News
Print PDF

Practice Areas

Court Suspends Bond Increase for Allegedly Infringing Goods

Wednesday, April 11, 2018
Sandler, Travis & Rosenberg Trade Report

The Court of International Trade has granted a temporary restraining order preventing U.S. Customs and Border Protection from requiring a higher entry bond for a company’s allegedly counterfeit imports. The court said this bond requirement is overly broad and that the TRO is necessary to prevent irreparable harm to the plaintiff.

The case arose after CBP imposed an enhanced single entry bond requirement, in the amount of three times the shipment value, for each of the plaintiff’s shipments. CBP alleged that the company had more than 30 shipments containing goods violating the Lanham Act, which prohibits imports of goods that copy or simulate the name of a domestic manufacturer or registered trademark in such a way that causes confusion to the public regarding the true origins of the product. CBP said any of the company’s entries without the required SEB would be rejected.

The CIT granted a TRO against this requirement because most of the associated requirements were met. First, the plaintiff showed it would suffer irreparable harm without a TRO because the cost of the SEB would likely force the company to cease operations. Second, the balance of hardships weighs in the plaintiff’s favor, as CBP’s burdens of resource diversion and inconvenience associated with having to inspect the plaintiff’s containers are outweighed by the plaintiff’s burdens of loss of reputation and customers and other potentially permanent consequences.

Third, the plaintiff has shown a likelihood of success on the merits of the case. The CIT explained that CBP’s imposition of an enhanced, punitive bond on all of the plaintiff’s imports, when it should be directed toward only the one percent of imports implicated by CBP’s allegations, is “an abuse of discretion that is contrary to [CBP’s] mandate” of not requiring bond amounts that “unnecessarily put an excessive burden on a person or firm or place them in an impossible situation.”

On the other hand, the CIT rejected the plaintiff’s argument that the imposition of the SEB requirement without an opportunity for the company to challenge the underlying factual and legal determinations judicially, or the ability to challenge the bond requirement, violates the Due Process Clause of the Constitution. The court noted that previous case law has established that individuals do not have a protectable interest to engage in international trade under the Constitution. The CIT also found that the public interest factor is the only one in CBP’s favor, as the public benefits from the efficient administration and enforcement of the law.

The TRO allows CBP to impose the enhanced SEB requirement “proportional to the percentage of allegedly infringing goods” but not with respect to the plaintiff’s other shipments (at least through April 20). The order also requires CBP to expeditiously process all of the plaintiff’s shipping containers and immediately release all imports not implicated by the underlying allegations.

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

Customs & International Headlines