Print PDF

January 21 2013 Issue

Monday, January 21, 2013
Sandler, Travis & Rosenberg Trade Report

IPR Infringing Goods Seizures Drop but Values Rise in FY 2012

U.S. Customs and Border Protection has released statistics showing that the number of its intellectual property rights seizures fell slightly in fiscal year 2012 but that the value of those seizures increased. Handbags continued to be the most seized commodity by value, China expanded its share of total IPR seizures to 72%, and there was a decline in seizures of consumer safety and critical technology goods.

Value and Volume of Seizures. The number of IPR seizures was down 7.8%, from a record-high 24,792 in FY 2011 to 22,848 in FY 2012. CBP attributes this decline to the expiration of a commonly enforced patent and the elimination of Section 337 exclusion orders from IPR seizure statistics. CBP notes that 68 exclusion order enforcement actions were taken in FY 2012.

The value of IPR seizures in terms of the manufacturer’s suggested retail price rose 13.5% to $1.26 billion, with the average value per seizure jumping 45.3% to $10,450. However, the domestic value of seizures of IPR infringing goods (i.e., cost when last purchased plus duties, fees and other charges) fell 12.2% to $156.5 million.

Commodities Seized. Handbags and wallets against topped the list of commodities seized by MSRP in FY 2012 at $511.2 million (40% of total seizures). This figure represents a 142.2% increase from FY 2011, which CBP attributes to “successful interagency-coordinated enforcement operations.” Other categories ranking high in this area included watches and jewelry ($187.0 million, 15% of the total), wearing apparel and accessories ($133.0 million, 11%), consumer electronics and parts ($104.4 million, 8%), footwear ( $103.4 million, 8%), and pharmaceuticals and personal care items ($83.0 million, 7%).

The top five categories of products seized by number were wearing apparel and accessories (7,805, down from 8,094; 29% of total), consumer electronics and parts (3,928, up from 3,186; 15%), optical media (2,892, down from 4,235,; 11%), handbags/wallets/backpacks (2,678, down from 3,014; 10%), and pharmaceuticals and personal care items (2,350, down from 3,206, 9%).

Consumer Safety/Critical Technology. The number of consumer safety and critical technology IPR seizures declined from 4,369 to 3,441 and the MSRP value of those seizures dropped as well, from $195.9 million to $146.4 million.

The FY 2012 seizure list for these goods (by MSRP value) was led by pharmaceuticals ($82.9 million, down from $138.2 million; 57% of total), consumer electronics and parts ($33.6 million, up from $31.1 million; 23%), cigarettes ($12.9 million, up from $10.9 million; 9%), critical technology components ($9.5 million, up from $7.5 million; 7%) and automotive goods ($3.9 million, up from $922,725; 3%). There was a 69.5% decline in the value of seizures of toys, a 72.9% decline for sporting goods and a 719% increase for food.

Pharmaceuticals also led the list of seizures by number (2,343, down from 3,127; 68% of total), followed by consumer electronics and parts (447, up from 442; 13%), critical technology components (256, 7%), sporting goods (134, unchanged; 4%), and cigarettes (122, down from 200; 4%). There were major increases in the number of seizures of counterfeit airbags (from 13 to 65), contact lenses (from 11 to 99) and automotive goods (from 32 to 79).

Source Countries. China accounted for 72% of the total MSRP value of IPR seizures at $906 million (up 12.5%). Handbags and wallets comprised 49% of these seizures. Other top source countries included Hong Kong ($156.3 million, 39% of which was watches and jewelry), Singapore ($9.4 million, 98% of which was watches and jewelry), India ($7.0 million, 76% of which was pharmaceuticals and personal care items), and Taiwan ($4.5 million, 38% of which was toys).

The top three source countries in terms of number of seizures were once again China (12,218, down from 13,592), Hong Kong (8,427, up from 6,597) and Turkey (678, up from 569).

Shipping Environments. The MSRP value of IPR seizures occurring at express consignment facilities fell 13.4% to $140.5 million but there were increases in the value of seizures at mail (7.1% to $80.2 million), cargo (23.9% to $696.4 million) and other (10.9% to $345.2 million) facilities. The number of seizures saw a reverse trend, with an increase at mail facilities (18% to 9,852) but decreases at express consignment (21.9% to 8,490), cargo (28.9% to 1,526) and other (12.9% to 2,980) facilities. 

FDA Invites Input on Food Facility Registration Form

The Food and Drug Administration is accepting through March 25 comments on the form used by foreign and domestic facilities that manufacture, process, pack or hold food for human or animal consumption in the U.S. to register with the FDA. Under the FDA Food Safety Modernization Act such registrations must be renewed every two years, with an initial deadline of Jan. 31. FDA Solutions Group LLC, a consulting company affiliated with Sandler, Travis & Rosenberg P.A., offers a full range of services associated with food facility registrations and renewals; click here for more information.

Under the Bioterrorism Act of 2002, information collected on Form FDA 3537 (which refers to both the paper form as well as the electronic system known as the Food Facility Registration Module) includes the name and full address of the facility, emergency contact information, all trade names the facility uses, applicable food product categories, and a certification statement that includes the name of the individual authorized to submit the registration form. Additionally, facilities are encouraged to submit their preferred mailing address, type of activity conducted at the facility, type of storage if the facility is primarily a holding facility, and approximate dates of operation if the facility’s business is seasonal. Pursuant to FSMA, the FDA added to this form a requirement for the email address for the contact person of a domestic facility and the email address of the U.S. agent for a foreign facility, an assurance that the FDA will be permitted to inspect the facility, and specific food categories as identified in “Guidance for Industry: Necessity of the Use of Food Product Categories in Food Facility Registrations and Updates to Food Product Categories.”

Under FSMA, food facilities are required to renew their registrations during the period Oct. 1 through Dec. 31 in each even-numbered year, although the first such deadline has been pushed back to Jan. 31, 2013 (click here for more information). Facilities are also required to use Form FDA 3537 to submit updates within 60 days of a change to any required information on their registration form. Facilities use Form FDA 3537a to cancel their registration when they cease to operate, cease to manufacture, process, pack or hold food for consumption in the U.S., or are sold to new owners.

The FDA received 12,011 new domestic facility registrations in 2010, 10,646 in 2011 and 10,584 in 2012. New foreign facility registrations totaled 20,598 in 2010, 20,009 in 2011 and 19,092 in 2012. The FDA estimates that over the next three years the average annual numbers of updates to facility registrations (118,530) and cancellations of registrations (6,390) will remain unchanged.

The FDA is interested in comments that address whether the information collected on Form FDA 3537 is necessary for the proper performance of the agency’s functions, including whether the information has practical utility; ways to enhance the quality, utility and clarity of the information collected; the accuracy of the FDA’s estimate of the burden of the collection; and ways to minimize that burden, including through the use of automated collection techniques and other forms of information technology. 

ITC Schedules Feb. 27 Hearing on Possible Additions to GSP and Waivers of CNLs

The International Trade Commission has scheduled for Feb. 27 a hearing to solicit public input on a number of potential modifications to the list of products eligible for duty-free treatment under the Generalized System of Preferences. Requests to appear at this hearing are due no later than Feb. 11. The ITC is also accepting written comments on these issues through March 4.

As requested by the Office of the U.S. Trade Representative, the ITC will provide advice on the likely impact on competing U.S. industries, U.S. imports and U.S. consumers of the addition of the following HTSUS subheadings to the list of articles eligible for GSP.

- 0603.11.00 or 0603.11.0010, 0603.11.0030, 0603.11.0060 (sweetheart, spray and other roses, fresh cut)

- 0710.80.97 or 0710.80.9722, 0710.80.9724, 0710.80.9726 (vegetables not elsewhere specified or included, uncooked or cooked by steaming or boiling in water, frozen, reduced in size)

- 2005.99.80 (artichokes, prepared or preserved otherwise than by vinegar or acetic acid, not frozen)

- 7408.19.0030 (refined copper, wire, with maximum cross-sectional dimension of 6 mm or less)

The ITC also will provide advice on the likely impact of competitive need limitation waivers on the following HTSUS subheadings for certain countries.

- 0410.00.00 (edible products of animal origin, not elsewhere specified or included) from Indonesia

- 0603.13.00 (orchids: cut flowers and flower buds of a kind suitable for bouquets or for ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared) from Thailand

- 1102.90.25 (rice flour) from Thailand

- 2106.90.99 (food preparations not elsewhere specified or included, not canned or frozen) from Thailand

- 6911.10.37 (porcelain or china (other than bone china) household table and kitchenware in sets in which the aggregate value of articles is over $56 but not over $200) from Indonesia

- 7202.21.50 (ferrosilicon containing by weight more than 55% but not more than 80% of silicon, not elsewhere specified or included) from Russia

- 7202.30.00 (ferrosilicon manganese) from Georgia

- 7202.99.20 (calcium silicon ferroalloys) from Brazil

- 7307.21.50 (stainless steel, not cast, flanges for tubes/pipes, not forged or forged and machined, tooled and otherwise processing after forging) from India

- 7307.91.50 (iron or steel (other than stainless), not cast, flanges for tubes/pipes, not forged or forged and machined, tooled and processed after forging) from India

- 7408.29.10 (copper wire, coated or plated with metal) from Thailand

- 9506.70.40 (ice skates with footwear permanently attached) from Thailand

The ITC will submit its confidential report to USTR by April 8 and make a public version available as soon as possible thereafter. 

Requests for FDA Export Certificates Can Now be Submitted Electronically

The Food and Drug Administration has introduced an electronic process for submitting requests for export certificates for products regulated by the FDA’s Center for Devices and Radiological Health. The FDA states that the new eSubmitter process will be a voluntary option to the current paper-based process, which will remain in place, but suggests that it could become mandatory at some point.

The eSubmitter process will be introduced in two phases. In the first phase, the CDRH Export Certification Application and Tracking System will be made available to industry for the electronic submission of requests for export certificates. The CECATS module is a part of the
FDA Unified Registration and Listing System within the FDA Industry Systems Portal utilized to automatically issue export certificates to U.S. medical device manufacturers/distributors who wish to export their medical devices to foreign countries. The FDA notes that the advantages to industry from this new electronic system will be to greatly reduce certificate processing time, eliminate the need to return submissions through automated real-time validation, and allow companies to receive real-time updates on the status of their requests via the Web. CDRH is developing webinars and will hold online training sessions with industry on how to access and use CECATS, and a schedule and detailed instructions will be posted later.

The FDA plans to implement in early 2013 phase two of the eSubmitter process covering the remainder of the export certification, notification and permit requests, as follows.

- Certificates of Exportability (sections 801(e)(1) and 802 of the FD&C Act)
- Non-Clinical Research Use Only Certificate
- Simple Notifications (section 802(g) of the FD&C Act)
- Export Permit Letter (section 801(e)(2) of the FD&C Act) 

Four-Year Prison Sentence, $10,000 Fine for Separate Illegal Exports of Microwave Devices

The Department of Justice announced Jan. 17 that a Pennsylvania man has been sentenced to 42 months in prison and fined $1,000 after pleading guilty to committing various export violations while employed by a company that manufactured and supplied microwave amplifiers to domestic and foreign customers. These amplifiers are controlled for national security reasons and have military applications such as radar jamming and weapons guidance. The man admitted that he had altered invoices and shipping documents to conceal the correct classification of amplifiers to be exported so that they would be shipped without the required licenses, listed false license numbers on export paperwork for defense article shipments, and lied to fellow employees about the status and existence of export licenses. These actions resulted in at least 50 unlicensed exports to destinations including China, India, Hong Kong, Taiwan, Thailand, Russia, Mexico and other countries. According to the DOJ, the man explained his conduct by “saying he was ‘too busy’ to obtain the licenses.”

Separately, the Treasury Department’s Office of Foreign Assets Control reports that a Florida-based distributor of microwave radio frequency devices has agreed to pay $10,000 to settle potential civil liability for apparent violations of the Iranian Transactions Regulations. Under its prior ownership and management the company apparently made an unlicensed sale and export of radio frequency measurement devices to Austria with knowledge that the items were intended for transshipment to Iran. When the company learned that the shipment had been returned from Austria without delivery, it reexported the same goods to Slovenia for transshipment to Iran.

OFAC notes that the base penalty amount for the apparent violations is $500,000 and that (a) the company lacked a sanctions compliance program at the time of the apparent violations and did not voluntarily disclose them to OFAC, (b) the charges reflect knowing and willful conduct by an employee that is attributable to the company, and (c) the company’s prior management at least had reason to know that the goods were ultimately destined for Iran. However, the much lower final settlement amount reflects that this company has not been the subject of any prior OFAC enforcement action and will (pursuant to a deferred prosecution agreement with the DOJ) implement a compliance program that includes sanctions and export compliance training of all employees. OFAC notes that this settlement is part of a comprehensive settlement with other federal law enforcement agencies and that “the enforcement response is proportionate to the nature of the violations, given the totality of the circumstances.” 

AD/CV Notices: Steel Products, Chlorinated Isocyanurates

Agency: International Trade Administration.
Commodity: Steel threaded rod.
Country: China.
Nature of Notice: Amended final results of 2010/2011 administrative review of antidumping duty order.
Details: Weighted average dumping margins of 21.15% for RMB Fasteners Ltd. and IFI & Morgan Ltd. and 206% for the China-wide entity.

Agency: International Trade Administration.
Commodity: Chlorinated isocyanurates.
Country: China.
Nature of Notice: Final results of administrative review of antidumping duty order for the period June 1, 2010, through May 31, 2011.
Details: Weighted average dumping margins ranging from 29.98% to 38.25%. AD duties based on these rates will be assessed on entries of subject merchandise made during the period of review, and AD cash deposits at these rates will be required for shipments of subject merchandise entered or withdrawn from warehouse on or after Jan. 22.

Agency: International Trade Administration.
Commodity: Cut-to-length carbon quality steel plate products.
Country: Korea.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Feb. 1, 2011, through Jan. 31, 2012.
Details: Weighted average dumping margins of zero for three reviewed manufacturer/exporters.

Agency: International Trade Administration.
Commodity: Stainless steel bar.
Country: Brazil.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Feb. 1, 2011, through Jan. 31, 2012.
Details: Weighted average dumping margin of zero for Villares Metals S.A.

Agency: International Trade Commission.
Commodity: Silicomanganese.
Country: India, Kazakhstan and Venezuela.
Nature of Notice: Determination to conduct full sunset reviews of antidumping duty orders. 

FTZ Board Asked for New Zone in Iowa, Expanded Zone in Oregon, Production Authority in Texas

The Foreign-Trade Zones Board is soliciting comments through March 25 on an application from the Port of Portland, grantee of FTZ 45, requesting authority to reorganize and expand this zone under the alternative site framework, with a proposed service area of Clackamas, Multnomah and Washington counties in Oregon. This application would have no impact on FTZ 45’s previously authorized subzones.

The FTZ Board is also accepting through March 25 comments on an application from the Northwest Iowa Development Corporation to establish an FTZ under the alternative site framework. The service area of the proposed zone would be Cherokee, Lyon, O’Brien, Osceola, Plymouth and Sioux counties in Iowa, within and adjacent to the Sioux Falls U.S. Customs and Border Protection port of entry. The FTZ Board notes that several firms have indicated an interest in using zone procedures for warehousing/distribution activities in this area but that specific production approvals are not being sought at this time.

Finally, the FTZ Board has set March 4 as the deadline for comments on a notification of proposed production activity within FTZ 117 at the Signal International Texas GP LLC facility in Orange, Texas, which is used for the construction and repair of oceangoing vessels. FTZ activity would be limited to the specific foreign-status materials and components and specific finished products described in the notification and subsequently authorized by the FTZ Board. In addition, production activity under FTZ procedures would be subject to the “standard shipyard restriction” applicable to foreign-origin steel mill products (e.g., angles, pipe, plate), which requires that all applicable duties be paid on such items. 

DR-CAFTA Short Supply Request on Composite Laminated Fabric

The Committee for the Implementation of Textile Agreements has received a short supply request alleging that certain composite laminate fabric, classified under HTSUS 6001.22, is not available in commercial quantities in a timely manner from a supplier in the DR-CAFTA countries. This fabric consists of a three-layered fleece/shell construction, woven outer layer and brushed inner layer bonded with a polyurethane membrane. It is used for performance outerwear and its specifications are designed to withstand prolonged use in extreme conditions.

The petitioner is requesting that this fabric be added to the short supply list in Annex 3.25 of DR-CAFTA in unrestricted quantities. Responses with an offer to supply this fabric are due no later than Jan. 31. 

No IPR Import Restrictions on Electronic Devices with Graphics Data Processing Systems

The International Trade Commission has terminated without the imposition of import restrictions patent infringement investigation 337-TA-813 of certain electronic devices with graphics data processing systems, components thereof and associated software. This termination is based on a settlement agreement between complainant S3 Graphics Co. Ltd. and S3 Graphics Inc. and respondent Apple Inc. 

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines