Experience With US Customs (CBP) – E-Commerce and the De Minimis Rule For Counterfeit Goods – MOU With US Chamber – Interview With Angelo Mazza – IP Fridays – Episode 153

IP Fridays - your intellectual property podcast about trademarks, patents, designs and much more

Profile of Angelo Mazza

Summary of the Most Important Points

1. Introduction:
   • Angelo Mazza, a partner at Gibney Anthony and Flaherty, LLP, is the guest on the IP Friday’s podcast. He specializes in brand protection and enforcement strategies and works extensively with law enforcement on intellectual property (IP) related crimes.
2. Experience with US Customs and Border Protection (CBP):
   • Angelo has over 30 years of experience training over 60,000 law enforcement officials, including US Customs, Border Protection, Immigration and Customs Enforcement, and the FBI. He started working with CBP in the early 1990s, training them on identifying various products and discussing enforcement-related matters.
3. Evolving Threats and E-Commerce:
   • The threats CBP faces have evolved significantly over time, with e-commerce being the biggest game-changer. The volume and type of cargo have increased, and CBP now deals with a much larger scale of goods, including counterfeit and illicit pharmaceuticals.
4. De Minimis and Counterfeit Goods:
   • The de minimis rule, which allows small-value parcels under $800 to pass duty-free, has been exploited by counterfeiters. This has led to a significant number of counterfeit goods entering the US, creating challenges for CBP in identifying and intercepting these goods.
5. Customs’ Efforts and Operations:
   • CBP has become more aggressive in stopping counterfeit goods and illicit pharmaceuticals, conducting operations like Operation Artemis and Operation Apollo. These efforts have led to a decrease in IP seizures as resources focus more on significant threats like fentanyl.
6. Role of Rights Holders:
   • Rights holders can protect themselves by recording their trademarks with CBP, providing training to customs officials, and responding quickly to inquiries about suspicious packages. Live training is preferred for its direct engagement and effectiveness.
7. Success Stories:
   • Angelo shared success stories where CBP’s efforts, in collaboration with HSI, led to the seizure of millions of dollars worth of counterfeit goods and the shutdown of operations exploiting the de minimis rule.
8. US Chamber’s Memorandum of Understanding (MOU) with CBP:
   • The US Chamber has developed an MOU with CBP, allowing brands to share worldwide seizure information, which aids in risk assessment and targeting counterfeit goods. This collaboration includes the donation of technology tools to assist customs in identifying counterfeit products.

Full Transcript

Introduction:

Our guest today on the IP Friday’s podcast is Angelo Mazza. Angelo is a partner with the law firm, Gibney Anthony and Flaherty, LLP, located in New York City. Angelo counsels clients in developing brand protection and enforcement strategies and works extensively with law enforcement on intellectual property related crimes. He has trained over 60,000 law enforcement officials, including US Customs and Border Protection, Immigration and Customs Enforcement, and the Federal Bureau of Investigation. For over 30 years, Angelo has provided training sessions for law enforcement at the federal, state, and local levels through the International Anti-Counterfeiting Coalition and its foundation. As the current director of US training, he is the driving force behind the IACC’s educational materials to assist law enforcement in fighting intellectual property crimes. Welcome Angelo to the IP Friday’s podcast.

Experience with US Customs and Border Protection (CBP):

Hi Ken, thanks for having me. Great introduction. I should read that more often. Excellent, and for our listeners purposes, Angelo and I have known each other for many years as I first started practicing law with the law firm, Gibney Anthony and Flaherty. So it’s great to be talking to you once again. Glad to be here, Ken. So Angelo, how did you get your start working so much with US Customs and Border Protection, otherwise known as CBP? Well, you know, Ken, it really is funny. You know how sometimes you fall into something? I kind of fell into it. I started doing the training with CBP back in the early 90s. We were going around training them, how to identify a variety of different products, discussing some of the issues we were facing. We would also work with local law enforcement as well in terms of the training. And that evolved over time more and more integrating with what Customs was doing, dealing more on not necessarily specific training, but more enforcement related matters. So now I do interact a lot with CBP on a regular basis. And it’s really fun and interesting. There are a lot of great people that work for the organization.

Evolving Threats and E-Commerce:

And how have the threats CBP faces evolved over time? What have you seen as the development over the years? Well, you know, that’s a great question, Ken. And I don’t want to date myself. And I don’t say I was there when the first clipper ships were coming across the ocean. But CBP was created as an agency, a revenue agency, right? It was part of US Treasury when it first started out. And the folks there would deal with the merchant ships coming in, imposing the taxes, checking the goods coming in. And it was a pretty straightforward operation. They were built to deal with one ship at a time over the years, you’ve got bigger and faster ships, containerized cargo, air cargo, express consignment cargo. And so what’s happened is that in one way or another, it’s been the volume and the type of cargo that they see that has increased tremendously from the 1780s up until today. And in fact, probably Ken, as you know, working in IP, the biggest game changer is going to be e-commerce. That impacts a lot of what CBP, the threats it’s dealing with and how it’s got to build its response. The response that was good 50 years ago is not gonna work today.

De Minimis and Counterfeit Goods:

Yeah. And what would you say is the biggest issue? If you had to stack all the issues up side by side, what would be the biggest issue today facing CBP? Let’s go back to e-commerce and its progeny, okay? And with that is de minimis. De minimis is a significant issue that customs is facing now. In fact, there have been a number of press releases and alerts that deal with this specific problem. So in order to help the listeners, the viewers understand this better, let’s take a step back and kind of understand what de minimis is and its impact on the customer. And its impact on the way customs works and the threats that it creates to the health and safety of the public in the US. So de minimis was created to be a catch-all for small value parcels. Now, these are parcels that come in. And at one point it was a $200 threshold. Anything below $200 would pass duty-free. Minor cursory looks at it. Several years ago, that value was increased to $800. So with $800, wow, that’s a, you can squeeze a lot more stuff in it. And the counterfeiters and the bad actors took advantage of this because for them, what’s value? You know, it’s all relative. If they have a thousand counterfeit watches, well, they’re only worth a penny each, right? They’re gonna value them very low or phone cases or any manner of good can be undervalued. So that’s been a problem. So they can shift significant quantities of goods by undervaluing. They can also bring in goods by mislabeling, misidentifying them. So the packages that come in many times may say stuff, gift, or be misidentified entirely. I know there was an example at JFK where items were labeled as low value synthetic diamonds, which of course caught the eye because some of the packages do get checked. Turns out it was a, I think five or $8,000 shipment of genuine diamonds. So obviously in that case, they were trying to evade the duty. So you’ve got people using the system to evade duty. You’ve got people using the system to ship in counterfeit goods. Why? Simply based on the volume of packages that e-commerce has created over time. Customs is looking at, I believe the number is for this fiscal year, they’re gonna look at in the de minimis arena, 1.3 to 1.5 billion packages entering the US. Wow, that’s a huge number. It is you at JFK alone, they see approximately 24% of that number. LAX sees 23%. A quarter billion, a quarter million packages each, at least in those facilities coming through. And these are small parcels. And obviously if you’ve got that many packages, you can’t look at them all. The best you can do is target and they do have risk analysis models, which will look at where the package is coming from, where are they going? Is it a particular region, a particular country? Are there known bad actors that they’ve been tracking? Well, now we’ve talked about it in terms of skipping out on duty. We’ve talked about it in terms of trying to smuggle counterfeit goods into the country. Unfortunately, it’s also a conduit for illicit pharmaceuticals. So the folks who bring you fentanyl have used this as a way to bring in finished fentanyl pills, finished product. They bring in the precursor chemicals. They bring in the pill presses to finish the product all through the de minimis environment. So over the past couple of years, customs has become much more aggressive in trying to stop this. They’ve had a couple of great operations, Operation Artemis, Operation Apollo, which really target the fentanyl product. So what does that mean for everybody else? Okay, so fentanyl is getting a lot of priority. It’s top of the list because of the significant harm it causes to public health and safety. IP is still a priority. Unfortunately, when you’re talking about things that can kill you just by touching a few grains of it versus a counterfeit phone case, then you can see why the numbers for IP seizures are gonna go down, which they have. There have been fewer because the energies have really been focused on the issue of fentanyl. And that’s gonna continue to be the case until it’s brought under control, until they can bring those numbers down. The other thing too that CBP is doing is they are reaching out to the trade community and particularly the customs brokers to remind them on those packages in which a broker is effectuating clearance that they have a responsibility to know their importer and to know the content of those packages to be clear when clearing them to explain what is in the packages, to make sure they are manifested properly because if not, then brokers will be penalized, including ultimately they could lose their licenses if they are committing fraud upon CBP for the entry of the product.

Role of Rights Holders:

Wow, with such a flood of goods, Angelo, what can rights holders do today to protect themselves in this environment? You know, Ken, it’s gonna be tough. There are no easy fixes to the way in which commerce has shifted to the online environment. People are very comfortable now ordering their goods, going to any site, maybe there are some, they stay away from their little doobies. But in many cases, they don’t think, don’t give it a second thought really, to go online and order and know that their goods are likely coming from a foreign country. So how can a brand try to help customs prevent entry of these goods? Well, obviously the first thing you need to do is record your trademarks. The IPR Enforcement Branch, IPR Enforcement Branch with CBP, they have an online portal, very straightforward to use, very low cost. If you’re a brand, there’s no reason not to record. It is, I believe, $180. The length of the recordation mirrors the length of the trademark. So if you’ve just gotten a new trademark, you’ve got that full time on it. If you’re coming up for renewal, then you will get the renewal period. It applies to copyright as well. What this does, and mind you, there are close, I think last time I looked close to 19,000 active recordations in the CBP portal in IPRIS. And they don’t get to all of them, but the fact that you put it in there, if they see something that is suspicious, they can look up the mark, they can find out who the contact is. You can upload materials to help identify the goods. They can reach out to you. They may follow up. They may be able to make a determination based on those goods. Now that’s the recordation process. You have to go beyond that though, because that can’t stand alone. That’s a great way to get on the radar. To start and be noticed. Then you’ve got to take some additional steps. That’s your first low cost step. Second one would be, think about training. Think about providing training to the folks at Customs. They are the front line at the ports at all the borders. So there are two ways to do that. That is either you can do it online. Customs has a method. You could look it up on their site, and it’ll take you through the steps on setting up the online training for officers, import specialists, fines and penalties folks, for them to be able to understand your product. Now, we like to do, as you mentioned, and that great reading of the bio, that live training is where it’s at. I think after having done both, I do think the live training is better. It’s better because you are directly engaging with the folks at US Customs on a personal level. They’re able to ask you a question in the moment. They’re able to handle the genuine and the counterfeit goods. And you’re able to explain any trends or issues that you’re seeing. And you can go around to the ports. As you mentioned, IECC does have a program where basically on a monthly basis, they will hit one or two ports. In fact, next week, unfortunately, after this broadcast airs, we’re going to have been in San Juan, St. Thomas and Atlanta to conduct training for the folks there. Each of those ports requested the training, and they’re very excited to find out more because there are goods going through all of them, counterfeit goods, which are then available either in a tourist economy setting or they’re coming in via air cargo. Now, the other thing that you can do, you’ve recorded your mark, you’ve done your training. Now, I mentioned before that there’s an opportunity that there is a chance that customs will actually reach out to you for verification about the goods. They may have the taint. Now, they can’t move to seizure unless they have a good reason to do so. And if that’s the case, then you need to respond to those inquiries very quickly. This isn’t, “Oh, I’ll put it off a week or two.” Customs is under certain time constraints in which they have to complete detention runs. They can do 30 days, but then if they’re going to perfect seizure, they need to move to that. And with the volume of goods, the quicker they get goods, either seized or released, then that’s what they have to do. We have a rule here where any time we receive a CBP inquiry for one of our clients, it’s a 24 hour or less turnaround. Even if it’s to the point of just being able to say, “We’ve gotten your inquiry, we’ve got to do some research, we will find it out, we’re going to get back to you,” then that’s what we’ll do. It’s important to acknowledge the work that Customs is doing and to reassure them that you’re on it, that you are going to back up the steps that you’ve taken with some concrete action. Now, remember, there’s one important thing, though, Ken, that comes into play. When you’re providing information to Customs, it should not be a determinative statement. So you cannot say, “The goods are counterfeit.” That’s not what you’re saying. You should say, “The goods are inconsistent,” because the determination as to the legitimacy or counterfeit nature of the goods has to be made by Customs after weighing the information in front of them and that has been provided. So it’s best to stay away from those determinative statements and the inconsistencies should be as to the products where they’ve sent you images or there are samples in some cases. It’s got to be specific to those, not generic statements, because those are easy to knock down. You want statements that apply to the product that you’re dealing with on screen or on hand.

Success Stories:

And, Angelo, if Customs finds a package that looks suspect, how does the brand owner find out about it? Do they get pictures emailed to them? Are they– or you get phone calls? What’s the process like? OK, good question. So based on the recordation, you have put your contact info in there or the person responsible to work with Customs. We have gotten calls. We have gotten inquiries via email that include images. And then we will sometimes be able to do it based on those images. Other times, we do request additional images of the item to assist in identifying. And sometimes we talk about it over the phone and we’re able to help them. We tell them what routes the goods typically follow or what different items accompany the good in transit. And that helps them make and to discern their decision. Sure. And also maybe even looking out to see who is the sender. Where is it coming from, right? Well, there are certain things they cannot disclose. And they’re not supposed to disclose the sender or recipient to the rights holder. Because the information they can disclose is limited. And that’s why we really focus on those images of the goods. And sometimes those images are fantastic. You can tell with great certainty what you’re looking at. And other times, those images are a little difficult to work with. So we have to make a second request. I always tell the folks at Customs, let’s make believe you’re taking pictures of your family. You want to see it. Well said. We’re getting near the end. I have two more questions. Could you share with me maybe one or two successes briefly that you’ve seen over the years? I think the successes we see in general come from when we’re able to take the information we receive after a seizure is perfected through the seizure notices. And we enter that in the database. We send a C and D. When we’re able to connect that info with a real world brick and mortar target, that is where it’s fantastic. We’ve had instances where CBP sees goods coming in on a constant basis. They make a referral to HSI. They, in turn, open up a case. We have– recently, there was a case that involved well over $15 million of our client’s product being sold by people who were doing small-time importations. This was in a mail facility environment. They were bringing in five, 10, never more than maybe 15 items at a time. But just think, they turned that over the years into $15 million worth of product. Another one that we count as success, customs was seeing goods coming in, going to a particular address in the Carolinas. They alerted HSI. HSI is a very important thing. They alerted HSI. HSI decided to make a controlled delivery. They thought they were going into a house that maybe just had a few items. They were doing mail fulfillment because they were advertising on Facebook. They ended up seizing well over $5 million worth of products on hand, including counterfeit pharmaceuticals, luxury goods, jewelry, a whole host of products. And we were able to find the seizure notices and were able to tell them that, yes, we had sent notice. These people were aware that what they were selling was, in fact, counterfeit. So those are the great cases. Those are what we try to build. We always try to work with law enforcement. That has the greatest impact and sends the strongest message to the counterfeiters that, at some point, we are going to find you. It may not be today or tomorrow, but we’re in this for the long game.

US Chamber’s Memorandum of Understanding (MOU) with CBP:

So last question for today, Angelo, is that the US chamber has a significant memorandum of understanding with CBP. Can you tell our listeners a little bit about that? OK. Well, Ken, one of the things– and this goes to some of the changes at CBP. I recall when I first started working with customs, the rights holders were in their silo. Customs was over here in their silo. And you didn’t mix. The grains did not mix at all. But what’s happened over the years, I think, based on the changing nature of trade and the need for additional resources, customs has become more amenable to working with industry or its representatives. So what that means in terms of the chamber, they have worked to develop an MOU where brands, rights holders, are able to share worldwide seizure information with CBP. That gets put into their risk assessment models. It gets evaluated. And this may open up, in fact, a whole new range of importers and exporters who they were unaware of previously. So from my understanding, it is leading to some beneficial effects where goods are being seized, being looked at, that were not previously because of the data the companies are providing. This also extends into the donation program where companies can provide their technology tools that can assist customs with identifying product, whether it be barcode readers, RFID readers, all types of different things that companies can be available to custom. I think CBP realizes that the brands do have some of the resources that are needed to simplify the process. I think, too now, customs is looking more at technology, especially the use of AI and identifying goods coming in. Their newest generation of X-ray machines that they use on packages uses AI to discern what is in those boxes based on the algorithms. I mean, some of this is so amazing and so incredible in terms of where we’re going to be in just a few years and the fight against counterfeits and CBP’s role in that. Angelo, times really are changing quickly, and I’m so grateful for the opportunity to speak with you today on the IP Friday’s podcast. Thanks again so much. Thank you, Ken. Thanks for having me. And if anyone has any questions, I’m always free to answer. Thank you. Thank you, Angelo.