Does the Spend Devil Wear Prada? Low-tech Negotiations Fund High-stakes Criminals

I was recently in Shanghai on business. An American woman walking down the street in Shanghai is repeatedly stopped and asked whether she would like to buy a watch or handbag. The goods being sold are designer fakes, like Rolex watches that may not work by the time you get home. I rebuffed all of these offers and found them annoying. Then, at the end of my trip, several of the Chinese women I'd been working with, bona fide procurement professionals, encouraged me to go to the Yatai Xingyang Fashion and Gift Market (aka, the "Fake Market") where they had recently shopped. I decided to give it a try, just for fun, and then report back to them how I made out. I'm not a big designer label aficionado, but I thought this might make for a fun story. This market is literally underground, a warren of stalls located right in the Shanghai Science Museum subway stop.

The negotiation process with the vendor was simple. She opened a suitcase of Prada bags in her store and began to show them to me. These bags hadn't even been on the shelf with the others. Once I had selected one, she put her asking price into a big calculator. The shopper counters the offer by putting on the calculator what he or she will pay until either an agreement is reached or the transaction is abandoned. During the negotiation, the vendor tries all sorts of ploys to get you to pay more, especially guilt-tripping, saying that she isn't going to make any profit or that her children are not going to eat if you pay her so little. In fact, it was hard to keep a straight face during this transparent haggling. Typically, genuine Prada bags start at $500+, but here they can be purchased for far less -- because they aren't genuine. In the end, I scored a Prada handbag for 75% off the vendor's asking price and far less than the price of a genuine bag. My Chinese purchasing mentors enthusiastically praised me for a very successful transaction. And later on, the American flight attendants on my flight home admitted that they too often buy these goods.

Suddenly concerned about bringing back such an item through U.S. Customs, I decided that I had better read the rules and regulations about bringing a presumed counterfeit item into the U.S. Was I going to be arrested or have my handbag seized? According to the Homeland Security regulations regarding prohibited and restricted items, you are allowed to bring back one such item (in the category of "Trademarked and Copyrighted Items") once every 30 days provided it is for personal use and not for sale. No stuffing 10 Breitling watches and three Dolce & Gabanna bags into your new suitcase (maybe also a designer fake) for holiday gifts, as someone I know once did.

I packed my handbag into my suitcase and headed home, thinking I had taken part in a harmless tourist adventure. Then I read an article in the April 26th WSJ, U.S. Seizes Big Batches of Fake Goods, which described how criminal gangs in China are using counterfeit items such as handbags to make easy money and fund their operations. The same article reported that terrorist organizations such as Hezbollah are doing the same. Instead of selling illicit goods, these groups find it easier to sell consumer goods. Also, the Department of Defense is concerned about fake goods getting into the military supply chain. And the next frontier is supposed to be pirated music, movies and medicine. Many American visitors make these designer goods purchases in China. However, the thought of possibly funding criminal gangs and terrorists gave me pause. What I did was legal, but perhaps not so harmless.

Sherry Gordon

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