They have destroyed crops across Europe, tearing

Keep it real NEWS ANALYSIS A recent debate examined what could be done to tackle the scourge of counterfeit and illegal pesticides in Europe. Martha Moss reports They have destroyed crops across Europe, tearing through farmers livelihoods and exposing consumers to serious health risks. They have cost the European economy 1bn and undermined the strict regulatory process legal pesticides must undergo before they are approved for use in the EU. Yet the legislation surrounding illegal and counterfeit pesticides does little to reflect the threat they pose to agriculture, the environment, human health and the economy. That was one of the key messages to come out of a Parliament Magazine event entitled Counterfeit and illegal pesticides: a real threat to EU public safety. The event, which was sponsored by Syngenta and brought together European policymakers, industry representatives and regulatory experts, heard that greater international cooperation was needed to reduce the number of illegal and counterfeit pesticides on the market and protect industry, farmers and consumers from their negative effects. Parliament s rapporteur on strengthening the customs enforcement of intellectual property rights Jürgen Creutzmann opened the discussion, warning, The increasing trade in counterfeit products [including pesticides] has become a serious threat not only for economic growth in the EU, but also for human health and the environment. The ALDE deputy highlighted industry figures showing that up to 10 per cent of Europe s plant protection products are illegal. He said, Unauthorised and untested pesticides enter the EU market, creating negative economic implications, putting in danger EU agriculture, human health and environmental safety, and destroying consumer confidence. Counterfeit pesticides usually enter the EU via smuggling or illegally under the cover of parallel imports, when legitimate parallel traded products are substituted with illegal copies. 15 April 2013 PARLIAMENTMAGAZINE 13

COUNTERFEIT AND ILLEGAL PESTICIDES We have to remind member states of their role in the fight against the illegal trade of plant protection products Wolfgang Reinert Creutzmann, a member of parliament s industry, research and energy committee, said, In order to prevent counterfeit and illegal products from entering the European market, we need to enhance cross-border cooperation and the cooperation between customs and competent surveillance authorities. He added that other measures could include improving traceability and strengthening controls on parallel imports. He also called for an end to the legal ambiguity surrounding the treatment of goods in transit. Currently, customs officials are unable to confiscate suspected counterfeit products if they appear to be destined for a third country, even though the illegal products often disappear somewhere in the EU once they are transported on. Joachim Hofmann, senior trademark attorney and counsel to product security at Syngenta, said he supported legal parallel imports, but warned that the system was often abused by counterfeiters. Highlighting the damaging effect of counterfeit pesticides on the European economy and citizens health, he said, There are losses for companies, but the greatest loss is for farmers, and the economy. There s much at stake, not only for private enterprises but for the whole industry, the economy, farmers, and the health and safety of consumers. He added, They [counterfeit pesticides] break the law, and cheat farmers and regulators. The products pose a risk for health and the Dealing with counterfeit products Over the last 10 years, we ve seen a steady global increase in the number of infringements in respect to agrochemical products. These range from simple trademark infringements, to lookalike products, patent infringements, counterfeits and illegal products (with product registrations). Over the last two years this rate increased by 61 per cent. Europe is not excluded from this development, rather the contrary. Europe is a major entry gate for products directly shipped from China. Cross-border movement of counterfeit products from production to distribution sites are eased by slack customs enforcement inspections as well as loopholes in legal frameworks, for example transit-jurisdiction. We also see many goods that are simply claimed as in-transit to outside the EU, false or inadequate declarations, patent-protected materials are re-named as patent-expired products and consignee companies, which do not exist or exist only as so-called letterbox companies. Despite this, it is possible to increase the number of successful seizures at custom points, such as the big harbours in Hamburg, Rotterdam or in Slovenia, although only a fraction of goods are ever detected. Many products seem to travel to the Ukraine or Russia where they are bottled and labelled only to return to Europe as counterfeits or alleged rebottled or re-labelled parallel imports. Counterfeits of empty bottles only used in the European market are also being seized, shipped in from China accompanying drums of active ingredients which due to patent expiration, but despite of missing product registrations, enter the European market without problem. Joachim Hofmann is a senior trade mark attorney for legal and intellectual property at Syngenta 14 PARLIAMENTMAGAZINE 15 April 2013

environment, and they create unfair competition. Despite this, Hofmann suggested that the punishments for the criminals involved failed to act as a deterrent. If there is a conviction, the fines are really low, he said. The reality is we have a fine of [ 1500] or [ 2500] at most. The risk is low, that s why organised crime is so interested in it. He also warned that law enforcement authorities do not make these cases a priority because they are seen as too complicated, and because the agencies themselves are under-resourced. Hofmann said counterfeit products entered the market, having usually originated in China, because of slack customs enforcement and loopholes in the legal framework (transit jurisdiction). It s important to be able to seize goods at custom points because once they are in the country, labelled and on sale it becomes much more difficult, he said, warning that where trademark rights were not infringed, it was almost impossible to prevent such products entering the market. Gregor Hilfert, chair of the Hamburg working group on pesticide controls, also There are losses for companies, but the greatest loss is for farmers, and the economy Joachim Hofmann Securing supplies called for action to close the loopholes surrounding the transit of illegal products. It s not my task to stop trademark infringement, but I m happy if there are trademark infringements because these allow us to stop products even if they are in transit, he said. Customs don t feel responsible as long as the goods are in transit that s a problem. Describing the current situation governing illegal pesticides as a mess, he said, It s unbelievable, but a consequence of the legal situation we have. Hilfert highlighted a case from Pesticides are a high value good and an essential tool for farmers, requiring more than 200m of investment and 10 years of research to develop them until going through a rigorous authorisation before reaching the market. So it is perhaps not a surprise that counterfeit and illegal pesticides business is booming providing farmers with cheap and uncontrolled products, generating over 1bn a year in Europe and constituting an estimated eight to 10 per cent of the total EU market. But these pesticides are sold untested, unauthorised and neglecting all the requirements ensuring safety for human health, the environment and farmer s livelihood, even putting farmers production at risk. These products do not constitute only a risk to innovation but also a significant risk for society and the environment. They enter the EU market primarily via smuggling or under the cover parallel imports, and come in various forms; as active substances, bulk consignment, or in finished packed goods. The packaging itself can be with basic labels without instructions, or have a well designed copy of the original labelling. Only through reliable suppliers will the farmer receive controlled products. We strongly encourage farmers to get to know their supplier and avoid buying products from unknown sources. Fake pesticides need to be tackled at entry: strong cooperation between customs phytosanitary and law enforcement authorities with industry is crucial. The ECPA also calls for effective monitoring and control of the market. Our industry is highly committed to partner and cooperate with relevant authorities and stakeholders to combat counterfeit and illegal pesticides. Friedhelm Schmider is director general of the European Crop Protection Association (ECPA) 2009 where a trader distributed 90 tonnes of the highly toxic nicotine sulphate chemical for illegal use in henhouses. As a consequence, NEWS ANALYSIS There are illegal products on the market untested and unauthorised undermining what we do to get the products tested Friedhelm Schmider 15 April 2013 PARLIAMENTMAGAZINE 15

COUNTERFEIT AND ILLEGAL PESTICIDES Olaf is not the solution, but could be part of the solution Thierry Henne Investigative capacity The European anti-fraud office (Olaf) has long been investigating the illegal trade in counterfeit cigarettes and tobacco products but its mandate also includes investigations related to other counterfeit goods, including counterfeit pesticides that enter the EU through its external borders. Olaf s investigative capacity for combating infringement related to counterfeit goods in the EU is very well perceived by the involved stakeholders. It is largely recognised that it fills a gap between the fraud prevention (risk management/control) and the coordination of enforcement activities within the EU followed by a potential fraud prosecution. Moreover, the investigative capacity conferred by bilateral mutual assistance agreements concluded with third countries is also a unique way to dismantle international fraud networks instead of only intercepting the counterfeit goods at the EU s external borders. Due to internal procedures and limited resources, Olaf s investigative capacities are only allocated to significant cases with specific emphasis on counterfeit goods posing a risk for the environment or public health and safety. Olaf s investigations into fraud related to counterfeit goods, which are carried out in close cooperation with EU member states, contribute significantly and constructively to the activities currently undertaken by other commission services. In this area, the office is also developing a partnership with the industrial sectors represented in the European observatory on infringements of IPR to better combat this fraud. In the fight against counterfeit goods posing a risk for the environment or public health and safety, like counterfeit pesticides, it is particularly vital to work with the customs authorities of non-eu countries (such as US Ice, Ukraine customs) as well as with other European agencies (such as Europol) and to share information with other competent organisations (such as plant protection authorities). Without cooperation between these agencies and organisations involved we cannot fight or tackle organised crime. Consequently, Olaf is probably not the solution, but could be part of the solution. Thierry Henne is intellectual property rights investigator at the European commission s anti-fraud office (Olaf) Recognising the danger US immigration and customs enforcement (Ice) is the primary investigative arm of the US department of homeland security. Homeland security investigations (HSI) is the directorate within Ice responsible for criminal investigations. Two decades ago, intellectual property rights (IPR) crime often involved knock-off handbags or watches. Today, homeland security investigations are dealing with fake medicines and counterfeit airbags. Counterfeit microchips have been sold to military agencies for use in battlefield communications equipment. These are just a few examples of the shift to increasingly dangerous counterfeit goods. US law enforcement is not alone in recognising the new dangers from counterfeits. Europe has witnessed the same, including counterfeit pesticides. In addition to the increased danger from IPR crime, law enforcement and regulatory agencies recognise that it is inherently transnational: there is little, if any, purely domestic IPR crime. Counterfeits are often produced in one country, transshipped through another to their final destination, and criminal proceeds are returned through various countries. Because IPR crime is transnational and increasingly dangerous, Ice s HSI initiated the national intellectual property rights coordination centre, a taskforce of 17 US agencies and four international partners, including Europol and Interpol. The task force exists to combat counterfeiting and piracy, increase awareness, and develop significant transnational law enforcement operations. The IPR centre has recently teamed with Europol and Interpol in multilateral enforcement targeting counterfeit sales on the internet, including fake medicines. Continued development of multilateral enforcement operations and exchange of relevant information is key to our success against counterfeiting and piracy. Erik R Barnett is US immigration and customs enforcement attaché to the EU 16 PARLIAMENTMAGAZINE 15 April 2013

residues of nicotine sulphate were found on eggs the lethal dose of this product is just 4ml, Hilfert said. He added, We have to improve the cooperation and exchange of experience between authorities on a local, regional and European level. We should intensify the supervision of plant protection imports. Friedhelm Schmider, the director general of the European Crop Protection Association (ECPA), said the trade in illegal pesticides generated around 4.4bn worldwide and at least 1bn in Europe. For Schmider, it was vital for industry, customs officials and law enforcement agencies to work closely together on the issue. Cooperation between all relevant law industries, monitoring and control of the market, working closely with industry to make an analysis quickly and training and educating farmers are the key elements to success, he said, adding that it is also important to raise awareness among farmers. He also said that, in order to prevent fake pesticides from entering the EU, customs officials must be empowered and greater cooperation was needed between pesticide regulators and customs officials. Cooperation between all relevant law industries, monitoring and control of the market, working closely with industry to make an analysis quickly and training and educating farmers are the key elements to success, Schmider said. He also warned that the trade in fake products undermines agricultural innovation, and could have damaging consequences for the economy at a time of high unemployment. According to Schmider, it takes the industry roughly 10 years to develop a new active ingredient with costs roughly 200m, yet there are illegal products on the market Counterfeiting is a transnational crime by definition so the only way to conquer that is by transnational cooperation Erik R Barnett Unauthorised and untested pesticides enter the EU market, creating negative economic implications, putting in danger EU agriculture, human health and environmental safety, and destroying consumer confidence Jürgen Creutzmann untested and unauthorised undermining what we do to get the products tested. It is our job to work together with all authorities and agencies to make sure this is stopped, he said. Wolfgang Reinert, the legislative officer responsible for pesticides at the European commission s health and consum- A serious threat The increasing international trade in counterfeit products in general and in counterfeit pesticides in particular has become a serious threat not only for economic growth in the EU, but in some cases also for human health and the environment. According to industry figures, seven to 10 per cent of plant protection products in Europe are illegal, constituting a market worth 1bn. That is why I welcomed the initiative to organise a conference especially dedicated to this topic. The aim of the conference was twofold: on the one hand to highlight the dimension of trade in pesticide counterfeits on the internal market. In this regard, we drew particular attention to the impact on public safety, agriculture and environment. In the second session, we looked at potential solutions to the problem and analysed possible legislative and administrative ways of combating the outlined phenomenon. The conference provided new insights as there were many distinguished speakers from industry, trade and the governmental sector whose contributions allowed us to analyse the issue at hand in such a profound and multifaceted way. The topic of the conference has been close to my heart for a long time. As parliament s rapporteur for the proposal on customs enforcement of intellectual property rights, I have taken a leading role in the ongoing revision of the legislative framework regulating customs handling of pirated or counterfeit goods. I hope that the updated regulation will facilitate the work of customs authorities and make it more effective. Jürgen Creutzmann is parliament s rapporteur for customs enforcement of intellectual property rights NEWS ANALYSIS 15 April 2013 PARLIAMENTMAGAZINE 17

COUNTERFEIT AND ILLEGAL PESTICIDES A growing challenge There are two main forms of non authorised plant protection products (PPPs). On the one hand there are products that cannot be authorised within the EU as the active substance included is not on the EU positive list. On the other hand there are counterfeits of authorised products. This is the most relevant group. Some of the counterfeit products are distributed as branded goods bearing counterfeited labels of the authorisation holder. Some other products were found to be distributed as parallel traded products bearing labels of the holder of the parallel trade permit. For most proven cases faked PPP were manufactured in Asia. In some cases illegal products were manufactured within the EU. In several cases it was proven that faked PPPs differed from the original product significantly. Thus, they also have other effects and risks. For some products, completely different and toxic solvents have been found that are not contained in the original product. The flashpoints of the counterfeits are then often much lower compared to the original product. However the greater hazard of such products is not reflected in the labelling. On the contrary, in many cases faked pesticides were found with a completely inadequate, misleading labelling or without labels and often they were not declared as hazardous goods. Non authorised PPPs pose risks for everyone involved - farmers, consumers and the environment. Combating the illicit trade of pesticides poses a growing challenge for the European authorities. As the goods are often sold through international corporate networks, close cooperation between member states is essential. Some changes to the framework have already been made, other adjustments, especially at European and international level, are necessary to ensure effective investigation and prosecution of illegal trade. Gregor Hilfert is chair of the Hamburg working group on pesticide controls We should intensify the supervision of plant protection imports Gregor Hilfert ers DG, used his presentation to set out how legislation can strengthen controls against illegal plant protection products. We have to remind member states of their role in the fight against the illegal trade of plant protection products, he said. A recurrent recommendation for legislation is to improve the tools for inspectors, he said, in order to prevent or phase out a situation where the fight against illegal trade cannot take place because of lack of capacity. He added that the EU should intensify the supervision of plant protection product imports and consider the circumstances under which parallel trading is a fiction. The commission would work with other authorities to ensure the full exchange of information, Reinart said. One way of doing this is through an EU-wide database for authorisations which will enable authorities to see if a product is authorised, he added. Controls are an essential element in the fight of counterfeit and illegal plant protection products. It is clear that controls cannot stand alone improving communication and the exchange of information between those involved is necessary and will be the formula of success. Erik R Barnett, of the US customs service, set out what the country was doing to tackle counterfeiting and called for greater international cooperation on tackling the issue. There are no reported cases of counterfeit pesticides in North America, something Barnett puts down largely to strong political will. The US also has targeting systems that are really well orchestrated, allowing them to seize illegal products, said Barnett. With most illegal products made in China, Barnett added that counterfeiting is a transnational crime by definition so the only way to conquer that is by transnational cooperation. For Thierry Henne, an investigator at the European antifraud office (Olaf ), it is vital for all actors to be involved in the fight against counterfeit pesticides. Without cooperation with Europol and other organisations we cannot fight or tackle organised crime, he said. We have a long way to go to reach a suitable solution, he added. The starting point will be that the source of information is coming from the industry without that we cannot start a case. We need to work with other agencies and plant protection authorities to share information through a taskforce if necessary. Henne added, Olaf is not the solution, but could be part of the solution. As the discussions during this event showed, the products may be fake, but they can have a very real impact on farmers, consumers, the environment and the economy. With this in mind, the EU should waste no time in stepping up its efforts in combating illegal and counterfeit pesticides and closing the legislative loopholes that allow the trade to flourish. 18 PARLIAMENTMAGAZINE 15 April 2013