CNBC says US China trade war increases the amount of counterfeits – true or false?

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CNBC reports that the US China trade war could lead to an increase in counterfeit goods for 3 reasons:

(1) Flooding of products where CBP cannot catch all fakes, especially through shipments of e-packets which weigh 4 pounds or less. The article says the port at JFK receives 120,000 e-packets a day.

(2) Counterfeiters using 3D printing to create “super fakes” that are very similar to the legitimate product.

(3) Counterfeiters hijacking well known brands on e-commerce sites by filing a document with the trademark office of an email address change. Once the email address change is approved, they go to Amazon to have them recognize their email as the legitimate source and take down the legitimate product.

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Here’s my thoughts on this:

1. E-Packet shipments have already been overwhelming CBP for the past 2 years or longer. A 2017 CBP report already mentioned the influx in e-packet delivery as causing more counterfeit goods to slip through.

2. The trade war and increase in these small shipments are not related. The rise in e-packet delivery is due to websites such as alibaba, dhgate, wish and all the other e-commerce platforms that allow US consumers to buy direct from Chinese manufacturers.

3. There is some confusion with buyers in the US who cite Customs Directive No. 2310-011A. This directive allows individuals to bring in (1) one counterfeit article, (2) for personal use, (3) not for sale and (4) it is declared. Some people confuse the directive as allowing shipments of counterfeit goods to be delivered to someone in the US. However, the directive says that the counterfeit good/gray market good must “accompany” you and therefore it cannot be sent.

4. I have to disagree with the article about the use of 3-D technology to create counterfeit goods. Most counterfeit items from China are from the same factory that produces the legitimate product. Sometimes the companies change vendors, leaving the previous vendor with the same tooling, product specifications and know-how to create the same product as the legitimate product (althought lacking the license to do so).

5. There isn’t a need for 3-D printing of counterfeit goods. The fake Otterbox is probably manufactured by the previous OEM manufacturer in which Otterbox sourced their products.

6. Item 3 about Amazon – the CNBC article actually says there has never been a confirmed example of this happening. The main reason is because Amazon will always email the previous email address to verify a request for a change of email was actually filed. The article says an attorney has had 15-16 instances of this happening but there has been no actual success by a counterfeiter.

I don’t see a correlation between the trade war and increase in counterfeit goods. There will always be a demand for counterfeit goods, and any country will have an incentive to supply such demand – trade war or not.

If you received a letter from customs seizing your merchandise because they believe the goods are counterfeit – contact experienced seizure attorney David Hsu at 832-896-6288 or by email: dh@gjatradelaw.com or David’s catch-all email: attorney.dave@yahoo.com.

4 US Companies falsely claimed their goods were “Made in the USA”, $0 in fines paid.

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According to the New York Times – four companies violated Federal Law by engaging in “unfair or deceptive acts” and false claims that their goods were “Made in the USA”.

The companies and violations include –
(1) Hockey puck manufacturer falsely claims their pucks were made in the US.
(2) California mattress maker falsely claimed there mattresses were “designed and assembled in the U.S.A.”
(3) California-based manufacturer of tactical gear and other merchandise falsely claimed their products were Made in the USA or American made.

Despite the false claims, the Federal Trade Commission (F.T.C.) found all four companies violated federal law, but did not punish the firms. No fines were issued and neither company was required to admit wrongdoing or notify customers of their false marketing.

Democrat lawmakers urged the President to get more tough on manufacturers who falsely label goods as made in America. In response, FTC officials indicated the threat of future penalties was an adequate deterrent as companies face a $40,000 penalty per violation if making any further false claims.

If you have any questions whether your goods qualify as “Made in the USA” or are under FTC investigation, contact experienced trade and customs attorney, David Hsu by cell/text: 832.896.6288 or by email at: attorney.dave@yahoo.com / dh@gjatradelaw.com.

Bi-Partisan bill introduced to block 25% tariff on imported cars.

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According to the Detroit News, U.S. Representative, Fred Upton (R) introduced legislation that would stop President Trump from imposing 25% tariffs on cars imported to the US under the premise of threats to America’s national security.

The legislation includes bi-partisan support and would require the International Trade Commission to first conduct a “comprehensive study on the economic importance of automotive manufacturing in America”.

Another argument is that the Trump administration is over stating the claim that cars and auto parts are a threat to national security of the US.

Since Trump proposed the tariffs in May of 2018, the proposed tariffs may be imposed as early as early May if the new legislation passes and becomes law.

More news will be posted as they become available.

China introduces new legislation to placate US IP concerns.

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According to Bloomberg – China’s legislative body has passed new legislation to replace three main laws that impact non-Chinese companies doing business in China:(1) Law of Joint Ventures with Chinese and Foreign Investment, the (2) Law on Foreign-Capital Enterprises and the (3) Law on Chinese-Foreign Contractual Joint Ventures.

To summarize, the new legislation includes: (1) promise of equal support to foreign and domestic firms, (2) equal treatment for license applications, (3) foreign companies can participate in setting industry standards and in government procurement, (4) right of foreign companies to appeal non-security related decisions and (5) a complaints mechanism for foreign companies.

The law was passed on March 15th and will take effect on January 1, 2020. Whether this will impact the current trade negotiations is still yet to be seen.

Passenger van or cargo van? That is the question (well, for Ford at least).

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A current case in federal court is attempting to address when or if a passenger van is actually a cargo van.

The case involves Ford Motor Company and their imports of passenger vans that removed a row of seats and sold the vehicles as cargo vans. Cargo vans were levied a duty of 25%, whereas their passenger van counterparts were only taxes 2.5%. Specifically, Ford imported “passenger vans” into the US from Turkey. After they cleared customs, the second row of seats were removed, windows blocked and holes on the floorboard for the seats were covered.

In 2017, the Court of International Trade ruled in Ford’s favor, but the government has appealed and the U.S. Court of Appeals for the Federal Circuit heard oral arguments yesterday (Monday 11, 2019). Many are watching the ruling as this may impact what strategies companies implement when “tariff engineering” imports to avoid higher duty amounts.

Tariff engineering and finding alternate classifications under the Harmonized Tariff Schedule of the US (HTSUS) are common ways importers try to lower their duty amounts.

The Ford argument is the goods should be classified as they are imported and subsequent altering does not matter. However, the government claims Ford’s wording of the vehicle is “for the transport of persons” instead of goods, ie is a cargo van.

Will update as soon as a decision is made.

If you are interested in how your company can “tariff engineer” goods or want to discuss alternative classifications for your goods, contact experienced trade attorney David Hsu at 832-896-6288 or email David’s catchall email: attorney.dave@yahoo.com (will be sent to David’s dh@gjatradelaw.com) email.

Huawei sues US Government, argues government ban on Huawei equipment is unconstitutional.

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China’s Huawei sued the United States government on Wednesday in the United States District Court in Plano, Tex., arguing the 2019 National Defense Authorization Act is unconstitutional because it bans government agencies from contracting with Huawei or companies that use the company’s equipment.

Specifically, Huawei claims Congress violated constitutional principles on the separation of powers and also the bill of attainder clause, by enacting legislation that specifies a person or entity for punishment without trial.

Huawei’s claim is not new, in the past, Russian based Kaspersky Lab filed a similar suit in 2017 after the Department of Homeland Security banned Kaspersky products from Federal agencies. A judge dismissed the lawsuits as there was a legitimate desire to protect American networks. If the U.S. Government can likewise prove a similar claim in the instant suit, Huawei may likely face the same result of Kapersky.

The US has argued that Huawei equipment poses a risk because it is used by Chinese authorities to spy on the communications. As such, many US wireless carriers have avoided using Huawei equipment.

More information will be posted as it becomes available.

Chinese exports drop 20% from last year.

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According to the General Administration of Customs in China, Chinese exports fell 20.7% from this time a year ago. Causes for the slow down may be related to a slow down in global demand for Chinese goods and the Chinese New Year holiday in February.

January and February 2019 customs data showed exports down 4.6% compared to 2018 data, indicating a slowing global economy and not the trade war is the cause.

The country’s exports to the U.S. fell 26.2% last month, while imports from the U.S. dropped 28.6%, leading to a bilateral trade surplus of $14.72 billion, a two-year low.

Check back for more trade law news.

US Kitchen cabinet companies petition for anti-dumping duties against Chinese cabinet producers.

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The American Kitchen Cabinet Alliance (AKCA) filed a petition with the International Trade Commission to impose antidumping duties and tariffs on imports of cabinets from Chinese manufacturers.

The AKCA claims the $10 billion cabinet industry is being harmed by imports of cabinets from Chinese manufacturers. The AKCA claims U.S. cabinet manufacturers have seen poor financial performance despite a 12.5% increase in the number of housing units completed in the U.S. The AKCA blames cheap imports from China for their financial decline.

The petition to the ITC by AKCA claims the kitchen cabinets from China are also sold at a below normal value and the AKCA is requesting an ADD rate of 175.5% to 259%.

If you are an importer or manufacturer of kitchen cabinets and ahve questions how the investigation on kitchen cabinets may impact you, contact attorney David Hsu at attorney.dave@yahoo.com or by text/call at 832.896.6288.

CBP Officers seize counterfeit iPhones.

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Photo of seized iPhones at Pembina. Source: cbp.gov

According to a U.S. Customs and Border Protection (CBP) media release, officers at the Pembina officers seize counterfeit iPhones at the Pembina Port of Entry in North Dakota.

The iPhones were seized for being in violation of intellectual property rights (IPR) regulations. The shipment contained 39 cell phones with the Apple trademark and have a retail price of $31,200.

The rest of the media release talks about CBP enforcing intellectual property, how counterfeit goods funds criminal activity, and counterfeit goods may be made out of materials that are harmful to the health and safety of the users..

The article didn’t go into detail, but here are a few other things you should know from my handling of iPhone seizures:

  1. Usually the violation is for a counterfeit use of the iPhone wordmark or the Apple logo. The “Notice of Seizure” will tell you what was violated. You have to read this carefully and must respond within 30 days to a notice of seizure.
  2. You will also get a letter from Apple’s law firm asking you to stop importing iPhone goods.
  3. Be sure your address is current and accurate with CBP, they will only mail notices to the address on the shipment.
  4. If you get a Seizure Notice, you have 4 options: file a petition, offer in compromise, abandon the goods or refer to court.
  5. The value of the iPhones given by CBP will be much higher than you paid, as I believe they value the goods at the MSRP at the time they are first released.
  6. Why does the value matter? The value of the goods will be used to calculate any penalties. For example, civil penalties may be 3x the value of the shipment.
  7. CBP and Customs problems don’t go away – CBP has 5 years to go after an importer. CBP isn’t going away and neither will your seizure.

If you have had your shipment of iPhones seized, contact me. I’ve represented many cell phone importers of iPhones, Samsung and their accessories and there are things we can do but time is of the essence.

Contact me at 832-896-6288 or by email at attorney.dave@yahoo.com.

Dulles CBP seizes 410 pounds of Khat from Nigeria

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Khat seized by CBP. Source: cbp.gov

Customs and Border Protection’s (CBP) seized 410 pounds of khat from Nigeria last week. The shipment was labeled as “dry moringa oleifera” but upon inspection the officers found seven boxes containing 80 bags of a green leafy product. Samples were submitted to a U.S. Department of Agriculture (USDA) botanist who determined the substance was khat. The khat is to be destroyed by CBP.

Khat possession and use in the US is illegal and CBP officers are always on the look ouf for khat shipments.

Since 1980, khat has been classified as a drug when chewed for its stimulant effect. Most of the khat produced is either in East Africa or the Arabian peninsula.