How can I apply to the customs authorities to seize goods which infringe my intellectual property (IP) rights?
There are two methods for applying to customs for seizure of goods.
1: Customs can temporarily detain suspicious shipments (for three working days) and notify you or your appointed customs agent of such detention provided that you have recorded your rights with the General Administration of Customs (GAC). Once notified, you have three working days within which to apply for seizure of the goods and pay a bond. Customs then detain the suspicious goods and commence an investigation to confirm whether or not the goods are infringing.
2: If you become aware of potential shipments of infringing goods you can apply on an ad hoc basis to customs for seizure. If you have not registered your intellectual property rights with customs and you become aware of a potential shipment of infringing goods, you can apply directly to customs for seizure of that particular shipment (this method is rare as customs generally proceed only where a recordal of rights has been effected). To apply for an ad hoc seizure of a suspicious shipment, you need to submit the following materials to the customs authorities at the port where the suspicious goods are being either imported or exported:
- application form
- evidence of your intellectual property rights in China
- information about the infringer and the infringing shipment/container (exporter’s name, goods name, port of export, container number etc.)
- a bond payment
Once they receive the materials and payment, customs will temporarily detain the goods and notify you and/or the consignor of the temporary detention. Once notified, you must apply to the court for a preliminary injunction or for property preservation measures (an order from the court requiring property to be seized for a particular purpose). If customs receives a written notice from the court requesting assistance in executing its order within 20 working days from the date of the detention, customs will provide the requested assistance. Otherwise, customs are required to release the goods.
How can I record my intellectual property (IP) rights with China customs?
Recording your intellectual property rights with customs is optional but highly recommended. To receive notifications from customs of the detention of suspicious shipments you need to register your intellectual property rights with the General Administration of Customs (GAC).
As a foreign entity you will have to apply for registration through a local agent who will submit an application online (at http://22.214.171.124/applyrecord) or by mail to: General Administration of Customs of China Legal Affairs Department, Intellectual Property Division 6 Jianguomen Nei Avenue, Beijing, 100730 People’s Republic of China.
If you have a representative office in China, it can file a registration request on behalf of your European-based Company (the actual rights owner) if it obtains a Power of Attorney from you. The application is subject to the approval of the GAC which normally approves the registration in about 30 working days.
If you are aware of any known infringers you can also submit a so-called ‘blacklist’ which will assist customs in determining which shipments are likely to contain suspicious goods. Once your application is submitted and registration approved by the GAC, information about your rights will be entered into the customs database of registered rights.
Registration with customs lasts until the renewal date of the right in question (so in the case of trade marks it can last up to 10 years).
What documents do I need to submit to apply for registration of my intellectual property (IP) rights with customs?
You need to submit the following documents with an application:
- a copy of your business licence or legal documentation confirming the existence your company (e.g. certificate of incorporation) and a Chinese translation
- a copy of the Chinese registration certificate for the trade mark, patents or copyright (if registered). If you would like to record an international trade mark extended to China, you will also need to lodge the relevant confirmation certificate in Chinese
- Proof of Power of Attorney. A standard form stating the power of attorney is available on the GAC website: http://126.96.36.199/applyrecord
- a registration fee of RMB 800 (as of August 2011)
- Ppictures of the relevant goods and their packaging
- copies of licence agreements related to the registered IP(if any)
How is the customs bond calculated?
The bond depends on the declared value of the seized goods. The required bond amounts to :
- 100% of the declared value if it is less than RMB 20,000
- 50% if between RMB 20,000 and RMB 200,000
- RMB 100,000 if the declared value is over RMB 200,000
If the seizures involve a small amount of goods, a bond may not be required; it will be sufficient to respond to the provisional detention notice confirming that the goods are indeed counterfeit.
How do I pay the customs bond?
The customs bond must be paid within three days from the date in which the notice of provisional seizure of the suspected infringing goods has been received.
It should be paid to the bank account of the local customs that has provisionally seized the goods. Some customs also accept payment in currencies different from Chinese Yuan (CNY) such as USD.
Considering the limited time-frame provided to verify the nature of the seized good and to pay the bond, the swift payment of the customs bond is probably the most burdensome aspect of the procedure.
Do the customs authorities have an obligation to seize goods that they suspect are violating intellectual property (IP) rights? Customs in China have the authority to seize goods without prior requests or notification from a rights holder. In practice however, customs rarely exercises this authority on their own initiative. Generally, customs will only detain goods where relevant rights have been registered with the General Administration of Customs (GAC) or when you apply directly to customs for seizure of a particular shipment (providing very detailed information).
Am I obliged to respond to seizure notices?
No, you are not obliged to confirm a provisional seizure even if you assess that the goods are counterfeits. If you fail to respond to the provisional detention notice, the goods will be released.
It is however highly advisable to respond to all seizures even if involving a small quantity of goods or if destined to markets that may not be that relevant to you.
In fact, not only is it important to actively support the authorities in the protection of your rights, but it should also be considered that the GAC can suspend the recordation of the rights belonging to right owners that have consistently failed to respond to provisional detention notices.
Do I have to act though an agent for recording my rights with customs and administering the customs seizures?
If your habitual residence or place of business is not in China you are required to entrust a Chinese agent to proceed with the recordation of your rights with the General Administration of Customs (GAC).
Your appointed customs agent will then be the contact point for the local customs for all provisional detention notices (the whole procedure is conducted in Chinese) and any other communication related to your recorded rights.
Why is intellectual property (IP) protection through customs important and how can the customs protection be incorporated into my IP protection strategy?
Intellectual property protection through customs is important because it offers you the chance to stop infringements at the geographic source (i.e. China) before they impact on your overseas markets. Information from customs may give you an idea of the level of infringing products leaving China.
Once infringing products leave China to be sold to the world it becomes much more difficult to track infringing goods. As in other countries, customs in China are most effective for protection of trade marks and may also be effective for design patents. Generally customs are less effective for copyright, patent and other technical rights. Ideally customs protection should be incorporated early on into your intellectual property protection strategy. When you are developing your intellectual property rights filing strategy you should keep in mind that once rights have been acquired in China you have the option to register your rights with customs. Registering your rights with customs should form part of your ‘checklist’ of things to do. In addition, the information on detentions or seizures (if any) you obtain from any customs (in China or overseas) should be fed back to China to help you trace the source of the infringement.
With customs the amount of help you get is proportional to the effort you put in. The more information you can provide to customs to help them understand your rights, your products, where they are made and how they are exported the easier it will be for customs to identify suspicious shipments. Customs training can also be incorporated into your intellectual property strategy. To maximise the benefit of a registration with customs, you should consider providing customs with training on how to distinguish authentic from counterfeit products, who authorised exporters are and who known infringers are etc. Customs restricts the number of trainings they accept. You would not necessarily organise the trainings with customs but rather engage a third party such as a consultancy that has developed a relationship with customs to make all the necessary arrangements.
How long does it take to resolve a customs related intellectual property (IP) dispute case? What is the procedure and how much will it cost?
If your intellectual property rights are registered with customs, they may initially detain the goods for three working days to allow you to respond to the customs notification. If you have responded to the notification of detention confirming that the goods in question should be detained, and deposited the requisite bond, customs must initiate and conclude an investigation within 30 days.
Within those 30 days customs will issue an administrative decision confirming whether the goods are infringing or non-infringing.
With the administrative decision, a fine can be imposed against the infringer.
It may also be the case that the customs cannot make a determination (because it may be beyond customs’ technical competence to make a formal decision on infringement – this can often be the case where the intellectual property rights concerned are technical rights, like invention patents).
If customs cannot make a determination, you will have to apply to the appropriate People’s Court for a ruling of infringement and/or property preservation. If you fail to make such an application (within 50 working days of the date of detention) customs will be required to release the goods.
Due to the high volume of seizures, in practice, customs can take longer than 30 days to conclude its investigation and issue the administrative decision; it may actually take six months to a year from the date of detention to the point when an administrative (punishment) decision is issued by the customs authority.
Once the administrative decision is issued and the goods are destroyed (or purchased by the right owner, or given to charity), the bond will be returned to the right owner. The customs will however retain from the bond an amount to cover storage and handling fees.
Bond amount is quite reasonable, although it will strictly depend on the type of goods that have been seized (for example, for high volume goods, the storage fees may be higher than that required for small items).
Therefore, in practice, the costs of an administrative customs procedure will be the storage and handling fees together with the bank fees that you will be required to pay when transferring the money requested as bond.
If you are acting though an agent or law firm, you would also have to consider the service fees required for filing the related documents and assisting you throughout the whole procedure.
What happens to the infringing goods once the administrative decision has been issued?
In most cases the infringing goods are destroyed during a ‘ceremony’ organised by the local customs where the customs gather all the infringing goods seized during a certain period of time.
The infringing goods may also be purchased by the right owner, if so required.
Alternatively, the goods may be given to charity or auctioned (in the latter case, only if the infringing features can and have been removed).