The New European Customs Regulation and Goods in Transit

"If you liked 1383/2003, you'll love
608/2013", they said. Hmm ...

Having spent too much time staring at the new European Union provisions on customs enforcement and wondering if all that detail about seizing goods was going to give him a seizure, this Kat was quite relieved to receive the following piece from Joe Cohen (Collyer Bristow LLP) which offers an interesting take on the new provisions, their interplay with the proposals-in-waiting for Europe's national and Community trade mark schemes, and their significance with regard to the enemy of so many respectable brands: those somewhat suspicious "goods in transit". Writes Joe:

The New European Customs Regulation and Goods in Transit 

The European Parliament has approved a new Regulation to give Customs authorities extended powers to detain counterfeit or pirated goods at the borders of the European Union. It's Regulation 608/2013 concerning customs enforcement of intellectual property rights, which repeals the current Regulation (1383/2003) and applies from 1 January 2014.

The proposition here is that the new Customs Regulation could, in certain specific circumstances, apply to counterfeit or pirated goods in transit.   After such goods are detained, the consignee, consignor, the declarant or the holder of such goods, seeking their release, would be required to prove, in a court of law, that the counterfeit or pirated goods are destined for a country outside the EU market.  Certainly Recital 10 says the new Regulation ‘solely contains procedural rules for customs authorities’. This note does not postulate that the new Regulation changes the substantive law – that will be covered by the new legislative package, involving the proposed new Community Trade Mark Regulation and the proposed Directive on Trade Marks in Member States.

The proposition is based on the following:

1.         Recital 15 now uses the words “… on the basis of reasonable indications…”, instead of “… having sufficient reason to believe this,…” in earlier drafts. This is an improvement, because “reasonable indications” can be read as meaning that the customs authorities should take into account inadequate or false transport documentation, which arouses suspicion that the goods are counterfeit or pirated and may not be destined for a country outside the EU.  This is in line with the EC Guidelines of 1February 2012.

2.         The use, in the new Regulation, of the words, origin, provenance and destination (my emphases), which appear in many places in the proposed Regulation, is a clear reference to goods in transit.  These issues can be and will have to be dealt with in the national court of the country in which the goods are detained. This can be seen from reading a combination of Articles 17(4) and 21.

Art 17(4) concludes with this sentence:

“The customs authorities shall also, upon request and where available to them, inform the holder of the decision of the names and addresses of the consignee, the consignor, the declarant or the holder of the goods, the customs procedure and the origin, provenance and destination of the goods whose release has been suspended or which have been detained.” (my Italics)

(The same wording is found in Art 18(5), which deals with situations before the grant of an application to the rights holder; and in Art 26(8) relating to small consignments. This is very specific wording in each of the sub-clauses, for which there must be a reason.)

Art 21 provides:-

“Where the holder of the decision has received the information referred to in Article 17(4) [origin, provenance and destination after grant of application to rights holder], 18(5) [origin provenance and destination, before grant of application to rights holder], 19 [inspection of goods and analysis of samples] and 26(8) [origin provenance and destination of small consignments], he may disclose or use that information only for the following purposes:
(a)     to initiate proceedings to determine whether an intellectual property right has been infringed and in the course of such proceedings; …”

 Thus it appears that the intention is that, when the customs authorities suspect that the goods are eg counterfeit and, the authorities note that the transport documentation is not complete or not clear as to eg the destination of the goods, they will (at the request of the rights holder) provide information to the rights holder to enable the rights holder to take court action against eg the importer.  The question of evidence and the burden of proof of the origin, provenance and destination will then fall to be dealt with in accordance with the rules of evidence and the court procedure of the national court.   This makes sense, because the courts are in a position to decide those issues of eg destination of the goods, whereas the customs authorities are not equipped to deal with those issues.

3.         The words, “in transit” appear in only three places in the new Regulation: Recital (21), Art 22(2) and Art 37.  The first two relate to the sharing of information between customs authorities (which may ultimately help rights holders indirectly).  The third relates to the requirement for a report, by 31 December 2016, on any relevant incidents concerning medicines in transit across the customs territory that might occur. This could help pharmaceutical companies – some time after 31 December 2016.

"In transit! I thought
uoi said "in trainset!" 

The absence of express reference to “goods in transit” elsewhere in the text of the new Regulation does not mean that the interpretation, in this note, is incorrect. Moreover, the interpretation of the new Customs Regulation is consistent with the proposals in the new legislative package on trade marks, which currently propose that trade mark owners shall be entitled to prevent all third parties from bringing counterfeit goods, in the context of commercial activity, into the customs territory of the Union without being released for free circulation there, where such goods, including packaging, come from third countries (proposed Regulation, Art.9(5), proposed Directive, Art.10(5))..

If this interpretation is correct, this is a major step forward.  The new Customs Regulation will provide a legal framework for establishing definitively, in a court of law, whether suspected goods are destined for a country outside the EU.  Thus, in court proceedings and in specific circumstances where the trade mark owner can show that there is prima facie evidence, in the form of inadequate or false transport documentation, that the destination of the counterfeit goods is not clear, the burden of proof will then shift to, say, the importer to prove that the goods are going to a customer in eg, Colombia.  In England and Wales (and in Scotland and Northern Ireland) there is a rule of evidence:  “He who asserts, must prove”.   

A practical difficulty might arise where it is impossible to identify the consignee of the counterfeit goods – either because, eg the bill of lading shows the consignee as “To Order”, or the name of the consignee is fictitious.   In such cases, it is possible in England and Wales (and in Scotland and Northern Ireland), to commence proceedings against a defendant whose identity is unknown. The court has the power to permit service of the proceedings by an alternative method or at an alternative place. Thus, the proceedings could be served eg on the consignor or the Customs authorities, to await the time when the owner of the counterfeit goods comes to claim them. 

Why this interpretation of the new Customs Regulation is important

As mentioned, the new Customs Regulation come into force on 1 January 2014. The changes to the substantive EU trade mark law, proposed in the new legislative package, will come into force a long time after 1 January 2014, as demonstrated below:

(i)         The Proposed new Regulation on the Community trade mark provides, at Article 9(5):

‘The proprietor of a European trade mark shall also be entitled to prevent all third  parties from bringing goods, in the context of commercial activity, into the customs territory of the Union without being released for free circulation there, where such goods, including packaging, come from third countries and bear without authorization a trade mark which is identical to the European trade mark registered in respect of such goods, or which cannot be distinguished in its essential aspects from that trade mark.';

This is the provision which is designed to overcome the effect of the CJEU decision in Joined Cases  C-446/09 and 495/09 Philips/Nokia which held that, under Customs Regulation 1383/2003, goods that come from a non-member state do not infringe EU registered marks when they are brought into the customs territory of the EU under a suspensive procedure. There will be much debate about this provision. Here are some of the issues:

(a)        What is the difference (if any) between “… or which cannot be distinguished in its essential aspects from that trade mark” in proposed Article 9(5) and “… there exists a likelihood of confusion…” in proposed Article 9(2)(b)? 

(b)        Is proposed Article 9, paragraph 5 compatible with Articles 51 and 52 of TRIPS? 

(c)        As the provision is so broad, could it be argued that it captures parallel imports which have been brought into the EU without the consent of the proprietor of the trade mark? 

(d)        What is the meaning and effect of “… into the customs territory of the Union…”?  Is it intended to include the territorial waters of the Member States?

This Regulation will enter into force 90 days after its publication in the Official Journal of the European Union.  This could be some way into the future; and very probably well after 1 January 2014.

(ii)        The Proposal for a Directive contains, at Article 10(5), effectively the same provision as that of Article 9(5) of the proposed new Regulation. Article 54 of this Proposal deals with transposition, ie requiring Member States to bring into force the laws, regulations and administrative provisions necessary to comply with, inter alia, Article 10, “by 24 months after entry into force of this Directive at the latest.”

This Directive will enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. This could be a long way into the future; and very probably well after 1 January 2014.  Thereafter, Member States will have two years to amend their trade mark laws. In the meantime, what is to be done about counterfeit goods accompanied by inadequate or false transport documentation between 1 January 2014 and the date upon which the new Community Trade Mark Regulation comes into force and the dates on which the Member States implement changes to their national trade mark laws?

The answer is that, as from 1 January 2014, trade mark owners should, in these very specific circumstances, be able to rely on the new Customs Regulation to have counterfeit goods in transit intercepted and detained by the Customs authorities, while the national courts decide the origin, provenance and destination of those goods.

Is this analysis worth trying out? Readers' thoughts and comments are, as usual, highly welcome.