Navigating Seizures of Transshipped Products
By Mitchell Fuerst and Stephen Wagner - Fuerst Ittleman, PL
Ever since U.S. Customs and Border Protection (CBP) named enforcement of intellectual property rights a “priority trade issue” in late 2007, the ports of South Florida have seen a dramatic upswing in seizures and forfeitures of allegedly volative goods. A large percentage of this enforcement effort is targeted, however, at goods never intended to enter U.S. commerce.
Every day, tens of thousands of packages are brought into the United States by air courier services, such as DHL, UPS or FedEx. Quite often, these packages are being sent from a foreign origin to a foreign destination, and are merely stopping in cities like Miami as the merchandise is being transferred from one flight to another. Equally often, the parties placing the goods for shipment are totally unaware that the goods will transship the United States.
Yet CBP officers at the express consignment facilities near South Florida’s international airports inspect these packages for violations of U.S. law. Recent cases have seen mobile telephones stopped for trademark violations (19 U.S.C. § 1526), pharmaceuticals seized for failing to obtain Drug Enforcement Administration controlled substance transshipment permits (21 C.F.R. § 1312.31), and foreign currency forfeited for violations of the Department of Treasury’s Currency Monetary Instrument Reporting requirements (31 U.S.C. § 5316).
The United States enforces its stringent laws on all goods introduced, or attempted to be introduced, into the U.S. The potential issues – and possible confusion for shippers – may arise at what it means to be “introduced” into the United States.
Under current law, any merchandise touching U.S. soil is considered to have been introduced into the country; the government doesn’t have to prove that the merchandise entered the stream of commerce. (United States v. Lehman, 225 F.3d 426 (4th Cir. 2000); United States v. Nine Hundred Sixty Thousand Dollars in U.S. Currency, 307 Fed. Appx. 251 (11th Cir. 2006).) Although never tested directly in court, the government interprets the holding in Lehman to mean that the intent of the shipper is irrelevant. Once the goods touch U.S. soil, they become fair game for government inspectors.
While the legal issues surrounding the government’s seizure and forfeiture of such products may be cut and dry – the offenses are often irrefutable in court – less certain is the potential liability for the air express company for such seizures.
Although most air waybills contain language exempting companies from liability for government seizures, an overriding issue may be one of proper notice. Air courier companies certainly have knowledge of CBP enforcement efforts – one worldwide courier company even partnered with a large customs and trade law firm to provide customs compliance services to its customers – and yet when merchants show up at the drop-off location overseas, they aren’t being told that (1) the products will enter the United States, (2) the products may be illegal under U.S. law, and if so, (3) the products will be seized.
Most air express companies do not provide information to consumers such as the route that packages will take, yet virtually all goods shipped by the major air couriers to Latin or South America will come through the United States for transshipment. Therefore, customers are operating from a position of ignorance (that the products will enter the U.S.), or a position of trust (that the products won’t enter the U.S.). All the while, courier companies remain silent, despite being armed with information that the consumer has a right to know.
Fuerst Ittleman, PL is exploring whether express consignment companies should have a legal, contractual duty to inform their customers of the risks of transshipment (i.e., seizure and forfeiture), and whether a class action lawsuit could be levied at air express couriers for abrogation of that duty.
Whether such an action could succeed is uncertain. What is certain, however, is that as more foreign goods are seized during transshipment through the U.S., more foreign businesses are learning that whether their shipping company wears yellow or purple or brown, such seizures are making them see red.
By Mitchell Fuerst and Stephen Wagner
Fuerst Ittleman, PL
1001 Brickell Bay Dr., 32nd Floor
Miami, FL 33131
305-350-5694
www.fuerstlaw.com
South Florida Legal Guide Midyear 2010