Anticounterfeiting Consumer Protection Act: Disposition of Merchandise Bearing Counterfeit American Trademarks; Civil Penalties

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 133

[T.D. 98-75]

RIN 1515-AC10

Anticounterfeiting Consumer Protection Act: Disposition of

Merchandise Bearing Counterfeit American Trademarks; Civil Penalties

AGENCY: Customs Service, Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations by adopting final

rules to implement two statutory changes contained in the

Anticounterfeiting Consumer Protection Act of 1996 (ACPA) enacted by

Congress to protect consumers and American businesses from counterfeit

copyrighted and trademarked products. This document addresses the

public comments submitted in response to the interim regulations which

initially implemented these counterfeiting provisions, and makes

certain changes to those interim regulations in response to the public

comments and in order to add clarity and improve the readability of the

final regulations.

EFFECTIVE DATE: October 26, 1998.

FOR FURTHER INFORMATION CONTACT:

For Entry Questions--Jerry Laderberg, Entry and Carrier Rulings Branch,

(202) 927-2320, Office of Regulations and Rulings;

For Penalties and other legal Questions--Charles Ressin, Penalties

Branch, (202) 927-2344, or John Atwood, Intellectual Property Rights

Branch, (202) 927-2330, Office of Regulations and Rulings.

SUPPLEMENTARY INFORMATION:

Background

Finding that counterfeit products cost American businesses an

estimated $200 billion each year worldwide, Congress enacted the

Anticounterfeiting Consumer Protection Act of 1996 (ACPA) to make sure

that Federal law adequately addresses the scope and sophistication of

modern counterfeiting. See, S.Rpt.No. 177, 104th Cong., 1st Sess.

(1995), reprinted in (1996) 4 U.S.C.C.&A.N. 1074. On July 2, 1996, the

President signed the ACPA into law (Pub.L. 104-153, 110 Stat. 1386).

The ACPA was designed to provide important weapons against

counterfeiters in four principal areas. First, it increases criminal

penalties for counterfeiting and allows law enforcement to fight

counterfeiters at the organizational level by making trafficking in

counterfeit goods or services an offense under the Racketeer Influenced

and Corrupt Organizations (RICO) Act, by providing increased

imprisonment terms, criminal fines, and asset forfeiture against those

involved in criminal counterfeiting enterprises. Second, the

legislation enhances law enforcement's ability to fight counterfeiting

more effectively by increasing the involvement of all levels of law

enforcement and expanding their power to seize counterfeit goods and

the tools of the counterfeit trade. Third, the legislation helps stem

the flow of counterfeit goods by making it easier to find imported

counterfeit goods and making it more difficult for seized goods to

reenter the stream of commerce. Lastly, the ACPA, in part, strengthens

the hand of businesses harmed by counterfeiters by updating existing

statutes and providing additional civil penalties and remedies against

counterfeiters.

Section 14 of the ACPA directs the Secretary of the Treasury to

prescribe such regulations or amendments to existing regulations as may

be necessary to implement and enforce particular provisions of the

ACPA. This document concerns sections 9 and 10 of the ACPA.

Section 9 of the ACPA pertains to government disposition of

merchandise bearing American trademark information and amends section

526(e) of the Tariff Act of 1930, as amended, (19 U.S.C. 1526(e)) to

ensure that counterfeits of American products are routinely destroyed,

unless there is no public safety risk and the trademark owner agrees to

some other disposition of the merchandise. The provisions of section

526(e) are provided for, in part, at Sec. 133.52(c) of the Customs

Regulations (19 CFR 133.52(c)).

Section 10 of the ACPA pertains to civil penalties and further

amends section 526 of the Tariff Act of 1930 (19 U.S.C. 1526) by adding

a new subsection (f) that provides for civil fines on persons involved

in the importation of merchandise bearing a counterfeit American

trademark and are in addition to any other civil or criminal penalty or

other remedy authorized by law. Since this provision is new, there were

no Customs Regulations that addressed civil fines for those involved in

the importation of counterfeit trademark goods.

To implement these statutory provisions as soon as possible to

afford the protection legislated to trademark owners and the public

from imported merchandise bearing a counterfeit trademark, on November

17, 1997, Customs published interim regulations in the Federal Register

(62 FR 61231). These interim regulations amended the Customs

Regulations at Sec. 133.52(c) to implement the provisions of section 9

of the ACPA, and created a new Sec. 133.25 to implement the provisions

of section 10 of the ACPA. The document also solicited comments

concerning these changes.

The comment period closed on January 16, 1998. Two comments were

received. The comments and Customs responses to them follow.

Discussion of Comments

The comments received were from a professional association and a

law firm representing a foreign trade association. Both commenters

supported the interim regulations, with one commenter suggesting

modifications. The suggested modification is discussed below.

Comment: One commenter urged Customs to modify the text of

Sec. 133.25 concerning use of the phrase ``American trademark.'' This

commenter states that the phrase is arguably ambiguous, as it is not

defined anywhere, and could lead to misunderstandings concerning the

scope of the protection afforded. The commenter cites the legislative

history of the ACPA (the Act) to show that Congress intended to extend

coverage of the Act to all entities, foreign as well as domestic,

holding a trademark properly registered with the Patent and Trademark

Office and recorded with Customs. Accordingly, the commenter recommends

that Customs modify the text of this regulatory provision to provide

for ``counterfeit mark or name (within the meaning of Sec. 133.21 of

this part)'' in lieu of the present ``counterfeit American trademark.''

Customs response: Customs agrees in part with this recommendation

to modify the text of Sec. 133.25. Use of the term ``American'' could

cause confusion regarding the scope of the protection afforded, since

Congress did intend to confer protection to trademarks (whether or not

owned by foreign interests) registered with the U.S. Patent Office.

However, Customs does not feel that adding the additional term ``name''

is appropriate; it might also cause confusion, since one cannot

register a trade name with the U.S. Patent Office. Accordingly, the

text of Sec. 133.25 is modified to read ``counterfeit mark

[[Page 51297]]

(within the meaning of Sec. 133.21 of this part)'' in lieu of the

present ``counterfeit American trademark'' text.

Conclusion

After analysis of the comments received and further consideration

of the matter, Customs has decided to adopt the interim amendments to

Part 133 of the Customs Regulations with the modification discussed

above in the analysis of comments. Further, to make the text of

paragraphs (a) and (b) of Sec. 133.25 read more clearly, the phrase

``as determined by'' in paragraph (b) is replaced with the phrase

``based on'' used in paragraph (a), and the term ``domestic value''

used in paragraph (a) is inserted in paragraph (b). Lastly, the

authority citation of part 133 is revised to add a specific authority

citation for new Sec. 133.25.

Inapplicability of the Regulatory Flexibility Act and Executive

Order 12866

Because these regulatory amendments reflect existing statutory

requirements or merely implement interpretations and policies that are

already in effect under interim regulations to protect trademark owners

and the public from imported merchandise bearing a counterfeit

trademark, pursuant to the provisions of the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.), it is certified that the regulations will not

have a significant economic impact on a substantial number of small

entities. Accordingly, the regulations are not subject to the

regulatory analysis or other requirements of 5 U.S.C. 603 and 604.

Further, this document does not meet the criteria for a ``significant

regulatory action'' as specified in Executive Order 12866.

List of Subjects in 19 CFR Part 133

Copyrights, Counterfeit goods, Customs duties and inspection,

Imports, Penalties, Prohibited merchandise, Reporting and recordkeeping

requirements, Restricted merchandise, Seizures and forfeitures,

Trademarks, Trade names, Unfair competition.

Amendments to the Regulations

For the reasons stated above, part 133 of the Customs Regulations

(19 CFR part 133), is amended as set forth below:

PART 133--TRADEMARKS, TRADE NAMES, AND COPYRIGHTS

1. The general authority citation for part 133 continues, and the

specific authority for Sec. 133.52 is revised, to read as follows:

Authority: 17 U.S.C. 101, 601, 602, 603; 19 U.S.C. 66, 1624; 31

U.S.C. 9701;

* * * * *

Sections 133.25 and 133.52 also issued under 19 U.S.C. 1526;

* * * * *

2. Section 133.25 is revised to read as follows:

Sec. 133.25 Civil fines for those involved in the importation of

counterfeit trademark goods.

In addition to any other penalty or remedy authorized by law,

Customs may impose a civil fine on any person who directs, assists

financially or otherwise, or aids and abets the importation of

merchandise bearing a counterfeit mark (within the meaning of

Sec. 133.21 of this part) as follows:

(a) First violation. For the first seizure of such merchandise, the

fine imposed shall not be more than the domestic value of the

merchandise (see, Sec. 162.43(a) of this chapter) as if it had been

genuine, based on the manufacturer's suggested retail price of the

merchandise at the time of seizure.

(b) Second and subsequent violations. For the second and each

subsequent seizure of such merchandise, the fine imposed shall not be

more than twice the domestic value of the merchandise as if it had been

genuine, based on the manufacturer's suggested retail price of the

merchandise at the time of seizure.

3. Section 133.52(c) is republished to read as follows:

Sec. 133.52 Disposition of forfeited merchandise.

* * * * *

(c) Articles bearing a counterfeit trademark. Merchandise forfeited

for violation of 19 U.S.C. 1526 shall be destroyed, unless it is

determined that the merchandise is not unsafe or a hazard to health and

the Commissioner of Customs or his designee has the written consent of

the U.S. trademark owner, in which case the Commissioner of Customs or

his designee may dispose of the merchandise, after obliteration of the

trademark where feasible, by:

(1) Delivery to any Federal, State, or local government agency

that, in the opinion of the Commissioner or his designee, has

established a need for the merchandise; or

(2) Gift to any charitable institution that, in the opinion of the

Commissioner or his designee, has established a need for the

merchandise; or

(3) Sale at public auction, if more than 90 days has passed since

the forfeiture and Customs has determined that no need for the

merchandise has been established under paragraph (c)(1) or (c)(2) of

this section.

Approved: August 3, 1998.

Samuel H. Banks,

Acting Commissioner of Customs.

Dennis M. O'Connell,

Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 98-25723 Filed 9-24-98; 8:45 am]

BILLING CODE 4820-02-P