Using customs to protect your IPR in China

While many European businesses suspect they know the ins and outs of customs, there are important differences with how authorities treat exports and imports in China. Understanding the nuances of intellectual property (IP) recordal can be vital to a foreign business’s success. The China IPR SME Helpdesk outlines the importance of filing your IP with China’s customs authorities.

Businesses in Europe have benefited from customs authorities preventing counterfeit products from entering their countries. The seizure of products that infringe on intellectual property rights (IPR) regularly makes the news in Europe. Not many businesses realise that unlike most countries, Chinese customs authorities not only have the power to examine and seize criminal imports, but exports as well. Chinese customs has the authority to protect IPR by confiscating goods that infringe on a company’s IPR and impose fines on infringers. However, if customs authorities discover a criminal offence has taken place they will hand the case over to the public security authorities for criminal proceedings. Customs’ IP regulations state that IPR can be filed with Beijing’s General Administration of Customs (GAC). Although it is not compulsory to file with the GAC in order to apply for local customs enforcement proceedings, it is beneficial for a company that moves goods in and out of China. If the company’s IPR is registered with the customs authorities, then they have the power to detain at will anyone suspected of infringing their goods. Additionally, local customs offices are more proactive when IP rights are recorded with the GAC, mainly because filing provides customs officials with easy access to internal IP databases and makes it easier for them to determine whether goods passing through customs are genuine or counterfeit. If an IP holder has registered their IP with customs, then customs can easily start the investigation process and decide what action needs to be taken. This can include imposing fines, destroying goods or handing the case to the public authorities.

Recordal of IPR with the GAC
The types of IPR that can be recorded with the GAC are trademarks, patents and copyrights. Separate applications must be filed for separate IPR. In the case of trademarks, holders must submit a separate application for customs recordal on each trademark in each legally outlined IP class. At present, there are no fees associated with IP registration. To file IP with the appropriate customs authorities, you must submit:

• a copy of your business registration certificate (including a Chinese translation);
• a copy of the trademark certificate (having been registered in China);
• any information pertaining to related licences (customs do not want to withhold goods if they are legitimate); and
• if one is used, something showing power of attorney with the name of the agent responsible for the registration process.

Information on infringers, that may have been collected independently, can also be recorded. This can include people’s names, company names and contact details. If your business has knowledge of a particular delivery and can inform the customs authorities of its arrival then they can examine the delivery in question.

Decision
Within 30 days of receiving all the relevant documents, the GAC will make a decision on whether to record the requested IPR. If the GAC approves the submission, the recordal of IPR will be valid for the duration of the IPR, or for a maximum period of 10 years. Renewal of customs recordal can be filed six months prior to expiration.

Customs enforcement proceedings
There are generally two ways customs enforcement proceedings begin. If you suspect that infringing goods are about to pass through customs, you may file an application with the local customs office where the infringing goods are entering or exiting the country. You must provide the local customs office with a deposit to cover any potential losses suffered by the consignee or consignor, and/or costs incurred by customs for warehousing or destroying any infringing goods. This payment is usually made in the form of bank transfer or cash payment. According to the Announcement on Accepting the General Guarantee for the Customs Protection of Intellectual Property, blanket securities in the form of bank guarantees are now acceptable upon prior approval from the GAC. This option is available to those who have not already registered with customs, despite the process being quicker, easier and successful if registered.

If customs suspect that certain goods infringe someone’s IPR, they will request that the consignee or consignor make a declaration regarding the status of such goods and the IPR in question. If not declared, customs will stop the disputed goods from being released and will immediately notify the IP owner. You must act within three days of being notified in order to file an application to detain the goods, commence customs enforcement proceedings and provide the necessary deposit to the local customs office. Given the short amount of time allowed to accomplish these tasks, if a guarantee is made by bank transfer from an overseas account the local customs authorities will usually accept an advanced copy of the bank transfer slip as preliminary evidence of submission within the allotted amount of time. This ex officio action by customs is only possible if you have registered with customs.

You will also have to confirm whether or not the goods in question are counterfeit. Customs authorities will make a final decision as to whether the goods infringe IPR within a six-month period. They then will decide whether to detain or destroy the goods, or fine the consignee/consignor.

If the customs authorities suspect a crime, they will hand the case over to the public security authorities after it is discovered.

Customs authorities will inform you of its decision and return any payment made after deducting expenses (such as warehousing, destruction of the goods in question, or for losses incurred by the consignee or consignor).

Points to bear in mind
The purpose of recording your IPR at China’s customs is to prevent counterfeit versions of your goods from entering the international market. Recordal gives customs authorities the ability to intercede autonomously if they believe this might be happening.

Recordal of IPR has, in the past, produced encouraging results. However, in order for customs authorities to make quick decisions when checking goods passing across the border, you should maintain close contact with the authorities. It is particularly important that you provide customs with a comprehensive description of your products, including pictures and samples, so they can easily recognise if goods have been counterfeited. Customs authorities are generally willing to attend ‘training’ meetings with you or your representatives in order to limit the number of infringing products that enter China.

In the Implementing Rules of Regulations on Customs Protection of Intellectual Property Rights (effective 1^st July 2009), you must provide customs with as much information as possible. For example, if there is any change to the information made in the recordal application, customs must be notified within 30 days. Failing to meet your recordal obligations can lead to the recordal being cancelled, so take time be familiar with the customs process.

The China IPR SME Helpdesk supports small and medium- sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their IPR in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within three working days.

The China IPR SME Helpdesk is co-funded by the European Union.

To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/.