CLOSING SPEECH COMMISSIONER KOVACS. It is really a pleasure for me to be here today to close this successful event

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1 CLOSING SPEECH COMMISSIONER KOVACS INTRODUCTION It is really a pleasure for me to be here today to close this successful event and to address you as operational customs officials from the 25 Member States and from some of our major international partners, as well as business representatives. Together you make up the key players in the fight against counterfeiting and piracy. As a man committed to concrete actions I regret that I was not able to participate in the control actions at the frontier. Unfortunately my engagements in Brussels have kept me away until today. I have been informed about the success of the operations yesterday that allowed the seizure of more than faked products of very different types. Most of the goods originated in China. The goods were mainly intended to transit Hungary on route to Poland and Romania as well as to other EU Member States. Such a success was only possible because of the efficiency of the Hungarian customs and the effective cooperation with our international partners. 1

2 I would like to take the opportunity to thank in particular our international partners that are participating in this seminar - the US, China and Turkey and also Romania and Bulgaria as candidate countries. Let me thank you all for your efforts to date. In recent years customs in the Community have achieved excellent results in combating counterfeiting. I believe that bringing customs and business together here, in this practical environment, will help us to further progress. I do not need to insist on the damage to jobs, to the revenue of Governments and to the income of business caused by counterfeiting. But I need to stress the real threat that counterfeit now also represents to health, to the security of our children, and in general to the prosperity of our societies. EU Customs are in the forefront of this battle and now seize about 100 million fake items a year - which represents a 900% increase in four years. This represents some 70% of the seizures worldwide. Even though these seizures are reckoned to correspond to more than 1 billion Euros - they are only the tip of the world's "fake iceberg" which is estimated to involve more than 450 billion Euros. This means 10 times the Common Agriculture Policy budget! 2

3 We are now faced by a growing flood of illegal and dangerous products and we must take firm and concrete steps to counter this growing fake traffic. Counterfeit seems to be more profitable than drug trafficking! I would like to take a few minutes of your time to inform you of the latest developments at Community level to further protect society from the all too "real" threat of fakes. THE PROBLEM You know certainly better than I do, as right-holders and operational customs officials, that counterfeiting is now big business, well organised and swift to adapt to new openings or opportunities. With immense amounts of money at stake, there is a risk that we are still in the opening phase of the fight to protect society and business from the dangerous fake trade. A quick look at the EU customs seizures for 2003 shows the rapidly changing problem we are facing. The number of seizures increased by 9% over the previous year and in some sectors the change is particularly alarming. Look at dangerous fake products - such as foodstuffs, where seizures have increased by more than 77% in comparison to the previous year. EU Customs seized almost 1.5 million foodstuffs in 2003 (including 3

4 mineral water, sweets, waffles and apples). Or children's toys, where more than 12 million fakes were seized, almost 1000% more than in DVDs, software and the like remain a big favourite for criminals. This is partly because they can make more profit out of this traffic than out of some forms of drug smuggling and also because large scale production is relatively easy. If we turn to the source of the counterfeit products, you will see that most of the production is from the Asian region, China alone represents the source of more than 60% of the fakes stopped by Customs in Europe. China is now actively trying to stop this trade and we welcome the recent strengthening of their customs law and its similarity to the EU Customs anticounterfeiting legislation. However, with more than 5000 sea-containers arriving daily from China and 1000 flights a week coming to Europe from Asia, we all face a difficult challenge. The EU Customs co-operation agreement recently signed with China will, however, together with the new Chinese legislation, provide both sides with a new weapon to help stop the flow of fakes. WHAT ARE WE UP AGAINST? 4

5 We have seen the problem, let us turn to whom we are fighting against. It is self-evident that it is not possible to produce large quantities of the high quality fakes that you see before you without serious equipment and a brilliant organisation. It is now an industry. And it is an integral part of organised crime. Customs seizures include complete mobile phones; laser ink cartridges; car parts and pharmaceuticals perfectly presented. This level of production needs investment in technology and skill. The range and quality of the fakes now being seized illustrates already one of the difficulties customs face in tackling this traffic. However, distinguishing the fakes from the real thing is only part of customs' problems. Criminals increasingly turn to smuggling to get their illegal goods past Customs. These techniques, and the avoidance of direct routes for many shipments, are very similar techniques to those used by drug smugglers. Those involved in counterfeiting are very often the same involved in drug trafficking, money laundering and other forms of organised criminality. WHAT NEXT? WHAT ARE THE NEW INSTRUMENTS? The first Customs returns for 2004 which include the results from new Member States show that the problem continues to grow. This is not surprising, as many very large countries are rapidly increasing their 5

6 industrial capacity and criminals are not slow to see an opening for quick and very large profits. We already have a number of measures in place and we have firstly to make sure we make full use of them. These include a new EU Customs Regulation which has been in force for just over six months. This law introduces new possibilities for improving the effectiveness of controls, particularly via greater co-operation and information exchange between Customs Regulation and business. This piece of legislation is already showing results. We must also act on the international front. I have mentioned already the new Customs agreement with China. We will use existing and future agreements with our main trading partners, including the United States, to share information and experiences. What are we going to do in practice? We need a number of concrete initiatives involving the key players - that is Business, Customs and the International Community. Co-operation with other law enforcement authorities is also of the utmost importance.! Increasing co-operation and information exchange with business 6

7 It is crucial to promote the business-customs partnership. Right-holders' knowledge of their products and trade patterns is a vital part of the range of weapons, which customs need to combat counterfeiting. But we also need business to be pro-active and Customs to recognise and support the efforts of business. One good example in this respect is the initiative of the Pharmaceutical industry in creating the Pharmaceutical Security Institute to specifically address this type of problem. This is a welcome step forward in a sensitive sector. A number of other initiatives under consideration include: Using Memoranda of understanding to promote co-operation with key players such as shipping lines, express carriers, airlines Working with business to produce practical guides for customs and promote targeted actions in high risk areas Establishing regular meetings with business to focus joint efforts Providing training for business on customs requirements! Customs working together Customs are the key enforcement agency for combating counterfeiting and are recognised as such internationally in the TRIPS (Trade Related Intellectual Property Rights) agreement. Although cooperation between 7

8 customs and other law enforcement authorities is of paramount importance, one can say without hesitation that the key role in the fight against counterfeit lies with Customs. Customs are indeed the only authorities with responsibility for and experience of controlling the full range of internationally traded goods. In the Community we have real experts in tackling counterfeiting, and I know many of them are here today. We must ensure that this expertise is fully used and we intend to do this via a number of practical measures, including: A task force of customs experts to work in MS and overseas Joint controls for high risk areas Real time exchange of risk information via a secure system Tailored solutions to specific problems! International co-operation: Europe cannot successfully combat counterfeit; this is an international problem which requires an international solution and we must work with our partners abroad to pool our knowledge and efforts to reduce international trade in fakes and cut off production at source, where possible. We would see two areas where we need to work quickly: 8

9 Using the Customs co-operation agreements to exchange information and create feedback systems to cut off counterfeiting at source, and Increased partnership with other international organisations like the World Intellectual Property Organisation, the World Customs Organisation and Interpol CONCLUSION We are facing a dangerous and rapidly increasing traffic. Customs results after enlargement show that the Customs seizures are increasing significantly. This is not unexpected. After all, we are facing high level criminality. We have to think just as practically as criminal organisations do and act decisively if we are to protect ourselves and the world from this threat. It is vital to work together. Although a lot has been done already in practice efforts need to be sustained and further developed. For that we need: political engagement at all levels the necessary resources a strong commitment from business. 9

10 I am currently considering the need for a Commission Communication, which would include a number of practical suggestions. Presenting a Communication of this type to Member States would ensure we have the necessary level of political debate that this important topic merits. Closing words Let me thank all the participants, and particularly the speakers, for their efforts during the conference. The exchanges and contacts between business and customs will be precious for our future work. Allow me to thank you in particular for your commitment, work and results achieved in recent years and to wish you good luck in our joint efforts. Special thanks also to our international partners. Finally, a big thank you to the Hungarian Customs Guard for the excellent organisation of this event, particularly Mr Nagy and his colleagues as well as our interpreters. I hope you have all enjoyed your stay in my home country and I wish you a safe journey home. Thank you all for your attention. 10