ACE and U.S. Customs in 2013: The Latest Regulations and Updates (Part 3 of a 3-Part Series)
    A Zepol guest blog by John M. Peterson, international trade/Customs law expert and partner at Neville Peterson LLP

As a safeguard for importers, the agency’s regulation provides for notifying importers of the detention of their merchandise, and giving them seven (7) working days prior to release of information to trademark owners to demonstrate that the imported goods are genuine. However, in criminal investigations, Customs has indicated that it will release information to trademark owners without giving notice to importers.
In practice, however, Customs has often released to trademark owners more information regarding imports than is authorized by its regulation. The agency has advised trademark owners of the dates and places of importations, the quantities of goods imported, the names of importers and, in many cases, the names of their foreign suppliers.

While the new procedure is designed to assist in excluding counterfeit goods from entry – particularly counterfeit electronics products which often find their way into military supply chains – there is a risk that some trademark holders will use the disclosure procedure to engage in “data mining” and identify sources of legitimate “gray market” imports of branded goods – and then take legal action to try and shut down those sources.

There is ample evidence that some firms are already engaged in this practice. Moreover, some trademark owners often induce Customs to seize gray market goods by terming such goods to be “unauthorized” or “illegitimate” – terms which do not necessarily indicate that the goods are “counterfeit” within the meaning of the Lanham Act.

There is also evidence that Customs’ database may become the next battleground in corporate intelligence wars. Already, legislation has been introduced in Congress which would expand disclosure to trademark owners (or their industry representatives) particularly in the areas of electronics and other “critical” products. Opposition to such legislation has come from importer trade associations, who are concerned that the legislation would empower the Secretary of Homeland Security to designate, by regulation, additional classes of “critical” materials subject to enhanced disclosure.

Customs data security has been an increasingly controversial topic in recent years. There have been repeated instances of importer “identity theft” in which illegitimate importers use the taxpayer ID number of other companies to cover the importation of counterfeit and contraband goods, products subject to antidumping and other special duties, and high-risk goods.

Just as the agency faces the challenge of controlling entry and input to its system, it also needs to deal with the question of data flowing out of the system. In this regard, the risk to the importing community may not come from hackers and miscreants, but from Congress, eager to prevent imports of questionable products, and domestic firms eager on exploiting Customs data for their own competitive ends.

ACE and U.S. Customs in 2013: The Latest Regulations and Updates (Part 2 of a 3-Part Series)
    A Zepol guest blog by John M. Peterson, international trade/Customs law expert and partner at Neville Peterson LLP

Recently, at a meeting in Arizona, a Customs official showed me (without disclosing confidential data) how, with access to a single ACE database, Customs could identify every piece of in-bond merchandise moving by truck for export, show the number of days remaining until the bond period expired, and set up pre-expiration warnings. And Customs could then divide that data, by carrier, port, commodity, and in any of a variety of ways.

By law, all of the confidential information reported to Customs is protected from disclosure by the Trade Secrets Act, 18 U.S.C. §1905, a provision in the Federal criminal code. Government officials who disclose confidential commercial data could be fined, or, in particular cases, prosecuted and jailed.

One of the first things every Customs official learns is that the information reported by importers and others who transact “Customs business” is untouchable and exempt from disclosure.

    But recently, cracks have appeared in the wall of confidentiality surrounding Customs records, fortelling a troubling     trend, as various constituencies claim a need for access to confidential business information in ACS and ACE.


Customs’ new rule is based on Section 818(g) of the National Defense Authorization Act for Fiscal Year 2012 (NDAA) (Pub. L. 112–81), which authorizes the agency to release otherwise confidential information to intellectual property rights holders who believe that importers are offering “counterfeit” versions of goods bearing their trademarks. The law authorizes Customs to provide rights holders with “information appearing on, and unredacted samples of, products and their packaging and labels, or photographs of such products, packaging, and labels”, so that the trademark owners may assist Customs in determining whether the products are prohibited from importation.

Customs’ interim regulation recognizes the competitive value of information provided to the agency in entry documents. “Information that is covered by the Trade Secrets Act and obtained from an importer, including the importer’s name and place of business, manufacturer’s identity, supply chain, and other confidential commercial or financial information, if disclosed, could provide insights into the importer’s business operations, processes, style of work, and income, all inuring to the importer’s competitive disadvantage.”

And Customs understands that a savvy competitor can glean quite a lot of information just by examining a sample or photograph of an imported product. Thus, the agency has noted, “product coding, such as serial numbers, and SKUs often incorporates information about where and when a product was manufactured, as well as other information that could allow one to identify information about the manufacture of the product. It is likewise possible that such information could directly or indirectly reveal the identity of wholesalers, exporters, or other parties in the importer’s supply chain and the timing and pricing of the transactions involving those entities.”

Still, Customs’ regulation allows the agency to release import information to trademark owners once the agency detains a shipment suspected of being a counterfeit version of the mark owner’s product. The information disclosed includes “information appearing on goods (and/or their retail packaging), and on images and samples, that are not redacted, i.e., images showing the merchandise (and/or its retail packaging) in its condition as presented for examination and samples (and/or its retail packaging) in their condition as so presented.” The disclosure of the information is intended to allow the trademark owner to assist Customs in the enforcement of the laws prohibiting the importation of counterfeit goods.

May imports increased for the second consecutive month, rising 3% compared to April, but decreasing 2.2% compared to May of last year. The United States imported 1.55 million TEUs (Twenty-foot Equivalent Units) in May, which is a record for the year.

“For the first two months of the year imports were up 7% over 2012, but in the last five months imports are only up 0.04% overall,“ says Zepol’s CEO Paul Rasmussen. “With holiday orders being placed soon, we’ll likely see increased imports in the coming months.”

You can read more about May's imports in our Press Release Here.

 
Methodology:
Zepol’s data is derived from Bills of Lading entered into U.S. Customs and Border Protection’s Automated Commercial Environment (ACE). This information represents the number of House manifests entered by importers of waterborne vessel goods. This is the earliest indicator for trade data available for the previous month’s import activity. The data excludes shipments from empty containers, excludes shipments labeled as Freight Remaining on Board (FROB), and may contain other data anomalies.       

Zepol's latest report details the top imported and exported products for the United States. Covering the first quarter of the year, the report provides insights into what products are growing the fastest and the prices of the most expensive and least expensive goods.

What you'll find in the report:

1. Top products imported and exported.
2. The latest and greatest: Fastest growing products.
3. From ‘top-notch’ to ‘dirt-cheap.
4. We import THAT?! - Imports you probably didn't know about.

"Zepol’s latest report is an all-encompassing view of U.S. trade for the first quarter, pertinent to importers and exporters from all industries,” says Zepol’s CEO Paul Rasmussen. “The report is a must-read for businesses looking to get a grasp on recent U.S. trade trends as well as pin-point opportunities for future trade expansions.”