Importing counterfeit merchandise into the United States — whether knowingly or unknowingly — exposes importers to two separate and serious consequences: seizure and forfeiture of the goods, and a monetary penalty that can dwarf the value of what was imported. This page explains both, and what you can do about them.
What Is a Counterfeit Trademark Violation?
Counterfeit merchandise is any merchandise that bears a trademark owned by a U.S. party and registered with the Patent and Trademark Office, without the permission of the trademark holder. The counterfeit mark can appear on the merchandise itself or on the label, sign, print, package, wrapper, or receptacle. 19 USC 1526(a). A counterfeit mark is defined as a spurious trademark that is identical to, or substantially indistinguishable from, a registered trademark. 19 CFR 133.21(a).
The most common counterfeit import cases we handle involve goods purchased online — particularly from China — including purses, clothing, electronics, accessories, DVDs, and musical instruments. But counterfeit violations can involve any product from any country. Importantly, the law does not require intent: even if you did not know the merchandise was counterfeit, it is still subject to seizure and forfeiture by CBP.
Counterfeit Goods vs. Gray Market Goods
Not every trademark dispute involves outright counterfeits. Gray market goods — also called parallel imports — bear a genuine trademark but are imported without the U.S. trademark holder’s authorization. The legal treatment of gray market goods is different from counterfeits, and the penalties are generally less severe. If you believe your goods may be genuine but unauthorized rather than counterfeit, that distinction is critical to your defense strategy.
CBP Seizure: What Happens and What You Can Do
Because counterfeit merchandise is illegal to import, CBP has authority to seize and forfeit it under 19 USC 1526(b) and (e). Once seized, CBP can destroy the goods, donate them to charity, transfer them to a government agency, or sell them at public auction — but only after the trademark owner’s marks have been obliterated and with the trademark holder’s consent in some cases.
Before taking any of those actions, however, CBP is required to give the importer an opportunity to respond. The process works as follows:
- Notice of seizure. CBP’s Fines, Penalties & Forfeitures (FP&F) office will mail a formal notice of seizure to the importer of record, typically by certified mail.
- Right to request samples. Since October 2015, importers have the right to request samples of detained or seized merchandise from CBP. This is an important tool — having a sample independently examined can establish that the goods are not in fact counterfeit.
- Petition for remission. The importer has the opportunity to file a petition for remission of forfeiture with FP&F. In this petition, you can argue that the goods are not counterfeit, that an exception to forfeiture applies, or present other grounds for release.
Circumstances under which seized goods may be released include: proof that the goods are not counterfeit; proof that the goods qualify as genuine gray market goods; personal use goods accompanying a traveler entering the U.S.; or cases where the trademark owner consents to the importation and the counterfeit marks are destroyed.
For truly counterfeit goods — particularly those with a registered and CBP-recorded trademark — the chances of getting the merchandise back are limited. CBP treats counterfeit enforcement as a priority trade issue, and petitions for remission succeed far less often than in other seizure contexts. That makes the penalty phase that follows all the more important to address aggressively.
The Penalty: When Forfeiture Is Just the Beginning
Many importers assume that once their goods are seized and forfeited, the matter is over. It is not. Weeks or months after forfeiture is complete, CBP can — and routinely does — issue a separate monetary penalty. This penalty arrives by certified mail from FP&F and demands payment of a specific dollar amount based on the alleged violation.
Anyone who caused, directed, or financially assisted the importation is potentially liable for the penalty — not only the named importer of record.
When Does CBP Issue a Penalty?
As a matter of policy, CBP issues a penalty when all three of the following criteria are met:
- The counterfeit mark is registered with the Patent and Trademark Office
- The counterfeit mark is recorded with CBP
- The importer had no consent from the trademark holder to import the goods
In all other circumstances, CBP has the authority to issue a penalty but may or may not do so depending on the individual facts of the case.
How the Penalty Amount Is Calculated
The penalty amount is not based on what you paid for the goods. It is based on the manufacturer’s suggested retail price (MSRP) of the genuine article — which can be orders of magnitude higher than the purchase price of the counterfeit goods:
- First offense: up to the MSRP of the genuine goods
- Second or subsequent offense: up to twice the MSRP of the genuine goods
To illustrate how significant this is: if you imported 100 pairs of counterfeit jeans that cost $5 each, but the genuine article carries an MSRP of $95, the first-offense penalty is up to $9,500 — not $500. A second offense in the same scenario could reach $19,000. For high-end goods like luxury handbags, guitars, or electronics, the numbers scale dramatically. CBP has assessed penalties in the hundreds of thousands of dollars on individual shipments.
Responding to a Counterfeit Penalty Notice
Upon receiving a notice of penalty, the importer has 30 days to either pay the penalty in full or file a detailed petition for mitigation arguing for a reduction or cancellation. Ignoring the notice is not a viable option — failure to pay or respond will result in referral to the U.S. Attorney’s Office for federal court collection proceedings, which can lead to liens on property, asset garnishment, and bank account seizures.
Filing a well-prepared petition for mitigation is almost always the right course of action. CBP’s internal mitigation guidelines establish a framework of mitigating and aggravating factors that determine how much relief is available. A persuasive petition works through those factors systematically and presents the strongest factual and legal case for reduction.
What Penalty Reductions Are Possible?
With a properly prepared petition and no significant aggravating factors, the following outcomes are achievable:
- First or second offense, no aggravating factors: reduction of 70% to 90% of the assessed penalty
- Aggravating factors present, or third offense: reduction of 50% to 80% is still possible with strong mitigating evidence
- Full cancellation: possible in cases where there are grounds to challenge the technical basis of the violation — for example, where the goods are not truly counterfeit, where the trademark was not properly recorded with CBP, or where other legal defenses apply
Great Lakes Customs Law has obtained complete cancellation of counterfeit penalties even in cases where a technical violation occurred. Results vary by case and no outcome can be guaranteed, but the difference between a well-argued petition and no petition — or a poorly prepared one — is frequently measured in thousands of dollars. You can review some of our penalty case outcomes here.
Trademark Holder Civil Action
CBP penalties are not the only exposure. Trademark holders monitor CBP seizure records and frequently send their own demand letters to importers identified in seizure notices. Depending on the circumstances, the trademark holder may pursue a civil infringement claim under the Lanham Act, which carries its own damages framework including the possibility of attorney’s fees and statutory damages. Receiving a CBP penalty notice and a trademark holder demand letter simultaneously is not uncommon, and the two proceedings require coordinated responses.
Counterfeit Seizure or Penalty Notice? Contact Us.
If CBP has seized your merchandise as counterfeit, or if you have received a notice of penalty, the 30-day response window moves quickly. Great Lakes Customs Law has handled counterfeit seizure and penalty cases at ports nationwide for more than 15 years. Attorney Jason Wapiennik has deep relationships with FP&F officers across the country and knows the internal mitigation guidelines CBP applies to these cases. Call us at (734) 855-4999 or contact us online for a free case review.