AMENDMENT 773

Amendment: Section 2B5.3(b) is amended by renumbering paragraph (5) as (6); by inserting after paragraph (4) the following:

“(5) If the offense involved a counterfeit drug, increase by 2 levels.”; and

by inserting after paragraph (6) (as so renumbered) the following:

“(7) If the offense involved a counterfeit military good or service the use, malfunction, or failure of which is likely to cause (A) the disclosure of classified information; (B) impairment of combat operations; or (C) other significant harm to (i) a combat operation, (ii) a member of the Armed Forces, or (iii) national security, increase by 2 levels. If the resulting offense level is less than level 14, increase to level 14.”.

The Commentary to §2B5.3 captioned “Application Notes” is amended in Note 1 by inserting after the paragraph that begins “ ‘Commercial advantage” the following:

“ ‘Counterfeit drug’ has the meaning given that term in 18 U.S.C. § 2320(f)(6).

“ ‘Counterfeit military good or service’ has the meaning given that term in 18 U.S.C. § 2320(f)(4).”;

by renumbering Notes 3 and 4 as 4 and 5; by inserting after Note 2 the following:

“3. Application of Subsection (b)(7).—In subsection (b)(7), ‘other significant harm to a member of the Armed Forces’ means significant harm other than serious bodily injury or death. In a case in which the offense involved a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, subsection (b)(6)(A) (conscious or reckless risk of serious bodily injury or death) would apply.”; and

in Note 5 (as so renumbered) by adding at the end the following:

“(D) The offense resulted in death or serious bodily injury.”.

The Commentary to §2B5.3 captioned “Background” is amended by inserting after the paragraph that begins “Subsection (b)(1)” the following:

“ Subsection (b)(5) implements the directive to the Commission in section 717 of Public Law 112–144.”.

Appendix A (Statutory Index) is amended by striking the line referenced to 21 U.S.C. § 333(b) as follows:

“21 U.S.C. § 333(b)                     2N2.1”;

and inserting the following:

“21 U.S.C. § 333(b)(1)–(6)          2N2.1

21 U.S.C. § 333(b)(7)                 2N1.1”.

Reason for Amendment: This amendment responds to two recent Acts that made changes to 18 U.S.C. § 2320 (Trafficking in counterfeit goods or services). One Act increased penalties for offenses involving counterfeit military goods and services; the other increased penalties for offenses involving counterfeit drugs and included a directive to the Commission. The amendment also responds to recent statutory changes to 21 U.S.C. § 333 (Penalties for violations of the Federal Food, Drug, and Cosmetics Act) that increase penalties for offenses involving intentionally adulterated drugs.

Section 2320 and Counterfeit Military Goods and Services

First, the amendment responds to changes to section 2320 made by the National Defense Authorization Act for Fiscal Year 2012, Pub. L. 112–81 (enacted December 31, 2011) (the “NDAA”). In general, section 2320 prohibits trafficking in goods or services using a counterfeit mark, and provides a statutory maximum term of imprisonment of 10 years, or 20 years for a second or subsequent offense. If the offender knowingly or recklessly causes or attempts to cause serious bodily injury or death, the statutory maximum is increased to 20 years or any term of years or life, respectively. Offenses under section 2320 are referenced in Appendix A (Statutory Index) to §2B5.3 (Criminal Infringement of Copyright or Trademark).

Section 818 of the NDAA amended section 2320 to add a new subsection (a)(3) that prohibits trafficking in counterfeit military goods and services, the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or national security. A “counterfeit military good or service” is defined as a good or service that uses a counterfeit mark and that (A) is falsely identified or labeled as meeting military specifications, or (B) is intended for use in a military or national security application. See 18 U.S.C. § 2320(f)(4). An individual who commits an offense under subsection (a)(3) is subject to a statutory maximum term of imprisonment of 20 years, or 30 years for a second or subsequent offense. See 18 U.S.C. § 2320(b)(3).

The legislative history of the NDAA indicates that Congress amended section 2320 because of concerns about national security and the protection of United States servicemen and women. After reviewing the legislative history, public comment, testimony, and data, the Commission determined that an offense involving counterfeit military goods and services that jeopardizes the safety of United States troops and compromises mission effectiveness warrants increased punishment.

Specifically, the amendment addresses offenses involving counterfeit military goods and services by amending §2B5.3 to create a new specific offense characteristic at subsection (b)(7). Subsection (b)(7) provides a 2-level enhancement and a minimum offense level of 14 if the offense involves a counterfeit military good or service the use, malfunction, or failure of which is likely to cause the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security. The Commission set the minimum offense level at 14 so that it would be proportionate to the minimum offense level in the enhancement for “conscious or reckless risk of death or serious bodily injury” at subsection (b)(5)(A). That enhancement is moved from (b)(5)(A) to (b)(6)(A) by the amendment.

Although section 2320(a)(3) includes offenses that are likely to cause “serious bodily injury or death,” the new specific offense characteristic does not because the Commission determined that such risk of harm is adequately addressed by the existing enhancement for offenses involving the “conscious or reckless risk of death or serious bodily injury.” Consistent with that approach, the amendment includes commentary providing that the “other significant harm” specified in subsection (b)(7) does not include death or serious bodily injury and that §2B5.3(b)(6)(A) would apply if the offense involved a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death.

Section 2320 and Counterfeit Drugs

Second, the amendment responds to changes made by section 717 of the Food and Drug Administration Safety and Innovation Act, Pub. L. 112–144 (enacted July 9, 2012) (the “FDASIA”), which amended section 2320 to add a new subsection (a)(4) that prohibits trafficking in a counterfeit drug. A “counterfeit drug” is a drug, as defined by section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321), that uses a counterfeit mark. See 18 U.S.C. § 2320(f)(6). An individual who commits an offense under subsection (a)(4) is subject to the same statutory maximum term of imprisonment as for an offense involving a counterfeit military good or service — 20 years, or 30 years for a second or subsequent offense. See 18 U.S.C. § 2320(b)(3).

Section 717 of the FDASIA also contained a directive to the Commission to “review and amend, if appropriate” the guidelines and policy statements applicable to persons convicted of an offense described in section 2320(a)(4) — i.e., offenses involving counterfeit drugs — “in order to reflect the intent of Congress that such penalties be increased in comparison to those currently provided by the guidelines and policy statements.” See Pub. L. 112–144, § 717(b)(1). In addition, section 717(b)(2) provides that, in responding to the directive, the Commission shall, among other things, ensure that the guidelines reflect the serious nature of section 2320(a)(4) offenses and consider the extent to which the guidelines account for the potential and actual harm to the public resulting from such offenses.

After reviewing the legislative history of the FDASIA, public comment, testimony, and data, the Commission determined that offenses involving counterfeit drugs involve a threat to public safety and undermine the public’s confidence in the drug supply chain. Furthermore, unlike many other goods covered by the infringement guideline, offenses involving counterfeit drugs circumvent a regulatory scheme established to protect the health and safety of the public. Accordingly, the amendment responds to the directive by adding a new specific offense characteristic at §2B5.3(b)(5) that provides a 2-level enhancement if the offense involves a counterfeit drug.

Offenses Resulting in Death or Serious Bodily Injury

Third, the amendment amends the Commentary to §2B5.3 to add a new upward departure consideration if the offense resulted in death or serious bodily injury. The addition of this departure consideration recognizes the distinction between an offense involving the risk of death or serious bodily injury and one in which death or serious bodily injury actually results. Departures for these reasons are already authorized in the guidelines, see §§5K2.1 (Death) (Policy Statement), 5K2.2 (Physical Injury) (Policy Statement), but the amendment is intended to heighten awareness of the availability of a departure in such cases.

Section 333 and Offenses Involving Intentionally Adulterated Drugs

Finally, the amendment provides a statutory reference for the new offense at 21 U.S.C. § 333(b)(7) created by section 716 of the FDASIA. Section 333(b)(7) applies to any person who knowingly and intentionally adulterates a drug such that the drug is adulterated under certain provisions of 21 U.S.C. § 351 and has a reasonable probability of causing serious adverse health consequences or death to humans or animals. It provides a statutory maximum term of imprisonment of 20 years.

The amendment amends Appendix A (Statutory Index) to reference offenses under section 333(b)(7) to §2N1.1 (Tampering or Attempting to Tamper Involving Risk of Death or Bodily Injury). The Commission concluded that offenses under section 333(b)(7) are similar to tampering offenses under 18 U.S.C. § 1365 (Tampering with consumer products), which are referenced to §2N1.1. In addition, the public health harms that Congress intended to target in adulteration cases are similar to those targeted by violations of section 1365(a) and are best addressed under §2N1.1.

Effective Date: The effective date of this amendment is November 1, 2013.