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SINO-American perceptions of counterfeiting in the construction supply chain

Permanent Link: http://ufdc.ufl.edu/UFE0041669/00001

Material Information

Title: SINO-American perceptions of counterfeiting in the construction supply chain
Physical Description: 1 online resource (53 p.)
Language: english
Creator: Cui, Shuai
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2010

Subjects

Subjects / Keywords: counterfeiting
Building Construction -- Dissertations, Academic -- UF
Genre: Building Construction thesis, M.S.B.C.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Abstract: The problem of counterfeiting has existed for a long time, from the ancient practice of producing fake currency to the many current cases of counterfeit products in most segments of industry. The construction industry has particularly become the target of counterfeiters, and counterfeit products now pose a threat to the safety and health of the public. These problems currently are common in both source countries and target countries. Recently, large quantities of fake fly ash, the basic ingredient of concrete, were founded to have been used in a $12 billion railway project in China. In February 2008, federal authorities of the United States seized some 400 counterfeit Cisco Systems knockoffs worth $76 million. Since cultural differences can produce substantially various attitudes toward counterfeiting, this thesis compared and contrasted the trends and perceptions between China and North America in order to form a comprehensive understanding of counterfeiting and thus recommend effective methods to mitigate the problem.
General Note: In the series University of Florida Digital Collections.
General Note: Includes vita.
Bibliography: Includes bibliographical references.
Source of Description: Description based on online resource; title from PDF title page.
Source of Description: This bibliographic record is available under the Creative Commons CC0 public domain dedication. The University of Florida Libraries, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.
Statement of Responsibility: by Shuai Cui.
Thesis: Thesis (M.S.B.C.)--University of Florida, 2010.
Local: Adviser: Minchin, Robert E.
Local: Co-adviser: Issa, R. Raymond.

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2010
System ID: UFE0041669:00001

Permanent Link: http://ufdc.ufl.edu/UFE0041669/00001

Material Information

Title: SINO-American perceptions of counterfeiting in the construction supply chain
Physical Description: 1 online resource (53 p.)
Language: english
Creator: Cui, Shuai
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2010

Subjects

Subjects / Keywords: counterfeiting
Building Construction -- Dissertations, Academic -- UF
Genre: Building Construction thesis, M.S.B.C.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Abstract: The problem of counterfeiting has existed for a long time, from the ancient practice of producing fake currency to the many current cases of counterfeit products in most segments of industry. The construction industry has particularly become the target of counterfeiters, and counterfeit products now pose a threat to the safety and health of the public. These problems currently are common in both source countries and target countries. Recently, large quantities of fake fly ash, the basic ingredient of concrete, were founded to have been used in a $12 billion railway project in China. In February 2008, federal authorities of the United States seized some 400 counterfeit Cisco Systems knockoffs worth $76 million. Since cultural differences can produce substantially various attitudes toward counterfeiting, this thesis compared and contrasted the trends and perceptions between China and North America in order to form a comprehensive understanding of counterfeiting and thus recommend effective methods to mitigate the problem.
General Note: In the series University of Florida Digital Collections.
General Note: Includes vita.
Bibliography: Includes bibliographical references.
Source of Description: Description based on online resource; title from PDF title page.
Source of Description: This bibliographic record is available under the Creative Commons CC0 public domain dedication. The University of Florida Libraries, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.
Statement of Responsibility: by Shuai Cui.
Thesis: Thesis (M.S.B.C.)--University of Florida, 2010.
Local: Adviser: Minchin, Robert E.
Local: Co-adviser: Issa, R. Raymond.

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2010
System ID: UFE0041669:00001


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1 SINO AMERICAN PERCEPTIONS OF COUNTERFEITING IN THE COUNSTRUCTION SUPPLY CHAIN By SHUAI CUI A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUILDING CONSTRUCTION UNIVERSITY OF FLORIDA 2010

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2 2010 Shuai Cui

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3 To my mom and dad for their continuous support in my education

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4 ACKNOWLEDGMENTS I would like to thank all my professors and teac hers who have continual ly assisted me throughout my educational career. Without their encouragement and help I could not have become as successful a person as I am today. Special thanks must be given to my chair Dr. R. Edward Minchin, who was available t o continu al ly encourage and assist me in preparing and finalizing my thesis. I also would like to thank all the members of CII project RT 264 who have aided in my data collection process. Special thanks to Dr. Russel l Walters who motivated and assisted me in data analysis. Many of the people interviewed over the course of this project would not have been available without these additional contacts. Finally, I would like to thank my family who have continuously been there throughout my entire education al career. Without their continued support and motivation this opportunity would not have been possible.

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5 TABLE OF CONTENTS Page ACKNOWLEDGMENTS ................................ ................................ ................................ .. 4 LIST OF TABLES ................................ ................................ ................................ ............ 7 LIST OF FIGURES ................................ ................................ ................................ .......... 8 ABTRACT ................................ ................................ ................................ ....................... 9 CHAPTER 1 INTRODUCTION ................................ ................................ ................................ .... 11 2 COUNTERFEITING IN CONSTRUCTION ................................ .............................. 12 Definition of Counterfeiting ................................ ................................ ...................... 12 Examples of Counterfeiting ................................ ................................ ..................... 13 Counterfeit Airline Parts ................................ ................................ .................... 13 Cr anes ................................ ................................ ................................ .............. 14 Chinese Drywall ................................ ................................ ............................... 15 Fake IT Components ................................ ................................ ........................ 15 Fly Ash ................................ ................................ ................................ ............. 16 Circuit Breakers ................................ ................................ ................................ 17 Pipe ................................ ................................ ................................ .................. 18 Pressure Vessels ................................ ................................ ............................. 18 Fasteners ................................ ................................ ................................ ......... 19 Summary ................................ ................................ ................................ ................ 20 3 LITERATURE REVIEW ................................ ................................ .......................... 22 Trends in Counterfeiting ................................ ................................ .......................... 22 U.S. Customs Impact on Counterfeiting ................................ ........................... 22 Conditions in North America That Encourage Counterfeiting ........................... 24 Conditions in China That Encourage Counterfeiting ................................ ......... 24 Trends in the Construction Industry ................................ ................................ ........ 27 Current Construction Material Market ................................ ............................... 27 Chinese Construction Industry ................................ ................................ ......... 28 Chinese Materials Quality Control ................................ ................................ .... 29 4 RESEARCH METHODOLOGY ................................ ................................ ............... 32 Introduction ................................ ................................ ................................ ............. 32 Data Collection ................................ ................................ ................................ ....... 32 Methodology ................................ ................................ ................................ ........... 34 Research Objectives ................................ ................................ ............................... 35

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6 5 DATA ANALYSIS ................................ ................................ ................................ .... 37 Research Questions ................................ ................................ ............................... 37 Research Question 1: Have you ever been the victim of counterfeiting? ......... 37 Research Question 2: Have you heard from a reliable source of another party being the victim of counterfeiting? ................................ ........................ 37 Research Question 3 A: What was the counterfeit item? ................................ 38 Research Question 3 B: How was counterfeiting detected? ............................. 40 Research Question 3 C: How wa s the product counterfeited? ......................... 41 Research Question 3 D: How did the product enter the supply stream? .......... 42 Research Question 3 E: Ho w did the vendor of the counterfeit item react when confronted? ................................ ................................ .......................... 43 Research Question 3 F: How did other interested parties react? What were their main concerns? ................................ ................................ ..................... 44 about counterfeiting? ................................ ................................ ..................... 45 Summa ry ................................ ................................ ................................ ................ 47 6 CONCLUSION ................................ ................................ ................................ ........ 48 Summary of Research ................................ ................................ ............................ 48 Limitations of Research ................................ ................................ .......................... 50 LIST OF REFERENCES ................................ ................................ ............................... 51 BIOGRAPHICAL SKETCH ................................ ................................ ............................ 53

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7 LIST OF TABLES Table Page 3 1 2003 United States Customs Service IPR seizure statistics ............................... 23 5 2 Chines e interviewees who have encountered counterfeiting .............................. 38 5 3 Breakdown of counterfeit items in North America and China ............................. 39 5 4 Perce nt of companies that experienced counterfeiting for each type of item ...... 39 5 5 Reaction of vendors in North American interviews ................................ ............. 44 5 6 Reaction of vendors in Chinese interviews ................................ ......................... 44

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8 LIST OF FIGURES Figure Page 2 1 Pair of cranes. A) The legitimate crane, B) The fake crane ................................ 14 2 2 Corroding copper. ................................ ................................ ............................... 15 2 3 Making the ash powder ................................ ................................ ...................... 16 2 4 Loading the ash powder ................................ ................................ ..................... 17 2 5 Genuine and counterfeit circuit breakers ................................ ............................ 17 2 6 Ruptured steel pipe ................................ ................................ ............................ 18 2 7 Failure of a pressure vessel ................................ ................................ ................ 19 2 8 Counterfeit bolts. A ) Bolts welded together to hide a deficient piece. B) Bolts welded together to hide a deficient piece. C) Bolt with visible voids ................... 20 4 1 Interviewee location ................................ ................................ ............................ 33 4 2 Interviewee type ................................ ................................ ................................ 33 5 1 Frequency of counterfeiting in China vs. North America ................................ ..... 38 5 2 Most common detection methods in China and North America .......................... 41 5 3 Most common methods of counterfeiting in China and North America ............... 42 5 4 Most common sources of counterfeit items entering the supply stream in China and North America ................................ ................................ ................... 43 5 5 Most commonly expressed concerns in China and North America ..................... 45 5 6 The attitudes of local governments toward counterfeiting ................................ ... 46 5 7 toward c ounterfeiting ................................ ................................ .......................... 47

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9 Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Science in Building Construction SIN O AMERICAN PERCEPTIONS OF COUNTERFEITING IN THE COUNSTRUCTION SUPPLY CHAIN By Shuai Cui M ay 2010 Chair: R. Edward Minchin Jr. Co chair: R. Raymond Issa Major: Building Construction The problem of c ounterfeiting has existed for a long time from the an cient practice of producing fake currency to the many current cases of counterfeit products in most segments of industry. The construction industry has particularly become the target of counterfeiters, and counterfeit products now pose a threat to the safe ty and health of the public. These problems currently are common in both source countries and target countries. Recently, large quanti ties of fake fly ash the basic ingredient of concrete, were founded to have been use d in a $12 billion railway project in China In February 2008, f ederal authorities of the United States seized some 400 counterfeit Cisco Systems knockoffs worth $76 million. Since cultural differences can produce substantial ly various attitudes toward counterfeit i ng, t his thesis compared and contrasted the trends and perceptions between China and North America i n order to form a comprehensive understanding of counterfeiting and thus recommend effective methods to mitigate the problem T his thesis analyzed data from 74 Chinese interview files and 85 North American interview files (75 from the U S 10 from Canada ) and i solated data from relevant

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10 answers to more than 40 questions, focusing on the 10 questions that best illustrate the difference s in attitudes, culture s trends and opinions betwe en C hinese and Western i nterviewees. The research found that the main source of the counterfeiting problem is China. The motivation of counterfeiters essentially comes from the culture of China which a philosophy that has resulted in a lack of awareness and legitimate regulations to effectively prevent counterfeiting. The preven ta tive actions that should be taken from this thesis are education and training. If China is going to sell to the United States they need to u nderstand how Americans feel about counterfeiting. Conversely i f the United States is going to buy from China, Americans need to understand the risk and send corporate representatives to China to oversee production

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11 CHAPTER 1 INTRODUCTION The constructi on industry constantly is being driven to build better, faster and cheaper products In order to pursue maximum profits, construction companies reduce costs by procuring raw material s and equipment from the lowest cost sources Since the trend of supply c hain management is toward global sourcing, more complications to secur ing the procurement have arisen Quality control can be a very complex issue if materials are pr ocured from a variety of source countries Fabrication errors, improper specifications, an d improper identification of items all are likely to be compounded on construction projects. On top of these quality control problems, counterfeiting does occur, which is the intentional act to deceive the purchaser into believing that the product or mater ial is something that it is not. Because t he construction industry directly affects the daily lives of every person the awareness of t he whole industry must be increased and effective measures must be implemented to mitigate counterfeiting Understanding a nd controlling cou n terfeiting requires the purchaser to understand how cultural differences produce different attitude s toward counterfeiting By understanding the cultural motivators that drive counterfeiters one can be in a better position to eliminate or reduce the lik e lihood of purchasing counterfeit products and materials The intent of t his paper is to compare and contrast the trends perceptions, attitudes, opinions and cultural ideas on counterfeiting between Western countries and China through a nalysis of collected data in order to recommend measures to mitigate the counterfeiting problems in these countries.

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12 CHAPTER 2 COUNTERFEITING IN CO NSTRUCTION The production and sale of counterfeit products plays a great part in the international economy In the mid 1980s it was estimated that counterfeit products composed nine percent of total world trade in manufactured goods. Even though many countries have signed agreements to protect intellectual property counterfeit products now are even more avai lable in international markets. According to the World Trade Organization, wor ld trade increased by 47 % from 1990 to 1995; during this period, however, trade in counterfeit products increased by 150 % With the inclusion of counterfeit products that are pro duced and marketed domestically within a country the total value of counterfeit products marketed in the world currently is estimated to be more than $1 trillion annually (Hung 2003) Definition o f C ounterfeiting A counterfeit is an imitation, usually mad e with the intent of fraudulently passing off as genuine. Counterfeit products often are produced with the goal of taking advantage of the established worth of the imitated product. Counterfeit products are different from low quality products. Low quality products o bviously fail to meet performance standards, while counterfeit products usually have during which the item appears to be functioning normally and likely would go undetected even by professional inspectors. Thus counterfeit products raise serious concerns Counterfeit products can be classified into three types. Class products and materials are the results of patent infringement or other intellectual property fraud and are of similar quality to the legitimat e brand. Class A counterfeit

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13 materials and products do not pose a hazard. Class and materials are obvious fakes which both the selling and purchasing parties usually know. They typically are not a concern in construction as they are detecte d through standard quality control methods. Class legitimate under normal quality control procedures but fail to perform due to low quality. Class focus of this research project because they are the most dange rous and difficult to identify This effort did not focus on: Intellectual property violations Low quality or poorly designed products (unless they were produced or marketed with the intent to deceive). C ommercial counterfeiting (retail products) Copyright infringement. Example s of C ounterfeiting Construction materials can be and have been counterfeited, and such counterfeit materials have posed great dangers to human health. Several high profile examples of counterfeiting have b een reported in the construction industry, such as the cases involving Chinese drywall, fly ash, cranes circuit breakers, pipe, pressure vessels and fasteners Co unterfeit A irline P arts In the commercial airline industry, aircraft routinely carry 300 or more people A failure caused by a counterfeit aircraft part can be truly catastrophic. Numerous major airlines currently have fake or used parts among their inventories, and some quietly admit it. In 1998, the Organi s ation for Economic Co operation and De velopment

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14 reported that as much as $1 billion in unapproved airline parts were in warehouses of U S a irlines and parts distributors. In 2001, a publication by Lawrence Livermore National Laboratory reported that as much as $2 billion in unapproved parts n ow are sitting on the shelves of parts distributors, airline s, and repair stations (Parker 2001). In 2004, the Federal Aviation Administration estimated that two percent of the 26 million airline parts installed in aircraft were counterfeit (Scottsdale 200 6). Cranes Counterfeit cranes have become a major problem in recent years. Counterfeiters have been able to duplicate actual product s almost exactly by making the general design and even coloring identical so that only a trained and experienced profession al would be able to tell the difference. In one case, some suspicious Tadano model cranes near Jabel Ali sea port were identified by close inspection to be counterfeit cranes manufactured in China Figures 2 1(legitimate) and 2 2 (fake) illustrate that the differences between the real thing and a counterfeit item can be subtle A B Figure 2 1 Pair of cranes. A) The legitimate crane B) The fake crane Terex Cranes also has identified eight counterfeit lattice boom crawler cra nes being sold as Terex Demag models in the Henan Province of China. These counterfeit

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15 cranes would threaten worker safety due to a mixture of different features and unmatched components in the manufacturing process. Chinese D rywall The case of counterfei t Chinese drywall has caused health concerns as well as deterioration of building components. In this case, the foul odor of sulfur emanating from the drywall was giving people serious respiratory problems that were compelling them to vacate their houses. Furthermore, the toxin that was given off by this drywall was corroding copper components in the building. These include d copper piping used in plumbing copper wir ing, and copper evaporator coils in the HVAC units. Public safety is a major concern w here t his type of drywall was installed. Figure 2 1 shows how gas emitted from the defective drywall corrodes copper wiring, turning it black. Figure 2 2 Corroding copper. Fake IT C omponents In 2005, a study by the Alliance for Gray Market and Counterfeit Abatement and consulting firm KPMG LLP estimated that the global IT industry annually loses about $100 billion due to counterfeiting This figure does not count the cost of indirect effects

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16 such as field service, recalls, and wa rranty claims as well as harm to the company image and loss of customer satisfaction (Laurent Bernardin 2009) At the end of 2007, European and U.S. officials vowed to crack down on fake IT components after a two week raid uncovered more than 360,000 coun terfeit i tems. The seizure, which had a total value of more than $1.3 billion, contained fake versions of products from Intel, Cisco, Phillips and ot her famous international companies Trade in fake IT components has reached $200 billion a year, and most of these goods originate in China (The Raw Feed, Friday, February 22, 2008) Fly A sh A variety of instances have occu r red in which people have been injured or even killed due to counterfeit material and equipment. Recently, large quantities of bogus materi al were found being used in several hundred kilometers of a $12 billion high speed railway between the cities of W uhan and Guangzhou. The railway contractors had been tricked into buying large quantities of fake or deficient coal fly ash which is a common ingredient in concrete. Authori ties believe that this problem c ould destroy the Figure 2 3 Making the ash powder

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17 Figure 2 4 Loading the ash powder structure of the railway creating a cata strophe in public safety. Figure 2 2 shows one of the factories that were making fake fly ash powder. Figure 2 3 shows the loading of fake fly ash powder in the town of Pingshi. Circuit B reakers Smaller items also were found to be counterfeit. These items include rebar, fasteners, and circuit break ers. In one case, a shipment of one million Square D circuit breakers was found coming into the port of New York from China; Square D does not Figure 2 5 Genuine and counterfeit c ircuit breakers

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18 even produce these items in China. In fact, Square D manufactures its products only in the U.S. So all imported Square D circuit breakers are counterfeit. Figure 2 6 shows the difference between genuine and counterfeit circuit breakers. Pip e Counterfeit piping is a common problem in the construction ind ustry. In one case, a steam line from a 300 megawatt unit at the Dato ng Power Station Unit 2 failed after only six weeks of use. F igure 2 7 shows the failure of this pipe. This failure of a pi pe that contained steam at 1006 F at a pressure of 2538 psi resulted in the death of two employees as well as serious injuries which left several people in critical condition. Figure 2 6 Ruptured steel pipe Pressure V essels Pressure vessels and other steel products tend to fail due to counterfeit steel Often this is a result of the fraudulent use of low quality steel or the use of alloys that

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19 may not be intended for application with certain chemicals or pressures. Many of t hese failures tend to occur during the initial hydro testing a dangerous situation that should never occur. Figure 2 8 shows the failure of a pressure vessel. Figure 2 7 Failure of a pressure vessel Fasteners In the 1980s, counterfeit fasteners were found on a rmy tanks, naval vessels, and I nterstate highway bridges. Consequently, the House Subcommittee on Oversight and Investigations examined the U.S. fastener industry. The study not only documented inadequate standards and quality control methods in the fastener industry but also found that low grade imported parts were passing through as high quality fasteners. In 1990, the Fastener Quality Act (FQA) provided guidelines for inspecting and labeling fasteners and accrediting test facilities. Today, counterfeit fasteners are a negligible problem in the U.S. although the fastener industry endured a 14 year struggle (1985 1999) with the federal government over the proper marking of products and strict adherence to industrial st andards (Joe Greenslade, Director of Engineering Technology for the Industrial Fastener Institute).

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20 Bolts are common counterfeit items because they often are already in place when items such as pressure vessels and valves are purchased. For this reason, it is a good idea to torque bolts even after they have been installed. Figures 2 9A and 2 9B show how fake bolts were made by welding smaller pieces to the ends of bolts that were the correct sizes to save money or fix broken bolts. In most cases, these bolt s are not checked; however, this bolt appeared loose, and when torque was applied, the bolt snapped into the two pieces seen in Figures 2 9A and 2 9B. Another situation can be seen in Figure 2 9C, where there are visible voids in a manufactured bolt. This defect is not visible on the outside, but once the bolt has been split, the voids are clearly visible. These voids can reduce the bolt strength, which leads to failure. Figure 2 8 Counterfeit bolts A) Bolts welded tog ether to hide a defic i ent piece. B) Bolts welded together to hide a d eficient piece. C) Bolt with visi ble voids Summary Because c ounterfeiting is a worldwide threat due the globalization of the supply chain, it should be addressed at the global level. How ever, counterfeiting can not be addressed the same way in every country it should be recognized that cultural differences still can result in substantial variations of definition s in ethics. A

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21 difference in ethics can directly affect attitudes toward counterfeiting. The better the understanding of differences in cultural perceptions of counterfeiting, the more effective measures can be taken to mitigate it

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22 CHAPTER 3 LITERATURE REVIEW Trends in Counterfeiting Product counterfeiting, w hich is commonly defined as unauthorized copying of trademarked or copyright goods, damages legitimate producers through lost sales. International product counterfeiting has grown to be a serious problem in several industries (Bloch et al. 1993). The manuf acture and sale of counterfeit products plays a significant role in the international market (Hung 2003). In the mid 1980s, counterfeit products composed an estimated nine percent of total world trade in manufactured goods. In spite of many countries havin g signed agreements to protect intellectual property rights (IPRs), counterfeit products are available more than ever in both world and national markets. The two most significant aspects of counterfeiting today are its financial significance and internat ional scope. The counterfeiting problem is not limited to just commercial goods. It also is a problem among industrial goods that sometimes has disastrous consequences. For example, ineffective counterfeit pesticides are estimated to have caused a 15% decr ease in the coffee crop of Kenya which is chief export crop. The problem perpetuated itself when farmers, afraid that the ineffective counterfeit pesticides posed a threat became reluctant to use any pesticides at all (Abalo 1984). U.S. Cus toms Impact on C ounterfeiting In 2003, U.S. Customs seized a net value of $94 million in counterfeit and infringing goods at ports of entry into the United States. Of this total, products coming from China accounted for $62.4 million or 66% of the total. The 2003 figures for China

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23 represent a significant increase over comparable figures from 2002 when China account ed for 49% of all counterfeit and infringing products and $48 million of the total $98 million in illegal product s seized by U S Customs (Chow 2004). Table 3 1 2003 United States Customs Service IPR seizure statistics Trading partner Domestic value ($) Percent of total China 62,468,018 66% Hongkong 8,236,507 9% Korea 3,219,268 3% Parkistan 2,010,465 2% Mexico 1,966,929 2% Malaysia 1,331,925 1% Philippines 1,224,058 1% Canada 1,189,160 1% Switzerland 676,197 Less than 1% Thailand 662,112 Less than 1% All other counteries 11,024,588 Total FY 03 Domestic v alue 94,019,227 Number of seizures 6,500 Counterfeit items from China and Hong Kong (through which many counterfeits produced in China are transshipped) accounted for $80 million or 75% of the total customs seizures. No other country accounted for m ore than three percent of counterfeit products. I t has become well known that many counterfeit products which are made in China are transshipped through other countries, such as those in South America and Canada, before ultimately entering the United State s Thus China accounts for a significantly higher percentage than the 66% reported by the 2003 U S Customs statistics. It is possible that China accounts for up to 80% or even more of the counterfeit goods that enter the United States. Note that the $94 m illion figure represents only the value of products that were actually seized by U S Customs in 2003 This likely is only a tiny fraction of what enters the U S market. If the total value

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24 of the products seized accounts for one percent of the counterfeit an d infringing products that enter the U.S. market then the total value would have been approximately $10 billion with China accounting for between $6 8 billion of that total. It is feasible that the actual figures are much higher (Chow 2004). Condition s in N orth America T hat E ncourage C ounterfeiting The United State s is the largest market in the world for counterfeiters. Counterfeiters select products originating in the United States because U S multinational corporations (MNC s ) expend a large amount o f time and money to establish product visibility and brand identity. Therefore, counterfeit products are desirable because they have been labeled as product s of legitimate manufacturer s Also the distribution of counterfeit U.S. products includes both dom estic and international products. Therefore, the counterfeiters can expand their market by selling their products both inside and outside the United States. The United States is one of the tech industries, and counterfeiters want to make the most technologically advanced products in order to increase profit. Moreover, the international market does not have an adequate supply of legitimate products of the United States, a fact that provides counterfeiters an opportunity to produce the se kinds of goods in order to meet demand. In the United States, domestic and international legislation have done little to regulate counterfeiters (Harvey 1987). Co nditions in China That E ncourage C o unterfeiting P roduct coun terfeiters have established the mselves all over the world, b ut the counterfeiting industry in China is estimated to pose the most serious counterfeiting problem in world history and appears to still be on the rise. The magnitude of

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25 counterfeiting operations in China is astounding. Accor ding to the Chinese value of counterfeit products domestically produced and marketed with in China in 1998 was $16.1 billion (Hung 2003). A recent study by State Coun cil Research and Development Center reported that in the year 2001 the Chinese economy included $19 24 billion worth of counterfeit goods. Brand o wners in China estimate that 15 20% of all products bearing well known brands in China are counterfeit and est imate their losses to be in the tens of billions of dollars per year. Counterfeiting is estimated to now account for approximately current gross domestic product (Chow et al 2004). In recent years, there has been an increase in t he number of both counterfeiting cases handled and criminals punished. Al l together 12,260 criminals involved in counterfeiting were prosecuted; of these, only 1,636 received sentences from five year imprisonment up to the death penalty. The others receiv ed less severe penalties. Among all cases, 8,272 w ere related to counterfeit money, securities, financial documents and special invoices, an increase of 64% since 1998; 206 were related to patent or trademark counterfeiting and false advertisements, an in crease of 26% over the last year with 275 criminals punished (Chow et al 2004). Another investigation of 283 enterprises in China conducted by the State Bureau of Quality Technical Supervision revealed a similar situation. Among all the enterprises inv estigated, 182 spend 240 million Yuan ( $ 29 million U.S ) annually and employ more than 1 600 people to combat counterfeit ing ; 160 of them suffered from counterfeiting

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26 activities, with a total damage of 9.6 billion Yuan, which accounted for 11.1% of their a nnual gross output value (Chow et al 2004). The counterfeiting of trademarks, brands, and other intellectual property in China is currently the most serious counterfeiting problem in the world. Fake foreign goods in China are so common that consumers cann ot easily distinguish between real and fake foreign commodities. Almost every consumer in China knows that counterfeits of well known international and local brands are peddled in every street market. The Shanghai Technical Supervision Bureau recently rele ased the results of a survey of computers t of 14 models of imported brand name computers satisfied industry standards. A large number of the low quality computers that were marketed as world famous brands actually were shoddy counterfeit products. A survey of the Shanghai footwear market in early 1996 indicated that various brands of shoes, including Nike and Puma, were low quality counterfeit knockoffs T he export of counterfeit products fro m China to co untries and territories abroad has increased recently, a disturbing trend which indicates that China has become the source of a global counterfeiting problem (Hung 2003). In recent years, c omplaints by Chinese consumers about counterfeit and i nferior products have risen sharply. As reflected in consumer complaints, almost every product catego ry is subject to counterfeiting ; these include television sets, washing machines, radios, stereos, cameras, motorcyc les, pharmaceuticals, baby food and in stant noodles. These complaints indicate that many counterfeit products are of inferior quality and may harm unwitting consumers. Perhaps t he most notorious recent incident involving counterfeit liquor, led to twenty seven human deaths in 1997 (Chow 2000)

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27 Trends in the Construction Industry Current C onstruction M aterial M arket Materials compose one of the three major cost s of construction. Materials sometimes are ordered weeks or even months in advance of requirement leading to uneconomical inventory on c onstruction sites or in contractor s warehouses. A study by Marsh (1985) shows that mat erials and equipment constitute approximately 60% of a s represent a large portion of construction costs and may represent a n even larger portion in the future (Bernold et al 1991). nstruction industry annually consumes 20 30% of the total steel production, 70% of cement, 40% of timber, 70% of glass, 50% of paint and 25% of plastic products (Chen 1998). Even though the state plan of producing and supply ing building materials through the quota system has shrunk significantly in the last decade, about 50% of building materials still are produced and supplied through the s tate p lan system for mo st large projects (Chen 1998). The cost of material varies depending on the type of construction project Various estimates place the cost of materials in industrial construction projects in the range of 50 60% of the project cost. This does not include e conomic costs that are not measured but nonetheless exist. Materials dictate 80% of a project sch edule from the initial material acquisition to the delivery of t he last item (Kerridege 1987). Furthermore, m aterials greatly costs, plans and operations and are a The importance of materials is even more evident among international construction projects. The management of materials on an overseas project poses

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28 another level of complexity, e specially in a situation where procurement responsibilities or the constructor. Many construction projects in third world countries are a ffected by the unavailability of l oca l l y sourced supplies in the host country, necessitating the imp ort of most materials. Quality can be come a complex issue if materials are procured from a variety of sources (Chen 1998). Chinese C onstruction I ndustry The Chinese economy has developed at an alarming rate since 1980. The gross value of industrial output increased by an average annual rate of 17% from 1980 1991 and 27% from 1992 1993, with a sh are of 57% of the GDP in 1991. In terms of agricultural output, t he average annual growth rate was six percent from 1980 1990 and four percent from 1991 1993, with a 27% share of the GDP in 1991. The share of services in the GDP increased from 23% in 1980 to 27% in 1993. Fixed investment grew at an average annual rate of 13% from 1980 1991 and 23.3% fro m 1992 1994, with a share in the GDP of 32% in 1992. National income grew at an average annual rate of eight percent from 1980 1991 and 12% from 1992 1994. The total value s of exports and imports in 1994 were $121 billion and $115.9 billion respectively, with a trade surplus of $5.1 billion. FDI inflows reached $42.2 billion by 1994, with an average annual increase of 28.1% from 1 986 1994 (Chen 1998). The gross output of the construction industry which was valued at 13.9 billion Yuan in 1978, had reached 382 billion Yuan in 1994 The major construction output for this period could be divided into the following numbers: 110,000 megawatts of new electrical generating capacity; 117 million tons of cement production; 7,484 km of new

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29 railw ay lines; 41,300 km of new high ways; 340 million tons of additional harbor cargo handling capacity; more than 10 new major railway stations in big cities; more than 2 billion square meters of new residential housing; 9.3 billion square meters of rural housing; and a large numbe r of public facilities. This output was complemented by roughly 25.4 million tons of additional coal production and 183 million barrels of additional petroleum recovery. T he annual output of the construction industry currently is about $93 billion The ind ustry employs about 24 million people, more than five percent of the total labor force in the country (Chen 1998). Construction activities have spread throughout the country. From 1978 1994 t he majority of Chinese construction projects were concentrated in the province of Guangdong and along the east ern coastal areas in the field of civil engineering and construction installation work. In recent years, increasing numbers of projects involving infrastructure and energy exploration have taken place in the i nland provinces (Chen 1998). in comparison to developed countries. Thus construction industry may exist The rapid growth of the co nstruction industry has directly resulted in a dire shortage of infrastructure and building space. Moreover, this growth rate is predicted to continue to increase in to th e foreseeable future (Chen 1998) Chinese M aterials Q uality C ontrol The q uality of c on struction is recognized as a serious problem in China The q generally is better than that of provincial enterprises, and the quality of construction by

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30 state o wned e nterp rises is considered to be better than that of u rban and r ural c ollectives and r ural c onstruction t eams (RCTs). The quality of work done by RCTs ranks worst; waste of construction material is a major contributing factor. The reasons for low const ruction qua lity range from poor designs to low quality materials, weak management, ambitious completion targets, and lack of worker skills. Improving construction quality is one of the major challenges currently industry ( Chen 1998 ). A lar ge amount of the available raw resources are made into building materials China widely uses raw materials and transport systems. The primary problems with the building material s in China are the following : Lower productivity in building materials in comp arison to other industries Lower profitability of building material Continued use of quota system for estimating construction costs. Cost estimating based on this system is in accurate because it is fixed annually or semiannually while material prices fluct uate (Chen 1998). The performance and quality of building materials are of great importance to the construction industry. They affect not only the safety and functions of construction projects but also socioeconomic development. A good example is found in building construction in Beijing. With the acceleration of urbanization in Beijing, building materials used in residential and public buildings are in high demand B ecause such a large quantity and great variety of building materials are being used in Beij ing, quality control measures are difficult to enforce In addition to bricks and building blocks mainly sourced by Beijing enterprises, an increasing proportion of building materials such as steel, cement, sanitary ceramics, stone materials and radiator s are supplied by enterprises from other provinces, a practice that contribute s to the complication of

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31 supply channels with the participation of numerous companies. This results in difficult management of product quality (Beijing Municipal Commission of Hou sing and Urban Rural Development 2007).

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32 CHAPTER 4 RESEARCH M ETHODOLOGY Introduction The objective of this research is to analyze Chinese interview data along with data gathered in the United States in order to c ompare and contrast the trends, perceptio n, attitudes and opinions of the different cultures. Data Collection To accomplish the research objectives, several interview methods were developed and used to interview a variety of people. The interview comprised approximately 40 questions about vario us inter related aspects of counterfeiting The interviewees included government agents, insurance agents, owners, contractors, manufacturers, and suppliers. Depending on who was being interviewed, different sets of questions were asked specific to a person Each interview took approximately one to one and a half hours to conduct, depending on the on the subject. These people were contacted with the help of the research team and were chosen based on the size a nd importance of their organizations in the global construction industry and their particular position s and functions within the organizations. In total, 180 face to face interviews were conducted with industr ial and governmental leaders in China, Taiwan, Hong Kong, the United Kingdom Pakistan, Canada, and throughout the United States. The team also conducted five telephone interviews. The breakdown was 70 face to face interviews in the U S 74 in Chi na, 10 in Canada, 16 in Taiwan, eight i n the UK, and t wo in Hong Kong. The phone interviews all were with in the U S. Figure 4 1 shows the breakdown of interviews by country.

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33 Figure 4 9 Interviewee location Figure 4 10 Interviewee type Interviewees from private industry tended to be responsible for either quality or procurement within their organization, thoug h some were in top administrative positions. The breakdown of interviewees for all na tions was as follows: 36 manufacturers (20%);

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34 32 government or pseudo government officials (17%); 7 insurance executives (4%); 20 suppliers or dist ributors (11%); 25 construction owners (14%); 64 contractors (35%). Figure 4 2 shows the interviewee breakdo wn by type. The questions that were asked included but were not limited to: 1. What is the difference between counterfeits and low quality products? 2. What do you do to prevent counterfeiting? 3. Have you ever experienced cases of counterfeiting? Where was the pro blem? Where did it come from? 4. What do you do to qualify vendors? 5. What are some key indicators of counterfeiting? 6. Who reports to whom in the case of counterfeiting? 7. What trends do you see in counterfeiting? 8. How aware is the industry of counterfeiting? Me thodology 74 of the raw Chinese interview files were translated into English and transcribed into Microsoft Word format along with 85 English interviews. This allowed the two sets of interviews to be categorically analyzed. The interviews followed a master script that was developed to collect data on the key points of the trends in counterfeiting. D ue to cultural differences, t he questions used in the Chinese i nterviews slightly diffe r ed from those asked in the United States. Professor Pan of Tsinghua Univ ersity who was responsible for collecting data in China revised some questions to adapt to the culture within China. An example of such a revised question is as follows: United States question #1 : What does your local government think about counterfeitin g?

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35 Chin ese question #1 : Have you ever discussed this problem with the local government? In an effort to identify cultural differences and thus effectively conduct the research, open communication was maintained with Professor Pan to clarify the reason s why she changed the questions. The data from 74 Chinese i nterview Files (65 interviewed by the Chinese team, nine interviewed by the American team), and 85 North American interview files were analyzed to compare and contrast the trends, perceptions, and attit udes between the Chinese and the North American data Because the data were mainly qualitative as opposed to quantitative, they could not be analyzed statistically but rather as a process of seeking trends and commonalities. Research Objectives The specif ic objectives of this research project are as follows : Assess t he vulnerability of the construction industry to counterfeit items Discuss issues involving the supply chain In dentify the attitude of source countries toward count erfeiting As the research methodology indicates, the following data points will be chosen from North American interviews and Chinese i nterviews: 1. Have you ever been the victim of counterfeiting? 2. Have you heard from a reliable source of another party being the victim of counterfeitin g? 3. Case Study Data a. What was the counterfeit item? b. How was it detected? c. How was it counterfeit ed (i.e. brand, material, documentation, certification)? d. How did it enter the supply stream? e. How did the vendor react? f. How did other interested parties react?

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36 4. Wha t does your local government think about counterfeiting?

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37 CHAPTER 5 DATA ANALYSIS Research Questions Research Q uestion 1 : Have you ever been the victim of counterfeiting? Research Question 2 : Have you heard from a reliable source of another party being t he victim of counterfeiting? As indicated by the background research counterfeiting has become a common problem in recent years. One point of interest in the research was to determine the vulnerability of the constructio n industry to counterfeit items. G uided by this objective, t he following question s were asked in the interviews: Have you ever been the victim of counterfeiting? and H ave you heard from a reliable source of another party being the victim of counterfeiting? Of the 74 interview ee s in China, 48 said that they have been the victims of coun terfeiting or have heard of an other party being the victim of counterfeiting. O f the 85 interviewed in North America, 53 said yes to the same question. Table 5 1 shows the percentage of North American intervie wees who have encountered counterfeiting. Table 5 2 shows the percentage of Chinese interviewees who have encountered counterfeiting. Figure 5 1 compares the experiences of North America and China. From the findings of the Chinese interviews, most people a re aware of counterfeiting and believe that it is a common problem. Even the interviewees who had Table 5 1 North American interviewees who have encountered counterfeiting North American interviewees who have e ither encountere d counterfeiting or have heard of a case of counterfeiting from a reliable source Frequency Percent Yes 5 3 62.3% No 1 8 21.2% N/A 14 16.5% Total 85 100.0%

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38 Table 5 2 Chinese interviewees who have encountered counterfeiting Chi nese interviewees who have either encountered counterfeiting or have heard of a case of counterfeiting from a reliable source Frequency Percent Yes 4 8 64.8% No 10 13.5% N/A 1 6 2 1.7% Total 74 100 .0 % Figure 5 11 Frequency of counterfeiting in China vs. North America not been victims of counterfeit products always knew of incidents reported by the media. The high proportion of interviewees who have experienced counterfeiting indicates that the pr oblem is very common in both source countries and destination countries. Research Question 3 A: What was the counterfeit item? To collect information on case studies a group of questions were asked in the interviews regarding actual cases of counterfeitin g Numerous counterfeit items were identified in response to the q uestion, w hat was the counterfeit item? Steel both bulk and plate, was the item most identified as counterfeit. Finished steel products such as valves and pipes also were common in both set s of data. Electrical items, primarily circuit breakers, were the construction items n ex t most counterfeited. Table 6 3 shows

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39 the breakdown of the most counterfeited construction items in both countries. Table 6 4 shows the percentage of interviewees who r eported on each type of item The perc entage per interviewee in Table 5 4 exceeds 100% because some interviewees identified more than one type of counterfeit item. A number of Chinese interview ee s mention ed a n upward trend in counterfeit non structural mate rials such as decoration material and wate rproof or insulation material because the standards and inspection processes in nonstructural materials are not sufficient to prevent counterfeiting. Essentially, the motivation for counterfeiting Table 5 3 Breakdown of counterfeit items in North America and China Counterfeit Items North America China Frequency Percent Frequency Percent Steel 17 16.5% 16 16.7% Valves 13 12.6% 12 12.5% Pipe 12 11.6% 14 14.6% Fasteners 10 9.7% 0 0 Cir cuit b reakers 7 4.8% 2 2% Rotating e quipment p arts 6 5.8% 4 4% Electric al e quipment 6 5.8% 8 8% Pipe fittings 5 5.8% 2 2% Pressure v essel s 5 4.8% 3 3% Cement 3 2.9% 3 3% Electrical c onduit f ittings 3 2.9% 2 2% Waterproofing or insulating material 2 1.9% 5 5.2% Pump s 0 0 3 3% Ceramic tile 0 0 5 5.2% Wir ing 2 1.9% 4 4.1% Other 12 11.65% 13 13.5% Total items 103 100% 96 100% nonstructural materials are lower risk and easier operation. Table 5 4 Percent of companies that e xperienced counterfeiting for each type of item Counterfeit Items North America China Frequency Percent Frequency Percent

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40 Steel 17 20% 16 21.6% Fasteners 10 11.8% 0 0 Valves 13 15.3% 12 12.6% Pipe 12 14.1% 14 18.9% Circuit b reakers 7 8.2% 2 2.7% Rotating equipment p arts 6 7% 4 5.4% Electric al e quipment 6 7% 8 10.8% Pipe fittings 5 5.8% 2 2.7% Pressure v essel s 5 5.8% 3 4% Cement 3 3.5% 3 4% Electrical c onduit f ittings 3 3.5% 2 2.7% Waterproofing or insulating material 2 2.3% 5 6.7% Pump s 0 0 3 4% Ceramic tile 0 0 5 6.7% Wir ing 2 2.3% 4 5.4% Other 12 14.1% 13 17.6% Total items 103 96 Total interviewees 85 74 Research Question 3 B : How was counterfeiting detected? C ounterfeit items have been discovered in several ways, the most c ommon being testing. F igure 6 2 shows the methods used to detect counterfeit items. F rom these findings, it can be see n that 24% of the Chinese interviewees answered that counterfeit products would have been put into use without certification, while 16% of the North American interviewees gave the same answer. Without ensuring product integrity counterfeit products that are put into operation will cause great problems after The definition of counterfeiting which was presented in C h apter 2 stated that counterfeit products appear to be good products, and thus are unlikely to be detected by simple testing. A source inspection program should be implemented regardless of where an item is placed for critical materials. The

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41 higher the cr iticality of the goods or materials, the more robust the inspection program should be. Figure 5 12 Most common detection methods in China and North America Research Question 3 C : How was the pr oduct counterfeit ed ? Figure 5 3 shows the breakdown of the m ajor methods of counterfeiting. In the North American interviews fraudulent stamps and paperwork were reported far more than the method most familiar to the public, which is faked bra nd names, lo gos, or trademarks. In fact, only 24 % of all identified counterfeit items were due to faked brand names, logos, or trademarks. Note that the percentages in Figure 6 3 should not sum to 100 % in North America n i nterviews because more than 25% of those who id entified counterfeit items could not remember the details of how an item was identified as counterfeit.

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42 B rand counterfeiting w as the most common method reported in the Chinese interviews The percentage of counterfeiting methods reported in the Chinese i n terviews exceeds 100% because f aked brand names and logos always co exist with faked certifications. Figure 5 3 shows the comparative methods of counterfeiting between China and the United States. Figure 5 13 Most common methods of counterfeiting in China and North America Research Question 3 D : How did the product enter the supply stream ? Each interviewee was asked to identify how the counterfeit items entered the supply stream. The uniform response was that the item entered through the distributors. I t is worth noting that most counterfeit items are purchased from smaller manufacturers or suppliers in China. These kinds of suppliers are more concentrated in s maller cities or towns in China where the re are few or no regulations. Figure 6 4 shows the

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43 percentage figures of how counterfeit items enter the supply chain stream in both countries. Figure 5 14 Most common sources of counterfeit items entering the supply stream in China and North America Research Question 3 E : How did the vendor of the counterfeit item react when confronted? The reports of reaction s when confronted about p roviding counterfeit products are surprising. Up to 50% of the interviewees answered that the vendor ducked responsibility or even denied the accusations In contrast, 36% of the vendors showed definite interest in taking measures to solve the problems, and 14% took some measures but were reluctant or had a gen erally bad attitude. The vendors usually replaced the problem items and then took remedial measures to mitigate the problems. Table s 5 5 and 5 6 show the react ion of vendors reported in North America n and Chinese i nterviews.

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44 Table 5 5 React ion of v endor s in North American i nterviews React ion of Vendor s in North America n Interviews Frequency Percent Took positive actions 12 11.6% Denied the problem 30 29.1% No response 16 15.5% 18 17.5% N/A 24 23.3% Table 5 6 React ion of v endor s in Chinese i nterviews React ion of Vendor s in Chinese Interviews Frequency Percent Took positive actions 24 25% Denied the problem 36 37.5% No response 15 15.6% 9 9.3% N/A 12 12.5% Research Question 3 F : How did other interested parties react? What were their main concerns? Another question related to the supply chain is : How did other interested parties react? Answers varied from person to person, but responses depended mainly on whether the intervi ewee was Chinese or Western This question is difficult to analyze because the interviewees responded as though they were asked different questions. Generally, the N orth American s replied that the other interested parties were upset upon learning about cou nterfeiting, but they we re happy that the counterfeit items were caught before being placed into application M ore than half of the Chinese did not answer the question directly but usually just identified the interested parties. The owners are most concer ned about counterfeiting, because they ultimately are responsible for everything that ha ppens on a construction project Counterfeit goods can cause great problems for owners in terms of safety, time, money, reputation etc Another further question asked is : What was the main concern of the interested party at that time ? S afety, quality, money and reputation are the most common concern s of the

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45 other parties. As can be seen in Figure 6 5 the total percentage is more than 100% because the interviewees alwa ys expressed concern about more than one effect The owners and government officials were concerned about the project safety and quality; the contractors mainly were concerned about time and money. Figure 5 15 Most commonly expressed concerns in China and North America Research Question 4 : counterfeiting? The answers to this question can be separated into two categories: One is the governmen awareness of counterfeiting and the other is whether it has effective means by which to control counterfeiting activity In answering these questions, the North American interview ee s have common opinions. They believe that i ndividual Chinese citizens understand the problem of counterfeiting and want to improve their efforts to end it; that t hey have values and have decided that counterfeiting needs to be dealt with; and that t he national government also wants counterfeiting stopped but do es no t have effective control measures Of the answers given in the C hinese interviews, 57% believe that the government is aware of the

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46 Figure 5 16 The attitudes of local governments toward counterfeit ing counterfeiting problem and is try ing to control it; 28% indicated that local government s have some tolerance of counterfeiting; and 15% responded that local government s do not care about the counterfeiting issue. Figure 6 6 shows the attitudes of loca l governments toward counterfeiting. Figure 6 7 shows W estern perceptions of what the governments in source countries think about counterfeiting Some conclusions can be drawn from these interviews; the governments of source countries really are aware of the counterfeiting problem but, to some extent, have complex attitudes toward the issue. On one hand, they try to supervise and control the problem but have difficulty finding an effective way. Local governments just take some regulation measures when acci dents happen rather than prevent counterfeiting beforehand. On the other hand, the central governments of some countries are more concerned about counterfeiting than the local governments. Local governments are more concerned about economic development and tax revenue; thus they tend to

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47 protect local manufacturers, and some smaller companies make counterfeit products in order to survive in a fiercely competitive market. Figure 5 17 ptions of the attitudes of governments in source countries toward counterfeiting The perception of local government s toward counterfeiting varies in different countries. Most interviewees in North America think that local government s in China are officiall y against counterfeiting but have no effective means to mitigate it Summa ry Since the data were mainly qualitative as opposed to quantitative, they could not be analyzed statistically but rather as a process of se eking trends and commonalities. These find ings show the differences between the North America and China.

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48 CHAPTER 6 CONCLUSION Summary of Research Counterfeiting is a worldwide problem. While the production of counterfeit items may be concentrated in certain areas of the world, their distributi on covers the entire globe. It is not surprising to find that China is the main source of counterfeit products. Understanding the essential motivation of counterfeiters is a good step to effectively prevent counterfeiting. Therefore much consideration sho uld be given to culture differences between countries, especially China and North American nations In a it should be recognized that cultural differences can result in substantial ly different perceptions of ethics. A difference in ethics can directly affect att itudes toward counterfeiting. In China, more than half of t he interviewees have been or kno w some people who have been victims of counterfeiting, a fact which indicates that the overall environment is not good. The increase of counte rfeiting problems ultimately could lead to increased tolerance of counterfeiting. The research found that s teel items, mostly piping, were most identified as counterfeit by the industry. Meanwhile, there is a trend in counterfeit nonstructural materials in construction. One reason is the low cost of decoration material, the other may be the long during which no problems are discovered. M ost counterfeit items are purchased from smaller manufacturers or suppliers in China. These kinds o f suppliers are more concentrated in smaller cities or towns in China, where few or no regulations exist Counterfeit items have been discovered in several ways, the most common being by testing But a large amount of counterfeit

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49 products are put into use without being identif ied This indicates that the current detect ion methods are to some extent, in effective or that some problems exist in standards of certification. The research discovered that the react ion of vendor s when confronted about providing cou nterfei t products is negative. They do not like to accept the responsibility. This is the most common problem in the Chinese construction industry lack of honest y This is the final line of defense in thwarting counterfeiting; if fake products are known to enter the supply chain, active inspection is a must. If a product is found to be counterfeit or if the integrity of the goods or materials cannot be verified, all members of the project (purchasing, inspection, engineering etc.) should be made aware of the issue and a conscious decision must be made base d on the potential risks and the disposition of the goods and/or materials. The research also found that local Chinese government s understand the problem of counterfeiting and want to improve their ef f ort to stop it They have values and have decided that counterfeiting needs to be dealt with The national government also wants counterfeiting stopped, but the ir control methods are not effective This may be a result of t he Chinese culture which believe s that Thi s is why they have not been able to effectively control counterfeiting activities Otherwise, local governments have certa in tolerance toward the existence of counterfeiting, because counterfeiting activity is able to moti vate t he development of local economies In Chinese

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50 Limitations of Research The limitation of this research would be the lack of data points ; al though the number o f interviewees and the number of questions asked in each interview provided an impressive number of data points, more always is better. On the other hand, the answers provided qualitative data rather than quanti tative data, which is not suited for statisti cal analysis. Therefore, the analysis is limited to comparative analysis.

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51 LIST OF REFERENCES Autograph Album for Ten Years' Enforcement for State Supervision and Inspection of Product Quality (1985 1995) (in Chinese) (Beijing, China: China State Bureau of Technical Supervision, 1995). 4. Ibid. 5. Ibid. 6. Ibid. 7. Ibid. 8. Ibid. 9. Ibid. Bernold, L.E. and J.F. a nalysis for b est b uy in c J. Constr. Engrg. and Mgmt ., 117(4) 645 658. Bloch, P H., R. F. Bush, and L. Campbell (2003) counterfeiting: a demand side investigation Journal of Consumer Marketing, 4 ( 4 ) 27 36 Chandhry. P. E. and Walsh, M. G. (1996) counterfeiting in international m arkets: t he p iracy p aradox p ersists Columbia Journal of World Business, 31(3), 34 38 Chen, J J (1998) c onstruction industry Construction Management and Economics 16(6), 11 719 Chow, D. C. K. ( 2000) "Enforcement against counterfeiting in the People's Republic of China Northwestern Journal of International Law & Business 20 ( 3 ) 447. Written testimony of D. C K. Chow, Ohio State University College of Law, Columbus, OH, < http://hsgac.senate.gov/ > Ghemawar, P. (1985) Building strategy on the experience curve Harvard Business Review 63(2) 143 9. Harrold, P. and R. L all (1993) China: r eform and development in 1992 93 World Bank discussion paper No.215 T he W orld B ank, Washington, DC. Harvey, M G. (1987). Industrial p roduct c ounterfeiting: p roblems a nd p roposed s o lutions. The Journal of Business & Industrial Ma rketing; 2(4), 5 13. WTO Asian Pacific Business Review, October, 58 77. Institute for Construction Training and Development Sri Lanka Count ry Report (1997). Keats A.M. and J. Joyner (1995). r eaches n ew l evels National Law Journal 17( 36), 19 22 Lenard, D. Higgins, D. and Cousins, L (1997) An overview of the Australian pro perty and construction Third Asia Co nstruction Conference Hong Kong

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52 Polytechnic University, Hong Kong. Lu, Q. (1994) The economic structure of the PRC construction industry in CIB W55 Annual Meeting Hong Kong Polytechnic University. "Meeting Materials of the State Crackdown o n Counterfeit Goods in 1995 (in Chinese), Quality Management Vol. 10, 1995, p. 16. Pasadilla J. R., and Y. H. Chiang (1998) development: implications of recent d evelopment of construction United States Intern ational Trade Commission (1983) "The Effects of Foreign Product Counterfeiting on U.S. Industry Acme Reporting Company, Washington, D.C. Investigation No. 332 158. The Economist (1997) Series, Schools Briefs on Globalization, November December. "Super vision and Inspection Promote the Improvement of Product Quality: 6500 Manufacturers of Non conforming Products Were Criticized" (in Chinese), People's Daily, Dec. 29, 1997. 12, Inspection results issued by the China State Bureau of Technical Supervision. SSBC (1993,1994,1995) China Statistical Yearbook 1993, 1994, 1995, China Statistical Information and Consultancy Service Center, The state Statistical Bureau of China, Beijing, China. Walker, A. (1981) "A Program to Combat Commercial Counterfeiting ," Tr ade Mark Report 70, 117. Wassermann, J. (1980) "UNGTAD: Trademarks and Developing Countries Journal of World Trade 14, 80. Westbrook, R. A. (1980) "A Rating Scale For Measuring Product/Service Satisfaction Journal of Marketing, 44 (4) 68 72. Yao B. (1997) uction industry. Review of Urban & Regional Development Studies 11(2), 78 81. Ye B. L. (1996). "Why l ow quality and fake products cannot be stopped." (in Chinese), China Quality December, 15. Xie A. L. (1995). "Legal c onstruction of q uality s hould c onform to the d emand of s ocialist m arket e conomy." Quality Management (in Chinese) 7 26 35. Zhang Z. Y. (1996). "Opportunity and Challenge Beijing Review 39(1), 4.

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53 BIOGRAPHICAL SKETCH Wu She has lived in Tianjin since she was born. She attended Yaohua High School in Tianjin from 1999 until her graduation in 2004. Sh e began her college career in Septe mber 2004 at Tongji University in Shanghai, China. In 2008, she completed her Bachelor of Science with a degree of Construction Engineering and Real Estate. While attending the University of Florida she worked as a Research Assistant to Dr. Edward Minch in. Upon graduating with a Master of Scie nce in Building Construction, she pursued a job in the construction industry.