Figure 2: Selected responses From Section 337 Surveya,b

Firms indicating that counterfeit/infringing goods continued to enter the country after
issuance of exclusion orders

"Figures do not include firms indicating they had no basis to judge.

The level of damage to consumer confidence in the product was not assessed in this survey.
CFigures represent those firms responding that goods continued to enter the country
(see shaded area in first pie chart).

Several firms complained that Customs' inability to enforce their

exclusion orders undermined the effectiveness of section 337 as a trade remedy. One firm commented that:

[For the time and money involved for a small firm like
ours, the end result was of little benefit because of
the lack of enforcement by the Customs Service."

Another stated that:

"[W]e believe that the efforts and money expended to
obtain the exclusion ruling from the [International
Trade Commission] . . certainly did not provide the
protection we expected."

"

Because of the lack of enforcement and high cost, firms commented that they would not use section 337 again to deal with imports of other types of counterfeit or infringing products. One stated

that:

"There are now many of our products being copied
identically. Because of the cost of the [International
Trade Commission] case and the lack of enforcement by
Customs it doesn't seem fruitful to take these other
items to the [Commission]. Yet, we are being hurt and
sales are suffering and people are being laid off."

Customs' performance reportedly improves when it is assisted by

Over 25 percent of

the owner of the intellectual property right. the firms receiving exclusion orders and 35 percent of the firms that had recorded trademarks and copyrights undertook independent investigations and provided the results to Customs. Such information could include the names of companies importing counterfeit or infringing goods or information on particular shipments of such goods. Nearly 80 percent of the firms that provided information to Customs and expressed an opinion were satisfied with Customs' response to the information provided. One firm commented that:

"Customs is most cooperative and efficient when placed
on notice. However, their ability to spot infringing
or counterfeit goods without notice is extremely

erratic."

Another stated that:

"Customs usually must be informed and prodded to be
effective, however, once informed and prodded, Customs
is helpful."

Survey Respondents Point to Staff

Limitations As Foremost Problem

Respondents to both surveys expressed high regard for the work of port inspectors and generally noted the competence and

helpfulness of port personnel. Reflecting these comments, one firm stated that it has "been impressed with the cooperative spirit and willingness to help exhibited by the Customs Service

personnel."

Respondents' comments pointed to staffing as the primary limitation on Customs' ability to protect intellectual property rights. One firm wrote that "individuals at the Customs service are most cooperative . but shortage of manpower has resulted Another stated that

in less than satisfactory results overall."

"it appears that the Customs Service may do what it can but with

recommended that "we need more trained import specialists at

ports of entry; need more trained inspectors at the major ports." Finally, one firm commented that "the only impediment to even

better enforcement of the laws by Customs is the lack and

shortage of personnel."

Survey Respondents Suggest Ways to Strengthen Customs Efforts

Survey respondents supported three proposals, two of which they volunteered, for enhancing the ability of Customs' present staff to protect U.S. intellectual property rights from counterfeit and infringing imports.

Over 90 percent of our survey respondents who expressed an opinion believed that authorizing the International Trade Commission to direct Customs to seize goods and cause them to be forfeited would improve Customs' ability to enforce section 337 exclusion orders. In our August 1986 report--International

Trade:

Strengthening Trade Law Protection of Intellectual

Property Rights (GAO/NSIAD-86-150)--we recommended that Congress give the International Trade Commission such authority, which would be intended to strengthen the deterrent effect of the exclusion order. If such a proposal were to become law, infringers would not only face the prospect of losing shipping costs but also the possibility that Customs would seize and dispose of their entire shipments.

Several survey respondents suggested that Customs needs to

shorten the 2 to 3 months it takes to inform the ports of a newly

recorded trademark or copyright.

A number of firms cited this

delay as a major problem.

One stated that "In my experience, it

takes about 2-3 months to register a [copyright] with Customs. That is too long . . piratical copies slip by Customs."

During

this period, counterfeit and infringing goods may continue to enter the country even though the intellectual property right is legally protected from the time Customs approves the application for recordation. Until port inspectors are notified, they have

no knowledge that they are to protect a particular trademark or copyright from infringing imports. In some cases, 3 months may constitute a significant portion of the entire market life of a product. Some consumer goods, such as those marketed in conjunction with newly released movies, have very short market

lives.

The survey responses also indicated that Customs could improve its performance by intensifying its efforts to elicit the support of intellectual property rights owners in identifying shipments containing counterfeit or infringing goods. This could be accomplished by providing an informational brochure or similar document to firms obtaining Customs assistance. Under current procedures, there is no formal mechanism for firms initiating section 337 proceedings to obtain any information from Customs. Firms recording trademarks or copyrights with Customs receive only confirmation letters and copies of the notices sent to the ports. As a result, they may not have realistic expectations of Customs' abilities or appreciate the need to provide assistance.