The Customs’ Role in Enforcement of Intellectual Property Rights

Background

Traditionally, Customs Administrations have been responsible for two distinct areas of work. Collection of Revenue at borders, linked in many countries with the collection of Excise taxes at inland locations, forms the first major aspect of their work. The second, equally important responsibility, which at first sight might appear to conflict with the revenue collection role, relates to the Protection of Society. Customs, situated as they are at land, sea and air frontiers, are the obvious choice as the main Government agency to protect the external frontiers. A broad range of border-related offences confront the Customs Officer. Such offences include the trafficking of, illicit drugs, endangered species, nuclear and hazardous goods and goods which are being imported, transited, or exported, whilst contravening Intellectual Property Rights (IPR) legislation.

The public perception of IPR offences is limited to fake T shirts, watches and perfume, and whilst these contraventions can be extremely damaging to individual companies and in turn national economies, the actual range of products being counterfeited is extensive and poses in many instances a serious health and safety risk to the public. Past cases include pharmaceutical products and prescription drugs, which have been manufactured with sub-standard constituents, unsafe car parts, reverse engineered aircraft spares, and computer processors where the operating speed has been artificially increased making the product more likely to break down under pressure. The last example is a graphic reminder of just how dangerous counterfeiting can be to society, especially if the fake computer part is installed as a key control component in a transatlantic jet aircraft.

A great potential exists for Customs to play an important and legitimate role in protecting society against intellectual property rights violations. The loss of revenue to legitimate businesses and therefore economies on the one hand, linked with the need to protect the public from dangerous and hazardous goods on the other, is a worthwhile and beneficial function.

Facilitating International Trade whilst protecting the border

Facilitating International Trade whilst protecting the border is potentially a difficult role, especially since neighbouring countries are often the most important trading partners and it is therefore important to actively facilitate legitimate cross-border trade, whilst trying to deal with a whole series of border protection issues. In many ways the border location represents a series of challenges and opportunities to Governments.

Since international trade is so important to national economies generally, it is important for Customs to respond positively to the legitimate needs of business. Successful international trade relies upon: efficient movement of legitimate goods, leading to more assured transit and delivery times, better business planning and ultimately increased profitability. Against this background Customs’ must also assert its own needs in fulfilling the role in Protecting Society. In today’s world, goods are moved on a “just in time” basis, through borders where simplified import procedures have been introduced, where there is much less documentation for Customs to rely upon and more business computerisation to deal with. In this changing environment Customs urgently need access to relevant commercial information and intelligence, especially trade related information in order to be effective and efficient in the future.

In 1991 the G7 Group of Nations identified these complementary needs, and recommended that the World Customs Organisation should develop an Action Plan to strengthen co-operation between carriers and the enforcement authorities. The recommendation led directly to the WCO “ACTION/DEFIS” programme (Alliance of Customs and Trade for the Interdiction of Narcotics) a Customs/Trade partnership which aimed initially at the interdiction of illicit narcotic drugs, but which has been gradually extended to embrace other forms of border related crime, including IPR violations.

Under this programme, WCO has negotiated 24 Memoranda of Understanding between the World Customs Organisation and international trade associations. These framework documents describe a Customs/Business partnership, which provide a crucial opening for member countries in their dealings with traders and trade bodies. Similar partnerships have now been replicated in over 30 member countries throughout the world and several thousand MOUs, tailored to specific national and regional needs have been initiated. Important Memoranda, dealing specifically with IPR issues, have been concluded between the WCO and the International Federation of Phonographic Institute (IFPI) in 1988, the umbrella organization of the mechanical copyright organizati­ons (BIEM) in 1997 and the Motion Picture Association (MPA) in 1997.

This new approach has caused a sea change in attitude between Customs and business, particularly the common work area of the transport trade and has greatly helped Customs to improve their efficiency through access to real-time commercial data and sensitive trade information needed for identification of counterfeit goods. For its part the legitimate trade benefits greatly by having a partner Customs administration with a better understanding of their business needs and better opportunities to facilitate their business throughput. It is also encouraging to see these internationally devised schemes taking root at local level, in helping to improve the daily lives of Customs and business at the frontier.

Planning at the International level against Transnational Organised Crime (TOC)

Trade partnership at international, national and local level

As international trade has burgeoned over the past decade, so have the range of cross-border crimes. Transnational Organised Crime, is reported as a growing phenomenon by a whole range of international committees and meetings.

The influence of Organised Criminal Groups in counterfeiting makes the Customs’ role in protecting the frontier even more important. Such groups have in the past profited from the substantial and reliable income provided by counterfeit goods, compared to the low overhead costs involved in illegal back street manufacturing facilities that they tend to use. Without a concerted effort from Law Enforcement agencies and business, organised criminal organisations can flourish without challenge. Police have a crucial role to play here in helping to identify the active criminal groups. Customs control and enforcement services also have the potential to make an important and unique contribution to the overall effort, by working in partnership with Police and other agencies against Transnational crime. Over many years, Customs have developed a key competence and knowledge concerning the movement of goods and people across the border, one of the most fundamental aspects of TOC. Their role however, potentially, goes far beyond this limited horizon, since they also act as a vital bridge between Government policy and international trade practice.

Co-operation at the international level is vital and one of the most important objectives in the WCO strategic plan is in building and maintaining co-operation between WCO and ICPO-INTERPOL. We fully recognise and appreciate the role that INTERPOL plays in co-ordinating international Police activity and by gradually increasing the dialogue, co-operation and contributions to each other’s activities, we are building a valuable partnership, which is fundamental to the fight against international crime.

These increased levels of co-operation have led to the signing, in November 1998, of a Memorandum of Understanding between the two organisations. In addition to this MOU providing a framework for future international co-operation, we believe that it has the potential to act as a catalyst for similar co-operation and partnership at the regional, national and local level. This approach is already operating in many countries, but we need to develop the idea further in developing countries, and those going through transition. Many advances in IPR enforcement could then be realised. With Police criminal intelligence combined with the Customs and business contribution, a more comprehensive enforcement approach could be established in order to combat the most damaging forms of international IPR organised crime.

The Agreement on Trade Related Aspects of Intellectual; Property Rights (TRIPS)

As part of the negotiations and convention which established the World Trade Organisation, The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) was concluded on 15^th April 1994. Section 4 of this world agreement contains 10 articles (51 to 60), for the first time recognises the full extent of the Customs’ contribution in protecting society against IPR violations. This section of the agreement introduces the concept of “Special Requirements Relating to Border Measures” and these measures become requirements for Governments to introduce at the time they accede to the WTO convention. Most developed countries implemented the necessary changes within 12 months, but developing counties were allowed a five year period, leading up to the year 2000, in which to develop their strategies and organisational plans. In the next eight months therefore, many WCO Member Administrations, will be finalising their arrangements in order to fully implement the various Customs related aspects of the WTO convention, including TRIPS.

These ten Articles form only a part of TRIPS; the other parts deal with general provisions, administrative matters, legal proceedings and other enforcement issues. Yet, most IPR experts would agree that effective border enforcement is one of the most important practical aspects of TRIPS.  Enforcement at the border can not only be effective in capturing vast quantities of counterfeit goods in bulk shipments, but it can act as a key intelligence function for Governments and international business. “Risk Testing” and using commercial and other intelligence at the frontier can gain a great deal of valuable knowledge about IPR violations. Such trend information is a critical factor in business marketing and planning strategies and has equal potential for Governments in helping to inform trade policy decisions.

Of course, all of this requires an efficient enforcement and communications platform on which to operate and a dynamic partnership at the international level between the key agencies, WIPO, WTO, WCO, ICPO and business.

The WCO IPR Programme

With these trends and conditions in mind, and realising the critical value of TRIPS, the WCO programme has been developed as a joint venture with international business. This partnership approach has been endorsed by the WCO Council, which brings together the Heads of Customs Administrations from all over the world and takes effect through the Enforcement Committee and an IPR Working Group. This group of Customs and business participants has energetically developed a strong working relationship, which benefits from the combined and complementary skills of Customs and business. A high degree of synergy and innovation results from this partnership, as crucial commercial information and a business dimension is combined with Customs information and key enforcement techniques. 

The basic WCO philosophy is to help Member Administrations to improve their efficiency and effectiveness in all aspects of their work. Through the IPR Working Group, Member Administrations are facilitated and assisted at their own pace, so that they can develop their own improvement plans. Business partners fully support this approach and fully fund the programme, which is delivered through two functional areas, Training and Promotion and Publicity.

Training priorities are determined through a training Sub-Group, again made up of Customs and business participants. Regional and National training seminars have been carried out in many countries of the world. Training projects for 1999 include regional training in South Africa, and a four stage practical exercise in Eastern Europe, followed by a Road Show. WCO also contributes strongly to the training initiatives delivered by WIPO and we are discussing with the EC PHARE / TACIS and APEC Intellectual Property Rights programme managers how to combine forces in the future, so that valuable training effort is not wasted.

The WCO IPR Promotion and Publicity Sub Group has developed a whole range of products which help Customs to understand and improve their IPR Enforcement.

Model Legislation

A WCO IPR Model Legislation has been developed to help countries in drafting, or revising their existing Customs legislation. The model is based on TRIPS and includes provisions on:

Raising Awareness and providing information

A video produced by Customs Audio-visual services but fully funded by business sponsors has also been produced in three languages, English, French and Spanish. A simple folder leaflet has been mass produced to complement the video in raising awareness amongst Customs Staff.

The WCO has also been developing its own INTERNET site at two levels, a general level access site for the general public and a private secure site for Customs personnel. Future plans involve the drafting of a Web form for companies to complete. This will contain details of their product range, proof of their IP right ownership and important counterfeit identification information. This information, which will include the vital information ingredients that should allow Customs staff to identify counterfeit products more easily, will be made widely accessible to front-line Customs personnel. Through this system they will also have ready access to the appropriate rights holder business, by the provision of contact point information.

Plans are currently being drawn up to link the WCO IPR Web page to sites managed by: REACT, a system developed in the Netherlands where companies can input such information directly and a similar system being developed by IFPI for the music industry. Discussions have also commenced with US Customs to link their site to WCO in a similar fashion. All of this activity is aimed at giving the key Customs personnel better information in order to be more effective. Customs in many countries have not however fully developed their computer networks, and in order to provide a similar level of information to officers in those countries the WCO Promotion and Publicity team is developing a single sheet A4 information card, which will contain all the key elements of data for products which are likely to be counterfeited.

The WCO Central Intelligence System (CIS), based in Brussels and ten Regional Intelligence Offices (RILO), form an intelligence network, which is also a valuable mechanism for raising awareness and disseminating information on smuggling and fraud trends to Member countries. On a routine level, RILOs produce trend information, which helps to identify current risks in terms of counterfeit products, trafficking routes and other new information. Members can then use this information to adjust risk profiles and deployment of resources.

The RILO offices in Asia and Pacific (based in Japan) and Eastern Europe (based in Warsaw) are increasing their level of activity in IPR and the dissemination of information. In 1998 for example, RILO Eastern Europe concluded a regional MOU with IFPI, to improve the exchange of information between Customs and the music industry in that region. The CIS and RILO contact points are included in this report at Annex 2.

Provision of Assistance

The WCO Secretariat and business partners are available to Customs Administrations seeking to improve their IPR enforcement arrangements. A number of WCO training programmes can be helpful in this regard. The Customs Reform and Modernisation programme has helped many Members to restructure and reorganise their administration. This can be linked to more specific Risk Assessment training, which helps Administrations to work based on intelligence principles. Once this has been achieved, the WCO IPR Training programme can assist Members to enhance their understanding and response to the problem of counterfeits.

A number of training styles are being developed, including the traditional approach that includes a regional and/or national seminar, followed by the drafting of an Action Plan. In 1998 major seminars in Russia, where 100 delegates from 8 time zones across the country attended an event in Moscow, and Mexico city, took place. A similar event in South Africa is planned for this year, where a number of countries of the region will participate. These events are intended to be very practical and informal and are designed to raise awareness and commence the necessary enhancement of systems. Equally important is the opportunity to build a partnership between Customs and business on this topic within the country and to set-up a system of contact points.

A separate initiative is being made to develop a “Road-Show” style of awareness raising. This will be more simply designed than the traditional seminar and can be linked to one-off practical exercises and intelligence projects.

Putting this into practice

In practice, and bearing in mind that IPR is a relatively new field of operation for Customs, most WCO Members are starting to respond positively to IPR fraud. The rate of improvement varies considerably and the level of Powers given to Customs also differs. The key elements for success are:

The appropriate legislation, including the power to work Ex Officio (Optional under TRIPS, but if countries adopt an intelligence based approach, then the ability to work on initiative is very important)

Effective Systems, including a non-bureaucratic, low cost, application procedure. This will encourage businesses to lodge an application and provide information

Access to information and intelligence. Most important of all here is sensitive commercial information.

Effective Enforcement, which includes a whole range of issues, but crucially the ability to manage and use information and intelligence

Effective communication, within Customs, but also with other agencies, neighbouring countries and with business. MOUs and less formal arrangements can help here.

Not all countries are succeeding at this level and there is a great deal of work still to do, but many Administrations are making headway. In the Russian Federation for example, as a result of a new Government and Customs initiative and the WCO seminar held in Moscow in September 1998, a new legal framework is being presented to Parliament, business contact has been increased, awareness raised and the amount of applications from business radically increased.  Other countries have more developed systems and are using their experience and intelligence methodology to target the problem. For example, Customs from the Netherlands, France, United Kingdom and USA have all provided assistance to other administrations in the WCO programme.

Future Priorities

The WCO programme will concentrate effort on the key elements described earlier. It will continue to raise awareness amongst Customs of the IPR problem, its damage to international trade and its links to organised crime. At a more advanced level it will aim to help Member countries develop organisational and technical improvements and solutions. A priority will be to bring about solid and long lasting change as a result of training activities. In this regard Action Plans and continuous support from the WCO / Business partnership will be linked to specific training events.

Development of information sources and Systems based on the Internet will be of equal importance as will the use of the WCO RILO network to help disseminate key information and trends.  Improving and maintaining co-operation at the international level between agencies and business will continue to be the most critical factor in dealing with the various violations of Intellectual Property Rights. The WCO is greatly encouraged by ICPO-INTERPOL efforts to collate more information on this important subject and looks forward to future joint initiatives in IPR in the future.

Annex 1: A summary of the “articles” within TRIPS relevant to Customs:

Section 4: Special Requirements Related to Border Measures

Article 51: Suspension of Release.A provision, which allows a right holder to lodge an application with Customs to suspend release of, suspected counterfeit goods.

Article 52: Application. Describes the conditions for making an application, Prima facie evidence of infringement and a “sufficiently detailed description” of the goods.

Article 53: Security or Equivalent Assurance. Security to prevent abuse of the system

Article 54: Notice of Suspension. Prompt notification by Customs to the rights holder of suspension.

Article 55: Duration of Suspension. 10 working days after the applicant has been served notice of the suspension; time period for Right Holder to commence legal proceedings.

Article 56: Indemnification of the Importer and of the Owner of the Goods. The applicant is liable to pay compensation to the importer, the consignee and owner compensation in the case of wrongful detention.

Article 57: Right of Inspection and Information. The right holder is given sufficient information and the right to inspect detained goods, in order to substantiate the claim(s).

Article 58: Ex Officio Action. Optional provision, which allows Customs to act upon their own initiative, without an application being required, in order to suspend clearance of goods.

Article 59: Remedies. Destruction order for infringing goods. Re-exportation not allowed.

Article 60: De Minimus Imports. Small “non-commercial” consignments may be excluded.