CAN A FORWARDER INSURE A SHIPMENT AFTER A KNOWN LOSS?

CAN A FORWARDER INSURE A SHIPMENT AFTER A KNOWN LOSS?

This question was addressed last week in the case of I.T.N. CONSOLIDATORS, INC. versus NORTHERN MARINE UNDERWRITERS LTD. [i]

A cargo loss was made known to the forwarder ITN which promptly notified the insurance company writing its open policy.   ITN subsequently issued a certificate of insurance to the cargo owner binding the insurer to cover the goods.  ITN paid the insurance company the premium called for by its open policy, but the insurance company later refused to honor the claim and attempted to refund the premium.  A lawsuit ensued, and the United States District Court for the Southern District of Florida granted the insurance company relief, stating that it could not be forced to insure a known loss.  ITN appealed, however, and the lower court’s ruling was overturned.

The 11th circuit Court of Appeals said,  “The question raised by the case of insurance coverage in this case rests on whether Northern in fact agreed to insure the lost shipment. That question in turn depends on whether Northern accepted ITN’s premium payment, thereby consummating the contract to insure it. The district court should determine whether Northern in fact accepted ITN’s premium payment such that a contract to insure the lost shipment was formed.”

The higher court suggested that the insurance premium may have been accepted initially by the insurance company to keep ITN’s business.  Although the appellate court agreed that the insurance company could not normally be forced to insure a loss after all parties knew one had occurred, it stated that under this policy it had the option to do so if it chose.  The language allowing binding of coverage after the fact of knowledge of the loss (common in insurance contracts) was discretionary on the insurance company’s part, and having taken the premium was an indication of its intent to cover the known loss according to the appellate court.  It ordered the lower court to reevaluate the claim in the above light and issue its new decision accordingly.   The lower court still can rule for the insurance company, but it must follow the higher court’s reasoning in its new opinion.

Generally, forwarders can cover shipments after a loss occurs if they have no knowledge of it.   Insurance companies, however, like everyone else deposit received funds immediately and apply them later.  They even allow payment by credit card, which is obviously automated. In fairness, they don’t always know what shipments the payments cover, so how can they be held to have “consummated the contract” by receipt of an automated payment?  We wait to see how the lower court resolves the matter.   More on this to come.


[i] No. 10-15152 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT I.T.N. CONSOLIDATORS, INC., I.T.N. OF MIAMI, INC., Plaintiffs – Appellants, versus NORTHERN MARINE UNDERWRITERS LTD, individually and as agents for Lloyds of London, Watkins Syndicate (WTK/457), Defendant – Appellee.

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Protecting Your U.S. Trademark Overseas

In addition to 84 other countries, the United States is a party to the two treaties comprising the Madrid System for international registration of trademarks.  This system provides trademark owners a cost-effective, efficient way to protect their trademarks overseas.  While not all business need to take advantage of the Madrid System, those businesses and individuals seeking to do business or market their products internationally should consider the benefits to protecting their trademark since theft of intellectual property can pose a serious threat to businesses domestic and foreign.

In order to start the process of registering a trademark overseas, the trademark owner, either an individual or a business, must first register with the United States Patent and Trademark Office. The USPTO provides information via its website www.uspto.gov/trademarks to help trademark owners understand the process of obtaining a trademark.  Once a trademark owner receives his trademark, he must understand that it is not up to the USPTO to police the trademark for him.  In other words, it is the responsibility of the trademark holder to find ways of stopping theft of his trademark, otherwise known as “infringement.”

To protect the trademark in the U.S., owners should register their mark with as many entities as possible that have the ability to help protect the trademark.  For example, U.S. Customs and Border Protection has a electronic system that allows owners to record their U.S. trademarks.  This electronic system, known as the Intellectual Property Rights e-Recordation (IPRR), is in place to assist CBP in preventing importation of trademark infringing goods.

The Madrid system for international trademarks is another way trademark owners can protect their rights.  Assuming a trademark owner has registered his trademark with the U.S., the owner may then file an international application via the International Bureau through the Office of origin.  Offices of origin are located within a trademark owner’s country if that country is a party to the Madrid System’s treaties.

An international application via the Madrid System must include the following:

  • A reproduction of the mark with a list of services it covers (classified under the International Classification of Goods and Services)
  • Designate the countries in which protection is sought (these countries must be contracting parties)
    • Designation of a contracting party is made under the treaty which is common to the Contracting Party and the trademark owner’s country (i.e. If the designated country is only a party to the Madrid Agreement and not the Protocol and the trademark owner’s country is a party to both, then the designation is made under the Agreement.)
    • This allows for three kinds of international applications:
      • Governed exclusively by the Agreement
      • Governed exclusively by the Protocol
      • Governed by both
      • Be prepared in one of the three languages of the Madrid System:  English, French, or Spanish
      • Pay the required fees through the Office of origin:
        • Basic fee
        • Complementary fee for each designated Contracting Party for which there is no individual fee
        • Supplementary fee for each class of goods and services beyond the third
        • Include certification by the Office of origin of the date the international application was presented

After the application is made and approved by the International Bureau, each designated Contracting Party may examine the trademark and determine whether it will provide or refuse protection of the mark.  Once protection is approved, the rights protected are the same as if the trademark owner had made individual registrations in each designated Contracting Party.

The international registration is dependent on the registration of the mark in trademark owner’s country or where he submits through an Office of origin.  If the trademark ceases to be in effect in the original country during that 5 year time period, then the international trademark ceases to be in effect as well.  However, after the initial 5 year time period, the international registration becomes independent from the basic registration in the country of origin.

It is very important for a trademark owner to either become very familiar with the requirements of owning a trademark in both the United States and via the Madrid System or hire someone who is very familiar with the requirements because there are many specific dates, timelines, and nuanced requirements in order to both register and maintain a trademark.  While it may seem like a lot of work, it is certainly worth the time, money, and energy to ensure your product or service is trademark protected.  You want to ensure that when consumers associate your trademark with a certain product or service that it is YOUR product or service to which they are making the association.

More information can be found by visiting the U.S. Patent and Trademark Office website at www.uspto.gov and by visiting the World Intellectual Property Organization at www.wipo.int/madrid/en.  You may also contact our firm at smorrison@customscourt.com or nmooney@customscourt.com or by calling (850) 893-0670 to get more information on U.S. or international trademarks.

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FMC RULING OPENS DOOR TO MISCHIEF

Sometimes the best intended act can lead to unanticipated results.  In the case of informal docket no.  1916(I)   GUMTREEFABRICS, INC. v. EVER-LOGISTICS INTERNATIONAL FORWARDING LIMITED d/b/a EVEROK INTERNATIONAL FORWARDING CO., LTD, the FMC opened the door to conduct which would ordinarily be prohibited.  In that case an importer claimed that cargo was extortionately withheld from delivery to it by a Chinese NVOCC seeking to collect its agent’s debts on other cargo from the importer.  The NVOCC’s agent in the United States had gone bankrupt, leaving the Chinese and with some unpaid obligations.  According to the complaint, fully aware that Gum Tree had already paid the Chinese company’s bankrupt agent what it owed, the Chinese NVOCC nevertheless extortionately withheld other cargo until Gum Tree paid nearly $20,000 of the bankrupt OTI’s debts.

After paying the Chinese again what it had already paid to the bankrupt agent, Gum Tree filed a complaint with the FMC hoping to collect its duplicate payments from the Chinese OTI’s bond.  The Federal Maritime Commission ruled that it had no jurisdiction over the NVOCC’s conduct because the NVOCC used Canadian ports to first discharge the U.S.-bound cargo. In previous rulings the FMC had said that it could not require untariffed or unbonded OTIs using Mexican or Canadian ports to post bonds and tariffs, or obtain other FMC authority to operate between the United States and foreign nations if they avoided U.S. seaports.  But for the first time the agency said that licensed, bonded and tariffed NVOCC can divert cargo to avoid FMC jurisdiction as well.

Now FMC licensing of NVOCCs and the corresponding bonds and tariffs may, in certain circumstances, be reduced to a charade.  All the NVO has to do is divert the cargo via Mexican or Canadian ports.  It can extort or otherwise abuse U.S. shippers without fear of Mexican or Canadian intervention (since the extortion/abuse will be committed in United States), and it can take comfort in the FMC’s position that it has no authority over the NVOCC in those circumstances.  The harmed shipper/consignee cannot invoke the terms of the OTI’s tariff or bond or seek the agency’s assistance as long as the cargo is diverted.

If this ruling is to stand, OTI’s should be required to provide notice to American shippers and consignees when such cargo will not be arriving or departing by sea from a U.S. port and to advise the implications of that fact.  This would help the cargo owner to affirmatively select an OTI which is operating under FMC jurisdiction and has a tariff to abide with a bond at risk.   It would avoid the Gum Tree situation where a shipper unknowingly placed its trust in an OTI which presented only the facade of FMC jurisdiction.  Such a regulation could also strongly encourage the use of U.S. ports in place of cargo diversion to Mexican or Canadian seaports.

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Customs Seizure Benefits Florida

In August 2008, a piece of America’s aviation history, the Douglas AD-4N Skyraider*, reentered its home territory under false pretenses, which ultimately led U.S. Customs and Border Protection (CBP) agents to seize the aircraft nearly a year later.  Import and export of military aircraft and other defense articles generally requires a license or permit under the Arms Export Control Act that neither the pilot or owner of the aircraft provided to CBP officers upon the plane’s arrival in Port of Buffalo, N.Y. from France.  Rather, the pilot provided false information to CBP in order to enter the country without the appropriate authorization.

The scheme may have worked had the aircraft’s 20mm cannons not been discovered in October 2008 at the Port of Savannah, Ga hidden inside containers being imported by the aircraft’s owner, Claude Hendrickson, president of Dixie Equipment in Woodstock, Ala.  Upon this discovery, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HIS) unit launched an investigation into the circumstances surrounding the importation of the cannons, which revealed the unauthorized entry of the aircraft earlier that year.

Under 22 U.S.C. §2778(b)(2) “Control of Arms Export and Imports”, no defense article (as designated by the President on the United States Munitions List) may be imported or exported without a license, whether for export or temporary or permanent import from either the Department of State or the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).  In this case, the importer would have required a license for importation from the ATF because the importation of the U.S. Munitions List Category 8 aircraft was permanent (as opposed to temporary import licenses, which are granted by the State Department).

The process of obtaining a permit from the ATF for importation of arms, ammunition and implements of war begins with an application Form 6, which must be signed, dated, and contain very specific information regarding the importer, foreign seller and shipper, and specifications of the article to be imported.  The regulations set forth in 27 C.F.R. §447.42 list the requirements in more detail.  Importers will generally have an answer from ATF on their permit within four to six weeks provided the importer properly completes the Form 6.  Once the importer receives the permit, it will be valid for one year from the issuance date, and the importer must then complete a Form 6A, “Release and Receipt of Imported Firearms, Ammunition and Implements of War”  in order to obtain release of the article from CBP upon its arrival into the United States.**

As a result of Mr. Hendrickson’s not following these guidelines for importing his aircraft, the plane and its log books, cannons, and other parts are now on their way to the National Naval Aviation Museum in Pensacola, Florida.

*This aircraft is an American single-seat attack aircraft that was used by both the U.S. and French military from the 1940s through the 1980s.  http://en.wikipedia.org/wiki/Douglas_A-1_Skyraider

**This is a simplified explanation of the arms licensing and permit procedure.  For more information on importing munitions, please visit the following website:  http://www.atf.gov/firearms/how-to/import-firearms-ammo-implements-of-war.html.  It is also highly advisable for importers to seek the advice of professionals engaged in the import and export of arms and munitions as well as the advice of legal counsel.

For more information see the following:

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CBP Now Accepts Online Requests For Confidential Treatment of Manifest Data

Some may not realize that data on inbound cargo declarations, CF 1302, is made public by CBP.  Certain data contained on outbound manifest is also publicly available, such as the name and address of the shipper, general character of the cargo, number of packages and gross weight, name of vessel or carrier, port of exit, port of destination and country of destination.  However, pursuant to 19 C.F.R. Section 103.31, an importer, consignee or exporter may request that data contained in inward manifests be considered confidential, thereby prohibiting dissemination of this information.  An importer or consignee may file a blanket request that information concerning all its shippers be considered confidential.

Until recently, this request, called a “certification” in the Regulations, could only be filed by mail.  However, CBP recently added a form to its website, http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/ams/vessel_manifest_confid_form.xml, whereby a request for confidential treatment may be submitted electronically.

Unlike a request for confidential treatment under the Freedom of Information Act or other administrative procedures, a party filing a certification concerning manifest data need not make a showing that disclosure of the data would harm their competitive position or is otherwise a trade secret.  Certifications are valid for two years from the time that CBP approves the request for confidential treatment.

One need not request confidentiality for entries and AES filings, as data contained therein are already considered confidential by the agency and is not made publicly available.

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