Importing counterfeit merchandise into into the United States is not only illegal, but is something that U.S. Customs & Border Protection takes very seriously. Intercepting counterfeits is considered it to be a priority trade enforcement issue. For truly counterfeit imported merchandise, there are few opportunities to get the seizure remitted (to get the merchandise back from customs), and so it is forfeited (becomes property of the government). We discussed this Part I of Importing Counterfeit Trademarks – Customs Seizures & Penalties. But, forfeiture is often just the beginning of the story, because customs can and does penalize people for importing counterfeit merchandise.

When does customs issue a notice of penalty for importing counterfeits?

As matter of policy, customs issues a penalty when 3 criteria are met:

1. The counterfeit mark is registered with the Patent and Trademark Office
2. The counterfeit mark recorded with U.S. Customs & Border Protection
3. The importer has no consent from the trademark holder to import the counterfeits

In all other situations, customs has the authority to issue a penalty, but may or may not, even if the merchandise is seized. It depends on the individual circumstances of the case.

What is a notice of penalty and who is liable?

The notice of penalty is sent from the Fines, Penalties & Forfeiture’s Office of U.S. Custom & Border Protection through the U.S. mail, usually certified. The notice of penalty is typically a 1 to 2 page document, that states what law or laws or regulations were allegedly violated, and based on the violation, it demands payment of a certain dollar amount.

The importer and anyone who causes, directs, or assists the importation (financially or otherwise) is liable to get the notice of penalty.

How is the penalty amount determined?

The penalty dollar amount is usually based on the maximum amount that customs can levy under the law for counterfeit violations; they are are not based on the price actually paid for the goods, but on the manufacturer’s suggested retail price (“MSRP”) of the goods if they were genuine:

• 1st Offense: the penalty is equal to up to the MSRP of genuine goods
• 2nd (or more) Offense: the penalty is equal to twice the MSRP of genuine goods

For example, if you are importing counterfeit jeans that cost $5 each, but which have a MSRP for genuine jeans of  $95, customs customs uses the $95 price in its calculation. In this example, if 100 pairs of jeans were imported, the penalty for a 1st offense is up to $9,500 (not $500). For a 2nd offense, the penalty is up to $19,000 (not $500 or $1,00).

Does customs ever reduce a penalty?

You can pay the penalty or, as we recommend, file a petition for mitigation to ask for a reduction in the penalty. Once the notice of penalty is sent, the recipient has either 30 days to pay the penalty or file a detailed petition arguing the legal bases for further mitigation (reduction) or cancellation of the penalty. We recommended preparing and filing a petition, with the assistance of legal counsel, which argues persuasively for the substantial mitigation, or when the facts and law warrant it, cancellation of the penalty in full. Great Lakes Customs Law has been very successful in getting these kinds of penalties reduced and, sometimes, even eliminated entirely (some history of our success is HERE).

A failure to pay the penalty, or the mitigated penalty, will result in the referral of the matter for collection through the U.S. attorney. Customs may sue the importer or the person providing assistance in federal court and get a judgment against them. This allows the government to lien property, garnish assets and bank accounts, and seize property to satisfy the judgment.

Obviously, the best course of action is to file a petition, get a reduced penalty, and pay it.

Is there a way to reduce the penalty from customs?

Yes, if a properly argued petition with factual and legal support is presented to customs, it is possible for a penalty reduction of anywhere from 10% to 30% for a first or second offense. There would have to mitigating and no aggravating factors to achieve that result.

A standard disposition with aggravating factors, or for a third offense, may still garner a reduction of 50% to 80%, if a properly argued petition with factual and legal support is presented to customs.

It is possible, and our law firm has been able to obtain complete cancellation of the penalty even in cases where there are still grounds for a technical violation of the law (some history of our success is HERE). Of course, results will vary from case to case, and no result could be guaranteed. Customs has maintains a list of mitigating factors and aggravating factors that it looks for, and which should part of the argument and analysis of any petition that is filed for them; without a careful and thoughtful analysis of those factors that customs looks for, you may end up pay more than necessary.

If you have had your merchandise seized or have received a notice of penalty from customs, call our office at (734) 855-4999 to speak to a customs lawyer about the possibility of getting your penalty reduced, or e-mail us through our contact page. We are able to assist petitions and in penalty cases by customs nationwide.