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The Need for IP Cargo Transporters to Conduct Background Screening of Their Customers—“Know Your Customer” (+AUDIO)

The Need for IP Cargo Transporters to Conduct Background Screening of Their Customers–“Know Your Customer” – AUDIO –


In one of our recent investigations, a container leaves China en-route to a U.S. importer. The “bill of lading” indicates that the U.S. importer is receiving “cable” and, indeed, the importer has the word “electronics” attached to its company name. This, of course, gives the impression there is maybe a good reason for the importer to be receiving “cable.”

Except, shortly after the shipment arrives, sale invoices indicate that the same “electronics” importer is selling knockoff “consumer products” to distributors, and shortly thereafter, the knockoffs begin to appear in retail establishments countrywide, as well as on e-commerce sites.


If the shipping transporter had been interested in “knowing his customer”, a basic background screening would have revealed that the U.S. importer’s business entity had only been established three (3) months prior to the shipment, and had no business history of any significance. That, in itself, raises suspicions and is a good indicator that the importer established the alleged “electronics business entity” essentially as a “shell” company to disguise its true purpose.


Holding intermediaries more and more accountable —in the transfer and transport of money and products—is an increasing global trend. Intermediaries (such as banks) are expected to now make a vigorous effort to know their customers before permitting their services to be used.

The same trend is developing in the transport and exchange of products, whether through e-commerce, or the physical trading of goods. One example, as it applies to e-commerce, is the challenge Alibaba, and other e-commerce platforms have had to confront in doing more to know their customers.

This is no less true for the transport intermediaries of large sea containers or cargo, and overland transport by rail or truck.


The International Chamber of Commerce (ICC) Business Action to Stop Counterfeiting and Piracy (BASCAP) published an outstanding report in March 2015 titled: ROLES AND RESPONSIBILITIES OF INTERMEDIARIES: Fighting Counterfeiting and Piracy in the Supply Chain. This comprehensive report spells out the problem and makes considered recommendations.

The following points are made in the sub-section titled, “Transport Operators-Suggested Best Practices:

“Historically, the system has relied greatly on customs to identify suspicious behavior. In a vastly expanded global marketplace, enforcers, intermediaries and rights holders need to develop new solutions as seen in banking and other sectors.”

“Develop and adopt appropriate voluntary practices to stop counterfeiters’ abuse of transport and distribution systems. This effort can start with adequate due diligence and Know Your Customer processes, including quality system reviews for shipping clients and customers. These systems should ensure accurate shipment paperwork, including in-depth background checks…”


In November 2016, the international shipping industry took an important step by signing a joint agreement with a number of major brand owners called, “The Declaration of Intent to Prevent the Maritime Transport of Counterfeit Goods.”


This declaration of intent is an important first step in transforming the relationships between the brand owners, the shipping industry, and their customers in order to further combat counterfeiting. But, if the shipping industry neglects to take vigorous steps to that end, it seems inevitable that brand owners will eventually take legal action against the transporters for failing to know their customers, just as legal action has increasingly been taken against banks over the last decade.

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Ron Alvarez is an IP investigations and protection consultant and writer in New York City. He is a former NYPD lieutenant where he investigated robbery, narcotics, internal affairs, and fine art theft cases. Ron has since coordinated the private investigation of international fraud and money laundering cases, as well as IP-related investigations and research involving the four pillars of IP: copyright, patents, trademarks, and trade secrets. Ron is a graduate of the FBI National Academy and earned a B.A. in Government and Public Administration from John Jay College of Criminal Justice in Manhattan. He has written a number of articles for various investigative publications, as well as published "The World of Intellectual Property (IP) Protection and Investigations" in November 2021.

2 comments on “The Need for IP Cargo Transporters to Conduct Background Screening of Their Customers—“Know Your Customer” (+AUDIO)

  1. Pingback: The Trademark Counterfeiter’s Depot – Self-Storage Facilities: Another Third-Party Supply Chain Intermediary – Part II – IP-PI-BLOG

  2. Pingback: Chinese Fentanyl and the U.S. Overdose Epidemic – IP PROBE – Blog

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