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May 30, 2022 View:

New Zealand Trade Development Agency warns companies to be aware of professional counterfeiting in China

The surge in exports has made some New Zealand products such as fast moving consumer goods (FMGG) such as cereals, beverages and Manuka honey the worst hit by professional counterfeiting, in response to which NZTE has alerted businesses to professional counterfeiting in China.

Image from: New Zealand Herald Chinese website

NZTE Shanghai Trade Commissioner Damon Paling recently said that some New Zealand exporters have become the victims of professional counterfeiting in China. The reason why they are victims is that these companies did not produce counterfeit products, but only had defects in the sales of their products, such as lack of complete Chinese instructions and lack of strict expression in the product literature. The Chinese counterfeiters purchased these products and then sued in court for $1,000 or ten times the punitive damages.

New Zealand"s exports to China reached another record high in 2017, with total exports of NZ$53.7 billion up 11 percent from 2016. Half of New Zealand's export growth came from China, which has replaced Australia as New Zealand's largest export destination for five consecutive years since 2013. The strongest month for exports was December.

The surge in exports has also seen some New Zealand companies targeted by professional counterfeiters in China. New Zealand's fast moving consumer goods (FMGG) such as cereals, beverages and Manuka honey are easily the worst hit, with companies either settling privately with counterfeiters or going to court, which can be tedious and costly to deal with.

Sanitarium, a leading cereal brand in Australia and New Zealand, has confessed that the company was targeted by a for-profit counterfeit. Sanitarium's Oceania cereal brand, Weet-Bix, is sold in China under the name Nutri-Brex, and counterfeiters have been carpet-picking words on packaging or website descriptions, looking for expressions that could easily lead to ambiguity.

Ted Andrews, general manager of Shin Shinsei China, said that even a small clerical error is magnified; Shinsei's products have passed customs security checks, but are still not safe from professional counterfeiters, who will put forward a claim figure and go to court if it is not realized.

He says professional counterfeiting is a unique phenomenon in China, which is unimaginable in other markets, and Paling says for-profit counterfeiting is a particular consumer behaviour that has emerged from China's food safety problems, but these people are chasing money and compensation and are driven by financial gain. He said New Zealand companies need to understand China's consumer protection laws.

China has significantly tightened its safety regulations on imported food. One recent example was a batch of Manuka honey that was returned to New Zealand by Chinese customs simply because the wrong expiry date was printed on the outer packaging: 29 February 2019, a date that does not exist on the calendar.Paling says that even with such a focus on the safety of imported food by the Chinese Customs and Quarantine Service, it still does not stop professional counterfeiters from going on a witch hunt.

In May 2017, the Supreme Court stated for the first time that profit-making counterfeiting should not be extended to all areas of consumer protection, but should be restricted to food and medicine; in addition, the practice of buying counterfeits, or even selling them again after winning a lawsuit, is a serious violation of the principle of good faith, and the courts do not support such behavior of punishing evil with evil.

Paling says this means professional counterfeiting will gradually die out in China, which he welcomes: companies may misrepresent their products when promoting them, but you shouldn't rise to the level of doing evil to make a profit for yourself.