Practical guidance on China customs enforcement of Intellectual Property Rights

China customs enforces Intellectual Property Rights (IPR) at the border based on the Regulations of the People’s Republic of China on Customs Protection of IPRs (the Regulations). IPR holders can register their rights in the Customs IP Protection System, and Customs will inspect imported and exported goods on its own initiative (ex officio) or upon request by IPR holders on the suspicion of counterfeiting. However, due to the weak awareness of this enforcement option, many companies often miss the opportunity to safeguard their rights. Understanding how China’s Customs IP Protection System works, what it can do for IPR holders, licensees of IP, as well as original equipment manufacturing (OEM) producers and their customers, will help companies mitigate losses to their IP.

What types of IPR can be protected?

According to the Regulations, the IPRs protected by China customs are:

• trademarks
• copyrights
• copyright related rights
• patent rights

These are consistent with protections afforded by Chinese laws and regulations covering IPRs. More information about protected IPR in China, please visit “Protecting your intellectual property in China”.

Copyright registration in China is voluntary, but since registration certificate is requested in the customs registration process, copyright holders need to register their copyrights before file applications in the Customs IP Protection System.

Who can apply for Customs IPR registration?

Only the owners of the trademark, patent, copyright and its related rights can apply to Customs to register their IPRs, or apply for Customs enforcement.

Licensees of IPRs are not qualified to register the IP rights in their own names. They have to be authorized by the licensors as representatives to register the rights in the names of the licensors.

Foreign holders of Chinese IPR need to designate a domestic individual, legal entity or other organization (e.g. the representative office of a foreign company) to file the application.

At the filing stage, the IPR holders provide the information about the goods, place of production, manufacturers, and importers and exporters in the system to help Customs identify infringing goods. If there are known infringers, they can be added to the system at the time of application or at a later date.

How does the Customs IP protection system work?

Once the Customs IP protection registration is completed, the Customs’ investigation and enforcement can be triggered in two ways, by the application of IPR holders or ex officio.

By application: if the IPR holder suspects infringing goods, application can be submitted to Customs to detain the goods by providing a guaranty covering the value of the goods, costs of warehousing and, potentially, eventual disposal. If the Customs unable to determine infringement, the IPR holder has 20 working days to obtain court order to preserve assets, or other such order, pending an investigation or legal action. Failing this, the goods will be released. Therefore, IPR owners need to ensure strong evidence to help Customs determine the nature and extent of infringement, and to avoid delays and expenses in bringing the case to the court.

Ex officio: if Customs initiate the case, it will inform the IPR holder once the suspected infringing goods are found. The right holders have three working days to decide whether they want to file application for detention and provide a financial guaranty. Similar to the investigation by application, if Customs is unable to establish infringement through its own investigation, the IPR holder may petition the court for an order to hold the goods. The time limit to obtain a court order in this case is 50 working days from the day the goods are detained.

Enforcement applications by IPR holders can be made with or without prior registration with Customs IP Protection Systems. However, ex officio enforcement can only take place with prior registration. The burden of proof of infringement lies with the IPR holder. For practical purposes, the IPR holder should also provide to Customs detailed information about shipments in question.

What are the consequences of Customs enforcement?

If the consignee or consignor of the suspected infringing goods can provide a counter guaranty for the value of the goods, the Customs can release the goods based on the consignee or consignor’s application.

Once the infringement is confirmed, the Customs will confiscate the infringing goods and inform the IPR holder in written form.

Where the confiscated goods can be used for charity purpose, the Customs shall transfer them to relevant institutions; if the IPR holder has the intention to purchase, the Customs may sell the goods to the IPR holder. If the confiscated goods are unable to be used for charity and the IPR holder has no intention to purchase, the Customs may auction them after the infringement features have been removed (e.g. logos), but this does not apply to imported counterfeiting goods. If none of the aforementioned disposal methods are available or if the infringement features cannot be removed, Customs will destroy the infringing goods.

Key takeaways for Canadian companies:

• IPR holders are encouraged to register their IP rights in the China Customs IP Protection System. The registration takes 30 working days, and is free of charge. Use of third parties to complete registration may incur service fees.
• Foreign IPR holders are not able to register directly and must use a China-based representative.
• The website of China Custom’s IP Protection System (under IP section) provides step-by-step instructions. Registration information should be updated regularly in order to provide the most accurate information to Customs to enforce IP holders’ rights.
• Licensees of IP rightsshould:
  • clarify with the IPR holders the IP registration status in China to make sure they are working with the protected IPR holder
  • ensure inclusion in the Customs registration as authorized user of the IP by the IPR holder
  • declare the details of IP rights related to the imported and exported goods to avoid potential detention of the goods
  • respond in a timely fashion to any allegation of infringement and detention of goods. There is no single standard about the time of for response to Customs actions. Different Customs offices may have different deadlines. 
  • work with qualified professional counsel to address any allegations of infringement.
• Companies sourcing from OEMs in China are encouraged to register their IP in China, even if they don`t sell in the Chinese market in order to avoid potential detention of goods.
• Choose an experienced Customs broker that enjoys a high rating from China Customs.

Businesses should always seek professional legal advice on IP protection issues in the People’s Republic of China. The Canadian Trade Commissioner Service can provide a list of IP and law firms.

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