My goods were seized by US Customs...Is it OK to “do nothing”?
When US Customs detains your shipment, not receiving your goods may be the least of your problems. As we heard at the ERAI Executive Conference from Brett W. Johnson of Snell & Wilmer, L.L.P., importing goods into the US is not a right - it’s a privilege. CBP can detain any shipment that is being imported into the United States, and will likely stop any shipment that CBP suspects contains a product with a counterfeit trademark.
Let’s start with the basics. For a shipment to enter the United States, the importer is required to file documentation at the port of entry describing the product(s) and listing a declared shipment value. According to CBP regulations, as a general rule, documentation must be maintained for a period of 5 years from the date of entry.i
Per 19 U.S.C. § 1499ii, CBP has the authority to open and examine imported merchandise. If the CBP officer notices a discrepancy in the documentation or suspects the goods are bearing counterfeit marks, 19 C.F.R. § 133.21iii provides the right for CBP to place the shipment in “detention” for a period of up to 30 days for further inspection. The detained shipment can be sent to a Commodities Specialist Team and/or a Center of Excellence and Expertise for further evaluation by an Import Specialist trained for a particular line of merchandise. According to CBP, “Ports and Center personnel have CBP Laboratory and Scientific Services personnel that can: X-ray Analysis; Decapsulation; Marking permanency; Enhanced Image reviews and collaboration with trademark owners.”iv During the “detention” period, CBP may provide samples to the original component manufacturer for examination.
If any product is determined by CBP to bear a counterfeit mark, per 19 C.F.R. § 133.21, CBP can, and will, seize the product. At the time of detention, CBP has 5 business days to notify the importer of their action. After this notification, the importer has 7 business days to demonstrate that the product does not contain a counterfeit mark.v
As the importer, your first response might be to “do nothing” and let CBP act in essence as a de facto testing house by seizing parts. Doing so, however, may send the wrong signals to CBP and can also result in financial penalties in the form of fines. Penalties include, “in accordance with 19 C.F.R § 133.27, CBP, as authorized by 19 U.S.C. § 1526(f), may impose a civil fine relative to seizures effected for merchandise bearing counterfeit marks pursuant to 19 U.S. § 1526(e). For the first seizure of such merchandise, the fine shall be no more than the domestic value the merchandise would have had if it were genuine, based upon the manufacturer’s suggested retail price (MSRP) at the time of seizure. For second and subsequent violations, the fine shall not be more than twice such value.”vi If your company repeatedly violates these regulations, you and/or your suppliers may be flagged in the CBP system for more frequent screening of imports.
CBP offers importers the following remedies:
1. Request administrative forfeiture proceedings as provided under 19 U.S.C. § 1607 and 19 C.F.R § 162.45;
2. File a claim and cost bond requesting that CBP immediately refer the case to the United States Attorney for court action;
3. File a petition for administrative relief with the Fines, Penalties, and Forfeitures Office at the relevant port of seizure, pursuant to 19 U.S.C. § 1618 and 19 C.F.R. §§ 171.1 and 171.2;
4. Tender an offer in compromise (i.e., a settlement payment)through the Fines, Penalties, and Forfeitures Office at the relevant port of seizure, pursuant to 19 U.S.C. § 1617 and 19 C.F.R §§ 161.5 and 171.31; or
5. Abandon the property – although you still may have to pay a penalty.vii
Allowing CBP to forfeit your shipment may seem like the simplest answer, but it can also make you look complicit in the eyes of the law. Repeatedly purchasing from the same overseas supplier whose goods are continuously seized will likely send up a red flag to CBP, and can be construed as an attempt to smuggle counterfeit goods into the country. Responding to detention notices with copies of test reports, evidence of your supplier selection process, copies of order documentation, or other information related to the shipment can demonstrate to CBP that your company is performing due diligence in selecting suppliers and is not negligent or fraudulent.
As we have seen from previous criminal indictments, CBP maintains records of detentions and seizures and does appear to track suppliers’ and importers’ activities. A lack of response from an importer appears to be construed by CBP as the importer having some knowledge that a shipment may have contained counterfeit goods. Naturally, despite due diligence from the buyer in his/her supplier selection process, a shipment can contain a counterfeit part. It seems that unless an importer asserts his remedies, however, a “negative strike” will be made against the importer as well.
Special thanks to Brett W. Johnson and Sarah Delaney of Snell & Wilmer L.L.P. (www.swlaw.com) for their assistance with this article.
iWhat Every Member of the Trade Community Should Know About: Recordkeeping, US Department of Homeland Security, http://www.cbp.gov/sites/default/files/documents/icp027.pdf
ii19 U.S.C. § 1499, http://www.gpo.gov/fdsys/granule/USCODE-2011-title19/USCODE-2011-title19-chap4-subtitleIII-partIII-sec1499
iii19 C.F.R. § 133.21, http://www.gpo.gov/fdsys/granule/CFR-2012-title19-vol1/CFR-2012-title19-vol1-sec133-21
iv Jorge A. Garcia, U.S. Customs and Border Protection, ERAI Executive Conference 2015 Presentation “United States Customs and Border Protection, Center of Excellence and Expertise for Electronics”, http://www.erai.com/customuploads/conference/2015/downloads/Customs%20Center%20of%20Excellence%20Garcia.pdf
v Brett W. Johnson, Snell & Wilmer, L.L.P., ERAI Executive Conference 2015 Presentation “Custom Seizures: Doing Business While Under Surveillance Panel”, http://www.erai.com/customuploads/conference/2015/downloads/Custom%20Seizures%20Brett%20Johnson.pdf
vi U.S. Customs and Border Protection, “What Every Member of the Trade Community Should Know About: CBP Enforcement of Intellectual Property Rights”, http://www.cbp.gov/sites/default/files/documents/enforce_ipr_3.pdf
vii U.S. Customs and Border Protection, “What Every Member of the Trade Community Should Know About: CBP Enforcement of Intellectual Property Rights”, http://www.cbp.gov/sites/default/files/documents/enforce_ipr_3.pdf; Brett W. Johnson 2015 ERAI Presentation, supra note v.
SEE MORE BLOG ENTRIES