By  on May 1, 2007

WASHINGTON — Counterfeiting of apparel, footwear and accessories in China worsened last year, despite pressure from the U.S. and initiatives by luxury firms and governments to prod the Chinese to strengthen enforcement, according to a new report.

Although there was "increasing attention from foreign governments, the media and China's central and local governments, the Silk [Street] Market in Beijing remains possibly the world's most notorious market for counterfeit goods," the U.S. Trade Representative's office said in an annual study released Monday on the effectiveness of intellectual property rights protection by U.S. trading partners.

Other "hot spots" in Beijing continue to be the Chaoyang, Tianyi and Yaxiu Markets, according to the report, which cited "local protectionism" as an underlying factor. The survey also found rampant counterfeiting of apparel, footwear and accessories in other provinces, including Fujian and Guangdong, which the USTR studied for the first time. The report cited improvements in intellectual property rights enforcement in some regions, including Shanghai.

U.S. trade officials said in the report that the fashion industry has cited Beijing's Silk Street Market, a shopping mall that opened last year, as "perhaps the single biggest symbol of China's [intellectual property] enforcement problems."

Fashion industry executives said in a separate January survey, according to the USTR, that "counterfeiting had worsened" in that market, with "apparent" violations in 65 percent of all outlets, and the proportion of apparel counterfeit goods — including apparel, eyewear, leather products, footwear and watches — ranging from 80 to 100 percent.

A U.S. trade official, who spoke on the condition of anonymity on a conference call with reporters, declined to comment on whether the U.S. would take action against the Chinese on apparel counterfeiting in the Silk Street Market, but added: "Certainly, the lack of progress by all is a concern for us."

China has long been the number-one source of counterfeit goods to the U.S. Counterfeit and pirated goods from China accounted for 81 percent of the total value of all merchandise seized last year, with a U.S. worth of $125.5 million, according to the Customs and Border Protection bureau. The value of bogus apparel seized from all U.S. trading partners, including China, rose $8 million to $24.3 million. The U.S. government did not reveal what amount of that could be attributed to China.The USTR filed its first intellectual property rights cases against China with the World Trade Organization last month. One case focuses on Chinese legal requirements intended to protect copyrights and trademarks, and the other targets trademarks and barriers to trade in movies, books, music and videos.

In 2005, China shut down the infamous Silk Alley, which was known as the place to buy designer fakes of all qualities from New Balance to Louis Vuitton handbags. But Chinese developers opened the Silk Street Market shopping complex next to the empty alley and many vendors from Silk Alley simply moved in, industry experts said.

A call to the Chinese Embassy in Washington seeking comment was not returned.

Several luxury firms have prevailed in court actions related to violations at the market and they executed a memorandum of understanding with the landlords in June, but it is unclear whether the agreement was ever adopted.

Travis Johnson, associate counsel of The International AntiCounterfeiting Coalition, which incudes as members Louis Vuitton, Gucci, Kate Spade, Chanel, Cartier and Rolex, said brand owners have taken different approaches to a culturally ingrained piracy problem in China that could take years to alleviate.

"Most of the more experienced brand owners have learned that there's a different culture and way of dealing with the Chinese government and with Chinese businesses than there is in other regions," Johnson said. "Most brand owners have really tried to look for more cooperative solutions rather than filing lawsuit after lawsuit."

Brand owners would like to see more criminal enforcement of intellectual property rights violations, but are divided on what role the U.S. should have in shaping China's policies, he added.

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