On July 1, 2006, the General Administration of
Customs ("GAC") issued the Announcement of the General Administration
of Customs No. 31. Ever since then, the intellectual property holder
may provide general security to the GAC in the process of implementation
of Customs protection of intellectual property rights in China.
The holder of IPR may apply for and provide the general security who
has requested the Customs many times within a certain period of time
to detain the imported and exported goods suspected of infringing
over the exclusive right to use the trademarks recorded at the GAC.
When applying for the general security, the holder of IPR should submit
to the GAC an application in writing accompanied with the following
documents:
1. The general security letter issued by the
bank, as warrantor, that is authorized to conduct financial business
in the Mainland China, in that the bank undertakes related liabilities
for the holder of IPR applying for the general security.
2. The list of the payments of the expenses of warehousing, maintenance
and disposal of the suspected infringing goods incurred after detained
by the Customs during the preceding year.
The general security letter issued by the warrantor is valid from
the date of issuance till June 30 of the coming year. The period defines
the term during which the warrantor shall undertake the security responsibility.
On one hand, the amount of the general security should be equivalent
to the aggregation of the expenses of warehousing, maintenance and
disposal of the suspected infringing goods incurred after detained
by the Customs at the request of the holder of IPR during the preceding
year. For example, if the holder of IPR provides the general security
in the year 2007, the amount should be the aggregation of the total
expenses of warehousing, maintenance and disposal of the suspected
infringing goods in each of the Customs ports across China in 2006.
On the other hand, if the holder of IPR did not request the Customs
detention of any suspected infringing goods or the holder of IPR did
request for the Customs detention but the payments of the expenses
of warehousing, maintenance and disposal of the suspected infringing
goods are less than 200,000.00 RMB, the amount of the general security
will be fixed as 200,000.00 RMB.
The holder of IPR does not need to provide security during the period
from the date when the GAC approves to use the general security to
December 31 of the same year, when requesting the Customs detention
of the suspected infringing goods. The period defines the term the
holder of IPR does not necessarily provide additional security to
the Customs port when the issues and incidents arise within the scope
of the general security.
Once the IPR holder's application for general security is granted
by the GAC, the holder of IPR does not need to provide separate security
when requesting the Customs port to detain the suspected infringing
goods during the period from the date of the grant till December 31
of the same year. While as a warrantor, the bank's security responsibilities
do not terminate by the December 31 of the year. The reason is that
the Customs may have not yet completed the investigation and treatment
of the suspected infringing goods at this point; furthermore, the
Customs may even detain the suspected infringing goods on the very
date of December 31 of the same year. As a result, it is not possible
for the Customs to calculate the expenses of warehousing, maintenance
and disposal of the suspected infringing goods and notify the holder
of IPR. Therefore, the term for the warrantor's security responsibility
should be extended till the closing of the case. Also, according to
relevant laws and regulations, it may take about six months for the
Customs to close a case from the date of the Customs detention of
the suspected infringing goods. That is why the validity of the general
security letter lasts till June 30 of the next year.
However, the holder of IPR shall pay the expenses of warehousing,
maintenance and disposal of the suspected infringing goods. The holder
of the IPR shall undertake civil liabilities of compensation if the
holder commits improper request of the Customs detention and has caused
losses to the consignor and/or consignee.
The GAC may notify the warrantor in writing, requesting the warrantor
to pay the items of expenses that do not exceed the security within
10 working days, if the holder of IPR commits one of the followings,
1. The holder of IPR fails to pay to the Custom port the expenses
of warehousing, maintenance and disposal of the suspected infringing
goods within 10 working days from the service of the Customs notification;
2. The holder of IPR fails to carry out the compensation liabilities
and the people's court has requested the Customs to enforce relevant
judgment during the validity of the general security letter.
The holder of IPR shall provide security simultaneously from the date
when the GAC sends notification to the warrantor to carry out the
responsibility of security.
If the IPR holder is a foreign entity, the Chinese subsidiary thereof
can apply for issuance of the general security letter in the name
of the subsidiary with the bank, and this shall not affect the performance
of the security responsibility by the warrantor.
A Chinese IPR agency can represent their clients in applying for the
general security as long as the agency has been made on the Customs
records as the agent of the Customs protection, in that, the agency
has been authorized by the holder of the IPR to handle the Customs
recordation of IPR and request to the Customs ports for detention
of the suspected infringing goods.
