ICCS and Certification Marks
ICCS USA v. United States is the last 2018 decision of the Court of International Trade we will cover here. Technically, I am timely because the pubic version of this opinion was posted in 2019. This is an interesting look at how Customs and Border Protection enforces certification marks at the border. It also illustrates some of the inner workings of Underwriters Laboratories, the private agency that issues the well-known UL in a circle mark.
ICCS imports butane canisters that were produced by a company in Korea called One Jung Can Mtf. Co. Ltd., ("OJC"). The canisters are marketed under the name "PREMIUM." As far back as 2001, OJC applied for and received UL certification for its "MEGA-1" model butane canisters. That certification was current through February 2017. Accordingly, OJC was authorized to place the UL mark on the MEGA-1 cylinders as a sign that they have been tested and conform to the UL safety standards.
This case is not about MEGA-1 canisters. In 2015, UL offered ICCS a service by which it will list multiple products made by a single company but marketed under different names. This is called a multiple listing. On October 7, 2015, ICCS agreed to participate in that service. However, prior to February 8, 2017, the online UL verification system listed only one ICCS butane canister; that canister was called "US BUTANE." After February 8, 2017, the system was updated to cover multiple canisters including PREMIUM. Keep that detail in mind.
The entry of PREMIUM canisters occurred on January 19, 2017. That was before UL updated its online verification system to include PREMIUM canisters. But, it is also after ICCS had contracted with UL to permit the certification of PREMIUM canisters. CBP initially held the merchandise and released it to the importers on January 30, 2017. Then, on February 23, 2017, CBP issued a Notice to Redeliver the merchandise, citing a trademark violation as the reason for the demand. ICCS was able to redeliver 29,008 of the 56,616 imported cylinders, which CBP seized on May 1, 2017. CBP assessed $41 thousand liquidated damages for the merchandise that was not redelivered.
Prior to receiving the notice of seizure, ICCS filed a protest challenging the redelivery notice. In the protest, ICCS argued that the redelivery notice was unlawful because it had properly applied the UL marking consistent with the multiple listing agreement.
So do we have a situation in which UL approved the use but failed to properly update its online verification system, which is apparently where CBP was getting its information? Or, do we have a situation where the importer had a right to apply to UL to add products to an approved listing and the importer failed to do so? The details will matter.
When the canisters were imported, CBP held them, released them, and then demanded that they be returned. It is not entirely clear what CBP did while the canisters were held nor whether the importer tried to present evidence of an active license prior to the delivery notice. The protest was deemed denied (which indicates that ICCS requested accelerated disposition).
The first question, as always, is whether the Court has jurisdiction. Here, that is straightforward. The CIT has jurisdiction over challenges to CBP denials of valid protests. 28 USC 1581(a). Decisions that are subject to protest are set out in 19 USC 1514, which specifically lists a demand for redeliver as protestable at (a)(4). Jurisdiction lies with the CIT.
Now comes the interesting question. What exactly is the CIT to review? There are two related but separate issues here. First is whether CBP's Notice to Redeliver was proper under the law. The second question is whether the merchandise was properly labeled.
According to the United States, only the first question is before the CIT. The scope and terms of the license are not before the Court. In other words, the way the government sees the issue, this case is entirely procedural and the only question is whether CBP acted according to required process.
ICCS, as you might imagine, takes a broader view of what is before the Court. According to ICCS, the CIT must review the terms of the multiple listing agreement to determine whether the canisters were legally labeled.
Part of the support for the government's position is that to the extent some portion of this entry was actually seized, jurisdiction to challenge the seizure lies in the district court, not the CIT. That is true enough. But, this case is not about the seized goods, it is about the redelivery notice that preceded the seizure and the liquidated damages on the merchandise ICCS could not redeliver. If the redelivery notice was not valid, then the $41 thousand in liquidated damages is also not valid.
The government's argument is basically that it checked the UL validation system and saw that the PREMIUM canisters were not entitled to carry the UL label. Any permission to use the mark, according to CBP came after the date of entry.
ICCS counters that the online validation system was not properly updated to show that the PREMIUM was included in the multiple listing agreement. In other words, CBP erred by relying on the UL system without regard to ICCS' evidence of an actual agreement with UL. Lawyers will note that the UL system is the secondary statement or parole evidence of the existence of a contract. It is hearsay in the administrative process. The best evidence of the legitimacy of the marks is original documents, not the online summary or repetition.
Given that, the Court of International Trade dove into the terms of the contract between ICCS and UL. First, the Court noted that the contract includes a choice of law provision making Illinois law applicable to any effort to interpret the terms. The basic function of the contract is to give OJC, the "basic applicant," the ability to affix the UL label to ICCS canisters. At the time of the contract, ICCS only registered US BUTANE as its approved product. The contract allows it to add others, after UL approval through the "multiple listing request" process of adding, deleting, or editing listing. Products added to the listing must be essentially identical to the originally certified product in all but superficial ways. After UL confirms that requested products meet this criteria, UL adds them to the listing and the verification system. The contract expressly forbids using the UL label on additional products until authorized to do so.
According to the Court, ICCS did not add PREMIUM canisters to the listing until after importation. Thus, it did not have authorization at the time of importation. That means the marks were "spurious" at the time of entry and CBP had every right to demand redeliver. The Court granted the government's motion for summary judgment.
This case is a good primer on dealing with UL certified (or allegedly UL certified products). Importers should ask suppliers for confirmation that any UL mark on the product has been approved by Underwriters Laboratories. The supplier (or manufacturer) should be able to produce a certificate. On top of that, the importer should take the additional diligence step of using the publicly available UL verification system to confirm what the supplier is telling the importer. The UL system is available at https://verify.ul.com/. Purchase orders should prohibit the use of certification marks without proof of qualification for the use of the label.
When purchasing UL labeled products, keep a few things in mind. First, UL's entire business model is built around the integrity of that mark. It has to strictly enforce its license agreements. Do not expect leniency. As noted in the ICCS decision, UL does not agree to retroactive licenses. It maintains a strict zero-tolerance policy. It will not consent to importation, exportation, obliteration or removal. An importer that has a spurious UL label on its product will lose the merchandise.
From Customs' perspective, the UL label is a reliable sign that the product is safe. That means CBP treats spurious marks as a risk to the public health and safety. Thus, CBP treats this as an important issue. Again, unless the importer can prove the merchandise is properly marked, it should expect to lose the merchandise.
As a buyer, you need to discuss these issues with suppliers up front. Suppliers may be more than happy to provide a UL label as an added service. They may know this is illegal. They may not have any idea what the UL mark means. Either way, the risk generally goes to the importer not the supplier.
Talk to your suppliers about all of the artwork on the packaging and on the product. Do not leave that up to the supplier. There are many similar certification marks in circulation today. Labels including Bluetooth, HDMI, USB, CD-ROM, DVD, Fair Trade Certified, Rainforest Alliance, Non-GMO, USDA Organic, and the various kosher and halal certifications are all certification marks. Lots of things you may think of as just information are actually certifications. When in doubt, check the Patent and Trademark Office and the CBP database of recorded marks.
ICCS imports butane canisters that were produced by a company in Korea called One Jung Can Mtf. Co. Ltd., ("OJC"). The canisters are marketed under the name "PREMIUM." As far back as 2001, OJC applied for and received UL certification for its "MEGA-1" model butane canisters. That certification was current through February 2017. Accordingly, OJC was authorized to place the UL mark on the MEGA-1 cylinders as a sign that they have been tested and conform to the UL safety standards.
This case is not about MEGA-1 canisters. In 2015, UL offered ICCS a service by which it will list multiple products made by a single company but marketed under different names. This is called a multiple listing. On October 7, 2015, ICCS agreed to participate in that service. However, prior to February 8, 2017, the online UL verification system listed only one ICCS butane canister; that canister was called "US BUTANE." After February 8, 2017, the system was updated to cover multiple canisters including PREMIUM. Keep that detail in mind.
The entry of PREMIUM canisters occurred on January 19, 2017. That was before UL updated its online verification system to include PREMIUM canisters. But, it is also after ICCS had contracted with UL to permit the certification of PREMIUM canisters. CBP initially held the merchandise and released it to the importers on January 30, 2017. Then, on February 23, 2017, CBP issued a Notice to Redeliver the merchandise, citing a trademark violation as the reason for the demand. ICCS was able to redeliver 29,008 of the 56,616 imported cylinders, which CBP seized on May 1, 2017. CBP assessed $41 thousand liquidated damages for the merchandise that was not redelivered.
Prior to receiving the notice of seizure, ICCS filed a protest challenging the redelivery notice. In the protest, ICCS argued that the redelivery notice was unlawful because it had properly applied the UL marking consistent with the multiple listing agreement.
So do we have a situation in which UL approved the use but failed to properly update its online verification system, which is apparently where CBP was getting its information? Or, do we have a situation where the importer had a right to apply to UL to add products to an approved listing and the importer failed to do so? The details will matter.
When the canisters were imported, CBP held them, released them, and then demanded that they be returned. It is not entirely clear what CBP did while the canisters were held nor whether the importer tried to present evidence of an active license prior to the delivery notice. The protest was deemed denied (which indicates that ICCS requested accelerated disposition).
The first question, as always, is whether the Court has jurisdiction. Here, that is straightforward. The CIT has jurisdiction over challenges to CBP denials of valid protests. 28 USC 1581(a). Decisions that are subject to protest are set out in 19 USC 1514, which specifically lists a demand for redeliver as protestable at (a)(4). Jurisdiction lies with the CIT.
Now comes the interesting question. What exactly is the CIT to review? There are two related but separate issues here. First is whether CBP's Notice to Redeliver was proper under the law. The second question is whether the merchandise was properly labeled.
According to the United States, only the first question is before the CIT. The scope and terms of the license are not before the Court. In other words, the way the government sees the issue, this case is entirely procedural and the only question is whether CBP acted according to required process.
ICCS, as you might imagine, takes a broader view of what is before the Court. According to ICCS, the CIT must review the terms of the multiple listing agreement to determine whether the canisters were legally labeled.
Part of the support for the government's position is that to the extent some portion of this entry was actually seized, jurisdiction to challenge the seizure lies in the district court, not the CIT. That is true enough. But, this case is not about the seized goods, it is about the redelivery notice that preceded the seizure and the liquidated damages on the merchandise ICCS could not redeliver. If the redelivery notice was not valid, then the $41 thousand in liquidated damages is also not valid.
The government's argument is basically that it checked the UL validation system and saw that the PREMIUM canisters were not entitled to carry the UL label. Any permission to use the mark, according to CBP came after the date of entry.
ICCS counters that the online validation system was not properly updated to show that the PREMIUM was included in the multiple listing agreement. In other words, CBP erred by relying on the UL system without regard to ICCS' evidence of an actual agreement with UL. Lawyers will note that the UL system is the secondary statement or parole evidence of the existence of a contract. It is hearsay in the administrative process. The best evidence of the legitimacy of the marks is original documents, not the online summary or repetition.
Given that, the Court of International Trade dove into the terms of the contract between ICCS and UL. First, the Court noted that the contract includes a choice of law provision making Illinois law applicable to any effort to interpret the terms. The basic function of the contract is to give OJC, the "basic applicant," the ability to affix the UL label to ICCS canisters. At the time of the contract, ICCS only registered US BUTANE as its approved product. The contract allows it to add others, after UL approval through the "multiple listing request" process of adding, deleting, or editing listing. Products added to the listing must be essentially identical to the originally certified product in all but superficial ways. After UL confirms that requested products meet this criteria, UL adds them to the listing and the verification system. The contract expressly forbids using the UL label on additional products until authorized to do so.
According to the Court, ICCS did not add PREMIUM canisters to the listing until after importation. Thus, it did not have authorization at the time of importation. That means the marks were "spurious" at the time of entry and CBP had every right to demand redeliver. The Court granted the government's motion for summary judgment.
This case is a good primer on dealing with UL certified (or allegedly UL certified products). Importers should ask suppliers for confirmation that any UL mark on the product has been approved by Underwriters Laboratories. The supplier (or manufacturer) should be able to produce a certificate. On top of that, the importer should take the additional diligence step of using the publicly available UL verification system to confirm what the supplier is telling the importer. The UL system is available at https://verify.ul.com/. Purchase orders should prohibit the use of certification marks without proof of qualification for the use of the label.
When purchasing UL labeled products, keep a few things in mind. First, UL's entire business model is built around the integrity of that mark. It has to strictly enforce its license agreements. Do not expect leniency. As noted in the ICCS decision, UL does not agree to retroactive licenses. It maintains a strict zero-tolerance policy. It will not consent to importation, exportation, obliteration or removal. An importer that has a spurious UL label on its product will lose the merchandise.
From Customs' perspective, the UL label is a reliable sign that the product is safe. That means CBP treats spurious marks as a risk to the public health and safety. Thus, CBP treats this as an important issue. Again, unless the importer can prove the merchandise is properly marked, it should expect to lose the merchandise.
As a buyer, you need to discuss these issues with suppliers up front. Suppliers may be more than happy to provide a UL label as an added service. They may know this is illegal. They may not have any idea what the UL mark means. Either way, the risk generally goes to the importer not the supplier.
Talk to your suppliers about all of the artwork on the packaging and on the product. Do not leave that up to the supplier. There are many similar certification marks in circulation today. Labels including Bluetooth, HDMI, USB, CD-ROM, DVD, Fair Trade Certified, Rainforest Alliance, Non-GMO, USDA Organic, and the various kosher and halal certifications are all certification marks. Lots of things you may think of as just information are actually certifications. When in doubt, check the Patent and Trademark Office and the CBP database of recorded marks.
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