With Easter rapidly approaching it is perhaps appropriate for us to engage in an egg hunt type of game. From time to time our legislators make us play find the prize by tucking important passages into bills that can run hundreds of pages. A case in point is the Trade Facilitation and Trade Enforcement Act (H.R. 644/S.1269), which was signed into law by President Obama on Feb. 24. This piece of legislation includes a variety of useful measures on trade protection and general trade policy. Among other things it authorizes and funds United States Customs and Border Protection (CBP), an agency within the Department of Homeland Security that regulates trade of foreign products entering the United States. Each year more than 11 million maritime containers arrive at our seaports. At land borders, another 10 million arrive by truck and three million by rail. Air travel accounts for an additional quarter billion more cargo, postal, and express consignment packages.
This piece of legislation also provides for the continued modernization of CBP’s automated tracking systems, again to ensure the facilitation of legitimate trade and enforcement of U.S. customs laws. The law further authorizes funding for the Automated Commercial Environment, or “ACE,” system. As a result, by December 2016, the private sector will be able to use just one portal to transmit information to 47 government agencies about exports and imports, thereby eliminating over 200 different forms and streamlining the trade process.
Now on to the Easter egg hunt portion of H.R.644/S.1269. If you look hard enough, hidden within this bill is a requirement that directs the U.S. Customs and Border Protection agency to expeditiously share information about suspect counterfeit parts – including semiconductors – with intellectual property rights (IPR) holders, potentially enabling quicker identification of counterfeits. Specifically, the bill requires CBP to provide IPR right holders with samples to determine if imported products are counterfeit.
Reacting to the signing of the bill into law, John Neuffer, president and CEO, Semiconductor Industry Association (SIA) commented: “Counterfeit semiconductors pose significant risks to public health, safety, and national security. The Customs bill Congress approved today will help reduce this risk and root out counterfeit semiconductors by ensuring open communication between Customs officials and semiconductor manufacturers who are best-equipped to identify counterfeits. This legislation is good news for the semiconductor industry and consumers of our products – and bad news for semiconductor counterfeiters.”
SIA estimates that counterfeit parts cost U.S. semiconductor companies more than $7.5 billion per year in lost revenue.
According to SIA, the U.S. Customs and Border Protection had previously redacted (a College Board SAT/ACT type vocabulary word which means edited or revised) images of suspect counterfeit semiconductors and delayed sharing information with companies that play a vital role in determining if parts are counterfeit and require seizure. Enactment of this legislation allows CBP to use the expertise of rights holders in determining if parts are counterfeit, thereby helping prevent counterfeit products from entering the United States.
A strong reporting program will further help prevent the recirculation of items suspected to be counterfeit in the supply chain. According to the Dept. of Homeland Security an increased enforcement focus on semiconductors and the safety and security risks they present resulted in a 5% increase in seizures from FY 2013 to FY 2014.
The Department of Justice (DOJ) also recently announced a new strategy that involves partnering more closely with businesses in an effort to combat Intellectual Property Theft. Said Attorney General Loretta Lynch: “Through this new approach, we intend to provide information and resources to individuals and companies that will help them identify and disrupt attempts on their intellectual property.” The FBI—working with its investigative partners at the National Intellectual Property Rights Coordination Center (NIPRCC)—is expected to play an integral part in this strategy.
Also new in DOJ’s approach to intellectual property theft is an enhanced relationship between its criminal and counterintelligence personnel when working theft of trade secrets cases. A trade secrets case worked under the counterintelligence program—which occurs when the involvement of state-sponsored actors is suspected—will be referred to a criminal squad if no state sponsorship is found. And when criminal investigators begin to suspect the involvement of a state sponsor, the case will be referred to the counterintelligence squad. The goal is to contain and/or even prevent the theft as quickly as possible, no matter who’s behind it.
Of course regardless of the legislation that is enacted or how efficiently law enforcement deals with it, the threat of counterfeit semiconductors is best reduced by the practice of only buying semiconductor products either directly from Original Component Manufacturers (OCMs) or from their authorized distributors.