The Office of Inspector General (OIG) has found that the Department of Homeland Security (DHS) and U.S. Customs and Border Protection (CBP) did not coordinate or manage intellectual property rights (IPR) strategy, and CBP does not have accurate data to demonstrate the full extent or effectiveness of its IPR enforcement.
According to OIG, DHS and CBP did not coordinate or monitor IPR strategy because DHS prioritized responding to ad hoc issues. Additionally, OIG said CBP did not strategically manage IPR or develop an IPR risk assessment.
Ultimately, OIG determined that CBP did not have standard operating procedures and believed targeting would satisfy risk assessment requirements. Without a strategic IPR approach, OIG found that DHS was limited to fragmented efforts from individual components and CBP may be unable to determine whether it focused finite resources on violations with the greatest risk. Additionally, the watchdog found that CBP did not have accurate data to manage the IPR enforcement process to 1) improve targeting or monitor alternative IPR enforcement actions, 2) report reliable seizure data, or 3) track IPR criminal referrals. OIG said these problems occurred because CBP did not establish standard operating procedures or oversight, including parameters for alternative IPR enforcement actions.
Title 19 United States Code Section 1526(e) requires CBP to seize any merchandise imported into the United States bearing a counterfeit mark. But OIG discovered that five of the 15 ports it visited and surveyed used alternatives to seizure. Although CBP officers enforced IPR through alternatives to seizure, they did not record these actions. Consequently CBP could not monitor how officers used alternatives to seizure, including whether officers denied entry for goods that pose health and safety risks or are identified in the enforcement priorities document. Some examples of health and safety risks might be counterfeit car interior lights that could catch on fire or counterfeit computer microchips used in hospitals or by the military in missiles and jets that could fail and jeopardize citizens and military personnel.
CBP estimated that processing one seizure costs more than $2,000 for 50 hours of labor, whereas an alternative like voluntary abandonment costs approximately $100 for 2.5 hours of labor. Large seizures can take several weeks to process and photograph each unique item for evaluation. OIG observed a seizure that officers at John F. Kennedy (JFK) International Airport processed for $2.5 million after detaining the items on July 8, 2021. The shipment contained 2,231 counterfeit handbags, sneakers, and other merchandise with 22 item types, requiring the officers to individually photograph each item type and submit 138 photos for verification as counterfeits and then seize them. Officers completed the seizure 41 days later, on August 18, 2021.
The watchdog has made several recommendations to address the shortcomings. These include developing, implementing, and monitoring a departmental strategic, risk-based approach for managing and enforcing intellectual property rights; and establishing a tracking mechanism for IPR investigative referrals. DHS concurred with the majority of the recommendations and expects to complete work to most of them by October this year. Further, meetings beginning in July will allow a collaborative review of existing DHS efforts related to the protection of IPR. The group plans to conclude evaluations and prepare recommendations to leadership in the first quarter of calendar year 2023. The remaining work will culminate in identifying resources and assigning staff to coordinate, implement, and monitor the risk-based approach.