IV.B Liability issues related to cross-border paperless trade system

Trading parties and other concerned entities may suffer losses from the incorrect transmission of information and may seek compensation for those losses from those liable for them under contracts among the transacting parties or, if this is not possible, under the general law of civil wrongs. This form of liability is separate from any sanction that may apply under criminal and administrative law.

More often, the law may limit or exclude liability of some actors, usually in order to encourage a certain activity or to lower obstacles to market entry. Limits to liability, in particular to the amount that may need to be paid, are also very common in contracts.

This section of the Checklist deals with liability rules that apply to the principal participants in a paperless trading system: the operators of the system itself (such as a single window); other governmental bodies or agencies with a role in trading; communications intermediaries like Internet service providers or the providers of trust services (such as certification authorities); and other participants in the system (such as customs brokers). The potential liability for each group may differ from that of others in its application or its limitation.

IV.B.1 May the operator of the paperless trade system be held liable for providing its services?

A paperless trade system should enable accurate and timely information exchange. The performance standards for information exchange may be specified in regulations governing the system or in contractual terms and conditions for the use of the system. If the performance standards are not met, the system operator may be held liable.

Another mechanism to address liability of the operator of a paperless trade system is appropriate limited liability or exclusion clauses, which may be prescribed by law or provided by agreement between the system operator and various users of the system. Such clauses in the agreement limit the liabilities of a system operator and may indemnify it against claims for damages.

IV.B.2 May government agencies participating in the paperless trade system be held liable for their interaction with the system?

Government agencies participate in the paperless trading system by providing and processing trade-related data for a number of purposes such as goods control, taxes etc. The accuracy and speed of their interaction will affect the efficiency of the system and ultimately of trading operations.

The obligations of government agencies with regard to their participation in the paperless trade system may be spelled out in the legislation establishing the system or in the MoU that they may have concluded to become system participants. Agreements among the participants in the paperless trade system may also contain liability rules for not providing or processing trade-related data correctly.

General law, regulation or similar instruments may provide for the liability of government agencies or for their exemption from liability when performing public functions.

IV.B.3 May service providers, such as internet service providers and trust services providers, be held liable for interacting with the paperless trade system?

Services provided by specialized technical providers are critical in enabling the exchange of electronic communications. In some cases, the law will specify certain aspects of their liability.

Statutes in many places frequently limit the liability of internet service providers for the information they transmit, especially if they do not originate the information.

See section 26 of the Electronic Transactions Act 2010 (Cap. 88) (Singapore) that deals with the liability of various network service providers.

26. Liability of network service providers

1. Subject to subsection (2), a network service provider shall not be subject to any civil or criminal liability under any rule of law in respect of third-party material in the form of electronic records to which he merely provides access if such liability is founded on –

a. the making, publication, dissemination or distribution of such materials or any statement made in such material; or

b. the infringement of any rights subsisting in or in relation to such material.

In addition, the law may set forth the basic obligations of certification authorities, which are a special type of trust service provider specialized in offering certificates, often PKI-based, supporting electronic signatures and other services such as timestamping, integrity and registered delivery. It may also specify the consequences for non-compliance with those basic obligations, or for otherwise causing a loss to users and third parties.

Article 9 of the MLES offers some general principles of conduct for providers of certificates for electronic signatures.

9. Conduct of the certification service providers

1. Where a certification service provider provides services to support an electronic signature that may be used for legal effect as a signature, that certification service provider shall:

a. Act in accordance with representations made by it with respect to its policies and practices;

b. Exercise reasonable care to ensure the accuracy and completeness of all material representations made by it that are relevant to the certificate throughout its life cycle or that are included in the certificate;

c. Provide reasonably accessible means that enable a relying party to ascertain from the certificate:

i. The identity of the certification service provider;

ii. That the signatory that is identified in the certificate had control of the signature creation data at the time when the certificate was issued;

iii. That signature creation data were valid at or before the time when the certificate was issued;

d. Provide reasonably accessible means that enable a relying party to ascertain, where relevant, from the certificate or otherwise:

i. The method used to identify the signatory;

ii. Any limitation on the purpose or value for which the signature creation data or the certificate may be used;

iii. That the signature creation data are valid and have not been compromised;

iv. Any limitation on the scope or extent of liability stipulated by the certification service provider;

v. Whether means exist for the signatory to give notice pursuant to Article 8, paragraph 1 (b), or this Law;

vi. Whether a timely revocation service is offered;

e. Where services under subparagraph (d) (v) are offered, provide a means for a signatory to give notice pursuant to Article 8, paragraph 1 (b), of this Law and, where services under subparagraph (d) (vi) are offered, ensure the availability of a timely revocation service;

f. Utilize trustworthy systems, procedures and human resources in performing its services.

2. A certification service provider shall bear the legal consequences of its failure to satisfy the requirements of paragraph 1.

Service providers will also have obligations under SLAs and contractual agreements and may be held liable accordingly. This contractual liability may be limited to the extent permitted by the applicable law.

IV.B.4 May other participants in the paperless trade system (for e.g., customs brokers) be held liable for their interaction with the system or their role in the passage of information or data passing through their systems?

The transition from a paper-based to a paperless trade system does not affect the obligations of participating parties, in particular traders and their agents, with respect to their acts or omissions during customs clearance or other trade-related operations. For instance, a trader who intentionally submits incorrect or false information may face criminal, administrative and civil sanctions both in the paper-based and in the paperless environment. The law may specify the duty to comply with general obligations when exchanging electronic information.

Section 96 of the Customs Act 2004 (Cap. 70) (Singapore) deals with the obligations of a trader or of its agent when interacting electronically with customs.

96. Declaration to give a full and trust account

1. The declarations referred to in sections 37, 59 and 80 shall, unless the Director-General allows under subsection (2), be made and submitted by an electronic notice in accordance with section 86 and such declaration shall give a full and true account of such particulars as required by the Director-General.

2. The Director-General may, in his direction and subject to such conditions as he may impose, allow any declaration referred to in sections 37, 59 and 80 to be made on a form determined by Director-General.

3. Such declaration shall –

a. give a full and true account of the particulars for which provision is made in the form; and

b. be in duplicate or in such other number of copies as the person to whom the declaration is required to be made may direct.

As with the other participants in the trade and communications chains, statutes may limit or exclude liability of selected service intermediaries in certain circumstances where the lawmakers want to encourage an activity. Likewise, contracts may allocate liability among parties, or eliminate it entirely, when allowed under applicable law.