CIT Injunction Stops CBP From Imposing Harsh Bond Requirements on Importer
The Court of International trade on May 25 issued an injunction barring CBP from imposing harsh bonding requirements on an importer accused of trademark infringement, finding CBP Norfolk far exceeded the agency’s own guidelines for bond amounts. The single transaction bond required by CBP Norfolk on U.S. Auto Parts would have put the company out of business, and indiscriminately applied to merchandise that was not alleged to be counterfeit while ignoring guidance in CBP’s bond directive, the court said.
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CIT had issued a temporary restraining order in the case in early April (see 1804090031). According to U.S. Auto Parts, CBP Norfolk had in March begun requiring a bond of three times entered value on all of the importer’s entries due to concerns that U.S. Auto Parts is importing aftermarket replacement auto grilles that infringe trademarks held by the car manufacturers. The bonds threatened to put U.S. Auto Parts out of business, especially because sureties were demanding full collateral, even though CBP admitted that 99% of the merchandise in the shipments was not infringing.
The bond amount of three times entered value of the entire shipment equaled $9 million for a publicly traded company with total earnings at $11.4 million in 2017, and U.S. Auto Parts would also likely lose its hard-won supplier relationships, probably causing the company to go out of business and resulting in “irreparable harm,” CIT said. CBP’s own bond directive says CBP should not “require bond amounts which unnecessarily put an excessive burden on a person or firm, or place them in an impossible situation,” the trade court said.
The preliminary injunction means CBP will be restricted from imposing the bond requirements until further notice, replacing the temporary restraining order, which had to be periodically renewed. Under the preliminary injunction, CBP may not enforce its single transaction bond requirement, and is restricted to only requiring the $200,000 continuous bond it required of U.S. Auto Parts before the enhanced bonding requirements. The court also ordered CBP to “use their best efforts” to process a backlog of shipping containers and release non-infringing merchandise to the importer.
(U.S. Auto Parts v. U.S., Slip Op. 18-62, CIT # 18-00068, dated 05/25/18, Judge Choe-Groves)
(Attorneys: Barry Irwin of Irwin IP for plaintiff U.S. Auto Parts Network, Inc.; Beverly Farrell for defendant U.S. government)