Friday, December 30, 2011

This is Encouraging

One of the issues I have long had with Customs' enforcement activities is what I perceive to be a lack of effort to differentiate between counterfeit goods, which should be seized, and unauthorized parallel imports, which are usually (but not always) perfectly admissible. Parallel imports, also known as gray market goods, are legitimate goods that are purchased abroad and imported without the authorization of the U.S. trademark or copyright holder. Image finding a case of expensive brandy at a fire-sale price in Iceland. If you think you can make a buck reselling the goods in the U.S., buy the goods, and import them, you are a parallel importer (and there is nothing wrong with that). Unless, as is often the case, the goods really are counterfeit and you are being duped, but that is not what we are talking about here.

The problem is that when your brandy arrives at the port, Customs and Border Protection has to decide whether you are entitled to import the goods. As a general matter, goods bearing American trademarks cannot be imported without the authorization of the trademark holder. So, CBP has the right (and duty) to ask whether you have proof of authorization to import (with an exception discussed below). When the importer can't show authorization from the trademark holder, Customs is, in my experience, apt to declare the merchandise to be counterfeit and force the importer to prove that it is not. That can be very hard to do. You are faced with trying to prove that a case a brandy, handbag, watch, or other product is genuine. Think about that. Better yet, go to your kitchen cabinet and pull out any box or can. Now, ask yourself what it would take to prove that the product in your hand is not a very good counterfeit. The fact that you bought it at the grocery store does not prove that the grocery store was not selling counterfeits (it happens). If you know what you are doing, you know to look for good printing, good grammar, consistent ingredients, and other factors that indicate that the merchandise is legitimate. But, it is hard. I suspect it is not uncommon for parallel importers to lose merchandise to seizures because they cannot provide evidence that the product is not counterfeit.

Also, even if the goods are legitimate parallel imports, they can still be excluded from the commerce of the United States if they are materially different than the same goods sold in the U.S. The threshold for "material" is not very high, so even legitimate goods can sometimes be lost on those grounds.

You may be asking what about this is encouraging about this.

Over the last couple years, I have been at several public fora at which CPB representatives talked about the priority efforts they take to enforce intellectual property rights. At several of those events, I have asked whether Customs trains port personnel to release legitimate parallel goods and what steps Customs and Border Protection takes to facilitate legitimate parallel trade. In the past, the response was dismissive. More recently, Customs has recognized the rights of parallel importers and has stated that enforcement efforts must be sensitive their needs.

That is consistent with this document, which is recommendations from COAC concerning intellectual property enforcement. The recommendations include extending C-TPAT to cover intellectual property compliance. This seems to be a reaction to the lack of enthusiasm for the Importer Self Assessment program. Another thought is to use an ISF-style pre-arrival filing to identify legitimate goods. All of this depends on some presently non-existent robust database to identify legitimate goods. To me, the interesting thing is that the document makes several references to the rights of parallel importers. That seems to mean that Customs and Border Protection will continue its valuable efforts at intellectual property enforcement and will, I hope, do that while bearing in mind the rights of parallel importers.

We will have to watch how that develops.

2 comments:

Jim said...

Let's hope so.

I know of an importer that was under the IPR thumbscrews. There was a DVD that shipped with their product - the DVD was not the main product, but contained a supplemental video. Customs wanted to see a license for, not only use of the letters "DVD", but the DVD compression software used in video's production. It required more than just the shipper in Asia, but several steps further upstream in the supply chain.

Would you know whether the Pirates of the Caribbean DVD you just bought was made with DVD compression software that was legit or bootledded?

A nightmare, finally accomplished, and totally uncalled for.

Jim Dickeson
Import Export Geeks

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