June 22, 2018

Denver Post: Cassidy Legislation the ‘Ultimate Solution’ for American Entrepreneurs Hurt by Postal Subsidies for Fake Chinese Products

“Your taxpayer dollars are paying for the subsidy that is helping destroy U.S. companies and U.S. jobs.” 

Denver Post

A Boulder company fighting Chinese knockoffs points to little-known culprit: China can ship packages for $1.42

By Tamara Chuang

June 22, 2018

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It all started when a steel ball and magnet became one of the more effective ways to prop up a smartphone back in 2012. The Steelie phone holder was just a newborn from a machine shop in Boulder. The little magnet and ball inspired hundreds, possibly thousands, of similar products — one might call them knockoffs — and created loads of legal work for the Colorado company behind the ball, Nite Ize.

From fending off poorly made copies to battling imitators that ripped off the Steelie brand name and packaging, Nite Ize went into whack-a-mole mode trying to keep up with products online that infringed on its intellectual property. Its latest weapon, a special International Trade Commission order directing U.S. Customs agents to seize offending products at the border, went into effect in late April and has resulted in Amazon taking down 381 items in a few short weeks.

But the ultimate solution will take the world to fix: Changing the nearly 150-year-old Universal Postal Union rule that allows countries like China to ship a small package of up 4.4 pounds to America for approximately $1.42.  Using those cheap rates, Chinese companies are able to put their smartphone holders in consumers’ hands for far less than Nite Ize can.

“It’s easy for people to go to Amazon and feel like they get a relative value for a (competing) product especially if it looks the same. But that (seller) has sideswiped all our intellectual property and research and development,” said Rick Case, who founded Nite Ize in 1989 with a headband flashlight strap. “… And with China Post, they’re shipping direct from China to the consumer for a dollar. That’s not within the bounds of what any viable company is able to do.”

Nite Ize is doing what it can to promote awareness of the century-old Universal Postal Union, which was established by the Treaty of Bern in 1874 to create a flat rate to send letters between countries. Developing countries received a discount. But according to the National Association of Manufacturers, China is still considered a developing country so letters and packages sent from China to a U.S. address cost the seller $1.42, said Patrick Hedren, the association’s Vice President for Labor, Legal & Regulatory Policy.

Last year, that was 658.8 million pieces of international inbound mail, up 6 percent from the prior year, according to U.S. Postal Service. Earlier years were unavailable. Another thing it shares: losses. USPS lost $97.9 million on inbound international mail in 2015. That grew 34 percent the next year to a loss of $134.5 million. In 2017, it lost $170 million, according to the Postal Regulatory Commission’s annual compliance reports.

By eliminating the discount to Chinese sellers, the hope is that U.S. shoppers will skip the pricier shipping and opt for the real thing. Ultimately, that would discourage illegitimate foreign sellers.

“There are many ways you can play whack-a-mole by trying to stop this on a case-by-case basis. But it’s not successful,” said Hedren, with NAM. “That’s why we’ve been focused on this very strange, esoteric postal issue that not only enables this but makes it very profitable (for knockoffs). The U.S. Postal Service is hugely subsidizing Chinese counterfeits and even drugs. It’s a mind-boggling consequence of a system that’s been around for more than 100 years.”

Some legislators are also paying attention and are pushing for changes. In April, U.S. Sen. Bill Cassidy from Louisiana and Texas Congressman Kenny Marchant introduced separate bills to end the Postal Service’s practice to subsidize inbound international shipments. Those are still winding their way through the system.

At Nite Ize, while the International Trade Commission order has helped it more quickly clamp down on infringing online products, Chief Legal Officer Clint Todd said it will continue to be a daily battle of finding offenders online. But he hopes that if postal rates change for Chinese shippers, then consumers will see and respond to the actual  price to ship counterfeit products from China.

“I’m trying to mention it every time we talk to someone who’s interested in our ITC order,” Todd said. “It’s something contributing to the problem overall. Your taxpayer dollars are paying for the subsidy that is helping destroy U.S. companies and U.S. jobs. This needs to be out there. Everyone who hears about it is similarly appalled.” 

who hears about it is similarly appalled.”

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