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Intellectual Property Rights

Missouri company pleads guilty to importing $1.8 million in products with counterfeit safety labels

SPRINGFIELD, Mo. – A Missouri company pleaded guilty in federal court Monday to importing thousands of lamps from China bearing counterfeit safety certification labels.

This guilty plea is the result of an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI)

GuildMaster, Inc., of Springfield, Mo., represented in court by company president Stephen Crowder, pleaded guilty to the felony offense of trafficking in goods with counterfeit marks. The company manufactures and imports furniture, lighting, accessories and wall art.

"Electrical appliances that are untested and unregulated or misrepresent their safety certification can present a safety risk to consumers," said Gary Hartwig, special agent in charge of HSI Chicago, which oversees Missouri. "While law enforcement is working to exclude from the U.S.-based marketplace products that misrepresent their safety endorsements, it is imperative that consumers be aware of the potential danger counterfeit items can pose."

"This prosecution sends the important message that companies importing goods from overseas may not gain a competitive advantage over those that play by the rules, by cutting corners when it comes to safety or intellectual property rights," said Tammy Dickinson, U.S. attorney for the Western District of Missouri.

Under the terms of the plea agreement, GuildMaster must forfeit 5,585 lamps that were seized by U.S. Customs and Border Protection (CBP), valued at about $1.8 million. The company also received five years' probation and forfeited $43,786 in cost bonds. Cost bonds are essentially a form of insurance required by the government in case an importer defaults on debts to government.

In December 2011, CBP discovered that lamps imported by GuildMaster bore counterfeit Underwriters Laboratories (UL) labels. UL is an independent product safety certification organization accredited for safety testing by the Occupational Safety and Health Administration (OSHA). The use of the UL mark is the manufacturer's representation to the public that the lamp as a whole was certified by UL as meeting safety requirements.

Between Jan. 10 and March 21, 2012, agents seized 10 shipments bearing counterfeit UL labels originating from Dongguan, China, and bound for GuildMaster in Springfield. Authorities also executed a search and seizure warrant at GuildMaster's business office and warehouse in Springfield. The seizures contained about 5,000 lamps bearing the counterfeit UL label.

GuildMaster was founded in Springfield in 1982 and was formerly a client of UL. The company stopped producing its own lamps in 2005, relocated its warehouse and closed its production facility in Springfield. Since 2005, GuildMaster has purchased lamps manufactured in China and imported them under the GuildMaster label.

GuildMaster established a Hong Kong-based trading company, Westway Enterprises Pvt. Limited, as a wholly-owned subsidiary in 2001. In May 2011, MeiHao Times Trading Co. Ltd. (located in Shenzhen, China) was established as a wholly-owned subsidiary of Westway to broker sales with Dongguan factories. This was required by Chinese law before GuildMaster could establish a mainland Chinese factory as a subsidiary.

Dongguan Yangming Hardware Crafts Limited was a manufacturer of lamps located in Dongguan City, Guangdong, China. In April 2009 GuildMaster (through Westway) began paying rent on the Dongguan factory. On Nov. 22, 2010 GuildMaster (through Westway) signed a formal three-year lease for the factory. On Oct. 11, 2011 GuildMaster (through Westway and MeiHao Times Trading Co.) purchased Dongguan Yangming Hardware Crafts Limited, including its name and export license, and operated a factory entity at that location.

According to the plea agreement, GuildMaster maintains that none of its agents or employees had personal knowledge that they violated U. S. laws by importing the lamps. However, GuildMaster acknowledges that the knowledge and actions of Westway employees and agents are attributed to GuildMaster because Westway was GuildMaster's wholly-owned subsidiary. GuildMaster also acknowledges that the knowledge and actions of Dongguan employees and agents are attributed to GuildMaster because Dongguan was a wholly-owned subsidiary of MeiHao Times Trading Co. Ltd., which was a wholly-owned subsidiary of Westway.

UL certification was an important issue in the importation of electrical appliances into the United States, and Westway tracked whether each of the vendors from which it purchased lamps and components was UL-certified. As of December 2009, Westway personnel knew the Dongguan factory was not UL-certified.

Before the federal seizures, GuildMaster did not inspect lamps coming from China to ascertain the authenticity of the "Portable Luminaire" certification marks placed upon the lamps. GuildMaster acknowledges that had it inspected the lamps, it would have seen counterfeit and unauthorized UL marks.