[Federal Register Volume 67, Number 110 (Friday, June 7, 2002)]
[Proposed Rules]
[Pages 39321-39322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14287]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 133
RIN 1515-AC98
Civil Fines for Importation of Merchandise Bearing a Counterfeit
Mark
AGENCY: Customs Service, Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to amend the Customs Regulations
pertaining to the importation of merchandise bearing a counterfeit mark
to clarify the limit on the amount of a civil fine which may be
assessed by Customs when merchandise bearing a counterfeit mark is
imported. The regulations currently use, as a measurement for
determining the limit, the domestic value of merchandise as if it had
been genuine, based on the manufacturer's suggested retail price of the
merchandise at the time of seizure. The language set forth in the
proposed rule adheres more closely to the statutory language, basing
the limit of the civil fine on the value of the genuine goods according
to the manufacturer's suggested retail price (MSRP), without any
reference to domestic value. Because the MSRP excludes retail sales and
markdowns, it is usually greater than the good's domestic value.
Removing the distinction between the statutory and regulatory language
will clear up confusion and result in Customs more uniformly
determining the amount of a civil fine when merchandise bearing a
counterfeit mark is imported.
DATES: Comments must be received on or before August 6, 2002.
ADDRESSES: Written comments, regarding both the substantive aspects of
the proposed rule and how it may be made easier to understand, may be
submitted to and inspected at the Regulations Branch, Office of
Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania
Avenue, NW., 3rd Floor, Washington, DC 20229.
FOR FURTHER INFORMATION CONTACT: Lynne O. Robinson, Office of
Regulations and Rulings: (202) 927-2346.
SUPPLEMENTARY INFORMATION:
Background
The Anticounterfeiting Consumer Protection Act of 1996 (the ACPA;
Pub. L. 104-153, 110 Stat. 1386) was signed into law on July 2, 1996,
to ensure that Federal law adequately addresses the scope and
sophistication of modern counterfeiting which costs American businesses
an estimated $200 billion a year worldwide. Toward that end, the ACPA
amended section 526 of the Tariff Act of 1930, as amended (19 U.S.C.
1526), to provide two new tools to fight the importation of counterfeit
goods: (1) The seizure, forfeiture, and destruction of merchandise
bearing a counterfeit mark under 19 U.S.C. 1526(e) (section 1526(e)),
as amended by section 9 of the ACPA, and (2) the imposition of a civil
fine under 19 U.S.C. 1526(f) (section 1526(f)), a new section of law
created under section 10 of the ACPA.
Under section 1526(e), merchandise bearing a counterfeit mark that
is seized and forfeited must be destroyed except where the merchandise
is not unsafe or a hazard to health and the trademark owner has
consented to its disposal by one of several alternative methods (see
sections 1526(e)(1), (2) and (3)). This provision ensures that a
violator cannot regain possession of the forfeited goods and distribute
them in some other manner (including making another attempt to import
them at another U.S. port or into another country). Under section
1526(f)(1), a civil fine is assessed against any person who directs,
assists financially or otherwise, or aids and abets the importation of
merchandise for sale or public distribution that is seized under
section 1526(e). Section 1526(f)(2) provides for a fine for the first
seizure in an amount up to the value the imported merchandise would
have had if it were genuine, according to the manufacturer's suggested
retail price (MSRP). Section 1526(f)(3) provides for a fine for
subsequent seizures in the amount of up to twice the value the imported
merchandise would have had if it were genuine, according to the MSRP.
On November 17, 1997, Customs published interim regulations in the
Federal Register (62 FR 61231) to amend Sec. 133.25 of the Customs
Regulations (19 CFR 133.25) to reflect the ACPA's amendment of 19
U.S.C. 1526. The interim amendments were adopted as a final rule
published in the Federal Register (63 FR 51296) on September 25, 1998.
A final rule document published in the Federal Register (64 FR 9058) on
February 24, 1999, redesignated Sec. 133.25 as Sec. 133.27.
Under Sec. 133.27 of the Customs Regulations (19 CFR 133.27),
Customs may impose a civil fine, in addition to any other penalty or
remedy authorized by law, against any person who directs, assists
financially or otherwise, or aids and abets the importation of
merchandise bearing a counterfeit mark that is seized under Sec. 133.21
(and 19 U.S.C. 1526(e)). Under Sec. 133.27(a), the fine imposed for the
first violation (seizure) will not be more than the domestic value of
the merchandise (as set forth in Sec. 162.43(a)) as if it had been
genuine, based on the MSRP of the genuine merchandise at the time of
seizure. Under Sec. 133.27(b), the fine imposed for subsequent
violations will not be more than twice the domestic value of the
merchandise as if it had been genuine, based on the MSRP of the genuine
merchandise at the time of seizure.
Upon review of Sec. 133.27, Customs has determined that the
language of the regulation is inconsistent with the language of section
1526(f). The regulation employs the term ``domestic value'' (of the
merchandise) while the statute does not use that term. Moreover,
because the MSRP is exclusive of any sale or markdown of a good at
retail, it is usually greater than the good's domestic value.
Therefore, setting the maximum amount of a civil fine by means of a
formula that includes both the domestic value of the merchandise and
the value of genuine merchandise according to the MSRP is confusing and
contributes to misunderstanding by both Customs personnel and the
public.
A review of the regulatory history indicates that Customs, in using
the term ``domestic value'' in Sec. 133.27 (Sec. 133.25 when published
as a final rule on September 25, 1998), relied on 19 U.S.C. 1606
(section 1606) and Sec. 162.43(a) of the Customs Regulations (19 CFR
162.43(a)). Section 1606 provides that Customs will determine the
domestic value of merchandise seized under the Customs laws at the time
and place of appraisement. Section 162.43(a) provides that ``domestic
value'' as used in section 1606 means the price for which seized or
similar property is freely offered for sale at the time and place of
appraisement and in the ordinary course of trade.
While this ``domestic value appraisement rule'' of section 1606 and
Sec. 162.43(a) is applicable in various circumstances involving
merchandise seized under the Customs laws, its application is
qualified. Under 19 U.S.C. 1600, the procedures set forth in 19 U.S.C.
1602 through 1619, including the use of domestic value as laid out in
section 1606, apply to seizures of property under any law enforced or
[[Page 39322]]
administered by Customs unless such law specifies different procedures.
Section 1526(f), however, specifies a different procedure for imposing
civil fines for the importation of merchandise bearing a counterfeit
mark. Therefore, the formula for civil fines set forth in section
1526(f) is controlling, and the domestic value appraisement rule of
section 1606 and Sec. 162.43(a) does not apply for that purpose.
Based on the foregoing, Customs believes that the term ``domestic
value'' should be removed from Sec. 133.27, leaving ``manufacturer's
suggested retail price'' as the applicable measure of the penalty. The
result would be that the formula for setting the maximum civil fine
under the regulation would more closely follow the language of the
statute. This would clarify for Customs personnel and the importing
public the limit of a civil fine and would enhance uniformity in
Customs assessment of fines when merchandise bearing a counterfeit mark
is imported and seized. In addition, as the MSRP of a given article (in
this case the genuine article that corresponds to imported merchandise
bearing a counterfeit mark) is normally greater than its domestic
value, because MSRP excludes retail sales and markdowns, civil fines
based on the MSRP will normally be greater. Thus, uniform application
of the regulation will ensure that the Congressional intent in enacting
section 1526(f), i.e., to enhance deterrence of trade in counterfeit
goods, is uniformly served.
Customs notes that guidelines for the mitigation of penalties
assessed under section 1526(f) and Sec. 133.27 were published in T.D.
99-76 (33 Cust. Bull. No. 43, October 27, 1999). However, as the
guidelines also use the term ``domestic value'' in the same manner as
Sec. 133.27, if the proposed rule is adopted as final, Customs will
modify the guidelines to more closely adhere to the language of section
1526(f).
Executive Order 12866
This document does not meet the criteria for a Asignificant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
The proposed amendment, if adopted as final, will result in the
language of the regulation more closely adhering to the language of the
statute, thus clarifying the maximum amount Customs can assess for a
civil fine when merchandise bearing a counterfeit mark is imported and
seized. Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601, et seq.), it is certified that the proposed amendment, if
adopted, will not have a significant economic impact on a substantial
number of small entities. Accordingly, the proposed amendment is not
subject to the regulatory analysis or other requirements of 5 U.S.C.
603 and 604.
Drafting Information
The principal author of this document was Bill Conrad, Office of
Regulations and Rulings, U.S. Customs Service. However, personnel from
other offices contributed in its development.
List of Subjects in 19 CFR Part 133
Counterfeit goods, Penalties, Seizures and forfeitures, Trademarks.
Proposed Amendment to the Regulations
For the reasons stated in the preamble, it is proposed to amend
part 133 of the Customs Regulations (19 CFR part 133) as follows:
PART 133--TRADEMARKS, TRADE NAMES, AND COPYRIGHTS
1. The authority citation for part 133 continues to read, in part,
as follows:
Authority: 17 U.S.C. 101, 601, 602, 603; 19 U.S.C. 66, 1624; 31
U.S.C. 9701.
* * * * *
2. Section 133.27 is revised to read as follows:
Sec. 133.27 Civil fines for those involved in the importation of
merchandise bearing a counterfeit mark.
In addition to any other penalty or remedy authorized by law,
Customs may impose a civil fine under 19 U.S.C. 1526(f) on any person
who directs, assists financially or otherwise, or aids and abets the
importation of merchandise for sale or public distribution that bears a
counterfeit mark resulting in a seizure of the merchandise under 19
U.S.C. 1526(e) (see Sec. 133.21 of this subpart), as follows:
(a) First violation. For the first seizure of merchandise under
this section, the fine imposed will not be more than the value the
merchandise would have had if it were genuine, according to the
manufacturer's suggested retail price at the time of seizure.
(b) Subsequent violations: For the second and each subsequent
seizure under this section, the fine imposed will not be more than
twice the value the merchandise would have had if it were genuine,
according to the manufacturer's suggested retail price at the time of
seizure.
Robert C. Bonner,
Commissioner of Customs.
Approved: June 3, 2002.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 02-14287 Filed 6-6-02; 8:45 am]
BILLING CODE 4820-02-P