Intellectual Property:

U.S. Customs and Border Protection Could Better Manage Its Process to Enforce Exclusion Orders

GAO-15-78: Published: Nov 19, 2014. Publicly Released: Nov 19, 2014.

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What GAO Found

The Department of Homeland Security's U.S. Customs and Border Protection (CBP) uses two processes to enforce exclusion orders issued by the U.S. International Trade Commission (ITC): a four-phase process to detect and deny entry to or seize infringing products at U.S. ports and an administrative ruling process that determines in advance of importing whether products are covered by exclusion orders. In the first phase of the process to enforce exclusion orders at the ports, CBP drafts a trade alert that provides enforcement instructions to CBP national targeting groups and local officials at all ports of entry to identify shipments for examination; without an alert, officials said, it would be difficult for CBP components to enforce an exclusion order. From September 2010 through April 2014, CBP excluded 158 shipments of products, such as ink cartridges and footwear. Before a company attempts to import a certain product, it may request that CBP determine through its administrative ruling process whether the product is covered by a particular exclusion order.

U.S. Customs and Border Protection's Process to Enforce Exclusion Orders at the Ports

U.S. Customs and Border Protection's Process to Enforce Exclusion Orders at the Ports

CBP's management of its exclusion order enforcement process at the ports contains weaknesses that result in inefficiencies and an increased risk of infringing products entering U.S. commerce. First, CBP does not routinely review ITC's list of exclusion orders or take other action to ensure that a trade alert has been posted to its intranet for each order. At GAO's request, CBP reviewed ITC's list of exclusion orders as of April 30, 2014, and reported that it had posted trade alerts for 83 of the 94 exclusion orders; however, it posted 17 of the 83 trade alerts after GAO's request for data. Without routinely taking action to ensure that trade alerts are posted to CBP's intranet, infringing products could enter into U.S. commerce. Second, CBP does not routinely review ITC's list of exclusion orders to identify orders that may be candidates for rescission by ITC. Requesting rescission of exclusion orders could enable CBP to focus its enforcement efforts more effectively and efficiently. Third, CBP's guidance lacks time frames for issuing trade alerts, which prevents CBP from monitoring timeliness. GAO found that it took CBP from 2 days to 3 months to request a posting of a trade alert to the intranet during the period from October 2009 through April 2014. Without actively managing trade alerts and establishing time frames for posting alerts, CBP management cannot hold staff accountable for timely enforcement of exclusion orders, and there is an increased risk of infringing products entering U.S. commerce.

Why GAO Did This Study

Under Section 337 of the Tariff Act of 1930, ITC investigates allegations of unfair import practices, including unlicensed use of intellectual property rights such as patents, copyrights, and trademarks. If ITC finds a violation of this law, it generally issues an exclusion order that directs CBP to deny entry of infringing products into U.S. commerce. CBP must determine, without inhibiting legitimate trade, whether products arriving at 328 U.S. ports are covered by exclusion orders.

GAO was asked to review CBP's enforcement of exclusion orders. This report (1) describes CBP's processes for enforcing exclusion orders and (2) assesses CBP's management of its enforcement process at ports of entry. GAO analyzed CBP and ITC documents and data from October 2009 through April 2014 and interviewed CBP and ITC officials.

What GAO Recommends

GAO recommends that CBP update its internal guidance with requirements to (1) routinely ensure that trade alerts are posted to the CBP intranet for each exclusion order, (2) routinely identify any orders whose changed conditions merit a CBP request that ITC rescind them, and (3) monitor timeliness of trade alert issuance. CBP concurred with recommendations one and three and described actions planned or under way to address them. However, CBP did not concur with recommendation number two. According to CBP, it is not mandated to identify potentially outdated orders and request that ITC rescind them. GAO continues to believe the recommendation is valid for reasons discussed in the report.

For more information, contact Kimberly M. Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In its written comments on the draft report, Customs and Border Protection (CBP)concurred with the recommendation to monitor timeliness by establishing time frames for issuing trade alerts for exclusion orders and reviewing performance against these standards. In January 2015, CBP implemented the recommendation. CBP's Office of International Trade updated its internal SOP for the Intellectual Property Rights Branch within its Regulations and Rulings Directorate to include procedures for the timely posting of trade alerts following the issuance by ITC of an exclusion order. The SOP establishes timeframes for drafting and posting trade alerts. Specifically, the SOP directs the IPR Branch to assign the development of a trade alert to an attorney on the same day that the Branch receives notice from ITC that an exclusion order has been issued. The assigned attorney is instructed to complete the trade alert within 5 business days after being assigned the exclusion order. According to CBP, the timeframes established in the SOP serve to provide metrics by which the timeliness of issuance of trade alerts can be gauged, CBP has begun to collect these metrics to assess timeliness. CBP provided GAO with a copy of the updated SOP.

    Recommendation: To improve CBP's management of its process for enforcing exclusion orders, the Secretary of Homeland Security should direct the CBP Commissioner to update CBP's internal guidance with requirements to monitor timeliness by establishing time frames for issuing trade alerts for exclusion orders and reviewing performance against these standards.

    Agency Affected: Department of Homeland Security

  2. Status: Closed - Implemented

    Comments: In an October 2014 letter, CBP commented that it concurred with the GAO recommendation and stated that its Office of International Trade would update its internal Standard Operating Procedures (SOP) for the enforcement of trade alerts. In January 2015, CBP implemented the recommendation. CBP's Office of International Trade updated its internal SOP for the Intellectual Property Rights (IPR) Branch within its Regulations and Rulings Directorate that established procedures to routinely ensure that every active exclusion order has a trade alert posted on the CBP intranet Specifically, the SOP outlines a process for assigning exclusion orders to individual attorneys who are accountable for drafting trade alerts and posting them on the intranet. The SOP also assigns responsibility to a supervisor to review trade alerts periodically to ensure that all active orders have a corresponding trade alert. The SOP further elaborates instructions for updating the trade alert when conditions have changed. CBP provided GAO with a copy of the updated SOP.

    Recommendation: To improve CBP's management of its process for enforcing exclusion orders, the Secretary of Homeland Security should direct the CBP Commissioner to update CBP's internal guidance with requirements to routinely ensure that trade alerts are posted on the CBP intranet for each exclusion order.

    Agency Affected: Department of Homeland Security

  3. Status: Closed - Not Implemented

    Comments: In January 2015, Customs and Border Patrol (CBP) told GAO that it did not concur with our recommendation to update its guidance with a requirement to routinely identify any orders whose changed conditions merit a CBP request that the International Trade Commission (ITC)rescind them. CBP noted that there is no statutory or regulatory authority mandating that it monitor the ITC's list of exclusion orders to determine if changed conditions of law or fact would warrant the rescission of any of the orders. In addition, CBP asserted that ITC, as the issuing agency of exclusion orders, and the relevant complainants, or both have responsibility for ensuring that the list of outstanding exclusion orders is current. As we state in the report, any person may file a petition to request that ITC rescind an exclusion order if he or she believes that changes in conditions of fact or law or the public interest require rescission. While CBP is not specifically mandated to conduct a routine review of exclusion orders to identify candidates for ITC rescission, CBP is the enforcement agency of exclusion orders. Based on internal control standards, we reiterate that it is good management practice for CBP to conduct these reviews that could potentially allow it to more effectively and efficiently focus its efforts by reducing the number of exclusion orders it is responsible for enforcing. For example, in response to our audit, CBP conducted such a review, identified six exclusion orders that it believed were candidates for ITC rescission, and submitted a letter requesting that ITC rescind the orders. This recommendation is being closed as unimplemented. CBP has not taken action.

    Recommendation: To improve CBP's management of its process for enforcing exclusion orders, the Secretary of Homeland Security should direct the CBP Commissioner to update CBP's internal guidance with requirements to routinely identify any orders whose changed conditions merit a CBP request that ITC rescind them.

    Agency Affected: Department of Homeland Security

 

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