Introduction

The government has announced the first step in its plan to crack down on counterfeit goods online.

At the end of January 2020 the Trump administration announced a plan to crack down on the sale of contraband and counterfeit goods online. The plan will affect numerous parties in the supply chain – from importers and sellers to customs brokers, forwarders and e-commerce providers.

The administration took the first step to implement the plan on 31 January 2020, when it issued a new executive order allocating more federal resources to the inspection and oversight of imports that are at risk for counterfeits and other illicit goods. These include 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 one week after the US Department of Homeland Security (DHS) issued a plan setting out steps to combat counterfeit goods.

New executive order – step one

The executive order contains four mandates of note. First, it orders US Customs and Border Protection (CBP) to develop new criteria for obtaining importer of record numbers and new consequences for customs brokers that help importers to evade those criteria. Specifically, the order directs DHS to issue a notice of proposed rulemaking which:

  • establishes criteria that importers must meet in order to obtain an importer of record number; and
  • 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 what the implications would be for an importer that has been suspended or debarred regarding its continued ability to import.

Second, the executive order states that CBP must require customs brokers to 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". The executive order directs CBP to punish customs brokers that help ineligible importers by limiting their participation in trusted trader programmes or even revoking their broker licences.

Third, the executive order 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 of whether the fees collected 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 IP rights for e-commerce plan

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

Under the plan, CBP will 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 states that CBP should also consider whether new regulations are needed to better define, and subsequently enforce, Section 321 eligibility requirements.

The plan includes immediate actions to be taken by DHS and recommendations for the government, such as:

  • ensuring that entities with financial interests in imports bear responsibility;
  • increasing scrutiny of the Section 321 environment;
  • suspending and debar repeat offenders and act against non-compliant international posts;
  • applying civil fines, penalties and injunctive actions for violative imported products;
  • leveraging advance electronic data for mail mode;
  • implementing the Anti-counterfeiting Consortium to Identify Online Nefarious Actors Plan;
  • analysing enforcement resources;
  • creating a modernised e-commerce enforcement framework;
  • assessing contributory trademark infringement liability for platforms;
  • re-examining the legal framework surrounding non-resident importers; and
  • establishing a national consumer awareness campaign.

In addition, the plan recommends the following best practices for e-commerce platforms and third-party marketplaces:

  • creating comprehensive terms of service agreements;
  • significantly enhancing vetting of third-party sellers;
  • placing limitations on high-risk products;
  • ensuring rapid notice and takedown procedures;
  • having enhanced post-discovery actions;
  • having indemnity requirements for foreign sellers;
  • having clear transactions through banks that comply with US enforcement requests for information;
  • ensuring pre-sale identification of third-party sellers;
  • establishing a marketplace seller ID; and
  • establishing clearly identifiable country of origin disclosures.