Alert 368 - China - Customs release report on IPR border measures – errant IP owners beware!


The Legal Department of the Chinese Customs General Administration (CGA) circulated a report in June 2010, called the “Notice on Re-Release of Goods under the IPR Border Protection Measures”. The Notice highlights problems created when IP owners who have recorded their IP with Customs fail to respond to reports of suspect shipments or manage information on authorised suppliers. Customs may no longer assist IP owners who consistently do this.

The report notes that Customs ports are encountering two serious difficulties with IP owners who have recorded their IPR on the Customs database:

  1. IP owners are failing to respond to Customs’ notices of suspected infringing goods within the statutory three days deadline. In some cases it is obvious to Customs that the goods are counterfeit; however they must be released if there is no response from the IP owner. The result of this is that Customs officers’ time and efforts are wasted and they are less inclined to detect and report infringements for those rights holders in future.
  2. IP owners are failing to update the list of authorised suppliers (or “white list”) on the CGA database. As a result of this, Customs are regularly detaining shipments from suppliers who turn out to be authorised but not listed as such on the database. This not only disrupts the IP owner’s own supply chain, but also wastes the effort of Customs officers.

The report proposes that if the IP owners regularly fail to respond to detention notices, Customs officers at their discretion may stop reporting to the IP owner any future shipments. Such a measure is actually provided for in Article 16 of the newly amended “Regulations of the Peoples’ Republic of China on the Customs Protection of Intellectual Property Rights”, which took effect on 1 April 2010 (the “Regulations”).

If the IP owner continually fails to respond to reports, or fails to update their “white list” and causes serious disruption to legitimate shipments or to Customs’ normal duties, local ports should report to the CGA, which has discretion to cancel the recordal on the CGA database, a measure which is also provided for in Article 11 of the Regulations.

Once the IP recordal cancelled, the CGA may refuse a re-application for a certain period of time. How long the cancellation would apply before the IP owner can re-file for recordal has not been stipulated however. It has been reported informally by Customs officers that the CGA intends to send a strong message by cancelling the recordal of at least one blacklisted IP owner within the coming months. It was also disclosed by a Customs official that according to internal statistics, approximately 60% of IP detentions reported by Customs turned out to be authorised, which represents a considerable waste of Customs resources.

Attached to the report was a “blacklist” of IP owners who the CGA has already identified as failing to respond to Customs notices or update their supplier list. This “blacklist” will be circulated and updated monthly.

Rouse contacted some Customs officers in different ports about how they intended in practice to treat “blacklisted” companies. Although some ports gave slightly different responses, all confirmed that they would tend to stop reporting to IP owners that are on the “blacklist”.

What should IP owners do?

IP owners should ensure that they are prepared to respond to every report from Customs of suspected infringing shipments, and not simply “cherry pick” cases. Where the detained goods are a very small quantity, IP owners should work to reduce the cost of handling the case rather than simply ignoring the report. Being “blacklisted” brings the risk that they will no longer receive any reports from Customs.

For IP owners who are already on the “black list”, Customs officers simply proposed that the IP owner should immediately re-engage with Customs and start responding actively to Customs reports. They will be removed from the list when it is updated.

IP owners with authorized suppliers should use the CGA IP recordal online database to update their “white list” in real time. Suppliers’ details and authorisation terms can be loaded into the database and amended at any time.

Managing a “white list” of authorised suppliers may still pose challenges for IP owners who source an extensive range of branded merchandise from China, often through intermediaries, which may be shipped from hundreds of different supply sources. However, for most IP owners, there is now a strong incentive to work actively with Customs, manage authorized suppliers and reduce the wasted effort in China’s IPR border protection system.

For more information, contact CustomsGroup-China@iprights.com.