Top Tips and Advice for Brand Owners to Get the Best Out of Their Relationship With Customs

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One good product is better than many fake goods

Lailah Gifty Akita

In the burgeoning wave of technological advancements and the globalisation of market access, numerous developing and developed nations have reaped substantial benefits. However, this meteoric rise has ushered in a surge in unregulated market forces, thereby providing fertile ground for the insidious proliferation of counterfeit, pirated, illegal and fake goods. Among the nations grappling with the repercussions of this unsettling trend, India, nestled alongside its Asia-Pacific counterparts, bears the brunt of these nefarious market dynamics. Presently, the Indian economy finds itself ensnared in an ongoing battle with growing intellectual property (IP) infringement challenges – wherein approximately 25–30 per cent (Source: Livemint) of products sold in India are counterfeit.

Markets in India wherein most of the counterfeit products are found

(Source: India TV, YouTube)

Legitimate businesses are experiencing a significant decline in sales, profits and reputation due to the proliferation of infringing and counterfeit products. These inferior imitations not only fail to meet the high standards of luxury goods but also leave customers dissatisfied with the original product. The industries most affected by this scourge include footwear, clothing, accessories, pharmaceuticals and medical products, cosmetics and electronic devices. Surprisingly, the World Customs Organization’s Illicit Trade Report of 2022 reveals that counterfeit accessories were the most frequently seized, with over 17,300 cases containing an estimated 3.55 million pieces, followed by clothing, with around 12,200 cases with 2.7 million pieces. The Forbes Report of 2022 further highlights the staggering value of global counterfeit products sold annually, estimated to be between US$1.7 trillion and US$4.5 trillion. This illicit activity has caused numerous high-end companies and global players to suffer significant losses in their operations, tarnishing their reputation and undermining their brand value.

Categories of products seized worldwide in 2021–2022

(Source: World Customs Organization, Illicit Trade Report, 2022)

As the global economy continues to flourish, the customs departments of nations across the world have assumed a pivotal role in safeguarding the interests of IP holders against counterfeiters and infringers. This is a boon for IP holders, as there is no more efficacious means of protecting their valuable IP than by intercepting and confiscating illicit goods at the border itself. For instance, the Mercedes-Benz Intellectual Property Competence Centre works in close collaboration with various law enforcement agencies worldwide, including customs departments, to thwart the nefarious activities of counterfeiters and infringers who seek to peddle spurious products in the market. Recently, the United States Customs and Border Protection seized a cache of shoes and purses that were found to be counterfeit products of prestigious brands such as Chanel, Louis Vuitton and Hermes, with the total value of the confiscated items exceeding US$700,000.

In accordance with the border protection measures outlined in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), holders of IP rights can get the cooperation of the relevant customs department to seize goods at the border and forestall their release into the market. As a signatory to the TRIPs, India is obliged to take decisive measures against any goods that contravene the regulations of international commerce. In light of this, and with the utmost regard for the protection of IP rights in India, the government of India has meticulously formulated the requisite laws.

Role of Indian customs office in IP enforcement in India

The government of India has repeatedly taken significant measures to reduce the influx of fake, pirated, illicit and counterfeit products into the Indian market and the curb growth of the grey market. One of the most significant steps taken by the Indian Customs Office (ICO) was to implement the Customs Recordal System to further its objective of preventing the cross-border circulation of counterfeit and infringing goods. Apart from this, the ICO has also introduced ICEGATE (Indian Customs Electronic Gateway), which is an interface between the ICO and the trade users for exchanging information and provides e-filling services to the cargo carriers and other trading partners. This interface has more than 160,000 thousand registered users serving more than 1.25 million importers and exporters.

The ICO, through the customs recordal platform, offers IP holders to directly notify customs authorities about both original and infringing products, which enables the customs authorities to identify the counterfeit and infringing products and take appropriate action. To facilitate this, the e-portal for customs registration in India provides various advanced features for the IP holders that allow them to upload and update photographs of the original as well as the counterfeit and infringing products, the distinguishing features and characteristics of the original product and any infringement to the jurisdictional officers.

To prevent the importation of counterfeit and low-quality products into India, IP owners are encouraged to record their IP rights with the ICO to monitor and confiscate them. This can be done in accordance with the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 and the Customs Act 1962, which serves as a safeguard for brand owners. Further, the relevant provisions allow for the detection and disposal of infringing and counterfeit goods at the border. Under the customs recordal, an electronic application is required to be filed with the ICO along with the necessary documents and information on the Indian Customs IPR Recordation Portal – www.ipr.icegate.gov.in. In this regard, except for patents, all other IP such as designs, copyrights, trademarks, copyrights and geographical indications can be registered with the ICO. Once the goods have been seized, they are typically communicated to the legitimate IP holders for review. Substantial fines are imposed on those who facilitate the importation of such counterfeit products. If the goods are identified as counterfeit or violate the IP rights of the proprietor, they are destroyed (for trademarks and designs) or transferred to the IP holders if desired (for copyright).

Further, it is pertinent to mention that the IP holder only has to apply for a single customs registration with the ICO for the relevant IP, based on which the ICO provides the benefit of broader protection in India across multiple commercial ports.

In addition, the ICO can also suspend or detain the clearance of goods on their own motion and even without the IP holders recording their rights with the ICO, if they have a bona fide reason to believe that imported good are infringing the IP rights of an IP holder. In such cases, the IP holders are required to register their rights with the ICO within a period of five days, failing which the suspension shall be cancelled. Goods that are imported for personal use and that are non-commercial in nature contained in the personal baggage or in small consignments are not subjected to the Indian Customs Rules.

In the present context, many high-end brands including Casio, Giorgio and Armani have collaborated with the ICO to identify and destroy alleged infringing and counterfeit products. In recent times, the ICO has actively enforced and protected the rights of various legitimate IP holders. For instance, in 2015–2016, the Anti-Smuggling Unit of Customs in Mumbai seized over 100,000 fake and counterfeit luxury goods. In 2017, the ICO seized about 12,000 counterfeit shoes in Chennai, which were supposed to be sold under well-known international brands such as Nike, Adidas and Reebok. According to the 161st report on Review of the IPR regime in India, in 2019, there were close to 187 seizure cases registered by ICO, with a value of around US$2.7 billion. In 2022, the Indian Ministry of Finance published an article in which it was found that cigarette packets containing 3.02 million sticks under the brands 'Gold Flame', ‘Fun Gold’ and 'Gold Clock' were seized by the ICO. Few representative photographs of counterfeit goods are provided below.

Source: Nyka

Original product third from left

Original product third from left

Source: Magzter

Further, the ICO has recorded the following number of cases for commercial fraud and outright illegal goods for the years 2020–2023. Also, the following number of arrests was undertaken by the ICO for the years 2020–2023.

YearCommercial fraudsOutright illegal goodsNumber of people arrested
2020–21276
(worth about US$252 million)
39
(worth about US$199 million)
27
2021–22323
(worth about US$335 million)
38
(worth about US$288 million)
26
2022–23391
(worth about US$187 million)
13
(worth about US$205 million)
17

Advantages for IP holders with customs protection

  1. Preclude counterfeit and infringing goods from entering the market: the confiscation of counterfeit and infringing goods with the ICO is highly advantageous to IP holders, as it effectively eradicates the source of infringement, thereby preventing the availability of such products to the discerning public. Once the counterfeit and infringing goods infiltrate the market, it becomes an arduous task for the IP holders to track and confiscate them. Moreover, the detrimental impact of these counterfeit or infringing goods can be averted, not only in terms of financial losses, but also in terms of the esteemed reputation and goodwill of the IP holders. This, in turn, ensures that the demand for their exquisite products remains steadfast in the market.
  2. Cost efficiency and time saving: the detection and confiscation of illicit and spurious merchandise by the ICO would lead to a considerable conservation of valuable time and resources for the IP holders. This would effectively preclude them from embarking on any other arduous forms of IP enforcement, such as initiating legal proceedings, conducting market raids and lodging police complaints. Furthermore, the exorbitant expenses and laborious efforts involved in investigating and tracing the counterfeit products can be averted, thereby saving a significant amount of both time and money.
  3. Identifying the source of the problem: having registration with the ICO also helps in identifying the source from where the counterfeit and infringing goods are entering into India, which will further enable the IP holders to strategise and take appropriate anti-counterfeiting actions in relevant jurisdictions. Custom officials may also be in a position to provide valuable information about the entities and individuals involved in the production and distribution of the infringing and counterfeit goods.
  4. Proactive steps of the ICO: to safeguard the rights of the IP holders, the ICO can even take suo moto action by suspending or detaining the clearance of goods (where ICO have bona fide reason to believe that the products are infringing or counterfeit) – without the IP holder recording their rights with the ICO. However, to enable the ICO to take swift and conclusive action, it is recommended to have a customs registration.

Recommendations to strengthen relationships for customs protection

Considering the immense advantages, IP holders can consider collaborating with ICO for effective protection of their brands and other original work from counterfeits and infringers. In this regard, the IP holders may consider the following steps.

  1. Proactively registering and recording of IP rights with the ICO, would be of paramount importance for the IP holder. This facilitates ICO to keep track of data on the entry of counterfeit and infringing goods into India.
  2. IP holders can regularly provide a detailed guide for product identification to the ICO and officials to help identify the original products and their distinctive characters – by providing the images of the same, an accurate description of the original product and a detailed explanation on how to differentiate the original product and the counterfeit and infringing products – including through pricing and certifications.
  3. IP holders should also conduct specific meetings/trainings/seminars on a periodic basis with ICO and the authorities to give them an overview on possible routes of a counterfeiter or infringer, updates on the identification of genuine products and on any information on the counterfeit or infringing goods that is known to the IP holder or their local counsel or representatives.
  4. Active participation by IP holders in the proceedings can help determine the nature of the imported goods and determine if the same are infringing the IP holder’s rights. Cooperation in a timely manner may result in faster action and resolution.
  5. It is also pertinent for the IP holders to get acquainted with the local laws relating to customs protection and enforcement and IP rights, which would enable them to have better coordination with the ICO and customs authorities in India. In this regard, the IP holders can also consult local attorneys and experts in India for a better understanding.

Conclusion

Given Indian conditions, protecting IP rights against counterfeit and infringing products can be extremely difficult for IP holders. However, by proactively coordinating with the ICO, following the above recommendations and building strong partnerships (with ICO and local attorneys and experts), IP holders can significantly restrict and curb infringing activities and nip them in the bud. These recommendations are both effective and simple to implement – thus providing comprehensive protection for the rights of the IP holders.

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