How do you protect yourself from any legal problems?

[mikehende]

Hey guys, I would like to inquire about legal issues when dealing with "high risk" items. We tried quite a few products in the past but some products such as perfumes, jewelry, designer apparel and certain electronics like mobile phones are high risk items. Since we've already established that any merchant we should intend on purchasing from is not obligated to provide a copy of their ID proving that they are the same person as named on the AOI or EIN doc they have produced, then this means we will need to purchase purely on "faith" that they are legit. Now what happens if that merchant should be obtaining the goods we are purchasing by illegal means or that the products show be fake and all of this without our knowledge, could we be fined or jailed because of that?

[Harold Mansfield]

Hey guys, I would like to inquire about legal issues when dealing with "high risk" items. We tried quite a few products in the past but some products such as perfumes, jewelry, designer apparel and certain electronics like mobile phones are high risk items. Since we've already established that any merchant we should intend on purchasing from is not obligated to provide a copy of their ID proving that they are the same person as named on the AOI or EIN doc they have produced, then this means we will need to purchase purely on "faith" that they are legit. Now what happens if that merchant should be obtaining the goods we are purchasing by illegal means or that the products show be fake and all of this without our knowledge, could we be fined or jailed because of that?

Of course you can. You know if you aren't dealing with the actual manufacturer or an authorized representative or wholesaler that you are you dealing in knock off or stolen goods. Not sure what country you're in, but in the U.S. no one is going to believe that you didn't know and it doesn't matter either way.

[mikehende]

We are in NY but since there can be many middlemen between the manufacturer and us there is no way anyone can know the source of the products.

[Harold Mansfield]

We are in NY but since there can be many middlemen between the manufacturer and us there is no way anyone can know the source of the products.
I'm sorry but that's no excuse and it won't stand up in court. Plenty of businesses sell all kinds of products and credible businesses know exactly what they are selling and where it comes from. Doesn't matter how many middlemen there are...they're all authorized.

Sounds to me that you know you're dealing with sketchy suppliers. You're either an authorize retailer, or you aren't. You aren't going to get a judge or prosecutor ( should it ever come to it) to believe you didn't know. You either got it from an authorized dealer or direct from the manufacturer or you didn't.

[Fulcrum]

I think we need to define the term "high risk" as well as what goods and materials fall under it.

Outside of stolen items, the only time I've ever heard of legal problems with regards to vendors/customers is in the financial services trying to curb/track money laundering.

[mikehende]

Sounds to me that you know you're dealing with sketchy suppliers.

Just the opposite, we don't know, that is the issue and that word "authorized" is key.

[Harold Mansfield]

Well maybe we need more specifics. I mean if you're selling designer purses, perfumes or NFL merchandise and getting them for cheap, and you aren't sure of the credentials of your supplier you kind of have to know they're knock offs which U.S. Customs takes seriously , as well as the companies being infringed on.

From what I know about eCommerce and retail in general, you can't just open a store selling (for instance) Samsung phones and just get them anywhere. If you're licensed to sell those items you'd be authorized by Samsung and buy from them directly or an authorized dealer or distributor in which there is no question who you are doing business with. If you aren't doing that, then you have to know.

What kind of products are we talking about?

[mikehende]

Ok, let's assume it's samsung phones since we have that on our radar. The chain can be Manuf->Jobber->Distributor->Wholesaler->Retailer->End user
problem is it can have quite a few wholesalers between Manuf and retailer as lot of of wholesalers call themselves distributors so the actual distributor can be authorized and so can the wholesaler he sells to but anyone between that authorized wholesaler and the retailer they will not be authorized, officially and therein lies the problem.

[turboguy]

It is illegal to sell counterfeit goods even if you think they are or might be real. The fact that you are asking how to protect yourself legally indicates to me that you are well aware that all or most are knockoffs. It also seems to me that if you were buying legitimate goods through this convoluted supply chain you talk about you would be asking us how to buy more direct (at a lower cost) rather than how to protect yourself.

The cold hard reality is that selling counterfeit goods is illegal. You can have as many layers of corporate shields as you want and this isn't a financial issue it is criminal and if they do catch you then you will go to jail no matter how you structure your corporations.

My suggestion is to forget about how to structure your business and find a legitimate business to involve yourself in. It's not worth the risk.

[mikehende]

Yes I think that is very wise or I ask a potential supplier to verify that they are authorized to sell that product.

[Harold Mansfield]

Ok, let's assume it's samsung phones since we have that on our radar. The chain can be Manuf->Jobber->Distributor->Wholesaler->Retailer->End user
problem is it can have quite a few wholesalers between Manuf and retailer as lot of of wholesalers call themselves distributors so the actual distributor can be authorized and so can the wholesaler he sells to but anyone between that authorized wholesaler and the retailer they will not be authorized, officially and therein lies the problem.

See below.


It is illegal to sell counterfeit goods even if you think they are or might be real. The fact that you are asking how to protect yourself legally indicates to me that you are well aware that all or most are knockoffs. It also seems to me that if you were buying legitimate goods through this convoluted supply chain you talk about you would be asking us how to buy more direct (at a lower cost) rather than how to protect yourself.

The cold hard reality is that selling counterfeit goods is illegal. You can have as many layers of corporate shields as you want and this isn't a financial issue it is criminal and if they do catch you then you will go to jail no matter how you structure your corporations.

My suggestion is to forget about how to structure your business and find a legitimate business to involve yourself in. It's not worth the risk.

Pretty much sums up what I was going to say.

[Paul]

It’s easy enough to do some due diligence on your suppliers. There are plenty of legitimate distributors of distressed, overstock, shelf pull and returned branded merchandise. Especially in the areas you listed. The legitimate ones state that very clearly, in fact their entire business is based on that. There’s nothing illegal about that.

If you are buying what you think is new fresh merchandise at prices less than wholesale that’s a pretty good clue that something is not right.

[mikehende]

Add to that list liquidation companies so you end up getting a very wide range of distributors/wholesalers who are not authorized by the manufacturer but as you've stated nothing illegal about their business or the products.

[CfDoodles]

Honestly, if you are already questioning this, then you have some doubts about them. If you want to run a legit business and retain customers, I would suggest looking for authorized suppliers. Why would you want to risk your business on shady suppliers?

[mikehende]

I got that, as mentioned earlier "verifying" that a supplier is authorized is the key.

[pushtheproduct]

You are dealing in counterfeit, copies and a grade fakes. This is a highly dangerous market which includes fines and jail times. If you are caught infringing on intellectual property you will get a fine of 30k or so. I would certainly advise you to find a cheap, licensed high demand product to import and sell.

[mikehende]

I am not seeing the counterfeit part of this, if for example you purchase iphones, when you call up Apple or visit their site to enter the serial and imei numbers and everything checks out then what's the issue?