Stories abound about individuals having their identities stolen, and such thievery is becoming more common in shipping, too.
Here is a typical example. For these purposes, assume ABC Inc. is a prominent apparel company, a C-TPAT member with a well-known, highly regarded label. A foreign seller dispatches a container of shoes bearing a counterfeit trademark by ocean consigned to ABC. If ABC’s real address is 12345 Elm St., Providence, R.I., the shipment might be consigned 15423 Elm St., Providence, R.I.
In addition, the bill of lading generally has a telephone number and a person’s name as the notify party. The consolidator at origin might not even know he is being used, and his U.S. partner, the delivery agent, knows even less.
The shipment arrives in Boston. The delivery agent calls the person at the number listed. He may advise the shipment has been diverted to a new address or he expresses a desire to pick up the Notice of Arrival. Either way, the U.S. consignee gets the details, the shipment is cleared and sent on its way. A similar scenario has the shipment arriving under the ABC name but clearing Customs under a different importer name. Regardless, ABC knows nothing about this shipment unless Customs selects it for inspection and the counterfeit shoes are discovered.
What can be done to minimize the likelihood of this happening to your company? Let’s be honest, if the bad guys are determined to import counterfeit goods, they’ll find a way, and there are limited options for a company to protect itself. Many C-TPAT members don’t want their company’s affiliation with the program made public for fear of drawing too much attention to their shipments. Customs recently admitted C-TPAT members could be targets for the bad guys.
One step all consignees and importers can take is to request confidentiality of manifest data under 19 C.F.R. 103.31(d). Not only are the company’s name, marks and numbers made confidential, but so is the shipper’s identity. Of course, other details remain public, including commodities shipped, port of loading and port of arrival. The missing link is that once Customs discovers a company’s identity has been stolen, it should be allowed to provide details about a given shipment to the aggrieved party. While that may seem logical, Customs says it is barred from doing so under a variety of trade secrets and privacy statutes.
What else can be done? How about due diligence by service providers?
In an ideal world, the consolidator at origin would ask more questions, but the key is what the delivery agent and customs broker are doing when the shipment arrives. How does the delivery agent validate the person he has called is employed by ABC? Has he checked the Internet to see if the address on the bill of lading matches any public address for ABC? Has he confirmed the person seeking delivery is an ABC employee? Frankly, delivery agents do remarkably little in matching the person they are dealing with to the company listed on the bill of lading. While shipping goods is generally built on some degree of trust, a bit more trust-but-verify is in order.
Did the customs broker get a copy of the bill of lading? If the consignee on the bill of lading doesn’t match the importer on whose behalf he is making entry, has he reconciled the two? While there is a big difference in terms of the publicly available information if the companies are privately held, our example assumes ABC is a well-known apparel company. It shouldn’t be difficult for the broker to do some Internet sleuthing and learn basic details about ABC. It may be that a given shipment could be sold in-transit, but how often does that happen between a major apparel company and a smaller entity?
Did the broker vet the power of attorney? Customs has said powers of attorney must be validated, and it has made recommendations on this topic. Was the power of attorney completed in person? Were the credentials of the individual signing the power of attorney checked? Was the corporate or business status of the importer checked through the filing authorities in the state of formation? Is the power of attorney completed and filled out properly?
It’s possible all these steps were followed and the misdeed not discovered, but in reality, too few of these steps are taken. This can come back to haunt all parties.
Several frustrated and aggressive trademark holders have begun to sue brokers for their involvement in the trademark infringement process. Other rights holders are refusing to let innocent importers off the hook unless they are willing to allow the trademark holder to review the shipment records of the importer’s customs brokers. While these are two of the more often relied upon civil remedies, the risk of not properly checking is simply too great.
Susan K. Ross is an international trade attorney with Mitchell Silberberg & Knupp in Los Angeles. She can be contacted at firstname.lastname@example.org.