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Overseas raids, secret marks and Homeland Security: How New Era fights fakes

Every year, New Era Cap Co. spends millions of dollars fighting counterfeiters who replicate New Era's original products, then sell them to consumers as the real thing.

It has partnered with agencies around the world to raid factories in places such as China, Brazil, Vietnam and the Middle East. It has seized counterfeit product. It takes down millions of fraudulent online listings each year.

"We do that to protect our brands and to protect our consumers, not just to protect our revenue," said Lorrie Turner, senior vice president of global legal and brand protection at New Era.

Still, the company hasn't come close to stemming the flow of fake goods sold to American consumers under the company's name.

And it's not just designer knockoffs that are getting through. Things like counterfeit pharmaceuticals, toothpaste and computer toner land in consumers' hands every day.

"Anything that can be shipped can be and is being counterfeited," said Warren Clark, President and CEO of the Better Business Bureau of Upstate New York.

Why does that matter? For consumers, counterfeit products can pose health and safety risks, as did 16% of products seized by Border Patrol agents in 2016, according to a recent study by the Better Business Bureau. Cosmetics contained ingredients harmful to eyes and skin, electronics contained lithium batteries that burst into flames and phone chargers carried safety labels despite having never been inspected. The numbers have only grown since then.

The threat doesn't just come from overseas. Earlier this month, a Cheektowaga parts dealer was sentenced to two years in prison for selling counterfeit airbags he bought on eBay, assembled himself then sold to mechanics.

Flex team member Sharon Sager attaches the panels together at the New Era factory in Derby.  (Mark Mulville/Buffalo News)

New Era officials said the money it spends to fight counterfeiters is money that can't be spent on innovation, taxes or employment.

Counterfeiting costs the U.S. economy $600 billion a year, according to the FBI.

As companies such as New Era have outsourced manufacturing overseas, they also have exposed their copyrighted products and trade secrets to counterfeiters who can duplicate products well and duplicate them quickly, Turner at New Era said.

They buy the same fabric New Era uses, the same labels and stickers and are able to replicate the company's products almost exactly. New Era itself might not be able to discern the difference if it didn't build in secret identifiers. After a while, though, counterfeiters learn how to replicate those, too.

The United States devotes significant resources to fighting counterfeiting: manpower from the Department of Homeland Security, U.S. Border Patrol, the FBI and the National Intellectual Property Rights Coordination Center, among others.

The current trade war between the United States and China could temporarily increase the flood of fake goods into the United States, according to Steve Shapiro, the unit chief for the FBI’s intellectual property rights unit. As tariffs increase the cost of goods, cheaper knockoffs become more enticing to American consumers.

It's not just that they undercut American businesses. Counterfeiters pose a threat to national security, according to Kevin Kelly, special agent in charge of Homeland Security Investigations Buffalo.

The money they make from selling fake goods often goes toward funding hackers, child labor, human traffickers, drug traffickers and identity thieves, even terrorism.

"When a crime is state-sponsored, it's economic espionage," Kelly said.

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