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STATEMENT OF

JULIAN C. MORRIS

PRESIDENT

OF THE

AUTOMOTIVE PARTS AND ACCESSORIES ASSOCIATION, INC.

Mr. Chairman and Members of the Committee:

The Automotive Parts and Accessories Association (APAA) is an

international association located in Washington, D.C.

We have more than

1,500 members who are manufacturers, manufacturers' representatives,

retailers, distributors, wholesalers and others engaged in marketing

automotive products here and around the world.

These products are sold

primarily, but not exclusively, in the "aftermarket.

The aftermarket

consists of products manufactured for and services provided to automobiles by manufacturers, distributors and retailers that are independent of the

vehicle manufacturers.

The aftermarket is vital to the nation's economy, providing at

least double the employment of the vehicle manufacturers and their

dealers.

We are hundreds of thousands of medium and large, but mainly

small, manufacturers and others located in every state of the Union,

producing and selling domestically in excess of $54 billion of parts, accessories and chemicals annually. As the leading parts and accessories

suppliers for the world, industry firms exported $10.6 billion of

automotive products in 1982.

Mr. Chairman, APAA vigorously supports passage of the Trademark

Counterfeiting Act of 1983, H.R. 2447. APAA believes that its enactment will facilitate our campaign both at home and abroad to take the profit

out of what has become a highly lucrative business.

SCOPE OF THE COUNTERFEITING PROBLEM

APAA's concerns about the burgeoning counterfeiting menace and our support for H.R. 2447 are raised from our perspective as the representative for the entire aftermarket distribution chain from the point

of manufacture to the retailer or service garage.

Reports from our members underscore the toll counterfeits have

taken on their sales, reputations, and market shares. Product pirates have made a multi-billion dollar business out of stealing the good names

of American parts and accessories manufacturers.

Some experts have

estimated the loss of legitimate parts and accessories sales at $12

billion internationally, with $3 billion of the total representing lost domestic sales. We would note, however, that the first hard figures on

the extent of the damage will not be available until the International

Trade Commission (ITC) investigation is completed.

The Commission designed

its survey to find out what American firms in a host of industries are

up against; how their sales, goodwill and workers have suffered; and what

they want government to do about it.

COUNTERFEITING CRIPPLES U.S. EXPORTS

We have found that counterfeiters hit parts companies and accessories

companies, large companies and small alike.

The only common denominator

seems to be high quality products that enjoy good reputations. The same good will that made America the leading parts and accessories manufacturer

for the world now renders U.S. companies particularly vulnerable to

foreign usurpers.

Transitions in the vehicle making industry, particularly moves by domestic auto producers toward world car production, greater foreign

sourcing necessary to contain costs, and a shrinking domestic market

leave only one way for automotive parts and accessories suppliers to meet the bottom line--we must export more. Counterfeiters stand in the

way of our meeting this challenge.

Their nefarious and unfair competi

tion is pushing the world's emerging growth markets beyond our grasp

and decimating market shares that took years to build.

We believe the lion's share of the problems

at least 75 percent

now takes place overseas, where we lose market share for one reason alone:

price.

Our firms simply cannot beat the price sheets of counterfeiters

who use inferior materials, cheap labor, shoddy construction, and who never paid a dime for research and development costs. Markets that took

years of American spade work to open

all of the innovation, design,

quality control, and marketing can be foreclosed by low cost counterfeits in just one marketing blitz.

COUNTERFEITING'S TOLL ON AMERICAN WORKERS

APAA believes that the most tragic consequences of counterfeiting

have been borne by American workers.

In the process of idling our plant

capacity, product pirates have stolen or prevented the creation of hundreds of thousands of jobs for Americans.

One small APAA member, a manufacturer of interior lighting, has been ripped off for nearly four years by an overseas manufacturer that has virtually eliminated the firm's sales outside the U.S., particularly in Japan, Europe and Canada. Now the products are entering this country too. As a result, the company expects to drop 12 to 20 people from its

payroll this year.

Unfortunately, this is not an isolated instance.

Another member,

an

accessories manufacturer, reports the copying of its products in every

detail.

This company as well as others we have heard from note signi

ficant loss of sales in such price-sensitive areas as the Middle East,

Australia, South Africa and South America.

Declining sales lead to layoffs--20 workers at one firm, 50 at

another and the toll mounts to staggering proportions.

And, of course,

the American economy is savaged by ever wider trade deficits caused by

billions in lost export sales.

COUNTERFEITING HARMS CONSUMERS

In the battle with counterfeiters for international sales, American

firms stand to lose any way you look at it.

On the one hand, market

share is stolen if a counterfeit works and the customer returns to buy

more of the low cost fakes. But, even more commonly, when the product fails to perform, the customer blames the American firm named on the

label, and the sum of dissatisfied customers means sagging demand for

American products.

Damage to a company's hard-earned reputation is

difficult to assess in terms of dollars, but it is an incredibly serious

aspect to this problem.

Test reports confirm that spurious automotive products simply do

not stand up to the quality of the genuine item.

Whether the item is a

spark plug, fake oil or gas filter, or a bogus electronic generator, it is generally a matter of poor performance that may lead to costly repairs. But when the shoddy equipment is brakes that fail to meet minimum load

standards, gas caps that lack safety valves, inferior power steering belts, or turn signals that do not always work, the consumer, as well

as others on the road, are placed in serious danger. One of our overriding concerns is that counterfeiters not be allowed to thrust into

the market automotive products that are dangerous to safety and health,

such as those fake brakes that caused great loss of life in a British

bus accident.

Since it is difficult to distinguish visually counterfeits from

genuine items--often not even the most conscientious mechanic can tell

the difference--it is paramount that the fakes be stopped at the border. To this end, we believe the Coalition's work with the U.S. Customs Service will pay off in the interception of more bogus goods. Through a series of seminars, the compilation of a "sinners list" of notorious offenders, and the distribution of manuals listing known counterfeited products, Customs should be better prepared to identify fakes.

For the American public, the problems are many: jobs lost to counterfeiters creating a general weakening of the economy and purchases that at best give them a poor return on their money and at worst pose a

vicious threat to their safety.

But there is more.

Americans and con

sumers worldwide have come to expect U.S. leadership in automotive product

innovation and invention. Ironically, the research and development that made the trademarks of American automotive products the most recognized and desired in the world are now seriously threatened by the theft of

those marks.

COUNTERFEITING ENDANGERS AMERICAN BUSINESSES

Our vantage point as the representatives of businesses in each link

of the automotive product distribution chain has given us insights into the special problems confronting each segment of our industry.

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