CBP Seizure - broker destroyed package illegally

[Brady H.]

We had a shipment from China get seized for a marking violation (No Made In China labels) in LA and were given 30 days to take action. On day 21 we accepted all charges to take corrective action, and were subsequently told that our package had already been destroyed. The third party broker to our logistics company signed a forfeiture on our behalf, as us without even apparent authority or POA through any contracts. This waived all of our rights to the package and destroyed our package, officially, only 27 days after the notice document. If this were of a substantial amount, we know that we would have a case well worth pursuing, but know that pursuing it solely for the $ amount of $6,000 is futile in federal court and Small Claims will be break even at best. We are considering focusing our demand letter on the legal infractions, essentially putting a small business out of business and going through a federal court. We understand that if we had success pursuing the case, California, where the broker and logistics company are based, have a propensity to reward attorney fees as well. Any insights if the legality of it makes it worth pursuing it or if we are somewhat forced to take the $6,000 hit and go out of business?

 

[Zigner]

If it's a matter of sue or die, I'd sue. Please keep in mind that a lawsuit is not a quick process, nor is receiving replacement goods from China. If you can't deal with a $6,000 loss, then you may wish to reconsider your business model.

 

[Brady H.]

Such is the life of startups. When you start with $15,000 and not even a year post revenue stage take a $6,000 hit, which would require another $6,000 outflow …$12,000 of $15,000 capital is obviously a big hit for us. We're not naïve to the small amount involved, which is why we are trying to decide to pursue or not on different grounds / focusing on the legality in play.

 

[quincy]

We had a shipment from China get seized for a marking violation (No Made In China labels) in LA and were given 30 days to take action. On day 21 we accepted all charges to take corrective action, and were subsequently told that our package had already been destroyed. The third party broker to our logistics company signed a forfeiture on our behalf, as us without even apparent authority or POA through any contracts. This waived all of our rights to the package and destroyed our package, officially, only 27 days after the notice document. If this were of a substantial amount, we know that we would have a case well worth pursuing, but know that pursuing it solely for the $ amount of $6,000 is futile in federal court and Small Claims will be break even at best. We are considering focusing our demand letter on the legal infractions, essentially putting a small business out of business and going through a federal court. We understand that if we had success pursuing the case, California, where the broker and logistics company are based, have a propensity to reward attorney fees as well. Any insights if the legality of it makes it worth pursuing it or if we are somewhat forced to take the $6,000 hit and go out of business?

Whether to pursue a legal action is a business decision you must make. I recommend you discuss the pros and cons with an attorney in your area.

If after a review of the facts your attorney believes you have a good cause of action, you will be in a better position to decide on the best path to take.

 

[Zigner]

Such is the life of startups. When you start with $15,000 and not even a year post revenue stage take a $6,000 hit, which would require another $6,000 outflow …$12,000 of $15,000 capital is obviously a big hit for us. We're not naïve to the small amount involved, which is why we are trying to decide to pursue or not on different grounds / focusing on the legality in play.

You also need to focus on the reality in play here. Short of them (somebody) willingly handing over $6k, there is nothing that you can do that will provide a "quick fix".

 

[quincy]

Why did the company in China fail to properly label the goods? But for that company's failure, you would not have experienced a loss.

 

[Zigner]

Why did the company in China fail to properly label the goods? But for that company's failure, you would not have experienced a loss.

But for the broker's improper handling of the matter, the OP would have no loss...

 

[quincy]

But for the broker's improper handling of the matter, the OP would have no loss...

Yes. But the problem originated with the Chinese company. The Chinese company should know the labeling requirements for goods shipped to the US.

I agree the broker might have erred in his handling of the seized goods.

 

[Brady H.]

Whether to pursue a legal action is a business decision you must make. I recommend you discuss the pros and cons with an attorney in your area.

If after a review of the facts your attorney believes you have a good cause of action, you will be in a better position to decide on the best path to take.

Definitely makes sense. We met with a former corporate counsel attorney connection of ours, as a pro bono consult, but would like to look at it from as many angles as possible. We realize there are issues from the manufacturer standpoint, but the small $ amount and it being a Chinese entity, make it much more complex to take any action. The illegality on the broker by committing fraud and acting outside of the law would make it an easy case if there were more commas involved in the $ amount. Ultimately were hoping for insight as to if there would be leverage in that, for the logistic company / broker to just want to squash it, get it over with and avoid the legal pursuit and backlash.

 

[quincy]

Definitely makes sense. We met with a former corporate counsel attorney connection of ours, as a pro bono consult, but would like to look at it from as many angles as possible. We realize there are issues from the manufacturer standpoint, but the small $ amount and it being a Chinese entity, make it much more complex to take any action. The illegality on the broker by committing fraud and acting outside of the law would make it an easy case if there were more commas involved in the $ amount. Ultimately were hoping for insight as to if there would be leverage in that, for the logistic company / broker to just want to squash it, get it over with and avoid the legal pursuit and backlash.

You could always have your attorney send a demand letter to the broker. Ask that you be compensated for your losses.

 

[Zigner]

Yes. But the problem originated with the Chinese company. The Chinese company should know the labeling requirements for goods shipped to the US.

I agree the broker might have erred in his handling of the seized goods.

I don't disagree - but how far back in the chain do we go?

 

[Zigner]

Definitely makes sense. We met with a former corporate counsel attorney connection of ours, as a pro bono consult, but would like to look at it from as many angles as possible. We realize there are issues from the manufacturer standpoint, but the small $ amount and it being a Chinese entity, make it much more complex to take any action. The illegality on the broker by committing fraud and acting outside of the law would make it an easy case if there were more commas involved in the $ amount. Ultimately were hoping for insight as to if there would be leverage in that, for the logistic company / broker to just want to squash it, get it over with and avoid the legal pursuit and backlash.

Fraud is a pretty big accusation for something that could just as easily have been a clerical error.

 

[quincy]

I don't disagree - but how far back in the chain do we go?

Chinese manufacturer and/or exporter?

Fraud is a pretty big accusation for something that could just as easily have been a clerical error.

I agree. The acts/actions should not be labeled as criminal. That can open up a claim of defamation. The small startup has enough to worry about without that.

 

[Zigner]

Chinese manufacturer and/or exporter?

Did the OP request and pay for such labeling?

 

[Brady H.]

It was a Chinese manufacturer/exporter. Demand letter is an obvious first step, were just trying to deduce, if in fact that is our best approach, is it worth it to spend $1-2k for a demand letter / what are our odds of that yielding anything? We understand that is obviously the biggest risk factor. Just trying to think about it from every angle.

Clerical error? You should avoid making assumptions without information. They signed my name and address, as the consignee, allocated to a statement that says "I hereby waive all rights..." signing the package into destruction as our course of action. The 20+ year corporate counsel attorney said this was clearly a legal / fraudulent infraction.