Background

A trade advisory panel is recommending the creation of separate lists of known intellectual property rights violators and trusted IPR vendors to help slow the volume of counterfeit goods being imported into the U.S., including through low-value (Section 321) entries.

At a recent meeting of U.S. Customs and Border Protection’s Commercial Customs Operations Advisory Committee, the committee’s IPR Working Group recommended that CBP seek and obtain the legal authority to create and enforce a comprehensive IPR restricted and prohibited parties list consisting of foreign and domestic parties (i.e., individuals, companies, or organizations) that are known offenders due to repeat violations. The working group said the IPR list should be modeled on the denied party lists used by agencies such as the Bureau of Industry and Security and the Office of Foreign Assets Control to restrict and/or prohibit trade with bad actors.

The working group suggested that parties who have been found to deal with counterfeit goods subject to a lesser offense (administrative detention or seizure) initially could be placed on the restricted list warranting automatic detention for all future shipments until further notice. Parties found to traffic in counterfeit goods subject to a higher offense (civil liability or criminal prosecution) or repetitive violations could be placed on the prohibited list barring future shipments until further notice.

According to materials prepared by the working group, a restricted or prohibited party list could help halt counterfeit trade by shifting from the current in rem approach, which only evaluates whether the merchandise itself is violative, to an in personam approach, which considers the parties involved in the transaction. This would help customs brokers, express carriers, freight forwarders, and others identify and avoid bad actors and promote “more dedicated and energetic action against actual violators.” In addition, shipments involving listed parties would be presumptively inadmissible, clearing up CBP’s resources to identify whether goods are counterfeit. The mere risk of being put on a list might also reduce illegal conduct.

Under the working group’s recommendations, the IPR list would be developed with information from numerous sources (including IPR holders and CBP seizure statistics) and could include companies that have made shipments without valid licensing agreements, offenders with more than three seizures and/or uncontested detention notices, and foreign shippers or consolidators of violative goods even if consolidated and commingled with legitimate goods. However, there would also need to be a sufficient vetting process to make sure that neither the trade nor CBP are improperly capturing gray market importers and the like that can legally import. Companies could be removed from the list if they provide receipt of proper licensing, change sourcing to an approved or licensed supplier or distributor, or remove violative goods from commingled shipments.

The working group also voiced support for an IPR trusted vendor concept under which IPR holders could green-list authorized and licensed importers. Factors that could indicate whether a party should be considered a trusted IPR vendor could include receipt of a binding ruling from CBP’s Office of Regulations and Rulings confirming the genuine nature of the goods.

For more information on these recommendations, please contact ST&R member and COAC co-chair Lenny Feldman at (305) 894-1011.

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