Senators Discuss Need for Shop Safe Act

Sen. Thom Tillis, R-N.C., chairman of the Intellectual Property Subcommittee of the Judiciary Committee, noted May 14 that he and Sen. Chris Coons, D-Del., have been trying to get Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce (Shop Safe) Act passed. The bill was first introduced in 2020.

Coons said he worked for eight years at a global manufacturing company, and, "We had a whole room at headquarters of fakes." He said that the Shop Safe bill would hold online platforms "liable for selling counterfeit products unless they adopt certain best practices."

Witness Aaron Bores, executive vice president of product development at the parent company of Moen, a plumbing fixtures and valves brand, said that while e-commerce sites like Amazon, Wayfair and Home Depot do take down SKUs when Moen identifies them, it's a game of Whac-A-Mole.

Bores said it's not just lost revenue for Moen; the company tested what it called "imposter brands" and found a majority of faucets either leached lead, or contained chemicals that should not be ingested, or both. These faucets weren't always straight-up counterfeits -- some said they worked with Moen -- but they did all pass counterfeit safety agency certifications, he said.

"Despite legislative advances like the INFORM Consumers Act of 2023, risks are accelerating," he said in his opening statement, referring to the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act. He said the bill needs to be refined to close loopholes.

He called for enhanced verification protocols for products claiming to be National Sanitation Foundation or IAPMO certified, so that fixtures that haven't passed those standards can't be sold. He also asked for more funding for CBP and the Consumer Product Safety Commission "to detect and intercept counterfeit goods."

He said the counterfeits are so convincing that even experienced plumbers aren't aware they're buying non-standard products, and that he, after 16 years on the job, can be confused.

Brad Muller, vice president of corporate communications for Charlotte Pipe & Foundry, told the panel that the company is a fifth-generation family business, which has 1,800 employees and a subsidiary that makes steel castings like manhole covers with another 1,000 employees. The company learned by accident in 2017 that Yitai was selling plastic pipes and fittings in Asia using the Charlotte Pipe name and logo.

He said they spent over $100,000 to go to court in China over the trademark infringement, and lost the case. The appeal has not moved forward. Charlotte Pipe also sued in Singapore, and while it lost the initial round, it won on appeal, and Yitai can't sell in Singapore now.

Between these IP cases and filing antidumping and countervailing duty cases and 14 Enforce and Protection Act complaints, Charlotte Pipe has spent about $6 million over the last seven years, Muller said. It won AD/CVD cases, and the exporters faced 41% to 494% duty rates, he said in his opening statement (see 1707240008).

"Despite Customs’ good faith efforts, they have been unable to stop the illegal trade flows that continue to harm our industry. By our estimate, Customs has been unable to collect approximately $51 million in duties owed on our products alone under the existing AD/CVD orders that date back to 2018," he said in his opening statement. He said Chinese producers send the pipes to Malaysia and Cambodia, and companies there fraudulently mislabel the products as originating in either Malaysia or Cambodia.

"In each case, Customs has found clear evasion of the AD/CVD duties," he said. "Current penalties for such behavior are woefully inadequate. To put it bluntly, the AD/CVD and EAPA processes are broken and in desperate need of repair."

He said his company welcomed 49% tariffs on Cambodia, 46% tariffs on Vietnam and 24% tariffs on Malaysia, saying those tariffs "would have seriously curtailed, if not ended, illegal transshipment of cast iron pipe and fittings through these countries. We hope the President will reconsider his decision to postpone these retaliatory duties."

He also praised Tillis's Fighting Trade Cheats Act (see Ref:[2309120045]). Tillis explained it as "basically giving the private sector a private right of action" for trade remedy evasion. Tillis said customs sees so many EAPA complaints, "they can't process all of them."

Tillis said to Sen. Adam Schiff of California, the new top Democrat on the panel, that he hoped he'd become a sponsor. "We’d like to get it done this year."

Tillis told Muller that the fact that he didn't prevail in court in China, given how obvious the imitation was, "demonstrates just how much work we have to do to get with a fair trading relationship with the Chinese Communist Party."