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HOME > Publications > Professional Articles > What can Customs Protection of Intellectual Property Right do?

What can Customs Protection of Intellectual Property Right do?

Author: Sean Jia & Jing Ning 2022-09-141121

Abstract: At present, it is a general trend for countries to implement stronger protection of intellectual property right (hereinafter referred to as IPR) on the basis of the Agreement on Trade-related Aspects of Intellectual Property Rights. Same as most countries, China Customs undertakes the main duty of IPR border protection. Since 1994 when China Customs was officially granted the duty of IPR border protection by the State, Chinese history of Customs protection of IPR has gone through nearly 30 years. Under the national IPR strategy, China Customs has continued to strengthen the infringement raid and IPR protection in the import and export links, which is a rare opportunity for the right holders to safeguard their rights. Unfortunately, we found that many enterprises had missed the opportunity to safeguard their rights in the import and export links because of their weak awareness of IPR protection or lack of understanding of Customs Protection of IPR. Based on this, let’s take a look at which enterprises need to pay attention to Customs Protection of IPR and what Customs Protection of IPR can do for you.


Key words: Customs protection of IPR, rights protection for enterprises


I. Who needs to pay attention to Customs protection of IPR?


1. IPR holders


IPR holders include domestic and overseas intellectual property rights holders. Domestic IPR holders can stop the import and export of goods infringing upon their own intellectual property rights through Customs to maintain their own brands and enterprise reputation, especially to promote the stability and expansion of overseas markets. Overseas IPR holders can also stop the infringing goods in the import and export links through Customs, prevent the goods infringing upon their intellectual property rights from entering into the sales channels and increasing the cost and difficulty to protect their rights.


NOTE: It is in different ways for domestic and overseas intellectual property rights holders to apply to China Customs for rights protection.


Domestic intellectual property rights holders can protect their rights through China Customs either directly by themselves or by domestic agents, while overseas intellectual property rights holder shall authorize their domestic business offices or entrust domestic agents to protect their rights through China Customs.


2. The consignees of imports and the consignors of exports


The consignees of imports and the consignors of exports shall truthfully declare to Customs the details of intellectual property rights relating to the import and export goods, and submit the relevant supporting documents pursuant to the regulations of the State. Once the imports or exports goods are identified as infringing goods, they need to bear the corresponding legal liability. On the other hand, it is true that a few enterprises use Customs protection procedure of IPR as a means of malicious competition, and there are also cases where the right holders cause losses to the consignees or consignors due to improper means of rights protection. Therefore, whether from the perspective of compliance operation, risk prevention, or preventing malicious competition and safeguarding their own rights and interests, both consignees and the consignors need to be familiar with the requirements and procedures for Customs protection of IPR.


3. Customs declaration enterprises


The consignees of imports and the consignors of exports usually outsource Customs declaration, logistics and other business to related agencies. These agencies are counterparts of Customs administration. Therefore, they should have the awareness and ability of Customs protection of intellectual property rights no matter from the perspective of providing professional services due diligence, or accepting Customs supervision and undertaking the duty of reasonable care as counterparts of administrative management.


In addition, Administrative Provisions of the Customs of the People’s Republic of China on Record-filing of Customs Declaration Entities (GAC Decree No.253) came into force on January 1, 2022. The Provisions removes the prohibition on the dual identity of a Customs broker and a consignee of import or consignor of export, which means that an enterprise can be registered as both at the same time, thus providing policy support for enterprises to expand their business areas. However, it should also be noted that this also puts forward higher requirements for compliance management of enterprises, including Customs protection of intellectual property rights and risk prevention and control.


4. Inbound or outbound passengers, the sender and receiver of mail


This involves the Customs Protection of IPR in postal channels, which is mainly based on Article 31 of the Measures of the Customs of the People’s Republic of China on Implementation of the Regulations of the People’s Republic of China on Customs Protection of Intellectual Property (hereinafter referred to as the Measures): “Where the Customs discovers that articles carried by individuals or posted into and out of China are suspected of infringing upon intellectual property rights stipulated in Article 2 of the Regulations and exceed self-consumption or reasonable quantities, the Customs shall detain the articles, except where the tourist or sender or recipient renounces the articles to the Customs and obtains the consent of the Customs.”


In terms of penalties, the seized articles shall be confiscated by Customs if they are deemed as infringing goods after investigation. Where the parties concerned are unable to be ascertained, the Customs may confiscate after three months from the date of the relevant announcement made by the Customs.


Therefore, a passenger entering or leaving the territory of China or the sender and receiver of mail needs to learn about the regulations regarding Customs protection of IPR, so as to avoid inconvenience in travel or loss caused by carrying or posting infringing articles.


5. Other Customs supervised enterprises related to import and export business


Domestic processing enterprises. Under the background of global economic integration, it is common for domestic processing enterprises to take orders from overseas companies, manufacture products according to specified brand requirements and export to earn processing fees. This brings up whether foreign-related OEM constitutes infringement, which is a difficult issue in the current Customs enforcement regarding intellectual property rights. And there are no specific regulations at present. In practice, the court’s rulings on this issue is also inconsistent with great differences and changes. Generally speaking, it is necessary to evaluate the domestic and foreign trademark registrations, the agreement and implementation of OEM contracts, and the trademark disputes involved in specific case. When taking orders, domestic processing enterprises had better consult a professional lawyer on intellectual property issues, so as not to be sued due to suspected infringement, the loss outweights the gain. As for Customs protection of IPR in foreign-related OEM, we will discuss it in the future.


Enterprises related to new business forms. At present, cross-border e-commerce is booming. While the State has issued policies to support and accelerate the development of cross-border e-commerce, it also requires Customs and other competent departments to strengthen law enforcement and supervision, and resolutely crack down on all kinds of illegal acts in cross-border e-commerce. Therefore, enterprises related to new business forms such as: cross-border e-commerce enterprises and foreign trade comprehensive service enterprises also need to pay attention to Customs Protection of IPR.


II. What is Customs protection of IPR?


1. the definition of Customs protection of IPR


The Customs of the People’s Republic of China is the State organ responsible for the supervision and administration of entry into and exit from the Customs territory. Since 1994 when China Customs was granted the duty of IPR border protection by the State, it has already been one of the statutory duties of China Customs.


According to Article 2 of Regulations of the People’s Republic of China on Customs Protection of Intellectual Property Rights: Customs protection of intellectual property rights shall mean the protection implemented by the Customs on the trademark rights, copyrights, copyright-related rights, and patent rights (hereinafter referred to collectively as the “Intellectual Property Rights”) in respect of the imports and exports under the protection of the laws and administrative regulations of the People’s Republic of China.


NOTE: In this note, border protection of IPR, IPR protection of Customs and Customs protection of IPR are synonymous.


2. Customs protects part of intellectual property rights in import and export links


Intellectual property rights protected by Customs in import and export links include the right to the exclusive use of trademarks, copyrights and copyright-related rights and patent rights mentioned in Article 2. And the exclusive rights of Olympic logo and exclusive rights of Expo were added thereafter. In other words, according to China’s existing regulations on Customs protection of IPR, Intellectual property rights protected by Customs in import and export links include the right to the exclusive use of trademarks, copyrights, copyright-related rights and patent rights, the exclusive rights of Olympic logo and exclusive rights of Expo logo.


3. Whether other intellectual property rights protected in China will be included in the scope of Customs protection is under discussion


In terms of questions like whether other IPR types, such as geographical indications, new varieties of plants and layout design of integrated circuits, will be included in the scope of Customs Protection of IPR, the author’s team is entrusted by the General Administration of Customs to carry out research on the subject of revising Regulations of the People’s Republic of China on Customs Protection of Intellectual Property Rights, and relevant issues are in the legislative demonstration.


4. Example of Customs protection of IPR


Shatian Customs, subordinate to Huangpu Customs, found that the surface of a batch of track lights declared for export by a company was bearing “OSRAM” mark. According to the label of the goods on site, as well as the analysis of the goods of the same brand found in the earlier stage, the inspectors believe that the goods were highly suspected of infringement. According to the confirmation of the right holders, 1,700 pieces of track lights were suspected of infringing OSRAM Co., Ltd.’s rights to the exclusive use of the trademark recorded with GAC. At present, Customs has detained the goods and handed them over to the disposal department, and the case is under further handling.


(From WeChat official account “Customs Release” - January 3, 2021)


Combined with the introduction of this part, let’s see whether the aforementioned case can be included in the scope of Customs Protection of IPR according to the following steps:


--The suspected infringing goods were inspected in import and export links, within Customs authority.

--The suspected infringing goods are exported goods, which is obviously related to import and export goods.

--The suspected infringed intellectual property right is the right to the exclusive use of trademarks, and belong to one of the IPR protected by China Customs.


In conclusion, it is in line with the concept of Customs protection of IPR and is a typical case of Customs Protection of IPR.


III. What can Customs protection of IPR do for you?


1. Official powers that Customs can exercise in IPR border protection


As mentioned above, Customs Protection of IPR is one of the statutory duties of China Customs, the power conferred on the Customs by Article 6 of the Customs Law (see the extension of knowledge 1) can naturally be exercised in accordance with the law in Customs Protection of IPR. In addition, Customs may also exercise the following powers while fulfilling the duties of intellectual property protection:


--Filing a recordal

--Notifying the right holders to confirm whether the goods constitute infringement

--Reviewing the application submitted by the right holders and receiving the guarantee

--Detaining the suspected infringing goods

--Under the mode of Ex officio Protection


Carry out an investigation and determination of whether the detained suspected infringing goods infringe upon the IPR


Impose administrative punishment decision


If the infringement is unable to ascertain, and the written notice on assistance in detention is received from the court within the prescribed time limit, Customs shall render assistance; otherwise, the Customs shall release the goods.


-- Under the mode of Protection on Request


If the written notice on assistance in detention is received from the court within the prescribed time limit, Customs shall render assistance; otherwise, the Customs shall release the goods.


-- Transferring to the competent department


For example, those infringing acts which are suspected of a criminal offence shall be transferred to public security department


-- Disposal of infringing goods

-- Return the security deposit to the IPR holder or lift the security liability


2. What can Customs do for you in IPR Protection?


Three tips for enterprises

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(1) The Customs will take the initiative to protect the recorded intellectual property rights for you and reduce the cost for rights protection.


If you want Customs to take the initiative to protect your IPR, you shall file IPR with the GAC in advance. So, what’s the advantage of initiative Customs protection for you?


First, it can greatly reduce the cost of rights protection. Initiative protection is also called “ex officio protection”. Under this mode, the maximum amount of Customs guarantee submitted by the right holders to Customs is no more than CNY 100,000. While the intellectual property rights have not been filed with Customs, the right holders must submit the guarantee equivalent to the value of the detained goods.


Second, filing a recordal can help to improve the seizure of infringing goods. The filing enables Customs to grasp a lot of intellectual property rights information in advance, which makes it more convenient for Customs to control risks in daily supervision and improve the seizure rate of infringing goods.


Third, filing a recordal can help enterprises save time from relevant administrative procedures. Filing a recordal means to submit the supporting documents and information related to intellectual property rights to Customs in advance, which saves the efforts for Customs to understand from the beginning and make preliminary judgment in the process of Customs clearance. In this regard, enterprise can take the preemptive in real-time Customs clearance. Moreover, under the mode of ex officio protection, holders of the right to the exclusive use of trademarks can also apply for the general guarantee of intellectual property protection, so there is no need to pay the Customs guarantee separately, so as to improve the efficiency of rights protection.


Tips 1: Filing a recordal can help to make the best of Customs protection of IPR.


(2) It can directly crack down and stop infringements and prevent infringing goods from entering into the sales market.


Once the suspected infringing goods detained by Customs are deemed as infringing goods after investigation, the infringers shall bear one or all of the following legal liabilities according to the specific circumstances:


--Administrative liability. Where the infringement is determined by Customs, Customs shall confiscate the infringing goods and impose a fine of no more than 30% of the value of the goods.

--Civil liability. The intellectual property rights holders may bring an action to the court to require the infringing enterprises to undertake civil liability and compensate for the losses caused by the import and export of infringing goods.

--Criminal liability. Where it is suspected to constitute a criminal offence, it should be transferred to PSB for handling.


Tips 2: From the perspective of the national intellectual property strategy and the existing practice in the field of intellectual property legislation, it is the trend to impose more severe punishment on infringement.


(3) Cross-departmental and cross-regional joint prevention and control can crack down and stop infringements to the maximum extent.


China is promoting the whole-chain protection of intellectual property rights. At present, the whole process of handling intellectual property cases by Customs has been paperless and traceable. The regional Customs in Pearl River Delta, Yangtze River Delta and Beijing-Tianjin-Hebei Region have carried out close law enforcement cooperation, and have continued the cooperation with Customs of Europe, the United States, Russia, Japan, South Korea and other countries and regions under the existing framework of intellectual property protection cooperation, so as to further improve the international network of combating cross-border infringement and illegal activities. Under this background, the right holders can seize the opportunity of Customs Protection of IPR in the import and export links, and Customs can carry out cross-department and cross-regional joint law enforcement through information sharing with the competent departments of intellectual property, PSB and courts, so as to maximally crack down and stop the infringement.


Tip 3: The Custom’s system for the administration of enterprise credit can be used to deter and punish the infringing enterprises, so as to minimize the possibility of engaging in infringing activities again


Extension of knowledge


1.Rights that Customs can exercise


Pursuant to Article 6 of the Customs Law (Amended in 2021), Customs may exercise the following rights:


(1) inspect inbound and outbound means of transport and examine inbound and outbound goods and articles; where a violation of this Law or other relevant laws or administrative regulations occurs, any offending items may be held in custody;


(2) examine the papers of persons entering or leaving Chinese territory; interrogate those suspected of violating this Law or other relevant laws or administrative regulations and investigate their illegal activities;


(3) examine and duplicate contracts, invoices, account books, bills, records, documents, business correspondence and telegraphs, audio and video recordings and other material related to inbound and outbound means of transport, goods and articles; where the means of transport, goods and articles which enter or leave Chinese territory are involved in a violation of this Law or other relevant laws or administrative regulations, the relevant materials may be withheld;


(4) within the jurisdiction of Customs supervision and designated coastal or border areas near the Customs office, inspect means of transport suspected of being used for smuggling and places suspected of concealing smuggled goods and articles, and search the bodies of persons suspected of smuggling; means of transport, goods and articles suspected of being involved in smuggling or persons suspected of being involved in the crime of smuggling may be detained subject to the approval of the head of the direct supervising Customs office or the head of the authorized subordinate Customs office; for persons suspected of criminal smuggling the term of detention shall not exceed 24 hours, but may be extended to 48 hours in special circumstances.


When investigating cases of smuggling in areas other than the Customs supervision and administration zone and designated coastal or border areas near the Customs office, Customs may inspect means of transport suspected of being used for smuggling and places suspected of concealing smuggled goods and articles except where they are the residences of citizens, and the parties concerned shall be present, subject to the approval of the head of the directly administered Customs office or the head of the authorized subordinate Customs office; where the parties concerned are not present, but there is a witness present, an inspection may be carried out; and where there is evidence showing that the means of transport, goods and articles are suspected of being involved in smuggling, they may be withheld.


The range of designated coastal or border areas shall be determined by the General Administration of Customs and public security departments of the State Council in conjunction with the relevant provincial people’s government.


(5) when investigating cases of smuggling, inquiries may be made into the deposits into and withdrawals out of financial institutions and postal service enterprises by suspected units or suspected persons, subject to the approval of the head of the directly supervising Customs office or the head of the authorized subordinate Customs office.


(6) when pursuing means of transport which or persons who have defied and escaped from Customs supervision and administration, Customs may continue the chase beyond the Customs supervision and administration zone or the designated coastal or border areas near the Customs office, so that they can be seized and brought back to be dealt with.


(7) a Customs office may be provided with weapons in order to exercise its functions and powers. The regulations governing the carrying and use of weapons by Customs officers shall be formulated by the General Administration of Customs in conjunction with the public security departments of the State Council and submitted to the State Council for approval; and

(8) other powers which Customs may exercise as stipulated by laws and administrative regulations.


2. Custom’s System of Administration of Enterprise Credit


In the supervision, Customs will apply different administrative measures according to the enterprise credit. The general principle is to “praise honesty and punish dishonesty”. The higher the enterprise credit grade is, the more preferential and convenient measures it enjoys. Administrative punishment for infringement may lead to the downgrading of the infringer’s enterprise credit in Customs. Once the credit grade is lowered to the level of dishonest enterprise, it will be subject to severe disciplinary measures. The legal consequences of dishonest enterprises are all-round and multifaceted. Serious adverse consequences will not only happened to them in the supervision of Customs, but also in the supervision of many China government departments and relevant organizations, such as taxation, banking, industry and commerce. The corresponding loss assessment is not only singular and tangible economic loss, but also intangible loss such as corporate reputation, planning and development.


Conclusion


1. At present, China is promoting the whole-chain protection of intellectual property rights, of which Customs protection of IPR is an important part. Both the right holders and the consignee of import or the consignor of export need to learn about what they can do through Customs protection of IPR, so that they can protect their rights or carry out risk prevention and control from the perspective of the overall interests of the enterprise or even the group.


2. At present, the whole process of handling intellectual property cases by Customs has been paperless and traceable. The right holders can seize the opportunity of Customs Protection of IPR in the import and export links, and Customs can carry out cross-department and cross-regional joint law enforcement through information sharing with the competent departments of intellectual property, PSB and courts, so as to maximally crack down and stop the infringement.


3. Apart from the right holders and the consignee of import or the consignor of export, this note also sorts out other relevant entities who need to pay attention to Customs protection of IPR. And we highlights the way of how to make the best of Customs resources to protect rights with tips.