CBP Needs Better Management of Exclusion Order Enforcement, Says GAO

CBP's enforcement processes for International Trade Commission exclusion orders at the ports are rife with problems, the Government Accountability Office said in a new report (here). "CBP's management of its exclusion order enforcement process at the ports contains weaknesses that result in inefficiencies and an increased risk of infringing products entering U.S. commerce," said the GAO in a summary of the report (here) on the exclusion orders, which are meant to stop imports of goods that violate intellectual property rights. The GAO looked at CBP's enforcement process, using trade alerts and targeting that are overseen by CBP's Office of International Trade and Office of Field Operations.

CBP should routinely review ITC exclusion orders to ensure trade alerts are posted to the agency's intranet for each exclusion order, the GAO recommended. The GAO review found that of the existing 94 exclusion orders in effect as of April, there were 83 trade alerts posted to the intranet, though 17 of those were posted just after the CBP IPR Branch received the data request from the GAO. For 27 of the 28 exclusion orders that weren't posted prior to the April data request there was no national targeting strategy implemented, said the GAO. CBP officials also "found they had not created a trade alert in any form for 1 of these 28 exclusion orders," the GAO said. The report, which was sent to the Senate Finance Committee, reviewed ITC and CBP information from Oct. 2009 through April 2014.

CBP should also "monitor timeliness of trade alert issuance, despite there being no established timeframe, said the GAO in the report. While "IPR Branch officials said they generally try to post a trade alert to the CBP intranet within 5 workdays of receiving an exclusion order from ITC," the GAO found it took the IPR branch from 2 days up to 3 months before it requested that an alert be posted on the intranet.

The GAO also recommended that CBP "routinely identify any orders whose changed conditions merit a CBP request that ITC rescind them," it said. CBP officials said they had resisted posting some exclusion orders due to possible eligibility for ITC rescission due to a change to the underlying IP, said the GAO. "CBP’s lack of routine reviews of exclusion orders has resulted in gaps and inefficiencies in CBP’s exclusion order enforcement," it said. CBP disagreed with the GAO's recommendation because it is not mandated to identify potentially outdated orders and request rescission, the report said.

While CBP agreed with two of the recommendations, it told the GAO that "the report would have been more value-added if it had included additional discussion on the challenges of making patent infringement determinations at the border under the time constraints imposed by statute" or of planned changes to CBP's rulings regulations. The report does mention a proposal in the works for a regulatory change that would allow for multiple parties to participate in the administrative rulings process (see 1411130021), which the agency also uses as an enforcement method, determining if a product is excluded prior to import. "As of October 2014, CBP officials could not provide an estimate as to when the inter partes process would be finalized," said the GAO.

The GAO review included interviews with CBP officials from headquarters, field offices and the ports, site visits to New York and California ports "where we could discuss and observe CBP’s exclusion order enforcement process for shipments arriving in land, sea, and air" modes, it said. The GAO also spoke with officials from the Office of Management and Budget's Office of Intellectual Property Enforcement Coordinator and the ITC. About 60 percent of the 94 exclusion orders in effect involved products such as integrated circuits, computer components, consumer electronics products, and chemical compositions that infringe U.S. patents, said the GAO. Those orders, more than half of which were issued since 2005, "covered a range of products, such as electronic goods; machinery parts; plastic plates, lids, footwear, and toys; motor vehicle parts and accessories; energy drinks; and cigarettes.

Several factors limit what CBP excludes, CBP officials told the GAO. For instance, many respondents in exclusion order cases are legitimate companies that are generally not importing infringing products intentionally and such companies may be able to resolve the issues by finding new suppliers, getting licenses or redesigning products, the report said. Also, "data on excluded shipments are underreported because of alternative actions that can be taken by CBP for shipments of products that are covered by an exclusion order but are also protected by a recorded trademark," it said. In those cases, CBP will "seize the shipment as a trademark violation rather than deny it entry under an exclusion order" because "complainants would rather have CBP seize these infringing products than risk the possibility that importers might try to reship the products" through another port.

There's been a total of 158 shipments excluded or seized from September 2010 through April of this year as a result of exclusion order enforcement, said the GAO. The GAO also considered future exclusion order enforcement efforts, based on interviews with CBP offices from Centers of Excellence and Expertise, said the GAO. CBP has said it is working to figure out how to handle such enforcement from the CEEs (see 14061612).