China: Customs Proceedings

Last Updated: 26 June 2009
Article by Willi Vett

Customs proceedings are one of the legal measures that holders of intellectual property rights ("IP Rights") can use for enforcement in the Peoples Republic of China ("PRC"). The relevant laws and regulations governing the customs proceedings are the Customs Law of the PRC ("Customs Law") as amended and effective 1 January 2001, the Regulations of the PRC on Customs Protection of Intellectual Property Rights ("Customs IP Regulations") and the Measures of the General Administration of Customs of the PRC for the Implementation of the Regulations of the PRC on Customs Protection of Intellectual Property Rights ("Customs IP Measures").

Article 91 of the Customs Law prohibits exporting goods from or importing goods to the PRC that infringe IP Rights and entrusts PRC Customs with protecting IP Rights by confiscating infringing goods and imposing a fine. If the infringement of IP Rights exceeds a certain threshold, then the customs authorities should also arrange for bringing criminal proceedings against the infringing party. These obligations are further regulated in the Customs IP Regulations and the Customs IP Measures.

The Customs IP Regulations provide that IP Rights can be recorded with the General Administration of Customs ("GAC") in Beijing. It should be noted that it is not compulsory to record IP Rights and IP Right holders can still apply with local customs for enforcement proceedings if the respective IP Rights are not recorded with the GAC. However, it appears in practice that the local customs offices are more pro-active when IP Rights are recorded with the GAC mainly because the recordal of IP Rights provides the customs officials with easy access to internal IP databases and generally makes it easier for them to determine whether goods to be imported or exported are fake or genuine. Recordal of IP Rights also facilitates commencing customs enforcement proceedings. Given that the recordal of IP rights with the GAC is inexpensive and straightforward, recording with the GAC is worthwhile considering.

Recordal Of IP Rights With GAC

As mentioned, the recordal of IP Rights with the GAC is relatively straightforward. The types of IP Rights that can be recorded are trademarks, patents (including patents for invention, utility patents and design patents) and copyrights. One separate application per IP Right shall be filed. For trademarks, holders submit a separate application for customs recordal for each trademark in each class. The information that an IP Rights holder should submit to the GAC includes complete contact details of the IP Rights holder, documentary evidence and information on the IP Rights to be recorded (including photos of the goods to be protected under the IP Rights in question) and information on any potential licenses, manufacturing rights, eligible importers or exporters etc.

In addition, IP Rights holders can also register information about infringers that is already known, such as names, company names and contact details. If the holder of trademark rights has detailed knowledge of specific deliveries of goods, the holder can inform the customs authorities, who shall then examine the delivery in question thoroughly.

The GAC shall within a time frame of thirty days upon receipt of all relevant documents make a decision whether to record the IP Rights in question. If the GAC approves the submission, the recordal of IP Rights is valid for a maximum period of ten years. If the IP Rights to be recorded are valid for a period of less than ten years, then the validity period of the customs recordal will follow such shorter period. Renewal of customs recordal can be filed during the six-month period before expiration.

Customs Enforcement Proceedings

There are generally two ways of commencing customs enforcement proceedings.

If an IP Rights holder suspects that infringing goods are about to be exported or imported, the IP Rights holder may file an application with the local customs office at the place of entry or exit (as the case may be) of the infringing goods. In addition, the IP Rights holder shall provide the local customs office with a security to cover potential losses of the consignee or consignor and/or costs incurred by customs for warehousing, storage and destruction of the infringing goods. Such security is usually made in the form of bank transfer or cash payment. According to the recently revised Customs IP Measures, blanket securities in the form of bank guarantees are now acceptable upon prior approval from the GAC.

If the customs authorities suspect that the goods to be imported or exported infringe IP Rights, they may require the consignee or consignor to make a declaration regarding the status of such goods and the IP Rights in question. If the consignee or consignor fails to make a declaration or fails to provide the customs authorities with sufficient information, the customs authorities shall suspend the release of goods and immediately notify the IP Rights holder. The IP Rights holder must quickly--within three days of receiving notice from customs--file an application to detain the goods and commence customs enforcement proceedings as well as give a guarantee to the local customs office. Given the short deadline, if a guarantee is made by bank transfer from an overseas IP Rights holder, the local customs authorities usually accept an advance copy of the bank transfer slip as preliminary evidence of timely submission of the guarantee.

The IP Rights holder will also have to confirm whether or not the goods in question are counterfeited. Thereafter, and within around six months, the customs authorities will make a final decision as to whether the goods infringe the IP Rights. The customs authorities will then decide whether to detain and destroy the goods. The customs authorities can also fine the consignee or consignor. If the infringement exceeds limits stipulated in the PRC Criminal Law, the customs authorities shall submit the case for criminal proceedings.

The customs authorities will inform the IP Rights holder about its final decision and return any security payment made, after deducting expenses such as for warehousing and destruction of the goods in question (or losses incurred by the consignee or consignor).

Other Considerations

The purpose of customs recordal is to stop the import and export of pirated products, thereby preventing counterfeited goods from entering the international market.

Recordal of IP Rights has, in the past, resulted in a number of encouraging results. However, in order for the customs authorities to make proper and quick decisions when checking goods passing the borders, IP Rights holders should maintain close contact with the customs authorities. It is particularly important to provide the customs authorities with a comprehensive description of the IP Rights holder's products and use of its IP Rights, so that the customs authorities can easily recognise counterfeits. For that purpose, customs authorities are generally even willing to attend "training" meetings with representatives of IP Rights holders.

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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