Untitled Document

December 8, 1999

Regulations Branch
Office of Regulations and Rulings
US Customs Service
Ronald Reagan Building
1300 Pennsylvania Avenue, NW
Washington, DC 20229

Re: Comments on Notice of Proposed Rulemaking + Anticounterfeiting Consumer Protection Act: Customs Entry Documentation

Dear Sir/Madame:

The Joint Industry Group (JIG) appreciates the opportunity to comment on the Customs Service proposed regulation (64 Federal Register 49423) that, if adopted, would require that each commercial invoice accompanying imported merchandise include a listing of any trademarks on the merchandise, its components, or its packaging. JIG is a coalition of more than one hundred and sixty members representing Fortune 500 companies, brokers, importers, exporters, trade associations, and law firms actively involved in international trade. JIG membership represents over $350 billion in annual trade.

The proposed regulation is intended to implement section 12 of the Anticounterfeiting Consumer Protection Act ("ACPA"). That section amended 19 USC 1484(d) by adding the following language:

"(2) The Secretary, in prescribing regulations governing the content of entry documentation, shall require that entry documentation contain such information as may be necessary to determine whether the imported merchandise bears an infringing trademark in violation of section 1124 of Title 15, or any other applicable law, including a trademark appearing on the goods or packaging." (Emphasis supplied)

Although the legislative history (Senate Report 104-177, which accompanied S.1136) of the Act suggests that the Congress was requiring that entry documentation provide information about trademarks, the italicized language makes clear that the Congress was simply giving Customs the authority to require such information if it would assist Customs in enforcing the law. As in numerous other laws, the Congress is relying on the expertise of Customs to determine the nature of the information that would aid it in achieving the Congressional objective. Customs is asked to exercise judgment and only require information on entry documentation that is needed to determine whether imported merchandise bears an infringing trademark, since it was assumed by the Congress that "[T]his provision should not be burdensome to legitimate businesses . . . ." Regrettably, the Congress also assumed that "most businesses already identify their trademarks on shipping documents, and identification of the trademark would add very little to the other shipping data already required to be recorded." Our members and the Customs Service know that statement is not true.

If the information currently required on entry documentation is sufficient, then no additional information should be required. The JIG submits that requiring importers to annotate invoices with information about trademarks on imported products or their packaging will cost trademark owners, the parties whom this law was designed to protect, millions of dollars annually, but will not, except in rare cases, help Customs determine whether the imported products are counterfeit. Nevertheless, if Customs believes that it must issue a regulation implementing section 12 of ACPA, we suggest that it be drawn very narrowly and exempt all goods bearing a trademark owned by the importer or for which the importer has a license to use.

The potential costs to our members far outweigh any benefit to Customs. Clearly, the proposed requirement would, in most instances, increase the costs and paperwork of the very companies it was designed to protect - legitimate trademark owners. Under the proposal, not only would an invoice have to specify the trademark on the imported merchandise itself, it would also have to specify the trademark(s) on any parts or components incorporated into the merchandise and any trademarks found on the packaging. In this age of global sourcing, it is not uncommon to find that an imported product is composed of numerous trademarked parts. Thus, the administrative costs of complying with this requirement - assuming that an importer could comply with this requirement - would be enormous.

Many companies are phasing out commercial invoices and are shipping goods based on a shipping notice issued by the shipper against an existing purchase order. When the goods are received, the importer is required to create an invoice for Customs. Thus, in order to comply with the proposed requirement, a company using a shipping notice would have to gather trademark information from all its suppliers and reprogram its computers to include a field for this information on the invoice it produces. This information would have to be updated continuously. Similarly, a company that still uses a traditional commercial invoice issued by the exporter would have to impose the responsibility on its suppliers to provide the required information and develop a system to insure that every invoice contains accurate information. Either way, the costs associated with gathering the information, updating the information, programming computers, and exercising reasonable care to insure compliance with the requirement would undoubtedly be very high.

On the other hand, the return on this enormous investment is likely to be very low. It is counter-intuitive to believe that an importer seeking to evade ACPA would comply with the new requirement. Improved enforcement of the anticounterfeiting law can only result from increased cargo inspections by Customs. Because under ABI, most invoices are not transmitted to Customs, any money spent on including this information would be wasted. Moreover, even if the money were spent on this activity, Customs inspectors would not know whether an invoice lists trademarks. Thus, the proposed additional information would not generate additional inspections. Furthermore, unless the information is automated, it would be unavailable to Customs personnel for targeting potential violations and they would be left to traditional methods of selecting shipments for intensive examination. Should Customs find counterfeit trademarked merchandise, invoices that either do not contain a list of trademarks or contain a list of trademarks that the importer is not entitled to use will simply provide a secondary basis for penalizing the importer, but the primary enforcement method will always be seizure and forfeiture of the offending goods.

Existing law provides adequate tools for the enforcement of the law. Under current law, trademark owners can easily obtain Customs' protection against both infringing and counterfeit trademarks. The proposed regulation adds nothing to the protection already afforded. Under Part 133 of the Customs Regulations, Customs may use its detention powers and/or its seizure and forfeiture powers to enforce ACPA. Several years ago, the law was amended to authorize the assessment of civil monetary penalties against violators. Clearly, Customs has a sufficient arsenal of weapons against counterfeiters, but first Customs must examine the imported goods to determine whether the goods bear a counterfeit trademark. The proposed regulation does not improve Customs' capability to identify suspect goods.

The proposed regulation is overly broad and ambiguous. The language of the proposed regulation requires the listing of any trademarks on the merchandise, its components or its packaging. It is not clear whether the requirement includes common law trademarks as well as trademarks recorded with Customs. In addition, it is unclear whether a trademark found on a part or components that are incorporated in a finished article must also be listed. For example, if an automobile's sound system contained trademarked speakers would they have to be listed? Would all the trademarks that appear on integrated circuits contained within an imported product have to be listed? An affirmative answer would place an unreasonable and, perhaps, impossible burden on importers. Further, the requirement that an invoice contain a list of "any trademarks appearing on packages in which the merchandise is packed" could be construed as requiring an importer to list the trademark of the carrier, such as "Federal Express" or "DHL," on its invoice when the product is being transported and imported in a package provided by the carrier. It could also be construed as requiring a listing of all the trademarks frequently found on the packaging of electronic accessories. This packaging often indicates that the accessory is designed to be used with certain models made by several different manufacturers, each of which carries their own trademark.

The consequences of omitting a trademark from an invoice are more likely to be felt by the honest importer. The proposal does not indicate the consequences of omitting a trademark, but it is likely that merchandise could be seized or, at the very least, detained, and exporters and importers alike could be subject to potential Customs penalties for false entry under 19 U.S.C. § 1592 or for importations "contrary to law" under 19 U.S.C. § 1596, even where there is no claim of trademark counterfeiting or infringement. Thus, it is probable that the new, proposed invoice requirement would be used more to penalize honest importers than to enforce the anticounterfeiting laws.

The proposed regulation should be more narrowly focused. There are a few industries that are seriously affected by counterfeit trademarked goods - the media and software industries, perfumes, watches, and other expensive consumer goods. If Customs believes that the listing of trademarks on invoices of goods of those industries would improve enforcement of the law - and we have serious doubts that it would - then Customs should initiate a dialog with those industries to determine whether the additional requirement imposed on legitimate business would be worth the potentially improved enforcement of the law.

An importer that takes the effort to register its trademarks with Customs is entitled to the protection afforded by the law without having to incur heavy, unnecessary administrative costs, costs that would have little impact on Customs ability to enforce the law. JIG is opposed to this proposed regulation and it should be withdrawn or narrowed in a way that would not place an onerous administrative burden and high costs on the very companies that the law is designed to protect.

Sincerely,

Richard H. Abbey,
Chair Import Programs and Informed Compliance Committee