Fake goods and a freight forwarder’s liability

Freight forwarders are an integral part of the supply chain and global trade, involved in handling goods using all modes of transport (sea, road, rail and air)..

However, many people are still unaware of Who is a Freight Forwarder and their role in the whole chain.. There is no one simple and quick explanation as to who is a freight forwarder and what they do..

In the most succinct and layman terms, a Freight Forwarder is a multi-function agent/operator who undertakes to handle the movement of goods from point to point on behalf of the cargo owner..

The essence of freight forwarding is to ensure that the cargo is picked up from the seller and delivered to the buyer at the required place, at the right price, and in the same condition that it is picked up from origin using the most suitable resources and routing possible..

Freight Forwarders however sometimes face situations which holds them liable merely due to them representing customers or handling shipments on behalf of customers..

Here is a real-life example from Singapore..

In April 2013, Singapore Customs inspected 2×40′ containers and found 436 cartons of fashion fakes and seized more than 30,900 bags, shoes, belts, and other fashion accessories..

The goods arrived in Singapore from China for further transhipment to Batam in Indonesia.. Megastar Shipping was the freight forwarder involved with the shipment..

The trademark owners of luxury brands Burberry and Louis Vuitton sued Megastar Shipping for trademark infringement, alleging that Megastar had imported the fakes into Singapore..

In December 2017, the High Court in Singapore ruled that freight forwarder Megastar Shipping was not liable as it was neither the importer nor did it act in concert with the importers under the Trade Marks Act (TMA)..

“The fact that (Megastar) as freight forwarder was named as the consignee… and was required to submit or make declarations under Singapore Customs rules and regulations does not mean Megastar is to be treated as an importer or exporter for the purposes of the TMA,” ruled Justice George Wei..

The plaintiffs argued that Megastar should be considered as the importer as well as the exporter or would-be exporter of the fakes, and was liable under the Trade Marks Act..

As per them, it was “irrelevant” whether Megastar knew if the containers carried counterfeit goods, among other things..

Justice Wei held that although the fakes were not meant to be released into the Singapore market, they were deemed to be imported into Singapore based on the provisions of the TMA..

He further ruled that Megastar was neither the importer from China nor the would-be exporter from Singapore to Batam and found that Megastar did not share a “common design” with the brand owners to commit the infringements..

“It was engaged as a freight forwarder by the third party for the limited purpose of arranging for the transshipments, but all the preparations and instructions for onward shipment of the counterfeit goods came from the third party,” said Justice Wei in dismissing the case and ordering costs to be paid to Megastar..

After they failed in this suit, the trademark owners appealed to the apex court..

Because this was an unusual case and probably beyond the technical understanding of the courts, Singapore Management University law professor David Llewelyn was appointed as amicus curiae – friend of the court – to address relevant questions..

As per the Straits Times, the court found there was no evidence that Megastar knew or had reason to believe those trademark signs were on the sealed goods as the documents given to it indicated only household goods and other seemingly innocuous generic merchandise..

There was no evidence that luxury products were included in the cargoes..

The court found that Megastar was merely providing a commercial service as freight forwarders in its ordinary course of business and nothing more..

While dismissing the appeal with costs, the court said “To impose liability for trademark breaches on Megastar based on the facts would be against the letter and the spirit of the Act. It would seem like a case of needing to make someone liable because the real culprits are not identifiable or reachable“..

Intellectual property law expert Martin Schweiger, who operates in Singapore and in Munich, said the decision has a major impact on the industry as it “sets a reasonable bottom line for the liability of freight forwarders and other service providers in the logistic-handling chain“.

“This is a relief for freight forwarders that handle shipping containers in transit, without opening them. Singapore is now very similar to the standards in the US, Europe and many other countries,” he added.

In its ruling, the Court of Appeal drew a line between effective enforcement against fake goods and holding “honest commercial persons” liable who were unaware the goods were fakes..

“There ought to be some limiting principle that distinguishes those who were truly using the sign for their economic benefit and those who were unknowingly facilitating these acts by merely being the conduit in the movement of the goods in question, for instance, cross-border services,” said the court in its ruling..

Source of the case study: Straits Times

Finally,

While this was a happy ending for Megastar Shipping, others may not be so lucky..

There are several freight forwarders who are held liable and accountable for several issues ranging from unpaid demurrage/detention, abandoned cargo, unpaid freight, unpaid charges, and other issues mostly on behalf of their customers..

This issue brings into sharp focus a few points as below :

1. In a particular shipment an exporter / shipper / cargo owner could all be different people..
2. In a particular shipment an importer / consignee / cargo owner could all be different people..
3. Just because someone is shown as the shipper or consignee on the bill of lading, it need not mean that they are the legal owners of the cargo..
4. Whoever is shown as the shipper or consignee on a bill of lading needs to be conversant and educated about the risks, responsibilities and possible liabilities associated with such a declaration..
5. The importance of declaring the goods properly and correctly on the bill of lading..