Instead of fluoride, the fake product may contain diethylene glycol (DEG), a compound used in anti-freeze and known to have been a source of a number of mass poisonings in South America.
The incident highlights a growing problem with fake products around the world that government are attempting to stop. Counterfeit products can harm a brand's name, especially if they pose a danger to health.
The counterfeit toothpaste is labelled as "manufactured in South Africa", with several misspellings such as 'South Afrlca' and 'Dental Assoxiation' on the packaging.
In a press release last week Colgate categorically stated that it does not use, nor has ever used, diethylene glycol as a toothpaste ingredient.
In May, the Food and Drug Administration (FDA) blocked imports of China-made toothpaste after reports that it contained diethylene glycol. The FDA started holding all consignments of toothpaste at US borders until tests proved it was safe.
Although no poisonings have been reported in the US from toothpaste to date, the FDA said that it has identified several toothpaste brands from China known to contain the chemical and has included them on an import alert.
The manufacturers of these products were identified as Goldcredit International Enterprises Limited, Goldcredit International Trading Company Limited, and Suzhou City Jinmao Daily Chemicals Company Limited.
China is the single largest producer of counterfeit goods, accounting for a massive 80 percent of items seized at the EU Borders in 2006.
The focus on China intensified in March this year, after the FDA found pet food ingredients from China contained the chemical melamine, a chemical that led to the deaths of hundreds of pet cats and dogs in the US.
In response to the crisis, governments are now putting pressure on source countries to stamp out the trade in counterfeit goods.
In a recent report, the Organization for Economic Co-operation and Development (OECD) called for clamp down on companies involved in the practice, estimating that the trade in counterfeit and pirated good totaled around $200bn in 2005.
John Dryden, OECD's deputy director, criticized the worldwide repercussions of the trade.
"It is pervasive, it involves some pretty unsavory and ruthless characters, and it has serious implications for health, safety, living standards and jobs. It is also a major disincentive to invent and innovate," he said.
In a move to try and allay consumer fears, the Chinese government announced this week a five-year plan to enforce stricter controls over manufacturing.
"Ensuring food and pharmaceutical safety for the public must be the starting point and destination of all work," a government website stated. "Monitoring and administering food and pharmaceutical safety must be at the very heart of grassroots and base work."