TRADE AND PASSENGER PROCESSING: 

Customs’ IPR Enforcement Strategy And 

Management Controls Over The IPR Module Need 

To Be Strengthened 

OIG-03-027 December 3, 2002

Office of Inspector General

******* 

The Department of the Treasury 
Contents 

Audit Report .....................................................................................2 

 Results in Brief............................................................................................. 2 

 Background ................................................................................................. 3 

Finding and Recommendations ....................................................................... 7 

Inadequate Procedures And Controls Result In Intellectual Property 

Rights Data Not Always Being Accurate, Complete Or Reliable........................7 

 Recommendations....................................................................................12 

 

 

Appendices

 Appendix 1: Objective, Scope, and Methodology.........................................15 

 Appendix 2: Management Comments.........................................................18 

 Appendix 3: Major Contributors To This Report...........................................21 

 Appendix 4: Report Distribution.................................................................22 

Abbreviations 

ACS Automated Commercial System 

CEBB Customs Electronic Bulletin Board 

FY Fiscal Year 

IPR Intellectual Property Rights 

IT Information Technology 

ITC International Trade Commission 

LA STC Los Angeles Strategic Trade Center 

OIG Office of Inspector General 

TCEP Trade Compliance Enforcement Plan 

USPTO U.S. Patent and Trademark Office 

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OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General

Customs’ IPR Enforcement Strategy And Management Controls Over The 

IPR Module Need To Be Strengthened (OIG-03-027) 

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December 3, 2002 

 

 Robert C. Bonner 

 Commissioner 

 U.S. Customs Service 

Intellectual property is defined as the exclusive ownership of an 

original product created from the work of individual artistic, 

inventive, and novel ideas. The Government provides protection 

to owners by allowing registration of these properties under 

copyrights, trademarks, and patents. These owners can also 

record their rights with the U.S. Customs Service, who monitor 

imported and exported goods for possible violation of these 

rights. Registration records, along with other intellectual 

property information related to imports, reside in the Customs 

Automated Commercial System (ACS) Intellectual Property 

Rights (IPR) Module used by Customs import specialists, 

inspectors, and other personnel involved with the enforcement 

of these rights. 

We conducted this audit to evaluate Customs’ enforcement of 

IPR. As part of the review, we evaluated the accuracy of data 

in the IPR Module. We performed fieldwork from August 2001 

through May 2002 at Customs Headquarters in Washington, 

D.C., and at the Customs Management Center and Port office 

at Long Beach, CA. The audit was included in our Office of 

Inspector General Annual Plan for FY 2001. A detailed 

description of our objectives, scope and methodology is 

provided in Appendix 1. 

Results in Brief 

We found that Customs’ enforcement of IPR may be hampered 

by the lack of reliable data in its ACS IPR Module. 

The IPR Module used by Customs import specialists, inspectors, 

and other personnel involved with IPR enforcement did not have 
accurate, complete, and reliable information. The IPR Module 

contained data that were entered into the system incorrectly. 

This was caused by data input errors that we believe could be 

mitigated by the use of two standard input forms—one form

that would enable IPR owners to submit their recordation 

application information in a uniform and consistent manner and 

a second internal form for data entry and quality control. We

also found a lack of adequate access controls to the system and 

the files. 

 

We made several recommendations to improve the management 

of the IPR Module. We recommended that Customs: 

(1) develop and use a standard recordation application form and 

data entry tracking/quality control form, (2) establish policy and 

procedures to ensure that all original files containing 

trademarks, trade names, and copyrights are properly

maintained, (3) correct errors in the IPR Module that we 

identified, (4) post a disclaimer on the Customs Electronic 

Bulletin Board (CEBB) to advise users of the existence of 

unreliable or incomplete data, and (5) allow access to the IPR 

files only to employees who have a justified need for authorized 

access. The CEBB is an automated system that provides the 

trade community with relevant current information about 

Customs operations and items of special interest.

Background 

American industries have been losing profitability and 

competitiveness because of unfair trade practices, especially the 

infringement of copyrights, trademarks, patents, and similar IPR 

violations. It is estimated that between 5 to 8 percent of all 

goods and services sold worldwide are counterfeit. It is also 

estimated that businesses in the U.S. lose in excess of 

$100 billion annually due to counterfeiting and piracy. 

Counterfeit products pose both a health and safety risk to the 

public. Because of its border control responsibilities, the 

U.S. Customs Service is on the front line to combat the growing 

economic threat that the U.S. faces from counterfeit and pirated 

goods. 

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Preventing IPR Violations

To fulfill its statutory and regulatory obligations of preventing 

the importation of merchandise that violates certain trademarks, 

trade names, and copyrights that have been registered with the 

U.S. Patent and Trademark Office (USPTO) or the U.S. 

Copyright Office, Customs is vested with the authority to: 

(1) exclude from entry, (2) detain, and/or (3) seize violative 

trademark and copyright goods. Violative trademark and 

copyright goods infringe on a company’s IPR. An IPR implies 

exclusive ownership of inventive, artistic, descriptive, and novel 

works. 

The following definitions are applicable in understanding 

Customs’ enforcement role. 

Trademark

Under U.S. law, a trademark is defined as a word, name, 

symbol, device, color, or combination thereof used to

distinguish goods, which identifies origin and ownership. 

Customs is responsible for protecting trademarks that are 

registered with the USPTO. 

Trade Name

A trade name is the name under which a company does 

business. Trade names are not registered with the USPTO, 

but may be recorded with Customs if the name has been 

used to identify a trade or manufacturer for at least 

6 months. 

Patents

Patents in the U.S. are registered with the USPTO for any 

useful process, machine, manufacture or composition of

matter or any new and useful improvement thereof. U.S. 

Customs’ patent enforcement differs from trademark and 

copyright enforcement in that enforcement authority is 

specifically limited to enforcing certain court orders and 

enforcing Exclusion Orders issued by the U.S. International 

Trade Commission (ITC). Customs is without legal authority 

to determine patent infringements. 

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Copyright

A copyright protects the tangible expression of an idea and 

gives the copyright holder the right to prevent the 

unauthorized use of the holder’s work. A copyright may 

exist in: literary works, musical works, dramatic works, 

pantomimes and choreographic works, pictorials, graphics 

and sculptural works, motion pictures, and other audio visual 

works, sound recordings, and architectural works. A 

copyright is registered with the U.S. Copyright Office; 

Customs’ protection of copyrighted works is primarily 

concentrated on works that have been recorded with the 

agency. 

Infringement Of An IPR

Infringement of an IPR involves the use of a protected right 

without authorization from the right’s holder. Customs is 

empowered to make substantive decisions pertaining to 

trademark and copyright infringement. Customs’ authority to 

enforce IPR is primarily contained in Titles 19, 18, 17, and 15 

of the U.S. Code, Title 19 of the Code of Federal Regulations, 

and Part 133 of Customs Regulations – Trademarks, Trade 

Names and Copyrights.

Accomplishing The Enforcement Mission

Customs IPR enforcement mission is accomplished through the 

cooperation of various disciplines within Customs in targeting 

infringing merchandise and taking enforcement actions. 

Each year Customs develops a Trade Compliance Enforcement 

Plan (TCEP) that identifies the work needed to achieve trade 

compliance strategic goals, and is linked directly to Customs’ 

Strategic and Annual Plans. 

Usually the annual TCEP includes an IPR Sub Plan, however, 

due to the events of September 11, 2001, a Fiscal Year 

(FY) 2002 plan was not formalized. 

 

Formal Planning has traditionally led to IPR seizures, and should 

continue to play a role in IPR enforcement. However, despite 

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the absence of a FY 2002 TCEP, Customs IPR seizures have 

increased. Greater post September 11 vigilance and vigorous 

enforcement of recent copyright legislation have contributed to 

such results. 

Customs has chartered a workgroup for developing a FY 2003 

IPR strategic plan. 

Seizures

Goods that violate IPR are either smuggled into the U.S., or

entered legitimately but not described on documents presented 

to Customs for entry. While traditional seizures for IPR 

violations are of articles destined for entry into the U.S., there 

have been a significant number of seizures of infringing items 

leaving the country. 

Customs’ top IPR commodity seizures include wearing apparel,

media, watches/parts, batteries, cigarettes, toys/electronic 

games/trading cards, computer hardware, sunglasses, 

handbags/wallets/backpacks, and footwear. The top 10 

countries for IPR seizures in FY 2001 were: China (46 percent

of total seizures), Hong Kong, Korea, Singapore, Taiwan, United 

Arab Emirates, Netherlands, Honduras, Pakistan, and Thailand. 

Customs Outreach Efforts

Customs frequently interacts with, or conducts outreach 

efforts, for trade associations and representatives from various

industries that have a vested interest in protecting IPR. These 

organizations often provide invaluable assistance to Customs. 

The trade associations include: Recording Industry Association 

of America, Software and Information Industry Association, 

International Anti-Counterfeiting Coalition, Interactive Digital 

Software Association, Motion Picture Association of America, 

International Trademark Association, Business Software 

Alliance, Pharmaceutical Research and Manufacturers of 

America, International Intellectual Property Alliance, and others. 

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 Finding and Recommendations 

Finding Inadequate Procedures And Controls Result In IPR Data 

Not Always Being Accurate, Complete Or Reliable

We found that the IPR Module used by Customs import 

specialists, inspectors, and other personnel involved with IPR 

enforcement did not have accurate, complete and reliable 

information pertaining to IPR to help Customs field personnel 

identify IPR infringements. Contributing to this problem was a 

recordation process that lacked a standard data input form and 

sufficient internal controls to prevent errors from occurring. In 

addition, the IPR Module recordation data available to the public 

on the CEBB, which is maintained by the Office of Information 

and Technology, was unreliable. A computer system failure in 

1999 caused some data to be corrupted, inaccessible, and 

unreliable. 

Our review also disclosed that many employees had unjustified 

access to IPR function codes that allowed them access to add, 

change, or delete recordation data within the IPR Module. This

condition occurred due to a lack of information technology (IT) 

controls that ensure only authorized employees have access to 

the data. We discussed this matter with IPR Branch officials, 

who told us they took appropriate corrective action by 

requesting IT officials to eliminate access to the IPR user 

function codes for 25 individuals. We also found a lack of 

maintenance and accountability over the original files of IPR

recordations by the IPR Branch. The files were stored in a room 

that afforded open access to all who entered the room, and 

there were no restrictions or monitoring on the removal of 

recordation files. 

Lack Of Accurate, Reliable, And Complete IPR Information

We found problems in recording information in the IPR database 

and in maintaining the CEBB database, which made both 

databases inaccurate and/or incomplete. 

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IPR Database Errors And Omissions

 

The IPR Module is an important enforcement tool used by 

Customs officials in the determination of IPR violations. 

Therefore, Customs officers using the IPR Module must be 

provided with data that is accurate and complete. Our sample 

review of IPR recordations disclosed numerous data input 

errors. 

In most cases, the information contained in the IPR Module was 

sufficient enough for a Customs officer to determine if an IPR

issue existed. Inaccurate or incomplete IPR data, however, may 

hinder Customs’ efforts in detecting infringing intellectual 

property importations. 

 

Customs ACS is a comprehensive tracking, controlling, and 

processing system that permits on-line query of Customs’ 

databases. To help Customs inspectors and other authorized 

personnel become more efficient and effective in enforcement 

efforts concerning IPR infringements, Customs created an 

IPR Module within ACS. The IPR Module is an electronic index 

of over 25,000 IPR recordations. The system’s keyword and 

other search capabilities allow inspectors, import specialists, 

and other Customs users nationwide to query and search the 

IPR database for copyright, trademark, trade name, patent 

surveys and exclusion order information. It also incorporates 

imaging technology – photographs, drawings and graphics often 

convey the nature of intellectual property more effectively than 

words. 

We sampled recordations to determine if the data maintained in 

the IPR database had been entered completely and accurately. 

We found errors where the data in the system could not be

verified to the original recordation input documentation.1

 The 

following are some examples of the errors/omissions: 

 

• Owner names, keyword identifiers, and product names were 

not spelled properly. 

1 Original documents include the registration certificate from USPTO or U.S. Copyright Office 

and a recordation application letter from the IP owner. 

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• The “Place of Manufacture” field, which required a 2-digit

alpha country code, was either blank or contained an 

erroneous country code, e.g., several recordations should 

have been entered as China (CN) but were actually input as 

Switzerland (CH); Japan (JP) was entered as Jordan (JO); 

and Indonesia (ID) was entered as India (IN). 

• Licensees were either omitted from the record completely, 

were not all listed as stated on the IP owner’s application 

letter, or their names were misspelled. 

Recordation Application Process Needs To Be Strengthened

Lack of an established standard form covering the IPR data 

required to be recorded with Customs, and lack of quality 

control procedures over the input of recordation data into the 

IPR Module contributed to the data reliability problems. 

Intellectual property owners seeking to record their rights with 

Customs are required to submit an application letter to the 

Customs Office of Regulations & Rulings (OR&R), IPR Branch. 

The application must contain specific information2

 such as the 

name and complete address of the IPR owner or owners, places 

of manufacture, and name and principal address of licensees. It 

must also contain the identity of any parent or subsidiary 

company or other foreign company under common ownership or 

control which uses a trademark abroad, or a statement setting 

forth the name(s) of the performing artist(s). Furthermore, it 

must include any other identifying names appearing on the

surface of reproduction of a sound recording, its label, or

container relative to a copyright recordation. 

We found that the required information on application letters 

was not always complete or clear enough to facilitate the entry 

of data into the IPR Module by the IPR Branch paralegal staff. 

Many application letters, with attachments, are submitted for 

multiple recordations that identify different criteria for each 

recordation. The data entry process can be cumbersome as the 

paralegals attempt to sort through the documents to make sure 

 

2 Specifically stated in Title 19, Customs Duties, Part 133, Trademarks, Trade Names and

Copyrights.

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the correct information is entered for the specific recordation 

that is being input to the Module. 

We believe that a standard recordation application form should 

be established that would not only allow for pertinent data to be 

submitted in a more uniform and complete manner, but would 

also assist the paralegals in processing the applications more 

timely and efficiently. The form could be constructed to parallel 

the IPR Module’s data fields. 

Also contributing to the data input errors was a lack of formal 

supervisory internal controls covering the entire recordation 

process within the IPR Branch. Although we saw evidence of a 

useful IPR recordation checklist, it was not used on a consistent 

and routine basis. We believe an internal control form should be 

established to specifically track and document all aspects of the 

recordation process after the assignments are given to the IPR 

Branch paralegals. This form should be attached to every 

recordation application and include dates and signatures 

documenting the progress and supervisory review of the data 

entry. Utilization of this form should help improve the quality 

controls covering the recordation process and enhance the 

accuracy and reliability of the IPR enforcement data in the 

Module. 

We also believe it should be a standard requirement that once 

an application has been entered into the IPR Module, the 

application entry screen should be printed and a copy should be

included in the permanent IPR owner files maintained by the IPR 

Branch. Customs officials told us that this practice has been in 

place since 1999 and is a requirement of standard operating 

procedures being drafted. 

IPR Recordation Data On The CEBB Was Unreliable

During our sample review of the 378 recordations, we tested 

the items to determine if the recordations could be located on 

the IPR CEBB. We were unable to access 181 of the 378 

recordations. We believe this was caused, in part, by a system 

failure a few years ago that corrupted the software and had yet 

to be corrected. The CEBB is an automated system that 

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provides the trade community with relevant current information 

about Customs operations and items of special interest. The

IPR database posted on the CEBB is based on redacted and 

consolidated data that is extracted from the IPR Module in ACS 

and is updated monthly. It also contains information relating to

the enforcement of ITC exclusion orders by Customs. 

Weak Controls Allowed Inappropriate Access To IPR Information

We found weak controls that allowed unjustified access by a 

number of employees to the IPR database and to the IPR files. 

Employees Had Unjustified Access To IPR Function Codes

We identified 25 Customs employees who were improperly 

assigned access codes that could allow them to add, change, or 

delete IPR recordation data in the IPR Module. This condition 

occurred due to a lack of IT controls; only those employees with 

a need for access to the system should be granted such access. 

As a result, accountability for data discrepancies in the system 

could not be affixed with absolute certainty and the integrity of 

the system was vulnerable. 

During our on-site review, we discussed this problem with 

Customs officials, who told us they took appropriate corrective 

action by eliminating all 25 employee names from the IPR 

Module’s utilization listing. 

No Controls Over Maintenance And Accountability Of Files

Our sample review of 378 original IPR recordation documents 

disclosed that source documentation folders were stored on 

shelves in an easily accessed room at Customs Headquarters. 

This room provided storage for not only IPR source 

documentation files, but also legal files from other branches 

within OR&R. We found that there was no central control for

the recordation files, no restrictions for removal of the files, and 

an open file room that allowed for unrestricted access. 

The IPR Branch staff for legal research and determination 

purposes often uses the original IPR recordation files. 

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Therefore, the loss of original files or the inability to locate an 

original file would be detrimental to the legal work conducted by 

the IPR Branch. 

 Recommendations

1. We recommend that the Commissioner of Customs direct 

the Office of Regulations & Rulings to develop and use a 

standard IPR recordation application form and data entry 

tracking/quality control form. 

Management Comment. Customs concurred and is in the 

process of developing a format for recordation applications 

that will be posted on its website for applicants to follow 

and will generally correspond to the ACS module screens to 

improve the consistency of information input into existing 

fields. This format will not be an “official” form but a 

suggested format and will be posted the next time Customs 

Regulations on IPR are revised with a completion date of 

August 30, 2003. 

The data entry tracking/quality control form has been 

completed and is in the form of a checklist that, when 

completed, will be filed in every recordation file. 

OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

August 30, 2003. However, final action is pending because 

the IPR recordation application format has not been 

completed and posted to the website for applicant usage. 

2. We recommend that the Commissioner of Customs direct 

the Office of Regulations & Rulings to establish policy and 

procedures to ensure that all original IPR recordation files 

containing trademarks, trade names, and copyrights are 

properly maintained. 

Management Comment. Customs concurred and is in the 

process of drafting standard operating procedures to 

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accomplish a consistent approach to maintaining the original 

recordation files with a completion date of August 30, 2003. 

OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

August 30, 2003. Final action will be completed when the 

SOP is finished and implemented. 

3. We recommend that the Commissioner of Customs direct 

the Office of Regulations & Rulings to correct errors in the 

Automated Commercial System IPR Module identified by OIG 

auditors. 

Management Comment. Customs has made these 

corrections. 

OIG Comment. Customs has made corrections to errors we 

brought to their attention during the audit. We consider this 

recommendation to have a management decision with final 

action completed. 

4. We recommend that the Commissioner of Customs direct 

the Office of Information Technology to Post a disclaimer on 

the IPR public Customs Electronic Bulletin Board to advise 

users of the limitations of the database. 

Management Comment. Customs concurred and is in the 

process of the final processing of the disclaimer before 

posting on the website. The disclaimer will be posted before 

August 30, 2003. 

OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

August 30, 2003. Final disposition is pending the posting of 

the disclaimer to the website. 

5. We recommend that the Commissioner of Customs direct 

the Office of Regulations & Rulings to establish adequate 

accountability controls to ensure that access to the IPR 

original owner physical files are restricted to employees 

requiring such access. 

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Management Comment. Customs concurred and has begun 

corrective action by placing locks on secured file room 

doors. A Security Access Card Reader System is in process 

and should be operational by February 28, 2003, allowing 

only personnel from the Office of Regulations & Rulings with 

approved Mint Annex badges access to the room. 

OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

February 28, 2003. Final action will be completed when the 

card reader system is installed. 

 

 * * * * * * 

We would like to extend our appreciation to Customs for the 

cooperation and courtesies provided to our staff during the 

review. If you have any questions, please contact me at 

(617) 223-8640 or Robert Mello, Audit Manager, at 

(617) 223-8643. Major contributors to this report are listed in 

Appendix 3. 

/s/ 

Donald P. Benson 

Regional Inspector General for Audit 

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Appendix 1 

Objectives, Scope, and Methodology 

The objective of this audit was to evaluate Customs’ overall 

performance in fulfilling its statutory and regulatory obligations

to enforce IPR laws and regulations. As part of this review, we

evaluated the accuracy of the IPR Module within Customs’ 

Automated Commercial System (ACS). 

To achieve these objectives, we reviewed Customs’ Strategic 

Plan, IPR laws and regulations, Customs’ policies and 

procedures, and IPR publications and guidance issued by 

Customs Headquarters. We reviewed an internal report, 

produced by Customs’ Los Angeles Strategic Trade Center 

(LA STC) dated July 30, 2001, titled: “Intellectual Property 

Rights, Evaluation and Risk Assessment Project.” We conducted 

our audit work at Customs Headquarters in Washington, D.C., 

where we interviewed personnel and evaluated various IPRrelated documents and products from the following offices that 

perform IPR related work: Office of International Affairs, 

Customs Cyber-Smuggling Center, Customs National IPR 

Coordination Center, Office of Trade Relations, Office of 

Regulations & Rulings - IPR Branch, and the Office of Field 

Operations - Commercial Enforcement Branch. We obtained IPRrelated training information from the Customs Office of Training 

and Development. 

We reviewed and evaluated IPR interventions, covering 

FYs 2000 and 2001, which were coordinated by the LA STC. 

We also visited the Customs Port in Long Beach, CA, and met 

with both staff from the LA STC and other port officials 

involved with IPR enforcement operations. 

We met with representatives from the following trade 

associations and companies to obtain their comments 

concerning Customs IPR enforcement efforts: Recording 

Industry Association of America, Software and Information 

Industry Association, International Anti-Counterfeiting Coalition, 

Interactive Digital Software Association, Motion Picture 

Association of America, Inc., an attorney from the Gibney, 

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Appendix 1 

Objectives, Scope, and Methodology 

Anthony and Flaherty Law Firm representing Rolex and Louis 

Vuitton, and the Trademark Counsel for The Gillette Company. 

We conducted 5 audit tests of the data (over 25,000 records) 

contained in the IPR Module to determine if it was reliable, 

complete, and accurate. Test one involved a sample of 

339 IPR recordations covering FYs 1999 through 2001. The 

purpose of this test was to determine if a registration 

certificate, issued by either the U.S. Patent and Trademark 

Office or the U.S. Copyright Office, was on file in support of 

the recordation. The second test involved a random sample of 

260 recordations. Since recordation applications are filed 

alphabetically by owner name in Customs’ IPR Branch, we 

randomly chose 10 recordations from the physical file folders 

for each letter of the alphabet. We checked three fields of data 

(recordation number, owner name, and product description) 

from each of the 260 recordations and verified the information 

with the data contained in the IPR Module. 

Our third test concerned data accuracy. Using analytical 

software, we randomly selected a sample of 378 recordations 

from the IPR Module and chose 13 key data elements, such as 

product description, contact name, owner name, place of 

manufacture, licensees, and so forth. We verified the data with

information contained on the registration documents and 

recordation application letters submitted by the intellectual 

property owners to Customs’ IPR Branch. 

We also used the analytical software to conduct the fourth test 

and scanned the entire IPR Module database to determine if key

data was missing from the data fields containing the IP owner’s 

name, the contact name, the expiration date, and the gray 

market indicator. 

For the fifth test, using the 378 recordations from our test three 

sample, we queried the IPR postings on Customs’ IPR Electronic 

Bulletin Board (CEBB), which is available for the public’s use, 

and verified the accuracy and completeness of the selected data 

that is posted on the CEBB. 

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Appendix 1 

Objectives, Scope, and Methodology 

Audit fieldwork was performed from August 2001 through 

May 2002. We conducted our audit in accordance with 

generally accepted government auditing standards. 

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Appendix 2 

 Management Comments

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Appendix 2 

 Management Comments

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Appendix 2 

 Management Comments

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Appendix 3 

Major Contributors To This Report

Office of Inspector General

 Donald P. Benson, Regional Inspector General for Audit 

 Robert Mello, Audit Manager 

 Maureen F. Barry, Auditor in Charge 

 Barry Russell, Auditor 

 Christopher Picollo, Auditor 

 Sonia Ng, Audit Associate 

 Kathleen Crowley, Audit Associate 

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Appendix 4 

Report Distribution

The Department of the Treasury

Office of Under Secretary for Enforcement 

Office of Strategic Planning and Evaluations 

Office of Accounting and Internal Control

 

U.S. Customs Service

 Commissioner 

Office of Planning 

Office of Regulations & Rulings 

Office of Strategic Trade 

 Audit Liaison 

Office of Management and Budget

OIG Budget Examiner 

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