Importer Sues CBP Over Bond Requirements on Car Replacement Parts for Alleged Trademark Infringement
U.S. Auto Parts seeks a court order barring CBP from imposing “baseless and excessive” single entry bond requirements on its shipments for purported intellectual property rights violations, it said in a complaint filed April 2. CBP Norfolk is requiring a bond of three times entered value on all of the importer’s entries due to concerns that U.S. Auto Parts is importing aftermarket replacement auto grilles that infringe trademarks held by the car manufacturers. But the allegedly infringing parts only make up a small portion of its overall imports, and in any case should not be considered counterfeit, U.S. Auto Parts said.
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According to the complaint, CBP only began seizing U.S. Auto Parts’ automotive grilles in June 2017, more than two decades after the importer started bringing them in. CBP Norfolk said the grilles were counterfeit because they bore the names and logos of the cars they were intended to repair: Ford, Chrysler, Toyota, Volkswagen and Nissan. Then, after seizing 17 entries, a CBP officer in Norfolk on March 17, 2018, informed U.S. Auto Parts that the agency would require a single transaction bond at three times entered value on all future shipments due to IPR concerns.
The bond would be impossible for U.S. Auto Parts to pay, forcing the company to stop importing and go out of business, the complaint said. It would amount to over $9 million only on the 92 containers currently on hold at the port of Norfolk, representing nearly 80 percent of U.S. Auto Part’s annual earnings, the importer said.
That violates CBP’s own agency directives against requiring “bond amounts which unnecessarily put an excessive burden on a person or firm, or place them in an impossible situation, U.S. Auto Parts said. It’s also unfair, because the vast majority of the merchandise imported by U.S. Auto Parts is not comprised of the allegedly infringing auto grilles, the complaint said. U.S. Auto Parts offered CBP Norfolk instead to bring all of its shipments into a foreign-trade zone to separate out the allegedly infringing goods before entering the rest, but CBP Norfolk refused to reconsider, representing an arbitrary abuse of the CBP officer’s discretion, the importer said.
And in any case, the goods are not counterfeit, U.S. Auto Parts said. First, the auto grilles are exempt from trademark enforcement under the doctrine of functionality, in that the trademarked features are essential to the purpose of the articles to serve as replacement parts, U.S. Auto Parts said. They’re also not counterfeit because they are authorized under the right to repair trademarked articles when not likely to cause customer confusion. Finally, U.S. Auto Parts has even licensed design patents from several of the original manufacturers for some of the grilles being seized, the importer said.
"While the number of seized automotive grilles currently represents less than one percent of our overall revenue and product assortment, we are taking this action to remove overly burdensome bonding requirements arising from the wrongful seizures,” U.S. Auto Parts CEO Aaron Coleman said in a press release issued by the company. “We will defend our right to sell these products as we believe U.S. Auto Parts has a responsibility to our stockholders and customers to continue providing an affordable means to buy aftermarket automotive grilles."
To that effect, U.S. Auto Parts requested that the Court of International Trade issue a temporary restraining order barring CBP from requiring the high single transaction bonds as a condition of entry, and ordering CBP to “expeditiously process” all of U.S. Auto Parts’ shipping containers and immediately release those that are not alleged to infringe any trademarks. The U.S. government’s brief on the importer’s motion is due April 11. U.S. Auto Parts also seeks a CIT judgment in its favor finding that CBP’s actions violate the Administrative Procedure Act by going against its own regulations and directives, and also violate the Eighth Amendment to the Constitution and the importer’s Fifth Amendment due process rights.
Email ITTNews@warren-news.com for a copy of the complaint.