Tag: customs attorney

Customs seizure of smuggled money in Arizona

Posted by Jason P. Wapiennik on

A news release from Customs & Border Protection goes into some detail on a recent money seizure in Arizona. The release says that Customs officer’s seized $10,744 in unreported money/currency from a 22-year old guy with a valuable pair of shoes (see below. sometimes  I just like re-posting these new releases for the pictures they provide of smuggling attempts).

U.S. Customs andCustoms Seizure Arizona Shoe Border Protection officers and Border Patrol agents conducting outbound inspections referred a 22-year-old man for further inspection. During a search of the man, officers found $10,744 in U.S. currency concealed in his shoes. The currency was seized and the man was arrested and referred to U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

Individuals arrested may be charged by complaint, the method by which a person is charged with criminal activity, which raises no inference of guilt. An individual is presumed innocent unless and until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

Unlike the usual cases I handled where the unreported seized money is part of a civil seizure, this apparently was a criminal seizure. While any violation can give rise to criminal penalties, usually if there is no suspicion of criminal activity the assistant U.S. attorney will not press charges.

In fact, before sometimes before a person is a released after being detained for bulk cash smuggling, a failure to report currency over $10,000, or a structuring violation the seizing officer will call and explain the circumstances to the assistant U.S. attorney, who may either accept, defer, decline prosecution. Of course, if prosecution is initially declined, it would not prevent the government from changing their mind and pursuing criminal charges should they find new evidence in the future.

The risk of criminal prosecution, and the complicated process of actually getting your money through the petition process, is a good reason to give our office a call at (734) 855-4999, or e-mail us if you have had your money seized by Customs, even if you feel it was innocently done. We provide more reasons for hiring an attorney in our tutorial on the currency seizure process.

Customs seizes $360,000 in Unreported Money

Posted by Jason P. Wapiennik on

A May 3rd news release from Customs & Border Protection details a recent money seizure in Texas. The release says that Customs officer’s seized $360,025 in unreported currency from a male Mexican national when attempting to exit the U.S. and enter Mexico.

What is interesting about this story is there is what is not said, because these news releases usually give some indication that they suspect there was some connection with illegal drug activity. This, however, only says what I have written about many times; that a failure to report currency over $10,000 (failure to report), or concealing more than $10,000 with an intent to evade the reporting requirement (bulk cash smuggling) is illegal.

Another curious aspect is that the $360,000 was concealed in 36 separate packages, which means that each package had about $10,000 in it. I don’t know if that’s just a convenient amount to put in a package, or if there were supposed to be 36 different transactions taking the money across the border by different people or at different times.  That would be a structuring violation, anyway.

Here is the full story:

The vehicle, driven by a 23-year-old male Mexican citizen from San Luis Potosi, Mexico, was selected for further inspection and was referred to secondary. During the process of the secondary inspection, officers noted irregularities within the vehicle and further inspection revealed multiple hidden packages of unreported U.S. currency. Officer discovered and seized a total of 36 packages, which totaled $360,025 in unreported U.S. currency and also seized the vehicle.

CBP-OFO arrested the male traveler and subsequently released him to the custody of Homeland Security Investigations (HSI) agents for further investigation.

“This outstanding seizure of unreported currency was accomplished due to excellent teamwork from our CBP-OFO officers,” said Efrain Solis Jr., port director, Hidalgo/Pharr/Anzalduas. “People who fail to declare currency in excess of $10,000 entering or leaving the country will face penalties or be subject to having CBP seize all of the unreported currency.”

It is not a crime to carry more than $10,000, but it is a federal offense not to declare currency or monetary instruments totaling $10,000 or more to a CBP officer upon entry or exit from the U.S. or to conceal it with intent to evade reporting requirements. Failure to declare may result in seizure of the currency and/or arrest. An individual may petition for the return of currency seized by CBP officers, but the petitioner must prove that the source and intended use of the currency was legitimate.

And I always recommend that anyone whose currency has been seized should contact a lawyer to draft a petition for return of the currency. So if you have had currency seized from Customs do not try to respond yourself but hire our firm, because we know what we are doing and have successfully handled many cases like yours. If you have questions, please give us a call at (734) 855-4999.

Commentary on CBP money seizures in Philly

Posted by Jason P. Wapiennik on

There is an interesting news release from CBP about some money seizures in Philadelphia that goes beyond the usual “facts-only” narrative style and  standard statements about the role of CBP in a typical CBP news release. I find it so interesting, in fact, that I am quoting it in full and providing my own commentary in red below:

Philadelphia — International travelers who arrive or depart the United States in possession of more than $10,000 are required to report all currency to Customs and Border Protection (CBP) officers and complete a Treasury Department Financial Crimes Enforcement Network (FinCEN) form. Those who deliberately refuse to comply with this federal currency reporting requirement face hefty consequences, from mitigated penalties to having their currency seized.

This is not quite right, because there are others who  “face hefty consequences” apart from those who “deliberately refuse to comply.” This includes people who are ignorant or misinformed about the monetary instrument reporting requirements, people who do not know how much money they are carrying — which could be because they did not count it or forgot it was in a pocket on a suitcase from a prior trip, or people who do not know they are over the limit because they are carrying foreign currency and do not know the exchange rate.

My point: deliberate refusal is just one way to get your money seized. It is definitely not the only way to get money seized, which is what Customs says in this news release. The reporting requirement law is written so that even unknowing violations are still violations. So accidents or other non-deliberate acts can, and often will, result in a seizure of money by Customs.

For example, I know many of my clients are unaware of the reporting requirement.  Others are aware of it but have a vague understanding of what it means for them, what is included as a monetary instrument, and how it is to be reported. Others know of the reporting requirement but think it does not apply in their situation. Finally, there are those who know it applies to them and they intend to make the report. But, when confronted by a uniformed Customs official they are intimidated, panic stricken, or their words are misconstrued. Then the official takes their nervous response for a “deliberate refusal” and tells them to be quiet while they search their bags. They are not given a further opportunity to to file a report or even make a verbal report. 

Other times Customs officers will ask a question like: “How much money do you have on you?” or “How much money is in your wallet?” This question will trigger a truthful response like “a few thousand.” The problem with this scenario is that there may be only a few thousand in their wallet or on their person, but there is a bag in the trunk of their car or two fat envelopes in their checked baggage that has $15,000 in it. So in this case Customs has asked the wrong question, the person has given the correct response, and they are most likely going to get their money seized.

Obviously, I take issue with a question like “How much money is in your wallet?” because the real question should be “How much money are you transporting?” Sure, if you are a confident person, not intimidated by uniformed officers, and know the reporting requirement like the back of your hand then you might say, “Well, I have $2,500 in my wallet, but in my wife’s baggage there are two envelopes with a total of $9,860 and I have a notebook in my carry-on luggage with another €5,000, too.” This is the correct response to any question about your money, but who would think to respond like that when all they ask about is your wallet?

So because the person does not give a full disclosure and only answers the question asked by Customs, they will be taken to an area where the person thinks they will have a chance to make a report about what the officer didn’t ask about, count the money, and make the report. Then the officers conduct a secondary examination, searching their vehicle or their baggage and find all the money that was not reported to Customs — and they seize it, after lengthy questioning where the person misses their connecting flight or whatever appointments they might have.

Now here is the problem: The question about what is in their wallet is unfair if asked to try to elicit a violation of the reporting requirement. Yes, other questions are more fair, and more accurate. However, Customs does not have to ask anything at all. Knowing about the reporting requirement and making the report is entirely up to the person who is transporting the money. So even if Customs asks the trick wallet question, or they say nothing at all, you still have to file a report and file it correctly. My problem with trick  questions is that it seems  designed to elicit a violation rather than achieve compliance.

The story continues…

A Russian man learned that lesson the hard way after CBP officers seized $34,500 from him Thursday afternoon at Philadelphia International Airport. During a secondary examination, the Russian man claimed verbally and in writing that he possessed $9,000; however, CBP officers counted $35,000. CBP officers released $500 to the man for humanitarian relief and provided him directions on how to petition the U.S. government for the remaining currency.

This is just the standard petition process, but you also have other options. Usually the petition advice is not received until given the notice of seizure, which can come days, weeks, or even months after the money seizure occurs. The length of times varies on the investigation, case load, and size of the port.

CBP officers assessed a mitigated $1,000 penalty to another Russian man who arrived on the same flight. That man also reported possessing only $9,000; however CBP officers discovered a stack of bills in his baggage. All currency equaled $18,800.

Well, good for this man who got his money back on the scene – usually any mis-report by 5% or more will not be returned on the scene; however, if the total amount is $25,000 or less and no further investigation into the incident is deemed warranted and the traveler has documentation showing legitimate source and legitimate intended use and there is no nexus to criminal activity, then the money can be returned.

“Customs and Border Protection officers offer travelers multiple opportunities to truthfully report their currency, but those who refuse to comply with federal currency reporting requirements face severe consequences, such as hefty penalties, or having their currency seized, or potential criminal charges,” said Allan Martocci, CBP port director for the area port of Philadelphia. “The easiest way to keep your currency is to truthfully report it.”

I know that this is sometimes true, but I am also sure that this is not always true. I know many clients had  opportunities to report transporting more than $10,000 in money but there are many have also been subjected to “zealous enforcement” and asked trick questions without sufficient opportunity to make, or amend, a report.  Sometimes the philosophy of some Customs officers is to “seize first, ask questions later.”

My clients also report intimidating behavior while they are being detained, like back-slapping, laughter, high-fiving among officers about their seizure prowess, unfounded threats of criminal prosecution, and Dirty Harry type comments like, “This ain’t your first time at the rodeo.”

It is also true, as this news release says, that the easiest way to keep your currency is to report it; but Customs can still theoretically seize your money if you have under $10,000 and they think you are “structuring” to avoid to have to file a report, or if you report over $10,000 but lack good documentation about the source and use of the funds, or if they believe it has some connection to criminal activity.

The story continues…

Philadelphia CBP recorded three additional currency reporting violations recently and one ended in the seizure of $17,516.

  • CBP issued a mitigated $500 penalty to an Israeli man April 18 who claimed that he possessed $10,000; however CBP officers discovered an additional $860 in his pockets.
  • CBP issued a mitigated $1,000 penalty to a Swiss mother and her Israeli son April 10 after CBP officers discovered $23,146 in U.S. dollars, Swiss francs and Israeli shekels. The pair, who arrived from Switzerland, reported possessing a combined $10,100 U.S. dollars and 7,700 Swiss francs. CBP officers discovered multiple bundles of currency during a baggage examination and inside a travel pillow. [See, this type of discovery makes Customs suspicious — but if you are traveling internationally it makes perfect sense to keep the money in different locations in your personal effects so that if lost or stolen, not all your money is lost or stolen. But, in this case the different locations probably resulted in a  a charge of failure to report and bulk cash smuggling.]
  • CBP issued a mitigated $1,000 penalty to a British man April 5 after CBP officers discovered that the man possessed $20,839 in U.S. dollars and British pounds. The man, who arrived from the United Kingdom, declared possessing only $9,000. CBP officers discovered several bundles of British pounds and two envelopes containing U.S. currency.
  • CBP seized $17,516 from a Nigerian woman who arrived March 29 after CBP officers discovered that she possessed $19,016. The woman claimed that she possessed $7,000; however CBP officers found more than $7,000 during an examination of the woman’s purse. CBP officers released $1,500 to the woman for humanitarian purposes and provided the woman directions to petition for the remaining currency.
  • In each case involving mitigated penalties, CBP officers required the travelers to complete a FinCEN form.

There is no limit to how much currency travelers can import or export; however federal law requires travelers to report to CBP amounts exceeding $10,000 in U.S. dollars or equivalent foreign currency.

In addition to narcotics interdiction, CBP routinely conducts inspection operations on arriving and departing international flights and intercepts currency, weapons, prohibited agriculture products or other illicit items.

So there you have it. If you have had currency seized from Customs do not try to respond yourself but hire our firm, because we know what we are doing and have successfully handled many cases like yours. If you have questions, please give us a call at (734) 855-4999.

 

Customs seizes unreported money at border crossing

Posted by Jason P. Wapiennik on

Two Mexican national women were trying to exit the U.S. at a port and enter Mexico when they were suspected of smuggling something, and searched. According to this  CBP news release:

During the search, a CBP officer noticed the woman appeared to be concealing something under her clothing, which turned out to be $20,000 in 

cash. ABulk Cash Smuggling Currency Seizure further search revealed another $13,400 in her shoes and $5,600 in a pair of pants she was carrying. Officers then found $10,979 in the woman’s purse, bringing the total amount seized to $49,979.

Two hours later, officers referred a 43-year-old woman from Nogales, Sonora, for further inspection as she was about to exit the U.S. through a pedestrian lane. A subsequent search led to the discovery of $11,361 in her purse. The woman told officers the money came from selling drugs and that she was being paid to deliver the funds back to Mexico.

Nearly $11k was located in the purse of a woman who was caught trying to bring nearly $50k into Mexico.

All funds were seized and both women were arrested on charges of bulk cash smuggling.

Well, this case is pretty clear if the woman admitted the money came from the proceeds of drug sales. This type of illegal activity is one of the very reasons for the requirement to report more than $10,000 being transported across the border. For most people who innocently run afoul of the law, if they could prove legitimate source and legitimate intended use of the funds then they have a good chance at getting back their money.

If you have had currency seized from Customs, I strongly advise against trying to do it yourself. Get the help of an experienced attorney who knows what he is doing. If you do not, you might only make the situation worse by handling it on your own or hiring a lawyer who does not regularly handle these types of matters.

To inform yourself, please read the various articles I have written on this and related topics. But do not let it replace the advice of attorney who is familiar with the law and your particular circumstances. If you have questions, please give us a call at (734) 855-4999.

 

Customs Money Seizure of $376,510

Posted by Jason P. Wapiennik on

Customs & Border Protection discusses a recent money seizure in a news release available by clicking HERE.  This time it was a Mexican national travelling from the U.S. to Mexico, who advised Customs that the items he was transporting in his truck were picked up at a swap meet. According to the story:

During the search of the truck, which was loaded with items the man said he purchased at a swap meet, officers found a box supposedly containing lawn furniture. The box actually contained seven packages of unreported U.S. currency totaling $348,840. The vehicle and cash were seized.

Then at the same port, on the same day and different man and vehicle were inspected, and:

During the search a zip-lock bag, a fast-food sack and a brownie mix box were discovered concealing unreported U.S. currency totaling $27,670.

A picture of this rich and chocolaty brownie mix was also included as part of the story.

These individuals were arrested and face charges for bulk cash smuggling under state law. If we assume he proves these two things, then this situation is regrettable for him and completely avoidable. But now, even if criminal charges are ultimately not filed or if they are ultimately found not guilty of a crime, they will still face civil forfeiture of the money and, if they want it back, will have to fight for its return administratively, or in the courts.If these individuals are found not guilty of a crime, then they face the  potentially difficult task of proving a legitimate source and legitimate intended use of the money. 

So, if you have had currency seized from Customs, I strongly advise against trying to do it yourself Get the advice of an attorney who knows what he is doing. If you do not, you might only make the situation worse by handling it on your own or hiring a lawyer who does not regularly handle these types of matters.

To inform yourself, please read the various articles I have written on this and related topics. But do not let it replace the advice of attorney who is familiar with the law and your particular circumstances. If you have questions, please give us a call at (734) 855-4999.

Bulk Cash Smuggling; Customs Currency Seizure

Posted by Jason P. Wapiennik on with 11 Comments

Arizona news is reporting that a Mexican national was caught trying to smuggle $90,000 in U.S. currency. The individual transporting the currency is being held for bulk cash smuggling charges.  The article has some interested pictures of the actual cash and its location. Apparently drug-sniffing dogs detected the presence of drugs in the vehicle (likely traces on the currency), which tipped them off the presence of the currency.

Legitimate source? Legitimate intended use? You be the judge!

You can read more about what constitutes bulk cash smuggling offense by clicking HERE. If you have had your cash seized by Customs you might find our article on responding to a U.S. Customs money/currency seizure helpful (click HERE to read it). You can also contact our office and speak to a customs attorney by call (734) 855-4999, or by clicking HERE.

Country of Origin Marking Requirements

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In a global economy where a person can find products from every corner of the globe consumers are sometimes inclined to make their purchasing decisions based on the country of origin (meaning where the product is made and where it is imported from). Americans, for sure, like to base their decision of whether to buy certain products based on country of origin. We have all probably, at one time or another, been told to buy American, to look for a made in U.S.A. label, or not to buy anything from China or some other country. My grandpa, who grew up during World War II, wouldn’t buy anything made in Japan or Germany, and for a  time during the Iraq War there was a call among some to boycott French products for their unwillingness to join the U.S. efforts.

This sentiment is nothing new, and in fact, is the reason that all imports into the U.S. must be marked with the country of origin. Recognizing this tendency, Congress

Made in China Image
Country of Origin Mark

authored 19 U.S.C. § 1304 in order to specify the various rules and exceptions to the country of origin marking requirement, and set out penalties for failing to mark and/or properly identify the country of origin of imported products.

Marking Requirements for Country of Origin

This law plainly states that every foreign products or article entering the U.S. must bear a mark indicating the English name of its country of origin, unless the article fits into a listed exception, discussed below. The country of origin mark itself must meet two qualifications, simply stated:

  • First, it must be conspicuously located on the article;
  • Second, it must be legible, indelible, and permanent;

Id. at §1304(a). The reason for these requirements to enable the “ultimate purchaser” (i.e., the person who will receive the article in its imported form 19 CFR § 134.1(d)) to readily identify the article’s country of origin in case that will affect his decision to buy or not buy a particular product. Customs can require that certain articles be marked in a specific manner, without exception, by stamping, cast-mold lettering, etching, engraving, or cloth labels (e.g., coffee, tea, spices, manholes, pipes, fittings, etc.). 19 CFR § 134.42.

Interestingly, the country of origin marking requirement means if you cannot find a country of origin marking on a product or its container, you may presume that it was made in the United States, because there is no marking requirement under this law for non-imported products (it could also mean that the country of origin marks were intentionally destroyed, removed, or concealed, or that Customs failed to intercept violative country of origin marking).

Exceptions to the Country of Origin Marking Requirements

Exceptions to the country of origin marking requirement typically arise when marking an article is extremely difficult or purposeless to mark. For example, the statute can exempt particular articles which are physically incapable of being marked, cannot be marked prior to their shipment to the U.S., or are imported for the private use of the importer and not intended for sale in the U.S. Id. at §1304(a)(3). Even in those cases, however, while marking the article itself may be excepted, the law still requires the importer to mark the country of origin on the container of the article, like the packaging it comes in. Id. at §1304(b).

Exemptions could be available in a variety of circumstances.  For example, marking a product could be economically prohibitive to the article’s importation or injure the article, or the origin could be apparent without explicitly marking the article.

How U.S. Customs Treats Mismarked or Unmarked Imports

In the absence of the required country of origin mark on imported articles, Customs will ensure that unmarked imported products are denied entry in commerce, or if already released from Customs custody, they will be required to be returned via redelivery notice. Customs may impose and collect an additional duty of 10% of the article’s value before allowing release, an amount in addition to any other duties normally owed, if any. Id. at §1304(i). Before release, Customs will  require that the article be marked with the correct country of origin and until marked duties paid.  Id. at §1304(j).

What to do When U.S. Customs Takes Issue with Country of Origin and its Marking

If you have a question about proper country of origin marking, identifying the actual country of origin, and otherwise determining how to comply with the Customs rules concerning proper country of origin marking for imported products, you should consult with an attorney experienced in the customs and related laws. It is possible to get a prospective ruling from U.S. Customs product which you intend to import, and an attorney can arguing for a particular manner of country of origin marking. Contact out office today to discuss your problem and your options.

Feel free to use this article to supplement your own knowledge, but do not let it serve as a substitute for legal counsel familiar with the various restrictions and exceptions of the law.

Reducing Penalties through Prior Disclosures of 1592 Import Violations

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Importing into the United States requires the importer exercise reasonable care, but competitive market forces and human nature can create the temptation to reduce expenses and maximize profits by finding new ways to save money through questionable application of the customs laws. Failing to exercise reasonable care, however, means possibly being penalized by Customs for import violations under § 1592. ((In summary, if any person does or attempts to enter or introduce merchandise into the United States by means of any material omission or material and false document, written or oral statement, or act that has the potential to alter the classification, appraisement, or admissibility of merchandise Customs will impose costly penalties on the violator. Bear in mind that Customs can impose penalties  – civil, criminal and monetary – under a variety of federal laws, not just under 1592.)) This means, among other things, an importer must make sure that they are classifying the merchandise properly. under the correct duty rate, giving accurate dutiable values and descriptions for the merchandise, marking the country of origin correctly, and much more. Failure to do so could cost you dearly in the form of severe monetary penalties, among other potential penalties, imposed by Customs.

"I think we could lessen our penalty exposure if we make a valid prior disclosure."
“Say, our customs attorney says we can lessen our penalty exposure if we make a valid prior disclosure to U.S. Customs for those import violations we found.”

CBP encourages importers who may have committed a violation to make a “prior disclosure.” If an importer becomes aware of § 1592 violations, they should not wait for Customs to notify them of the violations and demand payment of duties and penalties; rather they should act immediately and pro-actively and disclose violations or potential violations to Customs so that they can take advantage of significant penalty reductions allowed for those who disclose violations prior to a Customs investigation. This “prior disclosure” process is a formal notice, usually in writing, made to Customs regarding the circumstances of a 1592 violation. 19 CFR § 162.74.

How to Make a Valid Prior Disclosure

For a prior disclosure to be valid, a person must first make the prior disclosure before, or without knowing, that Customs has begun a formal investigation into the potential violation ((A prior disclosure can still have some benefit after a investigation has begun)); also, if the amount of duty loss is known, tender any actual loss of duties, taxes and fees or actual loss of revenue to Customs. In addition to this, the person must disclose the circumstances of the violation, including:

(1) Identif[ying] the class or kind of merchandise involved in the violation;

(2) Identif[ying] the importation or drawback claim included in the disclosure by entry number, drawback claim number, or by indicating each concerned Customs port of entry and the approximate dates of entry or dates of drawback claims;

(3) Specif[ying] the material false statements, omissions or acts including an explanation as to how and when they occurred; and

(4) Set[ting] forth, to the best of the disclosing party’s knowledge, the true and accurate information or data that should have been provided in the entry or drawback claim documents, and stat[ing] that the disclosing party will provide any information or data unknown at the time of disclosure within 30 days of the initial disclosure date. [ . . . ]

19 CFR 162.74(b).

It should be noted that, because the issues that go into making a valid prior disclosure are often complex, when properly done a person can still initiate a valid prior disclosure while avoiding immediate payment of suspected duty loss, and get additional time to assemble all the necessary information.

How Penalties Can Be Reduced or Avoided

Meeting these requirements will qualify the person for substantial penalty reductions in the event that penalties are appropriate. In order for Customs not to levy penalties at all Customs must find the absence of fraud, the presence of negligence or gross negligence, and the merchandise must be unliquidated. In the case of negligence or gross negligence and liquidation has already occurred  the penalty will be “the interest on any loss of duties, taxes and fees” “at the prevailing rate of interest” under the Internal Revenue Code. 19 CFR § 162.73(b)(2).

If the violation is a result of fraud and a valid prior disclosure is made, the penalty may be reduced from the equivalent to the domestic value of the goods and to only the amount of lost duties, taxes and fees, or if not duty loss, then just 10% of the dutiable value.

If you believe or have a question about whether you should make a prior disclosure, or have concerns about representations made to Customs or omissions  it is in your best interest to consult with an attorney experienced in customs law and prior disclosures. Please contact our office today at (734) 855-4999, or by visiting our contact page.

U.S. Customs money seizure in Maine

Posted by Jason P. Wapiennik on

The Bangor Daily News out of Maine reports on some noteworthy monetary instruments seizures in 2012 by U.S. Customs, including this one:

In one incident the agency highlighted, two Houlton Border Patrol agents seized $89,808 in U.S. currency, $10,440 in Western Union traveler’s checks and $200 in Canadian currency from two men from Canada.

The money was apparently was connected with:

. . . a telephone fraud scheme that preyed on the elderly. The scam involved the subjects advising the elderly of a grandchild or other relative desperately in need of money, and instructing them to wire funds. The victims were subsequently bilked out of hundreds of thousands of dollars. US Canada Border Marker

[  . . . ] The $100,448 initially seized by Border Patrol agents was returned to 18 of the victims.

No mention of the exact legal basis under which the money was seized, or exactly how this fraud scheme became unraveled at the border. I suspect somebody was trying to smuggling the money of the country to evade detection, and taxes, when CBP made the discovery and began putting the puzzle pieces back together.

If you have had currency seized from Customs, do not go it alone. Get the advice of an attorney who knows what he is doing. If you do not, you might only make the situation worse by handling it on your own or hiring an inexperienced lawyer. You worked hard for your money, so be sure to protect it. If you have questions, please give us a call.

To further inform yourself, please read the various articles I have written on this and related topics. But do not let it replace the advice of attorney who is familiar with the law and your particular circumstances.

Trademark Infringement: Importing Gray Market Goods and Seizure by Customs

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Importers purchasing products from abroad may find that they bought more than they bargained for if the merchandise bears a trademark or trade name.  For the protection of registered U.S. trademarks and trade names U.S. Customs and Border Protection (“CBP” or “Customs”) limits the admissibility of foreign trademarks or trade names ((Sometimes collectively called “marks” here)) if they appear virtually identical to those already registered in the US. Ultimately, Customs may seize and forfeit imported gray market goods and impose fines and penalties on the importer. 19 CFR 133.23.

Gray Market Goods Defined

Gray market goods are articles manufactured abroad that bear either a genuine trademark or trade name that is either identical to, or substantially indistinguishable from, a trademark or trade name owned and recorded by a United States citizen or corporation. 19 CFR 133.23(a). The concept can be a bit confusing, but key to understanding is to remember that gray market goods bear a legitimate trademark or trade name but are imported into the U.S. without the consent of the owner of the U.S. trademark.  In other words, when a trademark or trade name has been applied to merchandise for use in a foreign country but are imported into the United States, then the goods bearing that trade mark or trade name are considered gray market goods.

Container Ship

The term gray market goods is used to distinguish them from goods that might be sold on black market; gray market goods are sold through legal but unauthorized or unintended channels of commerce. Gray market goods are different from counterfeit goods by the genuineness of their trade mark or trade name; counterfeit goods carry a trademark or trade name which the law calls “spurious.” Sometimes used or refurbished goods fall in the category of gray market goods, and particular laws apply to their lawful importation.

Restricted Entry for Certain Gray Market Goods

Trademarks  and trade names of U.S. owners are entitled to protection against imports of gray market goods under two conditions.  First, the U.S. owner must register its mark with CBP through the Intellectual Property Rights e-Recordation (IPRR) system. Second, the U.S. trademark and the foreign trademark must be owned by two different people or companies ((Furthermore, the companies cannot subject to common ownership or common control — such as parent companies and subsidiaries, etc.)).  The satisfaction of these conditions subjects all incoming gray market goods to “restricted” scrutiny, and Customs identifies them as such in its IPRR database; if the conditions  have not been satisfied, the goods are deemed non-restricted.

CBP will almost invariably detain restricted gray market goods for up to 30 days; and what transpires within that time will ultimately determine their seizure and eventual forfeiture or their release. 19 CFR §§ 133.23, 133.25.

Due to a counterfeit’s total lack of authenticity, the statutory penalties for attempting to import a good bearing counterfeit mark are more severe than those for attempting to import an infringing gray good. For the most part, however, the procedures for determining whether an allegedly counterfeit mark should be released or seized do not differ from those of gray goods, set forth below. 19 CFR 133.21.

The Road to Release

When a gray good is detained, the importer bears the burden of establishing that its mark fits one of the exceptions, such as showing that the foreign trademark or trade name was applied under the authority of the foreign owner who is the same as the U.S. owner; or, the foreign and domestic goods on which the marks or names are  identical physically and materially. The rationale of this difference-demanding exception may seem counterintuitive; however, the objective of grayRoadmarket rules is to prevent an influx of products which will cause customer confusion. If the marks or names of the products are nearly identical, as is always the case with gray market goods, their physical or material components must also be so similar that the average buyer in the marketplace is not likely to be confused as to the source of the products. 19 CFR 133.23(d). Showing the the imported goods qualify for one these exceptions allows Customs to release them.

A key to successfully challenging detention is requesting a sample of seized or detained merchandise suspected, or alleged, to bear a counterfeit or infringing trademark.

The Road to Seizure

Although this article does not deal with counterfeits directly, it is worthy mentioning that harsher penalties await counterfeit items. CBP has the authorization to obliterate the counterfeit mark or name and destroy the goods if there is no safe way to recycle them. 19 CFR 133.21. CBP may also impose fines on individuals who aid or direct the importation of goods bearing a counterfeit mark or name with the intent of public distribution. The first fine will not be more than the amount the goods would have had if they were genuine. For the second and every subsequent seizure, the fine will not exceed twice that amount. 19 CFR 133.27.

Bearing in mind the goals of preventing customer confusion and ensuring imported are products safe, CBP is authorized to take certain steps to ensure that infringing goods never reach the channels of commerce. An importer’s failure show the applicability of the foregoing exceptions within the 30 day detention period will trigger seizure and forfeiture proceedings. 19 CFR 133.23(f). Additionally, within the 30 day window, CBP may alert the U.S. owner of the presence of the gray goods to obtain assistance in determining whether the gray goods infringe upon the trademark or trade name of the U.S. owner. The U.S. owner may then procure a sample of the imported goods for a more detailed examination. 19 CFR 133.25. If CBP, aided by the efforts of the U.S. owner, finds that the gray goods infringe upon the trademark or trade name of the U.S. owner, it may seize the goods and commence with forfeiture proceedings. 19 CFR 133.23(f).

Still Hope

In the event of seizure and forfeiture, the importer retains its rights to contest the seizure and forfeiture, including the right to samples of seized merchandise and to petition Customs for relief from the forfeiture. Petitions for Relief and/or lawsuits in the federal district court’s can raise important issues and challenge the basis for seizure by, among other issues, contesting whether the goods are, in fact, gray market goods, whether they differ in quality, whether there is likelihood of confusion, the legitimacy of the source, the authority under which the trademark was applied, and others.

If your goods have been seized or forfeited, or if you are are importing goods bearing a trademark or trade name which is similar to one already registered in the U.S., it is in your best interest to obtain the advice of an attorney with experience in Customs laws and the laws surrounding intellectual property. As you can see, the process of clearing an item through the border can be a nuanced process in which time constraints and complex factual questions play a critical role.

Feel free to use this article to supplement your own knowledge, but do not let it serve as a substitute for legal counsel familiar with the various restrictions and exceptions of the law. Please do not hesitate to contact our office to assist you in taking the next step.