U.S. Customs Expanding IPR Enforcement Efforts Through New Risk Model and “IPR Audits”

International Alert
06.23.05

In recent Congressional testimony, U.S. Customs and Border Protection (CBP) announced the development of a new “risk model” for assessing violations of laws and regulations governing intellectual property rights (IPR) by U.S. importers, and the expansion of specialized “IPR audits” targeting such violations. These efforts are part of a larger, multi-agency crackdown on products that infringe copyrights, trademarks, patents, or other intellectual property rights.

Late last year, CBP announced its participation in the multi-agency initiative “STOP!” (Strategy Targeting Organized Piracy). This program aims to improve U.S. enforcement of intellectual property rights, including through tougher policing of U.S. imports. According to CBP, its IPR-related seizures increased over one hundred percent between 2000 and 2004, and have continued to increase very substantially in 2005. At the same time, CBP has been incorporating IPR issues into its compliance assessments of individual U.S. importers, through both the Focused Assessment program and the Importer Self-Assessment program. Now, CBP is apparently formalizing its efforts to use risk targeting analysis and regulatory audit resources to address the burgeoning problem of infringing imports.

Specifically, in a Congressional hearing earlier this month, CBP’s Acting Assistant Commissioner Daniel Baldwin outlined “an innovative statistical model for assessing IPR risks at our borders.” The model incorporates CBP’s own IPR enforcement and import data as well as input from other government agencies and private industry, and is currently being tested at the national level. CBP intends to use the model for targeting both individual imports, which would be subjected to cargo examinations, and high-risk companies, which might become candidates for IPR-specific post-entry reviews.

Baldwin also detailed CBP’s strategy for these post-entry reviews, or “IPR audits.” Based on the newly developed IPR risk model and/or a company’s history of IPR violations, CBP intends to target approximately two dozen companies for IPR audits this year. The audits would include reviews of a company’s purchase records, product specifications, general and subsidiary ledgers, and payment records, along with other business records. Baldwin suggested that violations have already been identified in such industries as electronics, toys, and textiles.

These latest developments not only should put importers on notice to expect increased scrutiny of their IPR-related import transactions, but may also provide an important opportunity for U.S. IPR holders to influence the development of the IPR risk model. CBP’s consultations with industry, which are said to include the National Association of Manufacturers and representatives of the pharmaceuticals industry, are aimed at identifying and including risk indicators into the IPR risk model. Thus, participating companies and industry groups may be able to secure improved intellectual property enforcement in their areas of activity by working proactively with CBP to attack trade in infringing goods.

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