U.S. Customs and Border Protection on Tuesday released its E-Commerce Strategy that recommends changes in data acquisition approaches as part of the agency’s counterfeit targeting efforts.
U.S. Customs and Border Protection (CBP) Office of Trade (OT) Executive Assistant Commissioner Brenda Smith said her agency needs more authority to curb counterfeit imports during a Tuesday Senate Finance Committee hearing focusing on those imitation goods, as senators scrutinized CBP and interagency efforts to crack down on trade cheats.
Smith was directly answering a question that committee ranking member Ron Wyden, D-Ore., presented as a “yes or no.”
Smith said she will do her best to provide more details of additional needed authorities to Wyden’s staff within 60 days, but noted that the agency should first hear input from the Commercial Customs Operations Advisory Committee (COAC).
Among other collaborative initiatives for CBP and the private sector, a recent Government Accountability Office report recommended expanding CBP’s authority to notify online sales platforms when they are holding products that might be fake, as Wyden mentioned in his written hearing statement.
Wyden also said in his statement that, “in preparation for this hearing,” his office asked OT in person about whether CBP needs more enforcement authority to block counterfeits, but received no clear response prior to the hearing.
“I think we should start the conversation now, but what I would recommend is that we gather the information about what [counterfeit-related] data is available and who it should come from, and who it should be provided to, from our private-sector participants in the COAC E-Commerce Working Group,” Smith said.
COAC meets on a quarterly basis, and last met Feb. 28 in Miami.
E-Commerce Working Group materials associated with the Miami COAC meeting posted to CBP.gov didn’t specifically mention “counterfeits” or “intellectual property,” but an issue paper of the working group posted for the meeting said the group will develop “a series of process diagrams for CBP on e-commerce.”
That document also noted that CBP is working with the COAC, the interagency, and the World Customs Organization to develop a U.S. “response” to the WCO Cross-Border E-Commerce Framework of Standards. COAC is submitting comments to CBP, the document says.
CBP on Tuesday released its E-Commerce Strategy, intended to educate the trade community and the public about its customs regulations compliance responsibilities, including for small package shipments.
Among other things, the strategy calls for “enhanced legal and regulatory authorities” to better position CBP and the interagency to address threats, improve existing data collection, deepen existing private-sector partnerships, increase engagement on small parcels with e-commerce stakeholders, and continue as the global leader in standards and best practices for e-commerce trade.
Moreover, CBP is reviewing existing statutory and regulatory authorities to identify changes that would allow it to address more threats in the e-commerce shipment environment, including changes “pertaining to the provision and exchange of data, realignment of resources, improvement of targeting, and further development of risk segmentation processes,” the strategy says. “Once the review is completed, CBP will pursue the changes needed to maximize enforcement efforts.”
During the hearing, Sen. Bill Cassidy, R-La., probed whether federal agencies are adequately collaborating in trade enforcement efforts.
He asked Smith: When CBP learns that a firm is potentially selling counterfeits, does the agency trigger an investigation of an entire business for other potential lawlessness, such as trade-based money laundering?
Once CBP identifies a suspicious entity, it endeavors to take a “broad-based approach to looking at all of their business activity,” Smith replied.
However, it can be difficult to stop their illicit activity sometimes, because “oftentimes, they will disappear,” and must then be found by tracking down corporate officers or “other targeting information,” she added. “We are also looking to make sure that, when we see a pattern of conduct from one business entity, that we look for that same pattern of conduct in similar types of businesses.”
Several senators and witnesses agreed during a February Senate Judiciary Committee hearing that the True Incorporation Transparency for Law Enforcement (TITLE) Act pending in the committee would help restrict U.S. exposure to white collar crime, which includes trade-based money laundering and intellectual property-related violations such as counterfeit sales.
Among other things, the bill would require disclosure of beneficial ownership during a company’s incorporation process in the U.S.
There has been no action taken on the legislation since the Feb. 6 hearing.
In response to another question from Cassidy, Smith said when CBP identifies a counterfeit, one of its first examination questions is whether the shipment came from China or Hong Kong.
A 2016 report by the U.S. Chamber of Commerce Global Intellectual Property Center found that China accounted for about 72 percent and Hong Kong accounted for about 14 percent of counterfeits seized by U.S., EU, and Japanese customs authorities between 2010 and 2014.
The report estimated China being the source of over $285 billion in physical “trade-related” counterfeits annually.
Cassidy during the hearing said his office is working to learn more about how well agencies are working together on trade-based money laundering, noting an estimate that cartels move about $110 billion per year from the U.S. to Mexico, but “as best as we can tell,” the U.S. only confiscates about $7 billion.
Smith said interagency cooperation on tracking trade-based money laundering and other issues such as counterfeiting was going well, but Cassidy interjected that he had “heard from others, off the record, that it’s very bad, that it’s siloed, and that there’s not the cooperation between agencies required for it to be effective.”
He continued, “I’m not accusing you, but if we’re moving $110 billion a year, and we’re only getting $7 billion, it begs the question.”
Such money laundering is a “very sophisticated” form of trade violation, and it “behooves” this country to take a full government approach, “both from a criminal perspective and a civil perspective, and applying the information we can get from our intelligence agencies, to both recognize and share that information to ensure that we’re going after, in real time.”
Cassidy said he accepts Smith’s answer “conceptually,” but noted he is “probing for” agencies, including CBP, to respond more urgently to such money laundering and related activities in practice.
Cassidy’s message could serve to help catalyze such cross-government enforcement efforts, as he identified trade-based money laundering as a “high-risk area that the Congress is interested in,” Smith said. “And then, I think what we do is pull together those key agencies – whether it be ICE, whether it be the Department of the Treasury – to focus on trade-based money laundering, with the mandate to share information and take aggressive action.”
CBP official notes limited authorization to deny counterfeits
