CBP Changes Regulations for Suspected Counterfeit Merchandise

Sep 10, 2012   

In an effort to combat the importation of counterfeit goods into the United States, US Customs & Border Protection (“CBP” or “Customs”) has significantly increased the number of seizures of suspected counterfeit merchandise. Between 2010 and 2011, Customs seized nearly 25,000 shipments with a domestic value of approximately 200$ Million and retail values exceeding 1.1$ Trillion. These seizures accounted for just under a 25% increase for the fiscal year 2011. Customs is making a statement, and is taking significant steps to ensure that counterfeits are not getting into the United States market place. The downside of these efforts is that with the increased volume of seizures, it is becoming more difficult for Customs to differentiate between good faith importers and those who knowingly import counterfeits.

Products such as electronics, pharmaceuticals, and footwear are at the top of CBPs watch list and good faith importers of these goods are getting caught in the crossfire. Counterfeit or not, the chances of import cargo being detained or seized is much higher, and importers are forced to wait out what could be months of administrative proceedings to have their cargo released. Worst of all, until recently, there has been virtually no recourse for importers who want to dispute these claims expeditiously. Fortunately, Customs has recognized this problem and implemented new seizure and detention policies in response.

On April 24, 2012, Customs issued an interim rule entitled Disclosure of Information for Certain Intellectual Property rights Enforced at the Border. This regulation amends 19 C.F.R. § 133.21 which outlines CBPs regulations regarding the seizure and detention of suspected counterfeit imports.

In its interim rule, Customs established an entirely new notification and response procedure between itself and importers suspected of importing counterfeits. This new procedure is designed to benefit importers because the previous version of the regulation was silent as to how importers could respond to allegations of suspected forfeiture and provided little immediate recourse for upstanding importers who have been wrongfully accused of counterfeit importation.

Under the new regulations, CBP is given a maximum of thirty days to detain suspected counterfeit goods after which the goods will be excluded from entry or delivery pursuant to 19 U.S.C. § 1514(a)(4). This period can be extended up to an additional thirty days if the importer can display good cause. Under the old regulatory framework, CBP effectively had the power to detain importers items indefinitely and offered no remedy for importers to dispute the seizure of their goods.

Pursuant to the amended regulation in 19 C.F.R. § 133.21(b), CBP is also now required to notify an importer, in writing, that his goods are being detained within 5 days of the detention. The importer will then be afforded seven days to respond to CBP and offer evidence of the merchandises authenticity. Prior to the amendment, Customs had no formal requirement to notify importers of its intentions to seize their merchandise. In fact, CBP was only required to notify the trademark owner.

Section (b) creates a twofold benefit. First, it affords honest importers an opportunity to quickly dispute claims and have merchandise released without waiting (for what could have previously taken up to 60 days) to have the authenticity of there merchandise verified. Under the new regulation good faith importers could potentially have their shipments released in a fraction of the time if they can sufficiently and quickly gather evidence of the seized goods authenticity.

Secondly, this section requires CBP to become more efficient in its verification and disposition of alleged counterfeit goods. Under the auspices of the previous regulation, CBP had full discretion to take as much time as it felt necessary to complete the forfeiture proceeding. This is no longer the case. Customs must now be much more efficient with its procedure and have matters resolved within 30 days, barring any good cause extensions.

Aside from the previously mentioned changes, 19 C.F.R. § 133.21 is effectively the same with respect to Customs dealings with the actual trademark owner. CBP is still required to notify the trademark owner about information regarding the seized shipment (i.e. port of entry, quantity, description of merchandise, product samples, etc) within thirty days. The regulation also continues to afford trademark owners the discretion to provide written consent to have the goods disposed or entered into the US (after obliteration of counterfeit trademarks).

The effect of this updated regulation seems to be positive on all fronts: It puts all involved parties on notice, affords importers the opportunity to dispute and resolve claims quickly, and continues to enforce and protect the trademarks of companies who may be damaged from counterfeit goods in the domestic marketplace.

If you are an importer and have been notified that your cargo has been detained, do not hesitate to contact an attorney in our Customs practice to assist you in responding to CBP.