Newly-Adopted U.S. Customs Rule Provides Brand Owners with Critical Information to Combat the Import of Counterfeit Goods

For brand owners facing the challenges posed by counterfeiting, U.S. Customs and Border Patrol (“CBP”) recently adopted a new temporary rule which has the potential to make it much easier to combat the import of counterfeit goods into the United States (“Interim Rule”). The Interim Rule provides that in instances where the CBP has suspicions regarding the authenticity of goods being imported, and the importer fails to provide proof of genuineness, the CBP is permitted to share detailed information about the suspect goods and importer with brand owners. This represents a welcome sea change in CBP policy for brand owners who have long been frustrated by CBP’s policy regarding limited information sharing.

In the past, CBP’s policy was to conduct its investigation of suspected counterfeit goods without sharing specific information regarding the goods or the source with brand owners. CBP’s reluctance to share this information was driven by a concern that the goods may prove to be genuine parallel imports – commonly referred to as “gray market” goods. In the United States, gray market goods are legal, and past CBP practice ensured that sources of such goods were not provided to the brand owners for fear of disclosing the domestic gray marketer’s trade secret, such as the foreign source(s) of the goods. Although CBP’s legal concerns were valid, the near total lack of information sharing has been frustrating to brand owners who sought specific details regarding the goods or the foreign source to assist the CBP in reaching a determination regarding the genuineness of the goods. By way of example, the CBP has historically been unwilling to share unique bar code or serial number information relating to the goods despite the fact that the information could lead the brand owner to determine source of manufacture and the shipping or distribution sources. Again, the concern was that this same information could be used by brand owners to identify the source of gray market goods.

Under the Interim Rule, which went into effect on April 24, 2012, CBP is permitted to share specific information regarding the goods and source with brand owners absent the importer providing proof of genuineness after notification of CBP’s suspicion that the goods are counterfeit. The Interim Rule is a breath of fresh air for brand owners who have long lobbied for a change of CBP policy. Although brand owners will benefit from the permanent adoption of the Interim Rule, the basis for the policy change was primarily driven by the increasing concerns that many counterfeit goods pose a serious threat to public health and safety, and also national security.

It should be noted that the Interim Rule will remain open for public comment until June 25, 2012. Brand owners with concerns regarding counterfeiting should consider submitting comments in support of the rule as opposition is anticipated, particularly from those involved in the import or sale of gray market goods. Details regarding how to submit comments online can be found at the link to Notice for the Interim Rule provided above.

Gibbons will continue to monitor this development and is available to provide counsel in its regard.