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Trump Administration Cracks Down on Counterfeit and Other Goods Imported Contrary to Law

US Government Announces First Step in Plan to Crack Down on Counterfeit Goods Online
Aerial view of water and dock covered in shipping containers
Last week, the Trump Administration announced a plan to crack down on the sales of contraband and counterfeit goods online. The steps will affect a number of parties in the supply chain from importers and sellers to customs brokers and forwarders to e-commerce providers.

The administration took the first step to implement the steps outlined on January 31, 2020, when it issued a new executive order from President Donald Trump that will allocate more federal resources to the inspection and oversight of imports that are at risk for counterfeits and other illicit goods, including goods that are imported in a manner that evades duties, taxes, and fees that should be collected by the government.

The executive order was issued a week after the US Department of Homeland Security (DHS) issued a plan on steps to combat counterfeit goods.

New Executive Order- Step 1

The executive order contains four mandates of note. It first orders U.S. Customs and Border Protection (CBP) to develop new criteria for obtaining importer of record numbers, and new consequences for customs brokers that help importers evade those criteria. Specifically, the order directs DHS to issue a notice of proposed rulemaking which: (1) establishes criteria importers must meet in order to obtain an importer of record number; and (2) provides that persons debarred or suspended by CBP be ineligible for an importer of record number. It is unclear from the language of the executive order as to what the implications would be for an importer that has been suspended or debarred regarding its continued ability to import.

Secondly, the executive states that CBP must require that customs brokers report any attempts by importers that are ineligible to get an importer of record number "to re-establish business activity requiring an importer of record number through a different name or address associated with the debarred or suspended person." It directs CBP to punish customs brokers that help ineligible importers by limiting their participation in trusted trader programs or even revoking their broker licenses.

The executive order also calls for CBP to develop new criteria to measure foreign postal service providers' efforts to cut down on counterfeit shipments. If those standards are not met, CBP may subject shipments from those postal authorities to more inspections or block them entirely.

Lastly, the executive order mandates the Secretary of Homeland Security to submit a report that includes, among other things, an analysis or whether the fees collecting by CBP are currently set at a sufficient level to reimburse the Federal Government’s costs of processing, inspecting, and collecting duties, taxes and fees for parcels.

DHS IPR E-Commerce Plan

The executive order is the first step in a broader plan that DHS has to enforce intellectual property rights for e-commerce sales. Broadly speaking, the plan shifts the burden to e-commerce platforms to monitor for counterfeit goods.

Under the plan, CBP will also require formal entry for shipments deemed risky, “notwithstanding that such shipments might otherwise qualify for duty-free or informal entry treatment,” under existing authorities. The plan also states that CBP should also consider whether new regulations are needed to “better define and subsequently enforce Section 321 eligibility requirements.”

Here are the main elements of the plan:

Immediate Actions by DHS and Recommendations for the US Government

  1. Ensure Entities with Financial Interests in Imports Bear Responsibility
  2. Increase Scrutiny of Section 321 Environment
  3. Suspend and Debar Repeat Offenders; Act Against Non-Compliant International Posts
  4. Apply Civil Fines, Penalties and Injunctive Actions for Violative Imported Products
  5. Leverage Advance Electronic Data for Mail Mode
  6. Anti-Counterfeiting Consortium to Identify Online Nefarious Actors (ACTION) Plan
  7. Analyze Enforcement Resources
  8. Create Modernized E-Commerce Enforcement Framework
  9. Assess Contributory Trademark Infringement Liability for Platforms
  10. Re-Examine the Legal Framework Surrounding Non-Resident Importers
  11. Establish a National Consumer Awareness Campaign

The plan also recommends “best practices” for e-commerce platforms and third-party marketplaces

  1. Comprehensive "Terms of Service" Agreements
  2. Significantly Enhanced Vetting of Third-Party Sellers
  3. Limitations on High Risk Products
  4. Rapid Notice and Takedown Procedures
  5. Enhanced Post-Discovery Actions
  6. Indemnity Requirements for Foreign Sellers
  7. Clear Transactions Through Banks that Comply with US Enforcement Requests for Information (RFIs)
  8. Pre-Sale Identification of Third-Party Sellers
  9. Establish Marketplace Seller ID
  10. Clearly Identifiable Country of Origin Disclosures

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