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Best PracticesCBPCounterfeitsCPSCImportInvestigationIPR, Trademarks and LogosSeizuresU.S.Customs

Florida Companies Convicted and Sentenced

posted by Jennifer Diaz June 24, 2013 0 comments

Co Authored by Robert Becerra

In another example of the government’s continuing use of the criminal justice system to enforce international trade laws, three Florida companies and their management were recently convicted and sentenced for importing smuggled toys from China containing lead and containing counterfeit trademarks.

LM Import-Export, Inc., Lam’s Investment Corp., and LK Toys Corp., Hung Lam and Isabella Kit Yeung plead guilty to charges of conspiracy to traffic and smuggle toys containing hazardous substances such as lead, and one count of trafficking in counterfeit goods, in violation of 18 U.S.C. Secs. 371 and 2320, respectively. Co-defendant Yeung plead guilty to one misdemeanor count of submitting a false country of origin label, in violation of 19 U.S.C. Sec. 1304(a). The information, or charging document filed in court, against all defendants, as well as the plea agreements for each defendant can be found on the website of the District Court for the Southern District of Florida. (If you have trouble getting these documents, email me and I’d be happy to share them with you).

The facts underlying the charges, as stated in court documents, are that from April, 2000, until May 2011, a span of 11 years, the corporate defendants conspired to sell children’s products imported from China in violation of the Consumer Product Safety Act 15 U.S.C. Sec. 2068, and the Federal Hazardous Substances Act, 15 U.S.C. Sec. 1263. Some of the toys contained lead, while others presented various hazards such as choking, aspiration or ingestion. The products were imported using false statements on Customs declaration forms and with false country of origin labeling.

Hung Lam was sentenced to 22 months incarceration, 3 years of supervised release and a $10,000 fine. The corporations were sentenced to 5 years of probation. Yeung was sentenced to 1 year probation and a $1,000 fine. An order was entered mandating the forfeiture to the government of $862,500 and all products imported by the defendants that were seized by the government. The press release from the Consumer Products Safety Commission and Department of Justice discussing the case can be found here and here respectively.

This case is extremely important for importers to be familiar with and understand that:

  1. It is vital for importers to retain counsel to assist with pre-compliance before you import.
  2. When you receive any violation notice from the federal government, retain counsel immediately and be sure to address all violations with remedial action and enhanced compliance procedures in an attempt to keep administrative penalties or forfeiture cases from turning into potential criminal matters.
  3. Resolving a civil action through a consent decree with the government does not absolve you of criminal liability.
  4. Once contacted by government officials, retain counsel immediately. Any evidence you provide or any statements you make will be used against you in court.
  5. Repeated misconduct and federal regulatory law violations over a period of years will often result in criminal prosecution of both companies and their individual employees, resulting in federal prison sentences and substantial fines and forfeitures.

 

Best PracticesCBPEventsImportIPR, Trademarks and LogosSeizuresSpeakingU.S.Customs

Do You Know the Top 10 Tips When Importing?

posted by Jennifer Diaz June 18, 2013 0 comments

Do you know the top 10 tips when importing to ensure compliance?  If not, here’s why you should attend my Compliance Online webinar on June 27, 2013 at 10:00 a.m., EST. 

If you import merchandise into the U.S., you are the responsible party and must be aware your requirements and potential liability.  In this presentation, we will discuss how to comply with U.S. Customs and Border Protection’s (CBP’s) vast laws and regulations. By the end of the webinar you will know and understand the importance of:

  • Tariff classification;
  • Customs valuation;
  • Country of origin marking;
  • Intellectual Property Rights (IPR) Protection and CBP Enforcement; and
  • Free Trade Agreements (FTA)  you should be taking advantage of.

You will also learn basic customs concepts and terms like:

  • CBP Form 3461 & CBP 7501;
  • Protests;
  • Seizure cases;
  • Liquidated damage claims, Penalties/Fines;
  • Prior disclosure; and
  • FP&F Petition Process.

Learn key best practices and hear real life case studies. Learn what to do, and more importantly, what NOT to do, and what the consequences are for non compliance.

To register for this webinar on June 27, 2013 at 10:00 EST, click here.

BISExportIPR, Trademarks and LogosOFAC

Export Regulations and Cloud Computing…Beware!

posted by Jennifer Diaz May 28, 2013 0 comments

Co Authored by Perry Sofferman

Forrester Research predicts that the global market for cloud computing services will have increased from $40.7 billion dollars in 2011 to approximately $241 billion dollars by 2020. You can see the ZDNet article here.  This figure includes the Platforms as a Service, Infrastructure as a Service and Business Process as a Service delivery models. What this information reveals is that while cloud computing is already a significant part of operational strategy for many businesses (as well as governmental agencies), we should expect it to not only grow as a market but to become even more intertwined with the way we conduct business and store data on a daily basis. Consequently, businesses in general and export compliance officers in particular need to be vigilant and make sure that their use of this important technology is consistent with US export regulations.

When using cloud services, the user is uploading data to available servers in the cloud provider’s server facility(ies). The type of data uploaded and the location of the server where that data is stored can potentially trigger export compliance issues for the user. In fact, the ultimate location of the particular server used to hold the user’s data may be unknown to either the user or the cloud provider. Data can be redirected to various servers in different countries in order to properly allocate server space based on fluctuations of usage in different time zones.  It should be noted that this is only one example of several possible scenarios where the actual export of restricted data could occur inadvertently by the user.

Based on Advisory Opinions issued by the Bureau of Information and Security (“BIS”), there is guidance indicating that in scenarios where exports take place through means of cloud computing:

  • (i) the cloud computing provider is not the exporter (the user is) and
  • (ii) if foreign nationals employed by the provider access restricted data there may well be a deemed export of such data to such foreign national on the part of the user. 

If, however, a cloud computing service provider is aware that the service will be used to support certain proscribed activities, then the provider will be obligated to properly acquire the necessary license.    Neither the Directorate of Defense Trade Controls (DDTC) nor the Office of Foreign Asset Controls (OFAC) have yet provided substantive guidance on the subject of export regulations in relation to cloud computing, although OFAC has provided some limited guidance related to exports to Iran involving software and services incidental to personal communications. “Cloud Computing” remains an undefined term in the EAR, ITAR and OFAC regulations.

Top 5 Tips for Export Compliance Professionals in Regard to Cloud Computing 

  1. It is critical for compliance officers and others involved in export control management, including providers of cloud computing services, to take steps to better familiarize themselves with the many complex issues at play in this area. A good start would be a detailed review of the BIS advisory opinions, which can be found here.     
  2. In addition, users of cloud services should think about how to approach this issue with their providers. Users might consider gaining a good understanding of where their provider’s servers are located and whether the providers have instituted any safeguards to address export compliance issues. Likewise, providers may want to delve more deeply into the ITAR regulations with particular emphasis placed on the relation between cloud computing services and “brokering” activities.
  3. Compliance officers should make sure that members of their organizations are aware that export regulations are applicable to cloud services and that while the storage of data in the cloud might feel virtual, the penalties for export regulation violations remain brick and mortar.
  4. While exporters remain liable for violations of export regulations, compliance officers should work with their IT departments when negotiating terms to agreements with cloud services providers. For example, require the service provider to notify you in the event servers are added in geographic locations that might be problematic for you. See if it is possible to obtain a right to terminate in such instance. In addition, try to get the provider to indemnify you in the event there is an export violation as a result of a provider’s action or inaction.
  5. Make sure a review of how your organization uses cloud services is part of your standard compliance self-audit so as to identify any possible problems or lapses before they become significant.

In a speech in 2012, Under Secretary of Industry and Security, Eric Hirschorn, noted that a future project for the Bureau might be a review of “for clarification’s sake – the rules regulating cloud computing.”    For both users and providers, such a review should be anxiously awaited.

Best PracticesIPR, Trademarks and Logos

Protecting Your Intellectual Property Internationally

posted by Jennifer Diaz January 12, 2013 0 comments

Do you sell products in multiple countries?  How are you assuring your intellectual property is protected?  Do you know about "Foreign Patent Applications" or "PCT’s"?  If not, you may not be adequately protecting your intellectual property abroad!

When you sell your product in multiple countries you are vulnerable to other companies stealing your idea and reproducing your intellectual property as their own.

How do you protect yourself?

To protect your business from being taken advantage of you may consider filing a foreign patent application. You may ask, what’s a foreign patent application?  It’s a request at a foreign patent office for the grant of a patent for the invention described and claimed by that application. An application typically consists of a description of the invention, together with official forms and correspondence relating to the application.

Foreign patent protection will prevent others from profiting from your idea abroad. Many countries allow you to claim priority from your U.S. application. For utility patents you can file with priority status within one year of your original filing date in the U.S. under the Paris Convention, or six months from your original filing date for design patent applications. A utility patent protects the functional aspects of an invention and can provide broad patent protection, making it difficult for a competing product to avoid patent infringement. A design patent will protect the appearance of a new product as long as it is the main feature.

Another option you have is to file a PCT (“Patent Cooperation Treaty”) patent application for up to two and a half years from the initial filing date of your U.S. patent application. The PCT must be filed within a year of your first filed priority application to keep your priority date or before your U.S. application is published. The benefit to filing a PCT patent application is it allows you additional time to file in the specific countries of your choice. In some cases, the results of the search report issued for the PCT may be used to speed up prosecution in individual foreign countries and result in lower prosecution costs using the PCT Patent Prosecution Highway Petition.

Becker & Poliakoff, P.A. is proud to announce we have merged with Litman Law and are now offering a full range of intellectual property services, including patent and trademark services, to our valued clients. To learn more about protecting your brand internationally, please contact us.    

Best PracticesCBPCounterfeitsIPR, Trademarks and Logos

As U.S. Imports from China Intensify so does CBP Enforcement

posted by Jennifer Diaz September 18, 2012 0 comments

Co-authored by Michael De Biase

With the concentration of US imports from China increasing in parallel with intellectual property rights seizures, companies rely heavily on the government, specifically on US Customs and Border Protection ("CBP") to help protect and enforce their intellectual property rights ("IPR").

According to Global Sources, a leading business-to-business media company and a primary facilitator of trade with Greater China, "US imports from China [are] more concentrated than ever".

Data from the U.S. Department of Commerce establishes that importation into the U.S. is a concentrated field, with the top 500 U.S. importers – 0.4 % of all importers – comprising roughly 68% of all imports by value in 2010. Imports from China, although somewhat less concentrated, are still dominated by larger enterprises, as companies with more than 500 employees – 4% of all importers from China – account for 60% of all imports from China. As concentration increases, the opportunity to trade in quantities that take advantage of China’s economies of scale decrease; thus, heightened concentration is not a good thing for Chinese manufacturers.

While the import concentration from China is growing, CBP is reporting a record number of IPR seizures. From 2010-2011 alone, IPR seizures increase by 24%, and have nearly doubled since 2009. Considering that China is the number one source company of imports, it should come as no surprise that it also accounts for the largest number of IPR seizures, with 62% of all IPR seizures being sourced from China.

Intellectual property rights are some of the most valuable assets of the largest importers, and they must protect these rights. Here are some of our top tips to use when seeking to protect your IPR.

  1. Perform a search to see if there are other companies exploiting your IPR. You cannot protect something to which you don’t own the rights.
  2. Register your IPR with the appropriate U.S. federal entity; whether the Copyright Office or U.S. Patent and Trademark Office, registration is an important security measure.
  3. Record your IPR with CBP. CBP will provide its protective services for a minimal fee of $190 for 10 years of protection at all ports of entry.  There are numerous other benefits to recordation
  4. Know your manufacturer or the company from which you source your products. Find out who else sources from this manufacturer, and determine whether they have had any IPR issues.
  5. Execute thorough distribution agreements or purchase and sale agreements, and try to use letters of credit or escrow accounts.
IPR, Trademarks and Logos

China Sourcing Fair – How to Solve U.S. Customs Issues When Importing From China

posted by Jennifer Diaz July 9, 2012 0 comments

Jennifer DiazThe rewards of sourcing from China are well known, but succeeding at it is far from simple. With a sluggish global economy resulting in unpredictable market changes, cost-effective sourcing is important.

To help you build or sharpen your China sourcing strategies, I am thrilled to be part of a new series of "How to Source from China" conferences at the China Sourcing Fair (July 10-12, Miami)!

The conferences are led by industry experts, and reveal real-life sourcing risks in China.  We will share actionable knowledge at every step as the project moves from concept to delivery, and the conference will offer in-depth insights and practical tips on do’s and don’ts of China sourcing. Whether you’re a beginner or veteran buying professional, the FREE conference program is your chance to learn how to source efficiently and effectively from the "world’s factory".

Register now to enhance your importing skills and knowledge today! Conference seats are limited and are on a first-come, first-served basis.

I will be speaking on "How to Solve U.S. Customs Issues When Importing From China".

Intellectual property rights (IPRs) are a priority trade initiative for U.S. Customs. Most confiscated China imports violated US Customs’ IPR laws, which should serve as a reminder when buying from China.

In my seminar, we will look at ways of preventing and dealing with these issues. In particular, we will cover: 

  • Trademark / copyright violations (What U.S. Customs looks for)
  • Top compliance tips in advance of importation (What you need to know before your goods go!)
  • Statistics of seizure cases (concentrating on China statistics)
  • How cases progress with U.S. Customs

Join this session and you’ll leave with a better understanding!

Register now to confirm your seat!

Counterfeits

Unhappy Holidays for Some International Flight Attendants Courtesy of U.S. Customs

posted by Customs & International Trade Law Blog November 27, 2010 1 Comment

Every few weeks, I get a call from an international flight attendant who wants my help to deal with a huge fine issued by U.S. Customs and Border Protection. The typical scenario is that while the nice international flight attendant is traveling overseas, she purchases some counterfeit, luxury brand handbags, wallets, watches or jewelry for friends, family, or co-workers back in the States.  Flight crews are rarely stopped and searched by U.S. Customs upon return to the United States, so the risk is low. Unfortunately, some do get stopped, and the Customs officer seizes the counterfeit items.  That is just the beginning of the nightmare.

Some weeks after Customs seizes the counterfeit items, the flight attendant will receive a formal written Seizure Notice stating what was seized, why it was seized, and providing an opportunity for him or her to file a Petition. Since the flight attendant typically only spent a few hundred dollars, and the stuff is clearly counterfeit, most people don’t bother to file a Petition, and the merchandise is automatically forfeited to U.S. Customs.

What the flight attendants need to know is that after the merchandise is forfeited, Customs will send a second letter assessing a fine pursuant to 19 U.S.C. 1526(f). The fine is equal to the Manufacturer’s Suggested Retail Price (MSPR) as if those counterfeit items were real. So, instead of a fine of a few hundred dollars for a few, counterfeit Rolex or Chanel watches, the fine might total $100,000, as regular readers know from my August 10, 2010 blog post "U.S. Customs Inflates Seizure Statistics".

Now, the flight attendant (or your regular international passenger with the same problem) realizes that he or she needs to get a customs attorney ASAP to file a proper Petition to get the fine reduced or canceled.  If only the flight attendant had read my January 24, 2010 blog post, "Yes, You May Legally Import Counterfeit Merchandise into the United States," there would have been no seizure, and hence, no fine. 

Anyway, I am always available to help a flight attendant in distress with U.S. Customs. Who knows, maybe the flight attendant will return the favor someday with some extra peanuts or, better yet, a complimentary upgrade to first class.  :))

Counterfeits

U.S. Customs Inflates Seizure Statistics

posted by Customs & International Trade Law Blog August 10, 2010 2 Comments

U.S. Customs and Border Protection is one of the leading Federal agencies responsible for stopping counterfeit products from entering the United States. U.S. Customs does a good job seizing counterfeit products at ports around the country on a daily basis.   These counterfeit products vary from sunglasses to handbags to pharmaceuticals to footwear.  But U.S. Customs’ press releases always use an unrealistic, inflated number when describing the value of the seized merchandise.

For example, last week in San Francisco, U.S. Customs allegedly seized $100 million counterfeit Gucci, Dooney & Bourke, and various other illegally trademarked merchandise from the Fisherman’s Wharf area.  It was originally reported in the San Francisco Chronicle, then appeared on the Associated Press wire to the Chicago Tribune, the Washington Post, and other newspapers around the country.  The Chronicle stated in part:

On Tuesday, they announced the seizure of more than 200,000 counterfeit retail items valued at $100 million – if they were genuine, that is – during what they called the largest-ever bust of retail counterfeiters on the West Coast.

Note the words, "if they were genuine, that is." U.S. Customs uses the Manufacturer’s Suggested Retail Price (MSRP), which nobody pays, in reporting the value of the seized merchandise to the press.  So, for example, a blatantly counterfeit Louis Vuitton handbag that would have been sold to a customer at Fisherman’s Wharf for $50 may be reported by U.S. Customs to be valued at $1,000, a multiple of 20 times the selling price.

Customs does a good job at identifying, intercepting, and seizing counterfeit merchandise – something it refers to as a "priority trade issue."  Know, however,  that the value U.S. Customs places on the seized counterfeit merchandise is almost always much higher than you and I would pay, even for the real thing.

CounterfeitsImport

Yes, You May Legally Import Counterfeit Merchandise into the United States

posted by Customs & International Trade Law Blog January 24, 2010 10 Comments

Peter A. Quinter, Florida Customs LawyerMy friends tell me one of their favorite activities in China is to buy counterfeit items such as Gucci handbags or Montblanc pens. My friends do worry about U.S. Customs and Border Protection (U.S. Customs) officers looking through their luggage upon arrival at an airport in the United States, seizing the counterfeit items, and fining them.  The truth is that U.S. Customs allows the importation of counterfeit merchandise, but closely follow the rules as I explain them to you now.

First, know that it is generally illegal to import counterfeit merchandise into the United States.  The word "counterfeit" is defined in the Lanham Act at 15 U.S.C. 1124, and the U.S. Customs applicable law allowing for the seizure of counterfeit merchandise is 19 U.S.C. 1526.  That law gives your friendly U.S. Customs officers who are waiting for you at the airport the authority to look through your luggage, and seize counterfeit merchandise from you.  The U.S. Customs regulations at 19 CFR Part 133 give more specific guidelines to travelers interested in this topic. 

What the readers of this blog, and even many U.S. Customs officers, do not know is that it is perfectly legal for a person who visits China, or any other foreign country, to buy counterfeit merchandise there, including one counterfeit Gucci bag and one counterfeit Montblanc pen, declare it on the U.S. Customs declaration form, pass through U.S. Customs, and enjoy using the counterfeit items in the United States.   Of course, you generally get what you pay for, so the $2,000 Gucci bag that you purchased in China for $80 may not be such a bargain, but it can be a lot of fun to shop at a Chinese flea market, and compare the purchased products to the genuine items at your local U.S.-based retail store, or so I am told. 

According to Customs Directive No. 2310-011A dated January 24, 2000, "Customs officers shall permit any person arriving in the United States to import one article, which must accompany the person, bearing a counterfeit, confusingly similar, or restricted gray market trademark, provided that the article is for personal use and not for sale."  Moreover, the Directive states that "Customs officers shall permit the arriving person to retain one article of each type accompanying the person." 

Now, don’t go crazy trying to bring too much counterfeit stuff into the United States at once. There are many restrictions.  You can only bring counterfeit stuff in every 30 days, it must "accompany" you which means no FedEx, UPS, or DHL packages, and it is only applicable to "one article of each type" which means, for example, if you attempt to bring in two counterfeit Gucci bags, they both will be seized by U.S. Customs. And "personal use" means for you the traveler only; no counterfeit gifts for your friends and family. 

Finally, please don’t waste the U.S. Customs officer’s time attempting to explain to him that the fancy watches you purchased are marked "Rolexx" so they are not counterfeiting the Rolex trademark because of the different spelling, or that you did not know that importing counterfeit merchandise was illegal, because now you have read this blog post from "Mr. Customs".  

Just in case you do bring in one too many counterfeit products, there is an administrative process to challenge all seizures made by U.S. Customs, as I described in a previous blog post.

IPR, Trademarks and LogosU.S.Customs

Trademark Infringement

posted by Customs & International Trade Law Blog September 30, 2009 3 Comments

Jennifer Diaz, Florida Customs and International Trade LawyerHow often do you think U.S. Customs and Border Protection (CBP) officials have heard an importer say, “. . . but I didn’t tell the manufacturer to put that trademark on there”? Ignorance may be bliss, but CBP will not accept that excuse as an acceptable reason to allow counterfeit merchandise to enter into the United States, or even allow it to move in-transit through the United States. This, however, is the often heard explanation when an importer does not do its due diligence.

There are a few steps every importer should take prior to doing business with a new manufacturer or importing into the United States a new product.

A reputable manufacturer should, and ultimately will, provide a sample. Inspect the sample thoroughly. If it is an electronic item, you may want to go as far as taking it apart to make sure that the inner workings do not contain any trademarks or logos or copyrights which either you did not request or the manufacturer is not licensed to produce. If your sample is different than the merchandise shipped, then you can at least say to CBP, “This is not what I ordered. I have a sample of what I was supposed to receive," and the correspondence with the manufacturer to support your claim. Even if you do not  get your merchandise back from CBP, it is important to understand that you may use your due diligence as a mitigating factor if and when you are fined by CBP.  Fines are routinely issued by CBP pursuant to 19 U.S.C. 1526(e) and equal the Manufactured Suggested Retail Price (MSRP).  Companies which or persons who get such fines may get them reduced by filing a Petition.  Knowing the factors that CBP considers when reviewing the Petition is critical.

Licensing agreements (on paper) can be falsely produced by anyone with a computer and printer. Just because a manufacturer shows you what appears to be a license while attending a reputable tradeshow, does not mean it’s valid.

Just keep the following in mind. Ask for a copy of the licensing agreement, and don’t take a manufacturer’s word that they have a license, verify. Obtain references or work with reputable manufacturers. Don’t think that you’re just getting a great deal, because if it’s too good to be true, then it probably is!  Many trademark and copyright owners maintain websites which list the approved companies authorized to manufacture products with the protected trademarks or copyrights.

And lastly, don’t think that you won’t get caught. Remember, it’s CBP’s job is to protect both you and the economy.  Counterfeits are not limited to cheap handbags at the flea market, but auto parts and aircraft parts,  and many more items that you would not want to be substituted (think medicines).

If a hold, detention, or worse yet, a seizure by CBP occurs at any port in the United States, an importer should promptly contact a customs attorney to file a Petition to attempt to persuade CBP to release the seized merchandise.  Common trademark and copyright counterfeiting is for Bluetooth, Microsoft, Intel, Apple, Underwriter’s Laboratories (UL), and Tetris.  Petitions should contain specific information and attach certain types of documentation to convince CBP that it made an error in the initial seizure.  The Customs and International Trade Department attorneys of Becker & Poliakoff are very knowledgeable and experienced in these matters, and may assist companies with the process.