Except in Lily Wan's end of the business. Counterfeiting has been on the rise for about a decade, ever since U.S. golf companies began subcontracting club production in China. Of the major manufacturers, only Ping still makes most of its clubs in the U.S. The other big brandsAdams, Callaway, Cleveland, Cobra, Nike, TaylorMade, Titleistmake most of their club heads in China's Pearl River Delta region, where the combination of cheap skilled labor and technical expertise has created manufacturing's perfect storm.
"It's a no-brainer to be there," says Chip Brewer, CEO of Adams Golf. "The Chinese produce golf clubs of consistently high quality at unbeatable costs. They are very good capitalists, creative and hardworking. But that same entrepreneurial spirit also creates other issues."
Lily Wan was a new name in a game with endlessly rotating players. A private investigator in the United Kingdom suspected Wan's firm, Hong Kong Cedar International Investment, Ltd., of shipping counterfeit Callaways to Europe and informed the club manufacturer. So when the sleuth learned that Wan would attend the Professional Golfers' Association's show, Callaway's security director, Stu Herrington, began plotting with the investigator's company, Intellekt, to shut her down.
Intellekt set up a dummy corporation, Servitrade, Inc., which purported to represent 400 sporting-goods stores in the U.S. and Canada. Then Herrington enlisted the help of detective Ray Wood of the Orange County sheriff's office, who posed as a Servitrade executive. They contacted Wan to say they were interested in placing an order. They'd be in Orlando for the show and wanted to see some of her products. She promised to meet them on Saturday night.
She arrived looking like a Bond vixen: 157 centimeters tall, weighing 48 kilograms, stylish and attractive in her dark, tailored suit. She exchanged business cards with Herrington and Wood and, after brief pleasantries, laid counterfeits of a Callaway ERC II driver, a Great Big Bertha II and a Steelhead X-16 iron on a coffee table, in plain view of anyone strolling past. The men examined the copies carefully. "In China everyone knows they are not real," Wan said.
"The Great Big Bertha was a very, very impressive copy," says Herrington, who has been tracking down the Lily Wans of the world for Callaway for the past five years. "She gave us a price of $33 a head, delivered, or $32 with a volume discount." A generic graphite shaft might cost an additional $6; a grip, 50. Total outlay: $38.50 for a first-rate copy of a club that retails for $499. Wan even volunteered to blacken the soles of the clubs with water-soluble paint to hide the Callaway trademark. Servitrade could simply rinse off the paint once the clubs cleared customs. She also asked about the best routes to smuggle the clubs into the country.
Although Herrington is loath to reveal specifics of the conversation, he and Wan discussed the fact that many golf-club counterfeiters fly their shipments to Vancouver or Toronto, then truck them into the U.S. Another method, according to U.S. customs officials, is transshipping: sending the merchandise first to a country not associated with counterfeit golf clubssay, the Netherlandsthus avoiding the red flag that cargo from Taiwan or China might raise. Counterfeiters also smuggle club components in containers filled with legal goods, such as ceramics or auto parts. Or they simply list their cargo as something else on the shipping bill, playing the odds that it will get through amid the mass of foreign goods flooding U.S. docks. Six thousand containers a day are shipped to the U.S. from Hong Kong, according to the U.S. Bureau of Customs and Border Protection, and only 2% are physically inspected.
After an hour or so of such banter, Herrington and Wood identified themselves to Wan. "She insisted she'd done nothing wrong," Herrington recalls. "When we asked her where the clubs were made, she claimed she didn't know. She said some Chinese man named Joe had come up to her with the stuff on the streets of Hong Kong." Herrington confiscated the samples, and Wood delivered a stern lecture to the distraught Wan on the penalties she could face. In the end, though, he let her go, and she bolted. Although trafficking in counterfeit goods is a felony, "it's difficult if not impossible now to prosecute," says Wood, because so much attention is focused on combating terrorism. Two years ago Wan might have been put behind bars. Today, Wood notes, "U.S. law enforcement has bigger fish to fry." Still, from Herrington's point of view the sting was a success. "We really scared her," he says. "She's never coming back here."
Others are, though. "Now that so much legitimate business has moved to China, the counterfeit market can't be stopped," says Ken Gaul, the U.S. customs agent who spearheaded Project Teed Off, which resulted in 14 indictments and the seizure of $6 million worth of counterfeit golf merchandise in 1999. "At this year's show in Orlando, I saw an Asian man taking pictures of a golf club from several angles. Everyone knew what he was doing."
Those photographs, industry experts say, could have been digitally transmitted to a tooling factory in China, converted into three-dimensional form by means of a computer program and used to create a copper master of a head that could be ready for mass production in two weeks. "It takes us over a year to design a new club, using sophisticated computer programs that require the expertise of very experienced engineers," says Barney Adams, founder and chairman of Adams Golf. "If the club's a success, copies are on the market in 60 days. It's reprehensible. To get into the copying business, all you need is to take a couple of drivers and irons you like, fly to Hong Kong, and voil, you could be in the knockoff business tomorrow."
How much all this costs the golf industry is difficult to gauge. According to the National Golf Foundation, U.S. consumers spent $2.8 billion last year on golf clubs, some 70% of which came from China. If only 10% of those sales involved illegal knockoffs and counterfeitssome experts believe that figure might be higherthat would amount to nearly $200 million.