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Your Cyber Monday Shopping Could Send Cash to Criminal Cartels

Americans shopping online spent nearly $10 billion on Black Friday and are expected to spend a record $12 billion on Cyber Monday. Unfortunately, law enforcement experts say, too much of that holiday cash will go to criminal cartels — the same ones responsible for drug smuggling and smash-and-grab robberies across the U.S.

How? Thanks to the massive amount of illicit, stolen, and counterfeit consumer goods being sold to Americans, mostly via online shopping.

“The harsh reality is Santa is not the only one handing out toys this season,” said Alysa Erichs with United to Safeguard America from Illegal Trade (USA-IT). “Black market criminals have exploited the boom in online shopping by misleading consumers into buying stolen and counterfeit goods, many of which threaten the economy and our nation.”

Erichs, a former Acting Executive Associate Director of Homeland Security Investigations, made her remarks at a recent press event featuring members of law enforcement and America’s retail sector. They all had the same message: Shopping for deals online could mean sending money to criminal gangs.

Michael Ball with Homeland Security Investigations told reporters the largest counterfeit bust in U.S. history had just happened two weeks earlier. The Department of Justice announced the “seizures of approximately 219,000 counterfeit bags, clothes, shoes, and other luxury products with a total estimated manufacturer’s suggested retail price (‘MSRP’) of approximately $1.03 billion.”

Ball presented a display of seized counterfeit goods ranging from high-end electronics like iPhones to toys and luxury retail items, including Louis Vitton handbags. One popular item is a hoverboard built with batteries that “tended to burst into flame,” Ball said.

Jennifer Hanks, director of brand protection for the American Apparel & Footwear Association (AAFA), also highlighted the dangers consumers face from fake goods.

Authorities recently seized a shipment of children’s sleepwear marked as flame retardant but was not. And she noted a recent study that tested 47 counterfeit products. Of those, 17 were found to have dangerous levels of lead, arsenic, or other substances, she said.

And, Hanks added, counterfeit product and organized retail crime cost real Americans their jobs. The fakers destroyed over 300,000 U.S. jobs in various industries, such as toys, water filters, pharmaceuticals, personal care products, and car parts.

“If it can be made, it can be counterfeited,” she said.

Some of those job losses have been felt here in the Keystone State. The Pennsylvania Manufacturers’ Association is a member of USA-IT, and PMA President and CEO David N. Taylor told DVJournal counterfeits are part of the “ongoing economic warfare” being waged by the Chinese communist government against U.S. businesses and workers.

More than 75 percent of the value of counterfeit and pirated goods seized in the U.S. originate in China and Hong Kong, and online Chinese sellers often rely on Mexican drug cartels to skirt U.S. Customs and import lethal goods like fentanyl and fake pharmaceuticals, according to USA-IT.

“This is something that’s systematically bigger than any one company,” said Taylor. “We need a whole of government response.”

The counterfeiting taking place is “systematic and unrelenting,” Taylor added. “The problem is out of control.”

The impact of organized retail theft is being felt by shoppers in cities like Philadelphia, which has seen stores close across the city over the past two years. In September, The  Wall Street Journal reported retail theft in Philly increased by more than 30 percent compared to a year earlier. Some of the same goods being stolen in smash-and-grab robberies that make the nightly news also make their way to holiday shoppers, often via the internet.

Ball said the organized gangs grabbing armloads are luxury goods and high-end clothes aren’t shopping for their girlfriends. “It’s being resold to criminal organizations to fund organized crime,” he said. “That’s what’s happening.”

“People are being duped to be part of organized crime,” he said. “You’re giving hundreds and thousands of dollars to people who are flooding guns and drugs onto your streets. It’s one of the most foolish things you can possibly think of.”

Ball said counterfeit goods affect the economy and consumers who purchase them.

“It’s crucial that we all remain vigilant about the dangers posed by counterfeit goods,” said Ball. “If it sounds too good to be true, it probably is.”

STORY: Congress Proposes More Tariffs Just in Time for Holidays

Millions of American consumers and businesses will be part of the paradigm shift sweeping through e-commerce this holiday season. With the click of a button, they will order directly from manufacturers around the globe — skipping the red tape, warehouses, supply chain delays, and, importantly, the taxes and fees that come with them. Unless Congress gets in their way.

Right now, Congress is debating whether to take away consumers’ and businesses’ ability to import products duty-free under $800. Known as the “de minimis threshold,” this law that Congress passed in 2016 allows American small businesses to overcome barriers to entry that complex supply chains have historically created. It empowers them to compete in a world dominated by big box stores and mega distribution centers.

In 2016, Congress foresaw the e-commerce wave and raised goods defined as “low-value” from $200 to $800.

Despite its name, de minimis is a significant provision that cannot easily be discarded to score political points. But that is what some in Congress are working to do. The House Committee on Homeland Security recently held a hearing that spread misinformation about the policy and called for its elimination.

Primarily because of scandal-ridden Chinese fast fashion retail stores like Shein and Temu, critics are quick to label inaccurately de minimis as a “loophole” and a pathway for illegal substances to slip through our borders uninspected.

De minimis is not a loophole. It’s been around for a century and is a very intentional component of Congress’s approach that helps small businesses and reduces customs entry-processing expenses for low-value merchandise — of which the cost to process totals more than the cost of the merchandise or the duties that would be collected.

The shipments that arrive via de minimis are processed the same way as the cargo that comes off airplanes, trucks or ships.  While there may be enforcement or screening challenges with de minimis, they are the same challenges Customs and Border Protection (CBP) faces with other standard conventional cargo.

In a recent interview, Brandon Lord, the executive director of CBP’s trade policy and programs directorate, pushed back on the mislabeling of de minimis as a loophole, saying: “There’s a misconception that we don’t target or screen de minimis — it’s not true. People throw around the phrase ‘loophole.’ De minimis is not a loophole.”

We must set the record straight because following the political winds on this issue would hurt consumers and small businesses with higher taxes and supply chain clogs.

Small businesses seeking to sell their products — clothes, shoes, home appliances, first aid and much more — have built their business model around Section 321 and cannot afford a tax increase, particularly if they try to compete with mega-companies.

Christine McDaniel, a senior research fellow at the Mercatus Center, recently wrote that “without de minimis, a $50 purchase would nearly double to $97 because of administrative fees — and that’s before adding on tariffs.” McDaniel concluded that its elimination could “translate to an additional $47 billion in costs for consumers and business owners annually.”

If there are enforcement improvements that can be made with de minimis, let’s make them. But let’s also understand the facts.

Import statistics of Section 321 for the years 2018-2021 obtained from CBP via a Freedom of Information Act request reveal that trade compliance for de minimis shipments in 2021 was 98.5 percent compliant for non-express shipments and 95.5 percent compliant for express shipments.  Of 771 million de minimis imports in 2021, there were only 115,000 CBP seizures.

Congress must look at this new industry through a clearer lens to accept suggestions from businesses that use de minimis.

Chinese companies are not going away if we curtail de minimis — in fact, they are building warehouses right now in the United States.

Degrading de minimis would create uncertainty and costs for businesses and consumers when they need relief most.

Preparation May Make the Difference Between Holiday Gifts or Disappointment

Consumers preparing to enter the frenzied holiday shopping environment should bring an ample supply of patience with them, whether they’re shopping online or in-person, or whether they’re searching for that ideal gift or looking to secure ingredients for their family’s traditional holiday meal.

Supply chains stressed to or beyond their limits have led to retailers with depleted shelves barren of merchandise while online retailers struggle to get their products to customers. What strategies can shoppers use to cope with the present circumstances?

Brad Wilson resides in Drexel Hill. He orders his groceries online and points out that availability tends to run in cycles.

“I’ve noticed things seem to come in waves so to speak,” he said. “There’s a certain tea I like to buy. And, it’s not stocked, it’s not stocked, it’s not stocked. And then it is in stock. (Items) are not impossible to get, but then for two or three weeks you can’t get them, and then they’re back. I have not been able to buy something I want, that has not been a problem. But, over a period of time, you notice things aren’t available, and then they are.”

When it comes to the holidays Wilson says consumers may need to spend additional time in search mode.

“I think you might be able to find what you want. But you’re going to have to look in more different places,” he said. “I also think for holiday groceries and things, where you’re talking about turkeys, or beef roasts, the big items people like to cook on the holidays, I think that could be a problem. I think people who wait until the last minute and don’t plan properly could really have a problem. I think if you start planning and are prepared to jump two or three more hurdles than you normally have, I think you’ll be okay.”

Consumers may have a long wait if they’ve ordered a big-ticket item, such as a home computer.

When reached by phone, an Apple sales representative anticipated a wait of 22 days from the date an item was purchased online to the date of delivery, although she indicated that estimate changes daily and varies depending on the time the item is purchased.

David Galluch, a Newtown Square resident who is running for Congress in Delaware County,  holds an economics degree from the Naval Academy. He says the current crisis is fueling inflation.

“In the midst of a supply chain crisis you have too much money chasing too few goods,” he said. “That’s one of the primary impetuses behind inflation.”

Galluch doubts supply-chain issues are going away any time soon.

“The supply crisis is so deep,” he said, “And it’s going to take significant amounts of time for supply to catch up with demand and for productivity-enhancing investments and infrastructure investments to expand. I think this is probably here to stay for at least a year, if not more.”

With that in mind, Galluch says it’s safe to assume inflation isn’t going away either.

“I think, unfortunately, you have to make the assumption, for your own financial well-being, that inflation is not a transitory thing,” he said.

Which leaves shoppers with the challenge of navigating an arduous path as the holidays approach. Harleysville resident Kevin Hunter is making it a point to get his shopping done as early as possible. He makes his holiday purchases online

“I’ll probably try to get everything early and give (retailers) plenty of time,” he said. “Probably hoping by the end of November at the latest I have everything ordered.”

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