Customs protection of IPRs and compliance guidance in cross-border e-commerce

In recent years, intelligent property (IP) infringement cases in cross-border e-commerce have surged, prompting customs to become a crucial battleground for combating infringement and protecting IP rights.

According to the General Administration of Customs (GAC), the number of batches and quantities of suspected infringing goods seized in cross-border e-commerce has been rising annually.

In this article, the authors provide a brief overview of customs supervision in cross-border e-commerce, key points of customs protection of IP rights, and compliance measures for participants.

Customs supervision

Cross-border e-commerce involves trading entities located in different customs territories conducting transactions through online platforms and completing trade by delivering goods through cross-border logistics.

Participants include e-commerce platforms, payment and logistics companies, cross-border enterprises, and exporters to overseas warehouses.

Currently, the main customs supervision methods for cross-border e-commerce imports and exports include B2C online shopping bonded imports, B2C direct purchases imports, C2C direct mailing imports, B2B direct exporters to overseas warehouses, direct mailing exports, and bonded exports.

In addition, regulations on aspects such as customs supervision of cross-border e-commerce returns and tax policies are continually being improved.

Protecting IP rights

Customs protection of IP rights in cross-border e-commerce follows the Regulations on Customs Protection of IP Rights and its measures for implementation, adhering to the work mode and process based on applications and statutory authority.

Types of protected rights. These mainly include trademark exclusive rights, copyrights and related rights, patent rights, and Olympic and World Expo symbol exclusive rights related to imported and exported goods that are protected by Chinese laws and regulations.

Protection employs two working modes: application-based and statutory authority-based. Under the application-based mode, rights holders apply to customs to detain suspected infringing goods before import or export, providing a sufficient guarantee. Customs detains the goods and decides on further action based on the rights holder’s assertion of rights to the court. If the court issues an execution assistance notice, customs can assist in execution; otherwise, the goods are released.

In the statutory authority-based mode, rights holders pre-file relevant IP with the GAC. If customs officers detect suspected infringing goods during routine customs clearance, they notify the rights holder in writing, allowing the rights holder to decide whether to initiate protective measures.

The main difference between the two modes lies in the statutory authority-based mode’s requirement for rights holders’ pre-filing with customs; who then actively detect suspected infringing goods, notify rights holders, conduct investigations on their application, determine infringement, and enforce administrative penalties and goods disposal.

Customs protection rights and measures. In addition to exercising powers stipulated in article 6 of the Customs Law, customs officers can exercise powers such as IP protection filing review, risk assessment and control of suspected infringing goods based on risk judgement and infringement clues.

They notify rights holders when detecting suspected infringing goods, review protection applications and collect guarantees. Customs officers can detain suspected infringing goods, conduct investigations, impose administrative penalties, and dispose of infringing goods.

To improve interception rates, customs officers also enhance anti-infringement efforts through various measures like leveraging big data, clues and risk assessment. They undertake special actions, co-operate with other authorities for joint enforcement, collaborate with customs in other countries, exchange intelligence, and intensify anti-infringement efforts.

Legal liability for infringement. Once infringement is confirmed, infringing goods are confiscated and a fine of not more than 30% of the value of the goods will be imposed. Starting from 1 January 2024, the Administrative Penalty Discretionary Standards (III) of the Customs Law provides detailed regulations on the sequence and penalty standards for administrative penalties, as well as specific circumstances under which repeated infringement may be subject to heavier penalties.

If the infringement constitutes a criminal offence, customs will transfer the case to the public security branches. In addition to seeking rights protection through customs, rights holders often file lawsuits in court seeking civil compensation from infringers.

Compliance guidance

Focus on risk prevention and control of infringement. Many companies believe that if cross-border e-commerce trade involves low-value goods, customs will pay little attention to detecting infringing goods and impose minimal penalties.

In fact, cross-border e-commerce trade is not necessarily low in value and profit margins; and due to the frequent occurrence of infringement, customs attach great importance to IP protection and crackdowns.

Once a company is found to have infringed, it may not only be subject to administrative penalties but also face a downgraded customs credit rating and cross-departmental joint punishment.

It is recommended that:

• Companies check the filing status of relevant IP with the GAC before importing and exporting;
• Conduct advance review of the trademarks used in goods;
• Require suppliers to provide trademark registration information or authorisation documents; and
• Include clauses in contracts specifying liability for infringement issues.

Enhance awareness of rights protection, making good use of customs and other authority resources. On one hand, rights holders can file for IP protection with the GAC in advance; report infringement clues promptly; strengthen information exchange and key identification training with customs in IP protection; and seek judicial relief as soon as possible after customs seizes suspected infringing goods.

On the other hand, rights holders should also strengthen their awareness of full-chain protection of IP rights. This not only means seizing the opportunity of customs protection in import and export links for timely cutting-off circulation of infringing goods domestically and internationally.

Rights holders can also co-ordinate with customs, market supervision and administration departments, public security branches, courts and procuratorates through joint co-operation to maximise rights protection.

Jia Xiaoning is a senior partner and Ningjing is a senior counsel at AllBright Law Offices.