Made in (The People's Republic of) China: November 2008 Archives

The Associated Press | Los Angeles Times
November 13, 3008

WASHINGTON -- Federal health officials today ordered dozens of imported foods from China held at the border as possible health risks. Most are ethnic treats, including snacks, drinks and chocolates.

It's unusual for the Food and Drug Administration to put such a broad hold on goods from an entire country, not just a few rogue manufacturers. The order, which covers products made with milk, is a precaution to keep out foods contaminated with the industrial chemical melamine, which can cause serious kidney problems.

"We've continued to get information from others in the international community, and reports from China, about (melamine contamination) moving into different commodities," said Steve Solomon, a senior FDA enforcement official. "Most of the products we are talking about are finished products like cookies, cakes and candies. The impact will be for various ethnic communities looking for specific products."

Under the directive, FDA inspectors at U.S. ports of entry will detain foods from China made with milk and certain ingredients derived from milk. Importers must pay to have their products tested by an independent laboratory that meets FDA standards. Only products found to be melamine-free will be allowed into the country.

The order also applies to pet foods and some bulk protein products, the focus of a melamine recall in 2007.

Essentially, the FDA action shifts the burden of proof to Chinese companies, which must now supply evidence that their products are safe. Most consumers should not be affected, since major U.S. food manufacturers get their milk ingredients here.

Unscrupulous companies in China have routinely watered down milk, then added melamine to artificially boost protein readings on quality tests. The practice became known after the Beijing Olympics this summer. It backfired when tens of thousands of Chinese children got sick with kidney problems after drinking contaminated infant formula. Nearly 13,000 children were hospitalized in China, and at least four died.

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By Robert R. Frump | Shipping Digest
November 10, 2008

Tim Demarais, a vice president of ABRO Industries, was cruising through the exhibits at the Canton Trade Fair in the fall of 2002 when he spied a picture of his wife happily staring back at him from a tube of super epoxy.

It was only then that ABRO, a South Bend, Ind.-based exporter of quality adhesives, epoxies and fillers to developing countries, discovered that its products and its packaging -- including the one with the photo of Katy Demarais on the label -- had been counterfeited and offered at a fraction of ABRO prices.

"I really was stunned to see a booth, a Hunan Magic Booth, full of ABRO products," Demarais said.  "It had our epoxy, our super-glue, our gasket-maker. They literally had assumed our corporate identity.

"I noticed they had the actual photo of my wife in some of the paperwork," he said. "And I asked them, 'Who is this woman?' And they said, 'It's just some Western model.' I said: 'Western model! This is my wife!' "

Hunan Magic and other counterfeiters of U.S. goods steal more than the packaging and the brand image, of course. U.S. job and exports are at stake, and the problem has moved beyond the high profile knock-offs of film videos and expensive watches to the less glamorous grocery shelf and stock room and parts items.

The FBI estimates that intellectual property theft costs the U.S. economy more than $250 billion a year. According to U.S. Customs and Border Protection, that translates into more than 750,000 lost jobs.

Exactly what that means in terms of lost exports is tough to quantify, but Jonathan Huneke, vice president of the U.S. Council for International Business, believes it is profound.    

"Products with significant IP (intellectual property) make up more than half of all U.S. exports, driving 40 percent of the country's growth," he said.

And according to Hank Cox, a spokesman for the National Association of Manufacturers, the problem is made worse by the fact that most small businesses do not know there is a problem.

"Research conducted in the spring of 2005 by the U.S. Patent and Trademark Office indicates that only 15 percent of small businesses that do business overseas know that a U.S. patent or trademark provides protection only in the United States," Cox said.

He also noted that the FBI reports that in the U.S., all traditionally defined property crimes accounted for $16 billion in losses in 2005. "The best estimates we have for losses from piracy and counterfeiting exceed that number by five or 10 times," the NAM official said.

True, there have been some high profile busts lately. A doctor known as the "King of Viagra" pleaded guilty in October to being part of a global conspiracy to sell fake medicines in the United Kingdom. Dr. George Patino, 48, is expected to do serious jail time for helping to smuggle in fake copies of the impotence drug from illicit factories in China, Pakistan and elsewhere in Asia. He was caught in a sting operation.

Big pharmaceutical companies can devote millions of dollars to anti-counterfeiting operations and prosecutions, but the onslaught of piracy can be deadly to a medium-sized business such as ABRO.

With sales of about $100 million annually, nearly all of it outside the U.S., ABRO saw its sales plummet after the Canton Fair discovery because Hunan Magic and some other Chinese companies were offering much cheaper wholesale prices of inferior goods in fake ABRO packaging. Its U.S. suppliers saw orders drop by 18 to 20 percent, resulting in layoffs. The company said it lost tens of millions of dollars in sales as exports slumped significantly for years.

But even as business was dropping, Peter F. Baranay, president of privately held ABRO, made a decision. He fought back and fought back hard, even though it meant a concerted effort in the 150-plus countries where ABRO products were sold and hurt by counterfeits.

"We were pretty much the poster child for the new piracy," he said in an interview. "We were one of the first to let people know piracy is not just about software and movies and Gucci bags."

Indeed, the goods sold by ABRO are pretty much everyday items with relatively low margins. Over 65 years, the company developed a good brand name for products ranging from sealants, tapes and lubricants to small motorcycles. ABRO manufactured nearly all of them in the U.S. and exported nearly all of them to Third World markets.

Nearly six years after discovering its entire company had been counterfeited, ABRO has reclaimed its identity. Along the way, the head of Hunan Magic ended up in a London prison cell, at least briefly, following a "sting operation." The company is still in business but has agreed under pressure from the Chinese government to stop knocking off ABRO products; instead it presents its own product line under its name.

ABRO now routinely spends more than $1 million a year on private investigators, undercover operations and legal counsel.

"You rip off my product, that is a criminal activity," Baranay said. "We've gotten that message out there and we've gotten our company back. I'm happy to say we are back to our original level of sales and above that level, aiming at $250 million a year now.

"We also have a full-time attorney on staff devoted to nothing but intellectual property protection," Baranay said. "And he is on the road 75 percent of the time."

Not all stories end so happily.

In the world of small business, there may not always be a chance to fight back. A painter and designer, who asked that her name not be used, two years ago sent out a fabric design to be reproduced by a Chinese manufacturer. She obtained an international copyright and seemed to follow all the steps needed for a modest expansion of her little operation in a resort town. 

But as she was holding a press conference to unveil her new design, friends hesitantly told her that they had already seen purses with the design available in the shops of the tourist area where she worked. The counterfeits were from China. 

"The fakes actually were turned around faster than her originals," a friend said. "There was nothing she could do that made any sort of economic sense as she had no resources to fight it. All of us in the design business learned a lesson that very small businesses must be very careful in outsourcing material."

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By RADIO FREE ASIA (credits at end of article)
November 04, 2008

Hundreds of thousands of migrant workers in China's formerly booming coastal cities are heading home amid factory closures and labor disputes sparked by the global downturn.

SHENZHEN, China: Worker is detained during a sit-in protest outside a government building, 30 October 2008.

Millions of workers who flooded to China's booming coastal cities to find work during the past decade are now beginning to return home amid a wave of factory closures and unemployment sparked by the global financial crisis.

In a phenomenon more usual around the Lunar New Year holiday in late January, trains and long-distance bus networks are packed full of people heading west and inland, making tickets hard to come by as people head home to cut losses and be reunited with their families.

"A lot of people are workers returning to their family homes," one passenger on a packed train in southwestern China's Yunnan province said.

Factory closures and rising unemployment in the Pearl River Delta and eastern coastal regions are also sparking labor unrest, as workers stage demonstrations to demand their back pay and severance benefits from factories now in administration.

Police in the southern boomtown of Shenzhen detained eight former workers for the now bankrupt Hong Kong-invested watchmaker Yijinli following days of sit-ins and clashes with hundreds of workers who had not yet been paid by the administrators.

"There were about six or seven security personnel detaining one person," a former Yijinli worker surnamed Ou said of clashes that began Friday in the city's Bao'an district.

Workers demand back pay

"They pressed him to the floor and beat him really badly. Then they told us to get in the police vehicles, that there would be a free bus back to the factory. They still hadn't given us a response [to our demands]."

He said the workers had refused to move until their demands were met.

"Soon after that, more than 100 riot police came rushing in and started to drag us away. If anyone refused to get on the bus they would beat them. They said that the workers who had led the protest were disturbing public order. They detained seven people," Ou said.

A relative of one of the detainees, surnamed Yang, said the detention of his relative brought the total to eight.

"On Friday evening they detained one other worker. His name was Yang Daicheng. He had been speaking out quite fiercely around the factory," Yang said.

"That day they detained seven people. Now the total is eight. Four other people were taken in for questioning and held overnight."

Bao'an factories closed

He said most of the workers had left Shenzhen after collecting their back pay and severance benefits.

Government labor officials in the crisis-hit coastal cities have been scrambling to deal with a wave of such disputes, according to official media.

Four workers were injured in a scuffle with security guards when they took to the Shenzhen streets demanding back wages from Taiwan-invested appliance maker Shunyi Appliance Factory, the official Xinhua news agency reported.

The factory bosses couldn't be contacted, said Xinhua, which blamed the wave of closures on the rising value of the yuan, spiraling costs, and eroding orders.

The Shenzhen Labor and Social Security Bureau on Tuesday publicized the names of 30 companies that owe a combined 12 million yuan (U.S. $1.75 million) in back pay to workers. The Bureau demanded that executives report to the local labor authorities within 30 days, Xinhua said.

Fear of social unrest

In some places, the government has paid workers out of its own coffers to avoid further social unrest. Xinhua said the township government of Zhangmutou had pledged a payout to workers at the bankrupt Smart Union factory in Dongguan city worth 24 million yuan (U.S.$3.5 million).

Chinese experts say governments at different levels plan to earmark money for contingency reserve funds to help unpaid employees, most of them migrant workers. Plans were also being put forward for a mandatory reserve fund contribution by companies at start-up.

As for the former Yijinli protesters, Yang said the workers who had received government payout seemed to have forgotten about their former colleagues being held by police.

A police officer who answered the phone at the Bao'an district police station confirmed that the detentions had been made during the protest.

"At that time we detained a few people who were making trouble. I can simply tell you that all the people we detained will be dealt with according to law, with all documentation approved by higher levels of leadership," he said.

"However, if there are any dissenting opinions from among the relatives about the way we are handling this, they can launch an appeal at the Shenzhen Municipal People's Court," he added.

China's national police chief has called on police officers to mend relations with ordinary Chinese people, and to be careful of how they use force to settle disputes.

Original reporting in Cantonese by Hai Lan and in Mandarin by Gao Shan. Cantonese service director: Shiny Li. Mandarin service director: Jennifer Chou. Translated and written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.

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