In May 2016, the General Administration of Customs (“GAC”) and the Public Security Bureau (“PSB”) jointly uncovered large amounts of counterfeit automobile engine lubricants. The lubricants were first sold on e-commerce platforms and then imported into China from Southeast Asia. A successful wide-scale investigation ensued, involving seamless co-operation between Customs, the PSB and the UK authorities. The case was recently chosen by the GAC as the top case of Chinese border enforcement for 2016 (see here – Chinese language), and offers some useful insights for brand owners who want to include Customs actions in their China IP enforcement strategy.
The facts of the case can be summarized as follows: after the discovery of the counterfeit lubricants, the GAC and the PSB jointly set up an investigation group including the Hangzhou, Ningbo, Guangzhou, Huangpu, and Tianjin Customs. These five Customs houses then closely monitored the amount of engine lubricants being imported from a number of flagged South-East Asian countries. Some key results from this joint investigation were:
- 20 enforcement seizures, of which 6 were escalated to the PSB for prosecution;
- Seizure of 80 tons of counterfeit lubricants, valued at c. RMB 9,500,000 (USD 1,447,729);
- PSB and Customs officials closed and destroyed the contents of 5 storage houses holding counterfeit goods, arrested 11 suspects, and seized no less than 110,000 bottles of counterfeit engine lubricants.
What sets this case apart was that both Customs and the PSB mobilized a joint team to handle this case, and that this team was able to seamlessly share information and resources. Why was this case prioritized by the Chinese authorities? We believe this was due to the heavy involvement of the UK authorities (both UK Embassy staff and UK IP Office staff were involved in prioritizing and prosecuting this case), the sheer quantity and value of the counterfeit goods, and the media attention for this case.
This case shows the effectiveness of the various Chinese law enforcement agencies and their ability to work together when the circumstances are right. However, in practice it is often difficult for right owners to get Customs and the PSB to spend adequate resources on cases involving customs seizures. The main lessons from this case are therefore:
- Retain representatives on the ground (either lawyers or specialized employees) who can react quickly and effectively, within the very tight deadlines for customs seizures;
- Record your IP with Customs, so Customs can make ex officio seizures (see our article here)
- Do not just focus on brick-and-mortar counterfeiters, but also monitor e-commerce platforms and actively coordinate with Customs when it is suspected that counterfeits are being imported via a certain e-commerce provider or from a certain location;
- When it is expected that a customs case is high profile or otherwise important (e.g. food or product safety etc.), foreign companies may involve their governmental authorities (e.g. IP attachés, IP Office etc.) to help raise the profile of the case with the Chinese Customs and PSB.
GAC has indicated in their recent publications that , they will be placing more emphasis on international co-operation in conjunction with strengthening domestic co-operation between law enforcement agencies (such as Customs and PRB) going forward (full report here – Chinese language). Hopefully this new emphasis will lead to smoother prosecutions of future Chinese customs cases.
We will continue to monitor these trends and will provide updates when they become available.
See also: “Things you should know about IP Protection by Chinese Customs, see here.