China: Customs Actions – Procedures, New Measures, Case Studies

Last Updated: 1 March 2016
Article by Bin Zhang and Yue Zheng

With the first Regulations on Customs Protection of IP Rights promulgated in October 1995, China ascended the new height of protection of IP rights. Now the Regulations on Customs Protection of IP Rights is an important legal resource for IP owners to enforce their IP rights in China. According to the official statistics, in 2013 China customs totally detained about 19000 batches of imported or exported goods infringing upon IP rights. At present customs protection has become the most effective way to prevent the counterfeit goods from being exported out of China mainland.

As learned from customs recordation system, more than 70% of the IP rights recorded with China General Administration of Customs are trademark rights and on the experiences drawn from the cases our law firm handled on our clients' behalf, more than 99% of customs protection cases were related to trademark infringement cases, therefore, this article would only introduce trademark protection practiced by Chinese customs.

According to Regulations on Customs Protection of IP Rights, there are two patterns of customs protection, one is "Ex Officio Action", and the other is "Detention Pursuant to an Application". For the purpose of customs' Ex Officio Action, the trademark owner should record its registered trademark with China General Administration of Customs on the basis of each registration for each recordation. When a registered trademark has been successfully recorded with China General Administration of Customs, the information of the trademark will be uploaded to the official computer system of Chinese customs to be shared by all the local customs within China mainland. Once detecting suspected infringing goods during routine inspections on imported or exported goods, the customs will notify trademark owner or his agent of the detection. Upon confirming these goods are not legitimately manufactured, the trademark owner can file an application to customs for detaining the goods. Upon receiving the trademark owner's application, customs may detain the suspected infringing goods and then make an investigation to ascertain the infringing status of the suspected goods. If the customs determines the goods are infringing goods, the customs would confiscate the goods and then render a penalty decision against the exporter. If the customs could not determine the infringing status of the goods, the trademark owner may apply to the People's Court for adoption of the measures to order the cease of the infringing act or for preservation of property, meanwhile instituting legal proceedings with the People's Court, requesting the People's Court to make a judgment as to whether the goods has constituted infringement to the trademark right. Anyway no matter whether or not a trademark has been recorded with China General Administration of Customs, a trademark owner may have his trademark protected by customs, here we go to the other pattern for customs protection, namely Detention Pursuant to an Application. When detecting the suspected infringing goods in pending importation or exportation, the trademark owner shall submit an application and relevant documents of proof, and provide evidence sufficient to prove the obvious existence of the infringement facts as well. The application shall include the following main contents: the IP owner's name and his place of registration or his nationality; the IP's name, contents, and relevant information; the names of both the consignee and the consigner of the suspected infringing goods; the name and specifications of the suspected infringing goods; and the possible port and time of entry or exit of the suspected infringing goods, and the means of transportation therefor. If relevant trademark right has not been recorded with China General Administration of Customs, the trademark owner should also present a photocopy of the personal identity certificate of the trademark owner, photocopy of the industrial and commercial business license or photocopy of any other registration document and a photocopy of the trademark registration certificate issued by China Trademark Office. At the same time, the trademark owner should provide customs with sufficient evidences proving the goods requested to be detained by the customs are pending to import or export and the trademarks have been substantially used on the relevant goods without the consent of trademark owner. After the local customs detains the goods, the trademark owner should apply to the People's Court for a decision of ceasing the infringing act or property preservation within 20 working days from the official detention date of the suspected infringing goods. Otherwise the customs may release the goods. On experiences, the Detention Pursuant to an Application is not quite practical; obviously it is inconvenient to the trademark owner which explains why most of the customs cases we handled on our clients' behalf fall into Customs' Ex Officio Action category since China adopted customs protection of IP rights.

The Regulations on Customs Protection of IP Rights was amended two times in 2003 and 2010 respectively. According to the 2010 amendment, there were some new provisions implemented. The new provisions focus on the carried articles of individuals, disposal of the infringing goods, the cancellation of recordation and the withdrawal of application for detention. Among them, the following two changes should be noticed by trademark owners: 1. where an individual brings or mails into/out of China mainland articles exceeding the reasonable quantity for personal use and infringing upon others' trademark rights, such goods shall be treated as infringing goods. 2. where the confiscated goods infringing upon trademark rights can be used for the commonweal undertaking, the customs shall transfer them to the relevant commonweal institutions for welfare purposes; if the trademark owner has an intent of purchase, the customs may transfer the goods to the trademark owner non-gratuitously. If the confiscated goods infringing upon the trademark rights are unable to be used for the commonweal undertaking and the trademark owner has no intent of purchase, the customs may lawfully auction them after the infringement features have been eliminated; but the imported goods bearing counterfeit trademarks shall not be permitted to enter the commercial channels only by eliminating the trademarks on the goods, except for special circumstances; and if the infringement features are unable to be eliminated, the customs shall destroy such goods.

Three points needs special attention in Customs protection procedures: 1) Recordation, 2) Guaranty, and 3) Time Limit

1) The IP rights which trademark owner wants to record with customs should be protected by Chinese laws. If the trademarks used on the exported goods are protected by the importing country but not China, the trademark could not be accepted for protection by Chinese customs. The IP rights that could be accepted for recordation limit to trademarks, patents and copyrights, other types of IP rights could not be accepted for recordation with customs. The application for customs recordation should be filed with the General Administration of Customs in Beijing directly, other local customs within China mainland could not accept the application for customs recordation. The party who is capable to file the customs recordation is trademark owner or his agent, the trademark licensee may not file an application of customs recordation in his own name, but the licensee may file the application for customs recordation as an agent of the trademark owner. Pending trademarks could not be accepted for recordation with customs. If a trademark is an international registration, before applying for customs recordation, the trademark owner should first apply to China Trademark Office for a certified copy of the international trademark registration proving that said registration has been extended to China. The trademark owner may also record a legitimate users list with customs to avoid customs' possible detention or delay of the goods declared by the authorized exporters.

2) During the procedure of Detention Pursuant to an Application, the trademark owner should deposit a guaranty equivalent to the values of the goods with the customs. In the Ex Officio Action, the required guaranty varies based on difference in the value of goods: (1) where the value of goods is below RMB20,000, the guaranty should be equivalent to the value of the goods; (2) where the valued of goods is above RMB20,000 but below RMB200,000, the guaranty should be 50% of the value of the goods, but the minimum amount of the guaranty shall not be less than RMB20,000; (3)where the value of goods is above RMB200,000, the guaranty of RMB100,000 should be provided. Furthermore, upon the approval of the customs, the trademark owner may provide a bank guaranty with the customs. The amount of the bank guaranty shall be equal to the summation of the transportation, warehousing and disposal expenses occurred for all the detention cases the trademark owner filed during the immediately previous year; but the minimum amount of such bank guaranty shall not be less than RMB200,000. Where the customs determines to confiscate the infringing goods, the guaranty could be refunded after the trademark owner makes payment of transportation, warehousing and disposal expenses directly to the corresponding responsible entities.

3) In the Ex Officio Action, the trademark owner should respond to the customs notification within 3 working days, if there is no response by the deadline, the customs may release the goods. The 3 working days is strictly required in the customs protection. Actually we could notice it is sometimes tough for a foreign trademark owner to complete the whole procedures within 3 working days including scheduling the travel to customs' checking spot, inspecting the goods, filing application, arranging payment of guaranty, etc. In addition, the agent of the trademark owner will also consume a reasonable time. However in most of the cases, there is no grace period and the required 3 working days could not be adaptive. Therefore the trademark owner should have to prepare to answer the customs notification within a short time limit. In practice, the exporter usually provides customs with evidences or written announcement claiming their products are legitimate when customs shows suspicion about the goods. In this instance, customs will send the evidences and written announcement together with the notification to trademark owner for authentication. Trademark owner may analyze the available information, evidences and photos possibly provided by customs based on logical consequence and then make judgment as to whether these suspected goods are infringing articles or not, omitting the procedures to show up at customs' checking spot and view the goods.

Case Studies

Case 1

The customs not only detects suspected infringing goods where the trademark used is same as the trademark recorded with the customs, but also detects the goods with a trademark similar to the recorded trademark. In May 2012, 170 industrial sewing machines bearing the trademark "JUKIN" were detected by Ningbo Customs. JUKI Corporation, the trademark owner of "JUKI" for sewing machines, were informed via its China agent. After spot inspection, JUKI Corporation filed detention application with Ningbo Customs. In July 2013, Ningbo Customs issued a penalty decision stating that the detained "JUKIN" sewing machines are infringing goods, the goods were confiscated and a fine was imposed.

Case 2

For a customs protection case, the IP owner has a right to file a lawsuit against the exporter with People's Court claiming damages. In November 2007, Ningbo Customs detected 100 boxes of facial creams with the trademark PALMER'S SKIN SUCCESS. The trademark owner, E.T.BROWNE DRUG CO.,INC., asked its China agent to file a detention application within time limit and Ningbo Customs made a penalty decision in 2008 including the contents of confiscating the infringing goods and imposing a fine. Although the volume and the value involved in this case are far from enormous, the trademark owner still decided to file a lawsuit claiming damages and wishing to give a lesson to the exporter or any other possible parties who might conduct an similar infringing act. The lawsuit was filed in October 2008 with Ningbo Intermediate People's Court. However, just before the date for court hearing in January 2009, a settlement in favor of trademark owner under the mediation of the judge was reached.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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