Tag: counterfeit

Importing Counterfeit Trademarks – Customs Seizures & Penalties; Part 2

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?

Keep Calm Petition MemeYes, 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.

Counterfeit DVD Seizure by Philly Customs

Customs recently seized some counterfeit merchandise being imported through the port of Philadelphia. Yesterday, we began the first part of our series on what happens when a person or business imports counterfeit merchandise into the United States (please read the article, but I’ll give you a hint: it’s not good). As this customs news release points out, the reasons why customs seizes counterfeit merchandise is often more than just to protect the U.S. trademark holder, but because counterfeit products are often of lower quality and could cause serious harm to the consumers who use them. Read the article below with my own notes written in bold for a play-by-play of how the process of this seizure of counterfeit merchandise plays out.

PHILADELPHIA – The unofficial start to summer arrives in about two weeks, and as is customary, people are feverishly working on sculpting and toning their summer physique. Unfortunately, disreputable organizations know this too, and they prey on that motivation to sell under priced and potentially dangerous counterfeit exercise equipment and technology.

U.S. Customs and Border Protection (CBP) officers in Philadelphia recently seized 36 boxes of counterfeit BeachBody Focus T25 DVDs, and 12 boxes of counterfeit BeachBody P90X3 DVDs, worth an estimated $5,800 MSRP. [NOTE: As we will see in Part 2 of our series on counterfeit trademark customs seizures, MSRP is important when it comes to calculating the penalty the customs will issue to the importer].

The counterfeit DVDs arrived from Hong Kong in two separate shipments and were destined for two addresses in Philadelphia. CBP officers examined the shipments and detained them April 1 to determine their authenticity with the trademark holder, BeachBody. [NOTE: Customs contacts the trademark holder prior to formally detaining the merchandise to determine if the product is truly a counterfeit.]
Customs Counterfeit DVD SeizurePhiladelphia CBP seized two parcels of BeachBody exercise DVS April 25, 2014.CBP simultaneously worked with the importer and broker to obtain specific authorization from the trademark holder permitting it to import BeachBody products. Neither was able to provide an authorization letter from BeachBody. [NOTE: If the importer has the consent of the trademark holder to import counterfeit merchandise, or if it can obtain permission from the trademark holder prior to forfeiture, it’s possible to get the counterfeits released from seizure].

BeachBody confirmed that the products were counterfeit. CBP seized both shipments April 25 for a violation of 19 USC 1526, Merchandise Bearing and American Trademark. [NOTE: The importer will receive a notice of seizure by mail, with the opportunity to respond by, among other things, filing a petition for remission].

“U.S. Customs and Border Protection urges consumers to be especially vigilant against purchasing suspected counterfeit technology products that may have a hidden, embedded virus that can steal your personal information, wipe your hard drive clean, or destroy your electronic devices,” said Susan Stranieri, CBP Port Director for the Area Port of Philadelphia. “If the price seems too good to be true, it likely is a counterfeit or pirated item, and is a potentially dangerous product.”

The counterfeit DVDs will be destroyed.

Protecting intellectual property rights (IPR) remains a CBP priority trade issue.

CBP protects businesses and consumers every day through an aggressive IPR enforcement program. CBP targets and seizes imports of counterfeit and pirated goods, and enforces exclusion orders on patent-infringing and other IPR violative goods.

The People’s Republic of China, where these DVDs were manufactured, remains the primary source economy for counterfeit and pirated goods seized by CBP and its primary IPR partner, Immigration and Customs Enforcement (ICE). In Fiscal Year 2013, 68 percent of all IPR seizures were for goods manufactured in China. The MSRP of those counterfeit goods was valued at approximately $1.1 billion.

In addition to China, CBP and ICE seized counterfeit merchandise from 73 additional economies during FY 2013, including Hong Kong, India, Korea, Singapore, and Vietnam.

To view counterfeit seizure statistics from 2013, visit CBP’s 2013 IPR enforcement results and CBP’s IPR enforcement for more information on this priority trade enforcement issue.

Inspecting international parcels for dangerous and illicit products remains a CBP enforcement priority.

CBP routinely conducts random inspections operations on passengers and air cargo searching for narcotics, currency, weapons and other prohibited or illicit products.

If you have had money or merchandise seized by customs because they allege it is counterfeit and contains trademark violations, call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. We are able to assist petitions for customs seizures nationwide.

Importing Counterfeit Trademarks – Customs Seizures & Penalties; Part 1

Often, people and businesses can knowingly or unknowingly import counterfeit trademark merchandise into the United States. The majority of these types of importations we encounter for clients are Internet purchases from China, such as purses, videos/DVDs, guitars, clothing,  electronics and accessories, but they can really be any type of product and from any country. Sometimes people know the merchandise is counterfeit but other times they do not have any suspicion, or in some circumstances truly know that what they are importing is not counterfeit. Even if ignorant about the merchandise being counterfeit, if it really is counterfeit then the property is still subject to seizure and forfeiture by U.S. Customs and Border Protection.

What is a counterfeit or trademark violation?

Counterfeit merchandise is merchandise that “bears a trade-mark owned by [someone in] the United States, and registered in the . . . [Patent and Trademark Office].” The counterfeit mark can be on the “merchandise, or the label, sign, print, package, wrapper, or receptacle” itself. 19 USC 1526(a). A counterfeit mark is a spurious trademark that is identical to, or substantially indistinguishable from, a registered trademark. 19 CFR 133.21(a). If you do not have permission of the trademark owner to import the merchandise, it’s illegal to import it.

Because the counterfeit merchandise is illegal, it is subject to seizure and forfeiture by U.S. Customs & Border Protection under most circumstances (usually it must also be recorded with CBP per 19 CFR 133.21(b)). 19 USC 1526(b) and (e). This means that customs can take the suspected counterfeit merchandise and destroy it, or if they can obliterate the counterfeit marks and get the consent of the trademark owner, then customs can give it to charity, give it to a government agency for its own use, or sell it at public auction.

Is it possible to get the seized merchandise released?

Before customs can destroy the counterfeit/trademark violations, give it away, or sell it, they must first give the importer a chance to respond. Since October 2015, at the time of detention or even after seizure, the importer has a right to request samples of seized merchandise from CBP. After merchandise is seized, Customs through its Fines, Penalties and Forfeitures (FP&F) office, will send a “notice of seizure” of the counterfeit merchandise to the importer of record. The importer then has several options, among those are the ability to file a petition for remission of forfeiture with FP&F. In this petition, the importer has opportunity to demonstrate that there are no counterfeit/trademark violations involved with the import of the merchandise.

Alternatively, the importer could argue in the petition for remission to customs that some exception to seizure and forfeiture applies. If the importer can prove that the goods are not counterfeit, then the seizure would be remitted and the merchandise released to the custody of the importer. A similar result is possible in certain other circumstances, like if they are permitted genuine, gray market goods, or are for personal use and accompanying a traveler entering the U.S., or if the trademark owner consents to the importation and the counterfeit marks are destroyed.

My merchandise was seized and forfeited as counterfeit. Am I in any other trouble?

If you have merchandise seized by customs and either lose your opportunity to get the merchandise back, abandon the merchandise, or ignore the notice of seizure, it may not be the end of trouble for the importer. In general, customs has the authority to fine or penalize anyone who violates the laws enforced by customs. This means that, weeks or months after the property is seized and forfeited, you may get notice of penalty in the mail from customs that demands payment of thousands of dollars in penalties! It could also mean you get a letter from the trademark holder threatening you with further legal action.

In Part 2 of this series, we discuss when and how customs can assess a monetary penalty after the counterfeit property is seized and forfeited.

If you have had money or merchandise seized by customs because they allege it is counterfeit and contains trademark violations, call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. We are able to assist petitions for customs seizures nationwide.

Customs intellectual property enforcement through product seizures

Customs, like any other organization, sets goals and runs campaigns. In recent years there has been a focus on counterfeits, and products that infringe on trademarks, patents, or other forms of intellectual property. I know some folks who says customs doesn’t do enough in this regard. Nevertheless, touting its recent prowess in stopping a portion of the large amounts  of infringing goods flooding across the border, Customs recently released some news about its efforts for the 2013 fiscal year.

U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations today announced the comprehensive results of ongoing efforts to protect America from the illicit trade in counterfeit and pirated goods during Fiscal Year 2013. [ . . . ]

The number of [intellectual property rights] seizures increased nearly 7% from 22,848 in FY 2012 to 24,361 in FY 2013. The [manufacturer’s suggested retail price] of seized goods increased from $1.26 billion in FY 2012 to $1.74 billion in FY 2013 [Editor’s Note: this is the price of the counterfeit goods as if they were not counterfeit]. DHS averaged slightly over 66 seizures per day, with an average MSRP of each seizure being slightly more than $71,500.

“Together with our [intellectual property rights] partners, CBP continues to guard the nation’s borders against counterfeit products,” said CBP Commissioner R. Gil Kerlikowske. “These products are not only unsafe and dangerous to consumers, but they also pose a threat to the economic security of our country.” 

“These numbers are the result of the hard work of the men and women of the Department of Homeland Security and the increased collaboration of our agencies through the IPR Center,” said ICE’s Principal Deputy Assistant Secretary Thomas S. Winkowski. “But a great deal more has to be done to protect the public from the health and safety threat that counterfeits pose to our society. We will continue to pursue these criminals and educate the public about the real threats that intellectual property crimes pose.”

[ . . . ] Consumers are reminded to remain vigilant when making online purchases. [Editor’s Note: Internet purchasers are responsible for their imports complying with the law!]

[ . . . ] Collaboration through the IPR Center led to 692 arrests, 401 criminal indictments, and 451 criminal convictions for criminal IPR infringement activities in FY 2013.

While the People’s Republic of China remains the primary source economy for counterfeit and pirated goods seized, with a total value of $1.1 billion, representing 68% of all IPR seizures by MSRP in FY 2013, DHS made seizures from 73 additional economies during FY 2013, including Hong Kong, India, Korea, Singapore, and Vietnam.

CBP is committed to seeking global solutions to the global trafficking in counterfeit and pirated goods. Notably, CBP engaged in a joint enforcement operation with China resulting in the removal of 243,000 items trading between the countries, and also concluded joint enforcement operations with France and Germany.

CBP and HSI protect businesses and consumers every day through an aggressive IPR enforcement program. CBP targets and seizes imports of counterfeit and pirated goods, and enforces exclusion orders on patent-infringing and other IPR violative goods.

More statistical data is available by clicking HERE.

Importing infringing items into the United States is a very serious matter. First, it is very likely that after seizure the property will be forfeited and destroyed by the U.S. government if, in fact, they are infringing on someone’s intellectual property. Once forfeiture is perfected, the person who caused the importation will probably get a notice of penalty from U.S. Custom & Border Protection in the mail based on the maximum penalty the law allows for the type of violation.

The person will have a chance to respond to customs’ notice of penalty with the Fines, Penalties, and Forfeitures office by filing a petition for mitigation and ask customs to reduce the penalty based on the presence of certain mitigating factors that customs particularly looks for. Great Lakes Customs Law has been very successful in getting these kinds of penalties reduced and, sometimes, even eliminated entirely. If the person fails to pay the penalty, the government may bring a lawsuit against them in federal district court to recover the penalty in the form of a judgment, after which point the government can lien property, garnish bank accounts, and seize property.

If you have had money or merchandise seized by customs call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. Once your merchandise is seized, Customs may issue a penalty for the violation of law itself. If you have received a notice of penalty from U.S. Customs call our office immediately to discuss the possibility of filing a petition to reduce the penalty amount.

We are able to assist petitions and in seizures by customs nationwide.

U.S. Customs Counterfeit Seizure & Penalty; Fake Purses

KFox14’s website has a recent story about a a counterfeit purse seizure by customs with a value of around $12,000. We have previously written articles on trademark infringement gray market goods and trademark infringement, which can help you understand the process more.

The story AVAILABLE HERE on KFox14’s website, in part, says:

In January, 39 Michael Kors purses suspected of being counterfeit were seized at an El Paso port of entry. The purses were part of an international shipment from Hong Kong that was selected for inspection. Officers who were examining the shipment identified the suspect bags and they were turned over to members of the CBP Intellectual Property Branch for further review, officials said.

 

[ . . . ]

The purses were found to be of poor quality compared to what the brand was known for despite having nearly identical markings, officials said. A notice of seizure was given to the consignee of the shipment on March 10. The value of the seized handbags was estimated at $12,285.

Importing counterfeit items into the United States is a very serious matter. First, it is very likely that after seizure the property will be forfeited and destroyed by the U.S. government if, in fact, they are counterfeit. Once forfeiture is perfected, the person who caused the importation will probably get a notice of penalty from U.S. Custom & Border Protection in the mail for a minimum of $12,285, or the equivalent of the value of the products if they were real. That is what the law says.

The person will have a chance to respond to customs’ notice of penalty with the Fines, Penalties, and Forfeitures office by filing a petition for mitigation and ask customs to reduce the penalty based on the presence of certain mitigating factors that customs particularly looks for. Great Lakes Customs Law has been very successful in getting these kinds of penalties reduced and, sometimes, even eliminated entirely. If the person fails to pay the penalty, the government bring a lawsuit against them in federal district court to recover the penalty in the form of a judgment, after which point the government can lien property, garnish bank accounts, and seize property.

If you have had money or merchandise seized by customs call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. Once your merchandise is seized, Customs may issue a penalty for the violation of law itself. If you have received a notice of penalty from U.S. Customs call our office immediately to discuss the possibility of filing a petition to reduce the penalty amount.

We are able to assist petitions and in seizures by customs nationwide.

Customs Liability for Internet Purchases

In addition to helping importers before U.S. Customs & Border Protection that are businesses, whether large or small, we also represent the “little guy” when they find themselves faced with a notice or letter from U.S. Customs informing them that it appears they have somehow violated the law. Usually, these people — often nascent entrepreneurs —  are importing limited quantities of a product from overseas to make a quick buck or try their hand at a new business, and other times they are just individuals buying something for personal use.

These unsuspecting people get their goods seized by customs or get stuck with a demand to pay a penalty, for a host of customs violations, such as counterfeit/trademark infringement or incorrect country of origin rp_FrustatedExecutive-248x300.pngmarking. Then they must answer to the Fines, Penalties & Forfeitures officer and navigate a series complex sea of options and choices, without knowing what the effect in terms of money, cost of seized and forfeited goods, and time that their decisions will have. They usually do not have patience for those ignorant of the law and terse phone calls with them will do little to help you understand what is happening to you and your imports.

Lo, and behold: customs has published guidance for internet purchases for the public at large that explains, in simple terms, what the responsibilities are of a buyer purchasing from an online seller. The whole page is a must-read for anyone who is buying a product from overseas because, as it states:

It does not matter whether you bought the item from an established business or from an individual selling items in an on-line auction. If merchandise, used or new, is imported into the United States, it must clear CBP and may be subject to the payment of duty as well as to whatever rules and regulations govern the importation of that particular product into the United States.

Go have a look at the article “Internet Purchases“. It provides a checklist for internet purchasers to go through when ordering from an online seller, the declaration process, shipping methods, restricted merchandise, prohibited merchandise, and quotas. Of course, the information available can still be confusing, and should not replace the advice of an experienced customs lawyer. If you have had money or merchandise seized by customs call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. Once your merchandise is seized, Customs may issue a penalty for the violation of law itself. If you have received a notice of penalty from U.S. Customs call our office immediately to discuss the possibility of filing a petition to reduce the penalty amount.

We are able to assist petitions and in seizures by customs nationwide, including Detroit, Cleveland, Chicago, Buffalo, New York, and Los Angeles.

Customs Merchandise & Property Seizures in the Caribbean

U.S. Customs & Border Protection in Puerto Rico and the U.S. Virgin Islands recently reported their annual fiscal year statistics, which included the following nugget about currency seizures performed by customs. Most of these customs currency seizures occur at airports and water ports; we have reported on numerous currency seizures occurring at U.S. ports in the Caribbean in previous articles posted. The amount money customs seizes from travelers is staggering:

In Puerto Rico and the U.S. Virgin Islands, CBP officers and agents . . . seized approximately $3.5 million in unreported currency in FY 2013, which runs from October 1, 2012 to September 30, 2013.

If you have had your money seized by customs, read visit our page that is devoted to understanding currency seizures to help you understand the process.

But, the news release deals not only with customs money seizures, either, but also with customs seized merchandise imported for violation of intellectual property rights, too. We have previously written articles on trademark infringement gray market goods and trademark infringement, which can help you understand the process more.

CBP officers conducted more than 164 seizures related Intellectual Property Rights violations, with a domestic value of approximately $1.9 million.

If you have had money or merchandise seized by customs call our office at (734) 855-4999 to speak to a customs lawyer, or e-mail us through our contact page. Once your merchandise is seized, Customs may issue a penalty for the violation of law itself. If you have received a notice of penalty from U.S. Customs call our office immediately to discuss the possibility of filing a petition to reduce the penalty amount.

We are able to assist petitions and in seizures by customs nationwide, including Detroit, Cleveland, Chicago, Buffalo, New York, and Los Angeles.

CBP Counterfeit Handbag Seizure

I am sharing this news releases from Customs & Border Protection because it has to deal with topics that we have discussed in previous articles, namely seizures by CBP for counterfeit importations. We previously discussed the notion of gray market goods and touched on the topic of counterfeit imports in our article called Trademark Infringement: Importing Gray Market Goods and Seizure by Customs. This article only says that the bags were “in violation of the Hermes protected trademark” but does not specifically say how they were in violation; because the news release goes on to say that these bags were concealed within a shipment of non-infringing merchandise it seems unlikely that this was an innocent mistake by an inexperienced importer. It shows an intent to commit a fraud.

Los Angeles — U.S. Customs & Border Protection (CBP) officers and import specialists at the Los Angeles/Long Beach Seaport complex seized 16,053 counterfeit Hermes handbags in nine shipments from June 6 through September 17. All were in violation of the Hermes protected trademark.

Their combined domestic value of $295,665 contrasted to the manufacturer suggested retail price of $210,785,475 had they been genuine, illustrates the potentially high profit margins in such an illegal venture.

“CBP officers are trained to identify and interdict counterfeit goods, and this is a great example of how their training and expertise are employed every day in our ports of entry,” said CBP Director of Field Operations in Los Angeles Todd C. Owen. “These counterfeiters are not only cheating the legitimate designers and manufacturers of protected trademark merchandise, but also the public and the U.S. government,” he added.

Eight of the shipments were coming from China, one from China via Hong Kong. Two had the knock-offs hidden in the nose of the containers with concealing attempts of packing legitimate, non-infringing merchandise behind them.

Five different importers sent the shipments. All were destined to surrounding areas of Los Angeles except for one destined to Texas.

CBP Counterfeit Handbag Seizure
Approximately $1.26 billion worth of counterfeit goods originating overseas were seized by CBP in 2012. China, Hong Kong, Singapore, India and Taiwan are the top five countries of origination for counterfeit goods seized by CBP.

Nationwide, handbags and wallets comprised the greatest number of counterfeit items seized by CBP last year, with the value of seizures up 142 percent compared to 2011. Of the approximately $511 million in handbags and wallets seized, more than $446 million came from China.

Violations of trade laws, including violations of intellectual property rights laws can be reported to CBP online. ( e-Allegations Submission )

It looks like someone is going to be getting a notice of penalty CBP’s Fines, Penalties and Forfeiture’s office very soon. If you are facing penalties from CBP for items you have imported or for your import practices, call my office at (734) 855-4999 or e-mail us through our contact page.