Counterfeit goods and Bill C-8

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Heyman cries foul on counterfeit bill

Extra inspections too pricey, say feds.

The Hill Times Photo: Jake Wright
US Ambassador Bruce Heyman, at a Canada 2020 event welcoming him to Canada on June 2 at the National Gallery of Canada in Ottawa.

Peter Mazereeuw
Last Updated: Wednesday, 06/11/2014 12:09 am EDT

United States Ambassador Bruce Heyman took a shot at the federal government’s stalled anti-counterfeiting bill in his first major public speech in Canada last week, decrying an exemption for goods in transit from a third country to the US.

Intellectual property lawyers, an import-export industry spokesperson and Canada-US analysts echoed his complaint that Bill C-8, the so-called Combating Counterfeit Products Act, would exempt goods passing through Canada on their way to another destination from an examination for intellectual property infringement by the Canada Border Services Agency.

Requiring border officers to search goods in transit for counterfeiting would be too costly, said Jake Enwright, press secretary for Industry Minister James Moore.

“Our government doesn’t believe taxpayers should be on the hook for the cost of seizing counterfeit products that are destined for the United States that do not threaten health or safety,” he said.

NDP and Liberal MPs said cuts to the CBSA budget have already strained the agency, and inspecting goods in transit would only make things worse. Both said their parties would support the bill.

The Combating Counterfeit Products Act has remained at third reading in the House since January.

A hole in the shared perimeter

“The United States is concerned because the bill does not apply to goods that are shipped through Canada, from a third country to the US,” Mr. Heyman said, according to speaking notes, at a Canada 2020 event on June 2 in Ottawa.

“Given our highly integrated supply and production chain…We should have laws and procedures stopping these illegal goods at our shared perimeter,” he said.

It wasn’t the first time a US official has raised the issue. A 2011 report from the United States Trade Representative said Canada “should provide its Customs officials with ex officio authority to effectively stop the transit of counterfeit and pirated products through its territory.”

The counterfeiting bill, which introduces new offences related to possessing or exporting goods that infringe intellectual property law and overhauls Canada’s trademarks regime, includes a clause exempting items brought into Canada for personal use (for example, a single counterfeit designer handbag) and for “copies that, while being shipped from one place outside Canada to another, are in customs transit control.”

The exemption comes despite the 2011 pledge by the Canadian and US governments to work towards a shared perimeter, where goods will be checked once and accepted twice, said a handful of lawyers and analysts.

“Putting in the legislation, and stating quite boldly, ‘We will not [inspect],’ that defies the perimeter that we agree upon and it leaves us open then to the Americans to break the covenant of: inspected once, cleared twice,” said Colin Robertson, a former Canadian diplomat and current adviser for McKenna, Long and Aldridge LLP in Ottawa.

“I think [the exemption] will have implications for our bigger trade policy interests with the US, because intellectual property is always their first ask from Canada on a trade issue,” said Laura Dawson, an Ottawa-based consultant on Canada-US economic issues who has advised both governments.

As Beyond the Border program initiatives come up for renewal in the coming years, “[US] officials cannot help but sort of look at a status report card from the last couple of years, and say, ‘How well has Canada been co-operating with us?’” she said.

“I think they’re getting some pressure from the US to re-think their position,” said House industry committee vice chair and Liberal MP Judy Sgro.

Mr. Robertson said he did not expect the dispute between the two countries to spill over into other areas of their relations. It is unlikely Canada would use the exemption as a tool for leverage, as such behaviour typically backfires for a smaller trading partner, he said.

How big is the job?

Commentators disagreed over how large of a burden checking for counterfeit would be for CBSA officers, who already examine goods in transit for contraband and dangerous contents.

“If they’re already checking, why aren’t they taking the extra step and checking for counterfeiting?” said Lorne Lipkus, an intellectual property lawyer, in an interview. He testified in front of the House industry committee on behalf of the Canadian Intellectual Property Council.

The more thorough inspection for counterfeiting would slow down trade and reduce the resources border agents have to inspect goods destined for Canada, said NDP industry critic Peggy Nash in a phone interview.

Ms. Nash said while she understands Mr. Heyman’s concerns with the bill, her party will support it in Parliament. Cuts each year to the Canada Border Services Agency’s budget have left it without the resources to take on the added burden, she said.

Ms. Sgro agreed, and said limited resources constrain the border agency’s ability to do a proper inspection of goods in transit.

The Liberal Caucus has decided that voting against the bill would be “obstructionist,” and will support it and press for improvements going forward, said Greg McClinchey, Ms. Sgro’s chief of staff.

The Canada Border Services Agency’s budget has been cut by more than $140 million since 2011-12, though some funding has been added for Beyond the Border program initiatives. The cuts are slated to continue into 2016-2017, where planned spending will be nearly $300 million less than the agency’s 2011-2012 expenditures, according to the CBSA website.

Mr. Moore told the House industry committee in November that the CBSA has enough resources to put in place the current counterfeiting bill.

Martin Lavoie, director of manufacturing policy for the Canadian Manufacturers and Exporters, opposed the exemption in front of the committee. The law, as proposed, would not eliminate all the hurdles faced by intellectual property rights holders looking to stop counterfeit copies of their goods from getting to market, he said in a phone interview.

Bill C-8 has drawn the wrath of some in Canada’s intellectual property law community for overhauling Canada’s trademarks regime, they say for the benefit of foreign multinationals. Some intellectual property law experts have also criticized the bill for failing to adequately clarify the legal status of parallel imports, legitimate goods that are imported and re-sold against the wishes of the manufacturer.

The EU dropped a requirement to inspect goods in transit at the last minute from intellectual property regulations introduced earlier this year, said Ralph Cox, an intellectual property lawyer in Fasken Martineau’s London office.

The provision was dropped, despite heavy pressure from large multinational rights holders, out of fear it would be too onerous for border officers to inspect for all forms of intellectual property violations, he said, and because European case law provides other avenues for rights holders to pursue counterfeiters.