Customs Borders Regulations amended to strengthen protection

On 24th March 2010 the Intellectual Property Customs Protection Regulations were amended by the State Council. The new regulations came into effect on 1st April 2010.

The regulations have proved very effective in tackling IP infringement. Customs is highly proactive and numerous infringing goods have been detained at China's borders over the years. However, inadequacies have been found in the old regulations, and the objective of the amendments is to deal with these loopholes.

Under the former regulations, although rights owners were required to notify Customs of any changes recorded therewith within a certain period, failure to do so attracted no penalties. Now, at the request of the importer or exporter of the detained goods, Customs is empowered to remove the recordal in the event that serious consequences are caused to Customs or to the importer or exporter. However, the regulations do not explain what constitutes serious consequences.

Under the former regulations, if Customs was not prepared to detain suspect goods that were about to be shipped into or out of China, the only way for the rights owner to impound the goods was to apply to the court for an injunction or for property preservation, and to follow up by filing a lawsuit against the importer or exporter for infringement. Under the new regulations, the application may be made before or after the filing of the lawsuit.

The former regulations made no provision for the rights owner to withdraw a border protection application that it had filed with Customs. As a result, Customs could not release the detained goods, even where the rights owner and the importer or exporter had reached an agreement to resolve the dispute. This caused considerable difficulties. The new regulations allow Customs to release the detained goods once the application has been withdrawn.

Under the former regulations, in order to dispose of confiscated goods, Customs could auction them if the goods could not be used for charitable purposes or sold to the rights owner (provided that the infringing features had been removed from the goods). Under the new regulations, where the goods are imported counterfeits, there is no general right to auction and such goods can be auctioned only in special circumstances. However, these circumstances have not yet been exemplified.

The new regulations increase the penalties against individuals who carry or transport an unreasonable quantity of infringing goods. In addition to the goods being confiscated, as set out under the previous regulations, Customs may now impose a fine.