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Chinese Counterfeiting in America

China is not the only country with a counterfeiting problem. Most fakes are made in China, but they are sold in America, where counterfeiting is rarely prosecuted as a crime.
Counterfeit handbags | Source: Shutterstock
By
  • Associated Press

SAN DIEGO, United States — The Chinese woman has a history of selling counterfeit luxury goods. She has been sued in the U.S. by eight luxury brands. She owes Chanel Inc. $6.9 million for selling products online under its name.

None of it has stopped Xu Ting, a 45-year-old immigrant, from achieving a comfortable suburban life in San Diego with her husband and their 3-year-old son. Last year, she became a legal resident.

China is not the only country with a counterfeiting problem. Most fakes are made in China, but they are sold in America, where counterfeiting is rarely prosecuted as a crime. Lack of cooperation with China makes it easy for counterfeiters to move their money beyond reach — and hard to root out counterfeiting kingpins. As long as counterfeiters can stay out of jail and hold on to their profits — and consumers continue to buy — the trade in fakes will thrive.

"There's a million ways to game the system," said Dan Plane, an intellectual property lawyer in Hong Kong. "Probably the only thing that's going to stop her is when she passes away — probably on an island resort somewhere — or if she gets arrested."

So far, Xu Ting has simply refused to show up in court. She has worked toward a graduate degree at San Diego State University, helped her family accumulate at least $890,000 in bank accounts in China, and bought a $585,000 house with her husband, public records and court cases show.

"The essential point for Chanel is really shutting down the counterfeiting operations which we did successfully," Chanel spokeswoman Kathrin Schurrer wrote in an email. Schurrer added that the legal process is ongoing and declined further comment, but did note that "California has a law prohibiting the civil seizure of a home if it is a primary residence."

In 2009, a Florida judge ruled against Xu Ting and shut down seven websites selling fake Louis Vuitton, Marc Jacobs and Celine.

In 2010, Gucci and other brands in France's Kering group filed a lawsuit in New York federal court against Xu Ting, her future husband, and eight others who allegedly sold more than $2 million worth of fake handbags and wallets online to U.S. customers.

Xu Ting's husband, Xu Lijun, has settled. A licensed civil engineer in California, he denied wrongdoing but agreed to let Gucci keep $400,000 in seized counterfeiting proceeds and pay a $7,500 fine.

His lawyer, Eric Siegle, said he was "a small-time nobody."

"The people they are arresting or suing here in the United States are low-level people," Siegle said. "If you can find where the money is going, you can get to the heart of the problem."

But Gucci couldn't find where the money went once it landed in China because Chinese banks refused to disclose account details.

"BOC cannot comply with such orders without violating Chinese law," the Bank of China said in an email.

The case is ongoing. Kering spokeswoman Charlotte Judet said Gucci would "vigorously enforce any judgment" it obtained.

Xu Ting declined multiple requests for comment.

A slight man in wire-rimmed glasses answered the door in San Diego's Rancho Penasquitos area and identified himself as Xu Lijun but declined comment.

"After your colleague's visit, we communicated and she still did not want to do the interview," the family's lawyer in Beijing, Chen Peng, said.

In February 2014, Xu Ting got a green card, thanks to her husband's advanced degree or "extraordinary ability," according to a person familiar with the matter who spoke anonymously because immigration records are not public. Immigration authorities also have the Rancho Penasquitos address on record as her residence, the person said.

U.S. Citizenship and Immigration Services spokesman Christopher Bentley declined comment, citing privacy concerns.

Dan Kowalski, an immigration attorney and editor of Bender's Immigration Bulletin, said immigration officials may not have known about Xu Ting's legal problems but more likely didn't consider them a disqualification. Grounds for denying a green card range from committing a serious crime to having communicable disease but there's nothing about civil liabilities. A vaguer requirement of "good moral character" is more commonly applied for citizenship, not legal residence.

In the U.S., most counterfeiting prosecutions are civil cases brought by companies. Lawyers say criminal cases, which carry the possibility of jail time, are a more effective deterrent.

"A person is more likely to be struck by lightning than imprisoned for counterfeiting," said Geoffrey Potter, an intellectual property lawyer at New York's Patterson Belknap Webb & Tyler.

Justice Department spokesman Peter Carr said the government has done "a number of significant prosecutions."

"Large-scale commercial counterfeiting is one of the top enforcement priorities of the department's Intellectual Property Task Force," he said.

China is the largest source country for counterfeit goods seized in the U.S., and apparel and accessories are the largest category of merchandise. Luxury goods are typically made in Guangzhou and sent by container or courier like FedEx to the U.S. They may be sold in stores or flea markets but are usually hawked online.

"Unfortunately, once you shut one (website) down, they have 10 more ready to open up in a different name," said Bruce Foucart, director of the National Intellectual Property Rights Coordination Center, a multiagency group led by Immigration and Customs Enforcement. Foucart didn't know about Xu Ting.

Brand owners also bear responsibility.

"The biggest game changer for me would be if foreign companies took a more aggressive attitude toward enforcing their rights," said Mark Cohen, former intellectual property attache at the U.S. embassy in Beijing. "At the end of the day, there may be an economic calculation about how much money it's worth to pursue these people."

By Erika Kinetz and Elliot Spagat, with assistance from Raphael Satter, Rhonda Shafner, Fu Ting and Liu Zheng.

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