The Liberal government is in talks with U.S. officials to resolve fresh demands from Washington that Canada get tougher on counterfeit goods, such as fake iPhones and phoney Prada fashions, CBC News has learned.

The Trump administration wants Canadian customs officers to begin seizing so-called fake imports even if the goods — largely from China — are merely transiting through Canada to markets in the United States and elsewhere.

Under a Canadian law in effect from 2015, customs officers can seize only those fake imports destined for the Canadian market.

In the 13 months up to December last year, the Canada Border Services Agency (CBSA) seized 31 such shipments worth at least $600,000 — a drop in the bucket, according to critics who say fake imports to Canada are worth billions of dollars.

Canadian officials have long rebuffed demands for a much tougher counterfeit law, including demands by Obama administration officials who wanted the 2015 legislation to compel the seizure of fake imports transiting Canada, not just those intended for sale in Canada.

Then-industry minister James Moore, with the previous Conservative government, in 2014 resisted U.S. demands for a tougher counterfeit goods regime that would have required Canadian border officers to intercept more goods destined for the U.S. (Sean Kilpatrick/Canadian Press)

As James Moore, then-industry minister in the Conservative government, told a Senate committee in late 2014: "It's a bit of a stretch for someone in the American administration — I made this clear to them — to ask the Government of Canada and the Canadian taxpayers to act as a border filter for all goods destined for the U.S. market."

Seeking compromise?

But the Liberal government of Justin Trudeau now appears to be looking for a compromise with the Trump administration, which again formally raised the trade irritant on April 27.

"The United States remains deeply concerned that Canada does not provide customs officials with the ability to detain, seize, and destroy pirated and counterfeit goods that are moving in transit or are transhipped through Canada," says a report issued from Trump's trade office.

Michael Geist, a University of Ottawa law professor who is an expert on intellectual property, calls Canada's secret review of the anti-counterfeiting regime 'very troubling.' (CBC)

A briefing note obtained by CBC News from the CBSA under the Access to Information Act says the agency is looking to give the Americans what they want — without actually changing the law.

At an April 12 meeting with "private stakeholders" and others this year, the agency raised the possibility of "closing the in-transit policy gap with our American partners without legislative amendment."

… officials are seeking to find ways to by-pass those rules … very troubling. — Ottawa law professor Michael Geist on renewed Canada-U.S. talks regarding counterfeit goods

CBSA officials proposed alerting U.S. officials to suspect counterfeit goods should they happen to spot them while checking some in-transit goods for other reasons, such as health and safety.

Or Canada could sign a "letter of exchange" with Washington committing each side "to notify the other when suspect counterfeit goods are detected." Such a side letter with Canada was proposed by the U.S. during negotiations for the Trans-Pacific Partnership (TPP), a regional trade deal that was nixed by incoming U.S. President Donald Trump.

The agency proposed two other solutions as well, an expanded pre-clearance deal or a "perimeter" approach, both requiring more consultation and study.

Officials with the CBSA declined to comment on the issue, except to confirm that Canadian officials are still in talks with the Americans.

"Discussions with the United States on this topic are ongoing," spokesperson Jayden Robertson said in an email.

'Very troubling'

Law professor Michael Geist, who reviewed the CBSA briefing note for CBC News, noted that the document acknowledges Canada's counterfeit law is consistent with international standards, which do not require countries to stop in-transit goods thought to be counterfeit.

"The fact that Canada meets international standards and passed legislation specifically excluding in-transit shipments yet officials are seeking to find ways to by-pass those rules — including a trade agreement [TPP] side letter that is no longer operable — is very troubling," Geist, at the University of Ottawa, said in an email.

Toronto police display seized counterfeit products. The Trump administration is pressing Canada to do more to curb the trade in counterfeit goods — and an internal document indicates Canada is looking to appease Washington on the prickly issue. (Chris Langenzarde/CBC)

"Further, the lack of transparency associated with this process, including secret meetings with officials and select private sector stakeholders, runs counter to the government's commitment to open and transparent policy making."

But a Toronto anti-counterfeiting lawyer says Canada needs to consider "all options" to stop in-transit fake imports, including co-operation and information-sharing with the Americans.

Georgina Danzig, a partner with Kestenberg Siegal Lipkus LLP, says some importers may be using Canada to "launder" their counterfeit goods.

"Counterfeiters favour trading routes that they can use to launder their imports," she said in an interview, noting that there's also a risk the fake goods will come back into the Canadian market.

"Canada needs to do more," Danzig said, noting CBSA officers are seizing dozens of counterfeit-goods shipments while other countries sieze shipments by the tens of thousands each year. "The challenge lies in allocating sufficient resources."

In a report tabled in Parliament in May, the Liberal government cited a series of seizures of imported counterfeit goods that were intended to be sold in Canada including:

8,304 T-shirts from Pakistan, falsely claiming to be Under Armour products, seized in Montreal in April 2016. Value assigned by CBSA: $114,700

27,737 jerseys of unknown origin, falsely claiming to be official NBA Properties Inc. products, seized in Montreal in July 2016. Value assigned by CBSA: $3,010

Four shirts from China, falsely claiming to be Prada, seized in Montreal in June 2016. Value not available.

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