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Recent Seizure of Transshipped Counterfeit Cigarettes in Taiwan

Taiwan is located at the center of the Western-Asian Pacific Rim, making it an ideal transshipment hub. In recent years, many counterfeiters have taken advantage of Taiwan's geographical position and used it as one of the main sites for running a global counterfeit business.  


In 2017 alone, an estimate of 1.35 million packs of potentially counterfeit or unauthorized cigarettes was discovered and seized at the Kaohsiung Harbor. Such quantity makes it the largest quantity of illegal or unauthorized tobacco goods ever seized by Kaohsiung Customs in history. In one particular instance, three containers were smuggled from Vietnam to Philippines under the disguise of falsely declared Textile Fabric, which upon investigation were confirmed to be counterfeit cigarettes. The author will refer to this case as Case Study in the subsequent discussion in this article.


Looking at the Case Study, there are two important points which Trademark Proprietors could glean from when considering their trademark protection measures. Firstly, the practical ability of Customs Authority to seize transshipment of counterfeit goods. Secondly, the necessity to register trademarks at the main transshipment sites.


1. The ability to seize transshipments of Counterfeit Goods


Pursuant to Taiwan's Trademark Act, while the act of importing or exporting counterfeit goods is considered a criminal offence, the mere act of "transshipping" is not. Therefore Customs Authority would not be able to rely on the seizure procedures prescribed under the Trademark Act in relation to suspected transshipment goods. Where the suspected goods are only transshipped to Taiwan en-route for other ports, two options are available to the Customs Authority. Firstly, Taiwan's Customs can choose notify the Customs Authority of the relevant port who will then initiate the necessary seizure. Generally speaking, the sooner the notification is given, the better the chance of successfully locating and seizing the counterfeits.


Secondly, and perhaps the more preferable approach, is for the Customs Authority to initiate its own seizure, as was successfully achieved in the Case Study, by undertaking the following steps: 


STEP 1: Interception of the suspected shipments via NON-IP Regulations

While Customs Authority is most familiar with exercising its statutory power of seizure under intellectual-property-related laws ('IP Laws') such as the Trademark Act or Regulations Governing Customs Measures in Protecting the Rights and Interests of Trademark, what is often neglected is that various non-intellectual-property-related laws ('Non-IP Laws') also vest similar seizure powers in Customs Authorities. As illustrated by the Case Study, the Kaohsiung Customs and the Kaohsiung City Government, well aware of their legally vested powers, flexibly exercised their authority to seize the falsely declare goods under relevant Non-IP laws including Operation Directions for the Clearance and Management of Transshipment Goods, Customs Anti-smuggling Act, and The Tobacco and Alcohol Administration Act.


It is worth mentioning that the distinction between seizure under IP- and Non-IP laws is that the former involves a deemed criminal offence and the latter may not and this difference does affect the subsequent legal proceedings. However, in view of the common ends able to be achieved, it is the author's view that relevant enforcement authorities should become well versed with both means of seizure in order to maximize the enforcement efficacy from the trademark proprietor's perspective.


STEP 2: Immediate notification to the trademark proprietors to identify counterfeit goods


Strict notification requirements by Customs Authority to Trademark Proprietors are imposed under governing IP laws. When Customs Authority suspects that certain imported or exported articles may infringe a registered trademark, the Customs must notify the Trademark Proprietor accordingly. The notice may be an oral notice or by text, telephone, email or fax. After receiving the notification, the Trademark Proprietor has the opportunity to inspect the goods onsite but it must do so within the prescribed times - within 4 hours for goods exported by air freight, and within 24 hours for goods imported or exported by sea freight and goods imported by air freight. In reality, such prescribed timeframes are short and often put Trademark Proprietors under significant pressure to attend in time.


But in comparison, where the authorities seized the goods pursuant to Non-IP Laws, the trademark proprietors do not face the same time constraint when asked to provide assessment assistance. This approach is therefore operationally more flexible and also preferred by international companies who could then plan to appoint and send overseas team to Taiwan to authenticate the seized counterfeit goods.


STEP 3: Destruction of the counterfeit goods


Following successful seizure and identification of counterfeit goods, the enforcement agency is able to destroy the confirmed counterfeit goods. In many cases similar to the Case Study, the Kaohsiung City Government had on various occasions destroyed the seized cigarettes based on The Tobacco and Alcohol Administration Act.


2. The Necessity to Register Trademarks at Main Transshipment Sites


When deciding on the global trademark registration strategy, Trademark Proprietors or Brand Owners are often inclined to evaluate the marketability of the product in the country under consideration.


Yet from the viewpoint of combating counterfeit products, trademark registration in countries where transshipments are necessary, is just as important as trademark registration in countries where the products will be marketed. This is especially true for countries that enable law enforcement agencies to exercise certain enforcement actions based on the registered status of the trademark. Therefore, Proprietors are highly recommended to register trademarks even in countries that act as transshipment points where the product may not be marketed, for the purpose of legally enabling Customs seizures at that transshipment point, such as Taiwan in this instance. These registrations will practically complement and enhance the effectiveness of a global anti-counterfeiting strategy.


In summary, combating counterfeiting presents as an ongoing challenge for enterprises because of the ever-evolving nature of counterfeiting techniques and the many deliberately disguised operations involved. However, both IP- and Non-IP laws come to the Proprietors' aid for the protection of their registered trademarks. As illustrated above, especially where seizure operations are required, the expertise and readiness of the legal counsel engaged by the enterprise will greatly increase the likelihood of success against these illegal counterfeiting activities.