NIKE REPRESENTATIVE DESCRIBES COUNTERFEIT GOODS

UNCLAS SECTION 01 OF 02 ZAGREB 000812

SENSITIVE
SIPDIS

DEPARTMENT FOR EEB/TPP/IPE

E.O. 12958: N/A
TAGS: ECON ETRD PGOV SOCI HR
SUBJECT: NIKE REPRESENTATIVE DESCRIBES COUNTERFEIT GOODS
SMUGGLING IN CROATIA


1. Summary. Nike's brand protection manager for Croatia met
with Econ and FCS officers at the American Chamber of
Commerce in Zagreb in late November to discuss patterns of
counterfeit goods smuggling and quality of enforcement as it
faces growing demand for smuggled counterfeit apparel
throughout the region. He said that Croatia's geographic
position is extremely advantageous to goods smugglers, but
the response and capacity of law enforcement is uneven at
best. As a result of this meeting, AmCham and embassy
representatives decided to form an IPR working group among
AmCham's member companies to share information on counterfeit
goods production/smuggling, and to look for opportunities to
raise awareness of the issue with Croatian government and law
enforcement circles. End summary.


2. With the assistance of the Nike representative, customs
officials at the port of Rijeka recently seized 20 shipping
containers filled with thousands of pairs of counterfeit Nike
shoes destined for markets throughout Europe. The shoes are
now awaiting destruction at a warehouse, but the seizure
highlights a growing trade through Croatia in counterfeit
apparel, according to Nike. While Nike has not identified
Croatia as a major producer of fake goods, its geographic
position makes it a desirable entry point for goods headed to
customers both close by, such as the large counterfeit goods
markets in Brcko, Bosnia-Herzegovina and in New Belgrade,
Serbia, as well as to markets as far away as the UK. Most of
the counterfeit goods originate in China.


3. Nike has established relationships with police and
customs officials throughout Croatia, who alert Nike when
they intercept a suspicious shipment. The Nike rep then
goes, sometimes in the middle of the night, to inspect the
merchandise and tell Croatian officials whether the goods are
fake. He admitted that this identification is not always
easy and sometimes requires him to send a sample for closer
examination by Nike headquarters. Once identified as fakes,
the shoes are held in a warehouse while he arranges for their
destruction. But the smugglers adapt quickly to avoid his
interference. There have been recent cases of shipments of
"blank" shoes, with a courier bringing in suitcases full of
the famous Nike "swoosh" later on.


4. Often the Nike representative secures the cooperation of
the trucking or shipping company involved to help identify
future shipments as a means of reassuring authorities of the
shipper's innocence in the crime. He also works closely with
Nike's competitors Adidas, Puma, and others, recognizing the
mutual goal of stopping the counterfeit goods trade.


5. Unfortunately, Nike often comes up against regulatory and
resource deficiencies on the Croatian side that hinder IPR
enforcement. Our contact admitted that his seizures are only
quasi-legal since the designs being counterfeited are only
rarely covered by Croatian patent law. This is because of
the lengthy procedure to register individual designs with
Croatian authorities (often taking over a year). He
explained it is impossible for an international apparel
manufacturer, issuing hundreds of new products over four
seasons, to comply with the letter of Croatian law on
registration of designs.


6. Law enforcement resources and political will are also
severely lacking. The recent successes at the port of Rijeka
have been due solely to the energy and dedication of three
Croatian customs inspectors who have been willing to make the
effort to identify the shipments and work with the apparel
company representatives to stem the tide of counterfeit
goods. At other points of entry, especially along the long
land borders with Serbia and Bosnia Herzegovina, cooperation
is mixed at best. Even in Zagreb, the will among law
enforcement to fight trafficking in counterfeit goods is
sometimes weak. Our Nike contact told us he reported to the
police weeks ago the name and address of an individual
offering counterfeit goods for sale over the internet, but
the police have yet to act.


7. COMMENT: In discussions on international trade, Croatia
is often quick to mention that the port of Rijeka is three
days closer to Asia and the Middle East than the port of
Rotterdam. This advantage has clearly been noticed by
counterfeit goods manufacturers as well. Croatia also
struggles with a legal and law enforcement capacity that is
often lacking or out-matched. This is especially true along
the Bosnian border, where understaffed Croatian units face
smugglers with years of experience in trafficking of goods;

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experience in many cases honed during the Yugoslav wars, when
smuggling was a matter of life or death. These factors
combine to suggest the transport of counterfeit goods through
Croatia will be tough to combat. END COMMENT
BRADTKE