Singapore/Battam case transhipment concludes

The case of Burberry Ltd v Megastar Shipping Pte Ltd has reached the Singapore High Court. The case arose because counterfeit Burberry, Louis Vuitton and other luxury goods were shipped from China to Singapore, in two containers,  for onward shipment to Batam, Indonesia.  The crux of the Singapore litigation was about how the goods were transhipped through Singapore. 

The Singapore Court of Appeal has held that “goods in transit” are still imported so illegal under the Trademarks Act. However, the freight forwarder importer the goods, but it did not 'use' trade mark. Instead as a commercial freight forwarder it was unfair to impose liability for trade mark infringement as they are a mere conduit.  

The first thing to say about this is that transhipment is increasingly now viewed as something customs authorities must deal with from an IP perspective. The Singapore EU FTA ought to have covered it, but it did not include goods in transit. Singapore likes to defend its position as a transhipment hub, so not be obliged to check all shipments (despite earning money from each container that passes through its port). So it is positive that the court did find the goods imported in principle. In this case there were facts that showed the shipments passed through Singapore’s Portnet IT system. 

However the other issue is the use of the nearby Indonesian port, Batam. The problem there is that Indonesia has no effective border protection system, despite one being introduced last year. See here. So there remains a major issue whether Indonesian customs could stop the goods. Secondly Batam is a Free Trade Zone. It is often used for export processing, and illicit goods pass through it frequently. The region of Riau was historically known for smuggling - see here.  Indonesian customs generally do not interfere and it is not clear if the new IP border protection system could intervene at all. The IP owners suspect that such a huge volume of fakes cannot actually have been bound for Batam itself, that port being relatively remote from the major markets in Indonesia. 

So although important, the case probably doesn’t help in deterrence. Freight forwarders are not liable, and Indonesia’s Batam is still going to be used to handle illicit goods freely. The loss of the fake goods was the only deterrent to whomever the ultimate owners were, a fact which will never be known along with their ultimate destination.

Singapore's new Customs powers

Under the EU Singapore Free Trade Agreement, Singapore must improve its Customs IP border protection system. A new Intellectual Property (Border Enforcement) Bill passed into law on 9 July. It will improve IP border enforcement measures in the following ways:

• Allow upon IPR holders’ requests seizure of exports suspected of infringing copyrights and trademarks (imports can already be seized)
• Allow upon IPR holders’ requests seizure of imports and exports suspected of infringing registered designs
• New powers of disclosure by Customs to IPR holders of names and contact details of persons connected to the import/export of seized goods necessary to start IPR infringement actions. This is a narrow exception to Customs’ normal obligations of confidentiality and can only occur after seizure and document proof of rights and payment of security deposit.

The precise timing of the above new powers depends on the coming into force of the Singapore EU FTA, currently estimated to be mid-2019. Only the third of the above on information disclosure starts immediately. 
Singapore is often criticised for failing to stop infringing goods passing through its ports. It is the largest transhipment port in the world and Economist Intelligence Unit research suggests a vast trade in illicit goods occurs.  These new rules don’t touch goods in transit, but at least exports and imports can be properly controlled. One key main challenge is the cost of bringing expensive civil litigation proceedings against freight forwarders/shippers.
 

Singapore, transhipment and illicit goods

Changes are proposed to the Singaporean customs regime. The aim is to increase the country’s attractiveness as a transhipment hub. Singapore is already the largest transhipment port in the world. But industry is worrying that the amendments leave enforcement gaps and increase the volumes of counterfeit and other illicit goods passing through Singapore.

A public consultation is under way. One change relates to the submission of manifest data which must be provided within 24 hours of arriving and 48 hours of exiting Singapore. Normally this must contain particulars such as the quantities, brands and description of goods. The amendments allow for exemptions for large swathes of shippers.

The European Chamber of Commerce opposes this - “Singapore’s free trade zone (FTZ) [is] vulnerable  to abuse as it weakens the country’s governance of them”. Indeed the Illicit Trade Environment Index cites Singapore’s 7 FTZs as a serious risk over the trade in illicit including fake goods. The Economist Intelligence Unit identified Singapore as a problem due to a lack of vigilance over its FTZs. Basically they said that Singapore the other way while large quantities of illicit and counterfeit goods pass through its port destined across the world. Singapore earns income from every container that passes through it, so looking the other way reaps the country a lot of money for the suspected volumes of illicit goods including fakes, travelling across the globe which are transhipped through Singapore.

Singapore still does not allow for customs recordals but requires rights owners to initiate civil proceedings to obtain civil court orders to seize fake imports, at great cost.  But for transhipped goods there is virtually no policing at all. Add to that the use of Indonesia’s nearby FTZ in Battam for export processing and long time experts in the region quietly talk of transhipment of illicit goods being Singapore’s dirty little secret.

Singapore's role in the counterfeit goods trade highlighted

Singapore is one of the world's largest ports and supposedly the world's largest transhipment port. A recent OECD report points the finger squarely at Singapore for having a major role facilitating the global trade in fake goods. As much as 2% of the world's fake goods are alleged to pass through the city state's port. Despite having a strong IP system, that protection stops at the wharves and docks. Transiting through Singapore, contributing revenues to government coffers and supporting global criminal enterprises, are millions of dollars of fake shipments. This will come as no surprise to anyone who has seen the myriad of container ships parked offshore.

The government is however unwilling to discuss the situation, preferring like an ostrich to avoid the problem. After all they earn money from each shipment that passes through and the cost of inspecting or seizing illegal goods would be very high. Unfortunately this is believed to be only the tip of a far bigger illegal goods iceberg; that counterfeits are only one category of a vast array of much nastier illicit goods that pass through country's ports each year. As the criticism mounts eventually the ostrich will need to take notice.

Singapore counterfeit goods transshipment

IPWeek@SG closed today. IP Komodo espoused in the last talk one final message that Singapore address the issue of transshipment of counterfeit goods through the island state. Singapore is the largest transshipment port in the world, which unfortunately means it is transshipping a vast quantity of counterfeit goods - probably unknown to it.  Singapore earns a lot of money from this, charging shipping lines and storage charges for containers.

Meanwhile with no customs recordal and limited ex officio action, it is up to brand owners to try and divine what counterfeit goods are passing through Singapore and report it to Customs. And then engage in pricey civil litigation to detain and destroy goods. Clearly a civil court seizure system is inappropriate for what is essentially a volume problem - vast quantities of counterfeit goods passing through Singapore en route to other ports worldwide.

What Singapore needs to do is conduct effective Customs risk assessment analysis and intercept suspect shipments passing through the port, then report to IP owners. But first establish a system whereby once illicit counterfeit goods are identified then upon notification to the shipper to justify why the goods are not fake (in which case it can go to court - very rare), then the goods should be destroyed.

Then Singapore can rightly claim to be the region's IP hub. Right now the issue of transhipment causes more than a whiff of suspicion from brand owners.