Buyers of Fake Imports Can Be Fined by the Customs

When imports or exports are detained by Taiwan’s Customs and proved to be counterfeits, they give rise to IP infringement issues.  In a trademark or copyright case, the infringement may even lead to criminal charges.  More than that, Article 39-1 of the Customs Anti-Smuggling Act provides:

Where import or export goods, other than genuine parallel imports, have been declared to Customs and infringe on a patent right, trademark right or copyright, the actor shall be subject to a fine up to three times the value of the said goods, and the goods shall be confiscated, except as otherwise provided in other laws or regulations. 

According to an interpretation shared by the Customs Office and courts, the actor here refers to the consignee, holder of delivery order or cargo holder, and the actor does not need to have the intention or willfulness to infringe as required by the Trademark Act and Copyright Act in a criminal case.  The actor’s negligence is sufficient to trigger the Article 39-1 fine.

As such, a buyer of counterfeits who negligently has a counterfeit imported into Taiwan will be fined by the Customs under Article 39-1 even though he/she is not criminally liable. The question is: how strong a duty should a buyer bear in inspecting the genuineness of the imports he/she orders? What if the buyer does not know the goods are imports?

In a judgment rendered by the IP Court’ administrative panel this May, it was held that a buyer without knowledge that the ordered goods were imports was not liable under Article 39-1.  Zheng v. Taipei Customs, 109 Xing Ta Su 1 (Taiwan’s IP Court, May 2020).

The case started from a routine imports check conducted by the Taipei Customs.  In a bulk cargo from Mainland China were discovered 15 boxes of facial masks wrongly declared as shoes; they were hence detained and were soon attested to be counterfeits by the owner of the brand falsely labeled on the packages of the facial masks.  According to documents produced by the shipping company and the courier company responsible for the subsequent inland delivery, the buyer was identified to be an individual, an owner of a corner store.  He asserted that until the police came to his door he never knew the facial masks were imports or counterfeits; but this contention only helped him get released from the criminal charges.  Applying Article 39-1, the Customs fined him all the same and confiscated the facial masks, as the Customs believed the buyer had breached a duty of care that the Customs long held an online shopper should bear: the duty to check the origin as well as legality of the goods one intends to buy.

However, the Customs’ ruling was revoked by the IP Court upon considering the following facts:

  • The identity of the seller, a web vendor, was never disclosed during the transaction (and it seems the buyer never asked), and its acts and statements revealed no sign that the goods were stocked outside Taiwan.
  • The seller’s sole identifiable business presence was a selling space on a local e-commerce mall where the seller offered branded facial masks at very low prices and made ambiguous statements such as “large amount if delivery in Taiwan; located in Northern Taiwan; shipping to Mainland is acceptable.”
  • The seller invited buyers to send messages to its email address ended with “.tw” and accounts at instant messaging apps including LINE and WeChat (the former app being popular in Taiwan while not available in Mainland China).
  • In the buyer’s previous purchases from the same seller, the facial masks were delivered to him also by a local courier company. Nowhere on the carton/packages was ever indicated that the goods were imports, as there is no regulation demanding such disclosure.

Based on these facts, the Court held that the buyer had good reason to believe that he was trading with some local seller whose goods were delivered from Northern Taiwan (although in actuality he might be trading with a cross-Taiwan Strait knockoff gang.)  More, the Court made an apagogical argument based on analogy:

The defendant’s [i.e. the Customs’] view clearly and greatly departs from our common sense.  Let’s consider a similar scenario: a consumer makes a purchase at a physical store in our country.  As it turns out the store does not have the goods in stock and needs to order one from another store, it promises to send the transferred goods directly to the consumer.  What the consumer needs to do now is simply leaving a name and address where the goods will be delivered, without the necessity of ever considering the goods might be shipped from abroad.  If, instead of above, the consumer were now required to bear the duties to become aware of the possibilities that the goods might be imports and he/she might violate the Customs’ anti-counterfeiting rules, and to confirm with the store that “the goods should not be imports” so as to rid himself/herself of negligence, that would be something strikingly different from our daily purchase experiences.

Returning to this case.  It is definitely correct to say that the plaintiff should be mindful of the issue of the goods’ origin when making purchases online, but the information given in the e-commerce mall … was enough to make him believe that the goods he ordered were to be delivered from Taiwan. In this situation, it is unreasonable to say that the plaintiff should have further looked into whether the goods were shipped from abroad. ... If the Defendant’s view were to be adopted, then every consumer who purchases online … would be subject to the risk of violating the Customs Anti-Smuggling Act, which is not reasonable at all. 

What we find interesting about this case is that it provides a glimpse into the current difficulties that anti-counterfeiting agencies encounter in trying to curb the distribution channels of knockoff imports traded online.  As this case shows, counterfeit syndicates cunningly conceal their identities and sources of goods (while some consumers happily take the seller’s words at face value), and play on the weak traceability of cross-border goods owing to liberal trade regulations.  Free trade or stronger regulation, that is the dilemma.