $600,000 in restitution and forfeitures.

According to information disclosed during the court proceedings,Jordan owned two businesses -- Auto Pros and Sickspeed Inc. -- located in Moxee, Washington. He sold retail automobile parts via the Internet from these businesses. Jordan used these businesses to facilitate the importation of counterfeit airbags fromChina, which airbags were falsely labeled as being manufacturedby reputable automobile manufacturers, such Honda, Toyota, Ford, and General Motors. Jordan advertised these counterfeit airbags as genuine products and sold them via e-Bay. Jordan admitted that he actually sold approximately 1980 counterfeit airbags from June of 2011 to August of 2012, earnings proceeds in the amount of $444,180.

Alleged Trafficker of Counterfeit Automotive Accessories Indicted in Virginia

U.S. Department of Justice October 26, 2012

WASHINGTON—An alleged trafficker of counterfeit automotive accessories was indicted yesterday by a federal grand jury in the Eastern District of Virginia for allegedly participating in a conspiracy to sell to unsuspecting U.S. consumers more than $3 million worth of counterfeit General Motors (GM) and Bavarian Motor Works (BMW) automotive diagnostic devices and other automotive equipment, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the Eastern District of Virginia Neil H. MacBride, Assistant Director Ronald T. Hosko of the FBI’s Criminal Investigative Division, and FBI Atlanta Special Agent In Charge Mark Guiliano announced today.Katiran Lee, 39, an Indonesian national who allegedly sold the counterfeit goods while he was living in Duluth, Georgia, was charged with two counts of trafficking in counterfeit goods, four counts of wire fraud and one count of conspiracy to commit wire fraud.

February 16, 2012

Department of Justice

United States Attorney William C. Killian Eastern District of Tennessee

Dai Zhensong Sentenced to Thirty-Seven Months in Prison for Trafficking in Counterfeit Airbags CHATTANOOGA, Tenn. - Dai Zhensong, 28, a citizen of the Peoples Republic of China, was sentenced today in U.S. District Court at Chattanooga, to serve 37 months in prison as a result of his August 2011 guilty plea to a federal indictment charging him with five counts of intentionally trafficking in counterfeit airbags. The Honorable Curtis L. Collier, Chief U.S. District Judge, Eastern District of Tennessee, also ordered him to serve three years supervised release upon his release from prison and pay $210,738.00 restitution.

In September 2010, six boxes containing 68 airbags originating from Guangzhou Global Auto Parts International Group Co. LTD, (Guangzhou Auto Parts) located in Guangyhon City, Peoples Republic of China, were intercepted by the U.S. Department of Immigration and Customs Enforcement (ICE) and determined to be counterfeit items. The counterfeit airbags were delivered to a Chattanooga, address by ICE agents in a controlled delivery.

Zhensong was a part owner and manager of the international department of Guangzhou Auto Parts, a company that specializes in the production of auto parts, many of which are counterfeit. He entered the United States in October 2010 and traveled to Chattanooga to sell additional counterfeit airbags and other auto parts. The counterfeit airbags were manufactured by purchasing genuine auto airbags which were torn down and used to produce molds to manufacture the counterfeit airbags. Trademark emblems were purchased through Honda, Toyota, Audi, BMW

Three Automotive Parts Suppliers Charged in Manhattan Federal Court with Selling Counterfeit Replacement Parts U.S. Attorney’s Office February 19, 2013

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureauof Investigation (FBI), announced today the unsealing of indictments charging three automotive parts suppliers with sellingcounterfeit replacement parts. The three men—Shashi Malhotra, Fadi Kilani, and Richard Dininni—were arrested at their homes earlier this morning. Malhotra and Kilani will be presented in Manhattan federal court before U.S. Magistrate Judge Gabriel WGorenstein this afternoon. Dininni will be presented in federal court in Allentown, Pennsylvania.

Manhattan U.S. Attorney Preet Bharara said, “As alleged, these defendants sold the automobile replacement parts equivalent of designer knock-offs but represented to their unsuspecting customers that they were buying the ‘name brand.’ And while their replacement parts may have been no different from many other generic parts sold every day in the aftermarket, they were able to command the same higher prices charged by the automobile manufacturers’ whose names they stole. We encourage those who think they may have purchased counterfeit parts from these defendants or from anyone else to call the numbers listed at the end of this release.”

Going Forward

More Training for Federal, State & International Law Enforcement

Events scheduled in Chicago, New York and New Jersey this year

Continued Government – A2C2 Collaboration

Continue to Support IPR Center / Operation Engine Newity

Continue Working with E-commerce Platforms


Questions?

parts & materials committee “introducing a2c2” · parallel import (gray market) parts use...

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