[Federal Register Volume 63, Number 186 (Friday, September 25, 1998)]
[Rules and Regulations]
[Pages 51296-51297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25723]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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