Anti-counterfeiting in Mexico: the foreseeable future
After all the efforts that have been made in that last few years in Mexico, most notably the ones undertaken by customs authorities (General Customs Administration or AGA, a branch of the Federal government that is part of the Servicio de Administración Tributaria—SAT— the Mexican equivalent of the Internal Revenue Service in the US), it seems that there is a part of the Mexican government establishment that deliberately wants to slow down the progress that is under way.
Mexican customs was awarded the 2010 Yolanda Benitez Trophy presented by the World Customs Organization (WCO) “for demonstrating keen commitment to combating counterfeiting and piracy”.
Such recognition was a direct result of the actions and seizures of fake merchandise that started at the end of 2008 and increased dramatically during 2009, resulting in the largest amount of counterfeit items that have been seized by any government or law enforcement agency in a given period so far.
Such a historic accomplishment was celebrated with the above-mentioned award, but what has happened in the last year-and-a-half, and in what ways have smugglers and counterfeiters evolved to cut back their losses and continue to profit from their illegal trade? And in what ways can right owners improve their anti-counterfeiting efforts while keeping up with the challenges of enforcing and protecting their valued IP portfolios?
In order to explain the present conditions and what we can foresee in the next few years, it is important to explain the circumstances that led to the current involvement of Mexican customs in anti-counterfeiting efforts.
In the months that preceded the award of abovementioned trophy to the Mexican government, law enforcement and customs officials began to notice a reduction in the number of large-scale counterfeit shipments that arrived at the most important Mexican seaports on the Pacific coast (Manzanillo, State of Colima; Lazaro Cardenas, State of Michoacan; and, sometimes, Ensenada, State of Baja California).
Such decline was directly related to a significant growth in small shipments arriving to the country via air courier or mail; as the 20 and 40-foot ship containers coming into the country from South East Asia (mainly China) proved an easy target for increasingly proficient Mexican officials, counterfeiters began to ‘atomise’ their shipments by dividing the risks attached to one single shipment into dozens and even hundreds of small packages that could get passed customs disguised as gifts, samples or personal items.
Furthermore, and due to the lack of a direct route from Chinese mainland ports to smaller Central American ports in Guatemala, Honduras, El Salvador and Nicaragua, shippers of fake merchandise used the ‘international transit’ regime (ie, it was supposed to remain in port only for a short period while awaiting being loaded and re-shipped to its ‘final’ destination) to transport very large quantities of counterfeit items to Central America.
Before leaving Mexican ports, some of the containers were subjected to a customs regime change (from ‘international transit’ to ‘regular import’) and imported legally into Mexico under different schemes, while a significant portion of the items that were shipped to Central America were later transported back by truck to the southern Mexican border with Guatemala or Belize, where the fakes could be easily smuggled into the country.
These somewhat elaborate mechanisms were and, unfortunately, are still possible due to the poor control that Mexican authorities have over the country’s southern border. Mexico shares more than 1,100 kilometres of border with Guatemala and Belize, and only two customs offices, with fewer than 150 officers between them, are responsible for overseeing and guarding this vast amount of terrain.
As this situation progressed, IP rights holders and part of the Mexican legal community successfully pressured customs and justice authorities to increase their efforts to better identify ‘international transit’ shipments and to exert legal actions (including seizures at Mexican ports) against such shipments. These pressures resulted in the record-establishing seizures and actions during 2009 and 2010, but the situation has changed in the last months.
“Since the ‘international transit’ regime definition lacks both the intent and the actual execution of any punishable conduct, Mexican authorities would not have a valid legal cause to pursue any felony.”
Following the record seizures of previous years, and as a direct result of the diplomatic pressure from Central American governments and shipping companies (who face liabilities and extra costs due to the losses suffered by counterfeiters/shippers-turned-unsatisfied customers, while also having to endure the temporary detention of the containers in which the fake items are transported), in August 2011 the Internal Affairs Directorate of the General Prosecutor’s Office (PGR) issued an Official Opinion that addressed the legal precedence of criminal actions and seizures of alleged counterfeit merchandise found in ‘international transit’ shipments.
In short, the opinion establishes compulsory guidelines that prohibit all federal prosecutors from processing complaints concerning counterfeiting felonies, and warns of the legal consequences of ordering or conducting seizures against shipments under the ‘international transit’ regime.
In their particular criteria, counterfeiting felonies necessarily imply, at least the intent to perform a commercial activity (import/distribute/sell) in Mexican territory, and since the ‘international transit’ regime definition lacks both the intent and the actual execution of any punishable conduct, Mexican authorities would not have a valid legal cause to pursue any felony.
As unbelievable as the above may seem, the truth is that PGR’s actions have seriously undermined the excellent work that customs and IP rights holders had been successfully performing, a situation that adds to the urgent need to modify existing Mexican laws in order to provide customs with adequate legal powers to be able fully to enforce IP rights and prosecute offenders.
Mexican customs authorities have no legal powers to act in matters concerning IP infringements or counterfeiting, and may intervene only when a competent agency—the PGR, Mexican Institute of Industrial Property or a judge—issues an order to detain illegal merchandise.
A coordinated plan
So, what can realistically be done in Mexico concerning counterfeits, and what can the IP rights holder expect when undertaking an IP enforcement or anti-counterfeiting effort? The simple answer is that despite current limitations, any IP owner can expect significant results only if such efforts are duly planned, executed and coordinated.
After a comprehensive and integral assessment of this kind has been performed, IP owners should be better prepared to determine what aspects of the enforcement of their rights is more convenient from a cost/benefit point of view: either attacking the many aspects of the problem (be it import, distribution, storage, transport or final sale to the general public) one at a time, or designing a comprehensive and tailor-made anti-counterfeiting programme that may last for several months, years, or as a permanent full-time effort.
Anti-counterfeiting efforts may be the best investment that any organisation could make if a well-planned overall objective is set and the appropriate measures are taken: to locate the source and channels of distribution of counterfeits, to attack them aggressively whether they are imported or locally produced and, finally, to publicise the legal measures undertaken to attack counterfeiting.
This last part, concerning the publicity and exposure of anti-counterfeiting campaigns, is extremely important, because it is important not only to combat, using all legal means available, the production, distribution and sale of counterfeits (be they domestic or imported), but also to make a very strong statement about it.
The people involved in counterfeiting usually see their activities as a business and so they are willing to devote their resources only as long as they perceive that their investment is going to be, to a certain degree, most profitable while facing the least amount of possible risk.
If an IP owner has consistently and publicly showed a strong commitment to enforcing and protecting its IP rights, counterfeiters may be reluctant to start ‘carrying’ the merchandise of that particular brand and, instead, favour others that are not known for enforcing their IP rights.
In theory, a well coordinated enforcement campaign could provide significant results for an IP owner, even to the extent of recovering control of the market (if it had been lost due to fake items), and/or greatly reducing the negative impact of counterfeits on the intangible values (exclusivity, brand integrity, etc) of its IP portfolio.
Still, it is important that, even after reaching this goal, IP owners should continue to monitor the presence of counterfeits and to enforce their IP rights, adopting a zero-tolerance campaign towards counterfeiters. We recommend seeking professional counsel concerning the most effective method of enforcing part of your most valuable assets: your IP rights.
