CBP Discusses Strengthening IPR Enforcement at Trade Symposium (New ISA for IPR Planned, Etc.)

Highlights of the CBP and trade discussion include:

CBP Plans to Develop New Importer Self Assessment IPR Program

CBP officials state that they plan to create an Importer Self Assessment (ISA) program for importers in the area of IPR in order to build a body of trusted importers.

(ISA is a voluntary approach to trade compliance. The program provides the opportunity for importers who have made a commitment of resources to assume responsibility for monitoring their own compliance in exchange for certain benefits.)

Development in 2010. In 2010, CBP plans to develop an ISA-IPR program and work with the trade to establish parameters (including benefits and requirements). Some of the requirements mentioned by CBP include the establishment of IPR internal controls and membership in the Customs-Trade Partnership Against Terrorism (C-TPAT). Some of the benefits mentioned include fewer cargo exams and the elimination of most audits (except single issue audits for serious infractions). CBP notes that the key to participating in this program will be the design and implementation of IPR controls and the testing of those controls.

Enrollment in 2011. CBP's goal is to get the IPR component established and open it up for enrollment in the first part of 2011. CBP is expected to make an announcement on the ISA IPR component in early 2010.

(See ITT's Online Archives or 01/25/10 news, 10012510, for BP summary of CBP's ISA presentation at the Trade Symposium.)

CBP Considers New Voluntary Disclosure Program for IPR

CBP officials stated that they are considering a program to allow importers to voluntarily disclose information on IPR violations (in a manner similar to that for a prior disclosure) in order to obtain relief from penalties and seizures.

Recommended by COAC. This is one of seven recommendations made to CBP by the Departmental Advisory Committee on Commercial Operations of U.S. Customs and Border Protection and Related Homeland Security Functions' (COAC's) IPR Subcommittee. At the November 4, 2009 COAC meeting, CBP stated that it CBP stated that it continues to work on establishing a one year voluntary disclosure pilot for IPR violations. During the November 2009 meeting, CBP sources noted that they are reviewing policy and legal issues related to such a pilot.

(See ITT's Online Archives or 11/10/09 and 02/25/09 news, 09111015 and 09022515, for BP summaries on COAC's IPR Subcommittee recommendations, etc.)

CBP is Looking to Collect More IPR Penalties

CBP officials note that for the period 2005-2009, CBP issued more than 1,000 penalties for counterfeit trademarks totaling approximately $94 million (under 19 USC 1526(f)), but only $2 million has been collected to date.

Problems with MSRP. CBP notes that IPR penalties issued under 19 USC 1526(f) are based on the Manufacturer's Suggested Retail Price (MSRP) of the genuine goods which often results in penalties that are far in excess of the actual value of the infringing goods, which could make the U.S. Attorney's Office reluctant to prosecute a case for fear the court will consider the fines excessive. CBP further notes that when the penalty amount greatly exceeds what the importer is able to pay, the U.S. government often settles for a nominal amount (when compared the amount of the fine).

Broker, fraud penalties discussed. CBP and the trade discussed various ideas on how CBP's penalty collection could be improved to serve as a greater deterrent, including (i)broker penalties (under 19 USC 1641) with a view to deterring customs brokers who have acted on behalf of importers known to them for previous IPR violations; (ii)commercial fraud penalties under 19 USC 1592 (in addition to any other IPR-related fines); (iii) having CBP work with the Department of Justice (DoJ) to better understand its criteria for accepting cases, identifying alternative methods of pursuing collection (e.g., CBP could pursue case if the DoJ declines, enabling CBP to place a lien against the assets of a violator who does not pay a fine, and working with the Internal Revenue Service), (iv) assessing fines at less than the MSRP; and (v) publishing names of parties that fail to pay IPR fines, penalties.

CBP's Goal Over Next Several Years is to Double the Number of IPR Audits

CBP officials note that in the last several years, the Office of Regulatory Audit has played an important role in CBP's strategy to deter the importation of infringing goods.

70 IPR audits to date. According to CBP, Regulatory Audit receives audit referrals from CBP's targeting groups and sends teams of Import Specialists, auditors, and intelligence analysts to the importer's premises. In the last several years, the use of auditors for IPR enforcement has resulted in the completion of over 70 IPR audits and $10 million in penalties.

Audit constraints. Some of the constraints that limit Regulatory Audit's effectiveness in the area of IPR include: (i) the lack of authority to seize violative merchandise when an auditor visits a company premises, (ii) shortcomings in the recordkeeping requirements (e.g., many IPR-related records are not included on CBP's (a)(1)(A) list, which prevents the assessment of recordkeeping penalties); and (iii) limited Regulatory Audit resources.

Goal of doubling audits. A Regulatory Audit official noted that one of CBP's goals over the next several years is to free up or get additional resources to double the number of IPR audits at the importer's premises each year.

Five Challenges Limit More Effective IPR Enforcement by CBP

CBP has identified the following as the key challenges that limit its ability to achieve more effective IPR enforcement:

Lack of advance information restricts targeting. CBP's lack of information on legitimate trademarked, copyrighted goods creates targeting inefficiencies. CBP is forced to conduct unnecessary examinations and expend resources on compliant goods, instead of being able to focus on non-compliant imports.

Focus is on seizure, not deterrence. The administrative law and CBP's IPR enforcement processes and systems focus on the seizure of goods and this does not always serve as a deterrent to violations.

Infringement determinations are difficult. CBP can have difficulty determining whether certain goods are infringing because the quality of counterfeit and pirated goods has improved. This can impede the release of legitimate cargo and result in the inadvertent release of infringing goods.

No trade partnerships (except with rights holders). CBP notes that its partnerships with the trade community have largely been restricted to rights holders and this limits the information that is available to CBP for targeting, etc. (See above for CBP's plans to create an IPR component to the ISA program.)

Low collection amounts for IPR penalties. CBP notes that the low amount of IPR penalties it collects does not serve as a deterrent and often wastes CBP resources.