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Tracing the Counterfeit Shoe Market

Homeland Security Investigations special agents busted a New York criminal ring manufacturing counterfeit Nike Air Jordans in August 2018, arresting five people. All told, the gang imported more than 380,000 counterfeits – shipped by at least 42 containers – between January 2016 and July 2018. The knockoffs, worth more than $70 million, were discovered by federal agents at warehouses in New York.

Due to consumer demand, Nike Air Jordans and other top athletic shoes are a key target for counterfeiters.

Despite international efforts to stop counterfeiting, a lack of consumer knowledge and the increase of online shopping gives crooks more ways than ever to dupe unsuspecting individuals out of jobs, profits and the health and safety of their families.

But how do these knockoffs get to the U.S., and where do they come from? Most counterfeit shoes arrive from China in mislabeled containers. They are stored in warehouses and then shipped to stores. When caught, it may not be easy to find the people responsible for the illegal production, distribution and sales because the documents they arrive with usually contain false information.

Counterfeit Shoe Capital of the World

One city in southeast China’s Fujian Province is at the heart of China’s fake shoe industry.

During the day, Putian is a quiet enclave tucked away from the hustle and bustle of its coastal neighbors. But as the sun sets on the city, it comes alive with traffic jams as couriers pick up boxes of counterfeit shoes from business owners so they can deliver them to middlemen who prepare them for shipping to foreign markets.

The "fake shoes market" has become the center of the local economy in Putian. Despite efforts by the local government to crack down on it, the market never disappears, with its products sold in and distributed to every corner of the globe.

How They Are Made

Due to anti-counterfeit security measures designed to thwart counterfeit efforts in legitimate factories like Nike, which has been in Putian since the 1980s, those who produce knockoffs usually buy a pair of authentic brand shoes and reverse engineer them.

This involves an experienced individual who gets the shoes, takes them apart and draws up a design for production.

While the origin of the factory in China where the $70-million-worth of counterfeit Nike Air Jordans were made was not disclosed, much of the counterfeit industry operates the same: production takes place inside a factory after the counterfeit item is developed; they are then transported by courier to a point of contact where they are prepared for shipping in containers.

When the sneakers arrived from China in containers in Newark, New Jersey, investigators from HSI and the New York Police Department inspected 27,000 pairs of sneakers while gathering evidence to charge five individuals of an international counterfeit operation with trafficking in counterfeit goods.

The sneakers were generic but designed to look like the genuine Nike brand shoes, imitating their color and construction but without the trademarked logos to reduce the risk of interception by customs. The men collected the shoes in Newark before transporting them to Brooklyn and Queens where they applied counterfeit Nike logos to turn around and sell to U.S. consumers as the real deal.

Raids on the premises revealed thousands of the counterfeit Air Jordans, bulk fake Nike logos and the machinery to apply them.

The People’s Republic of China (mainland China and Hong Kong) remains the primary source for seized counterfeit and pirated goods, accounting for 83% of all seizures by the Intellectual Property Rights Center (IPR) and 92% of the estimated manufacturer’s suggested retail price value of all IPR seizures.

The Dangers of Buying Counterfeit

The dangers of buying counterfeit products aren’t always obvious. There are economic impacts, legal implications and health and safety risks that are important to know before you buy.

Some of the most dangerous counterfeit products involve automotive parts, electronics, safety equipment, prescription drugs and cosmetics due to the potential threats they present to public safety and public health:

  • Counterfeit airbags and their components can cause severe malfunctions ranging from non-deployment, under inflation, over inflation to explosion of metal shrapnel during deployment in a crash.
  • Counterfeit lithium-ion laptop batteries pose significant risk of extreme heat, self-igniting and exploding.
  • Counterfeit helmets and baby carriers can break.
  • Counterfeit prescription drugs may not contain the active ingredient or could lead to accidental overdose.
  • Counterfeit cosmetics can cause severe skin reactions.

Each time you buy a counterfeit item, a legitimate company loses revenue and damage is done to their brand reputation. This translates to lost profits and the loss of U.S. jobs over time. What’s more, counterfeit items are often produced illegally and sold at a profit to fund other criminal activities, such as forced labor or human trafficking. This makes the production and trafficking of counterfeit goods a transnational crime, commonly linked to transnational criminal organizations (TCOs). As such, related commercial fraud violations are also investigated by HSI’s Border Enforcement Security Task Forces (BESTs).

Online sales have contributed to large volumes of low-value, small packages being imported into the United States. More than 90% of all counterfeit seizures occur in the international mail and express environments. Many of these shipments contain counterfeit goods that pose the same health, safety and economic security risks as large shipments that come in shipping containers.

About the IPR Center

The IPR Center has been at the forefront of America's response to intellectual property theft and its enforcement of international trade laws for more than 14 years. Its efforts have a direct impact on the nation's health and safety, economy and warfighters.

Created in 2008 and formally codified in the Trade Facilitation and Trade Enforcement Act of 2015, the Center is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. Led by an HSI director, along with deputy directors from the Federal Bureau of Investigation and U.S. Customs and Border Protection, the center brings together 28 partners including federal and international law enforcement, industry, and academia in a task force setting using a three-pronged approach to combat intellectual property and commercial fraud crimes: interdiction, investigation, and outreach. This enables the IPR Center to leverage the resources, skills, and authorities of each partner.