Our Deposit Bank Is a US Bank. Will the General Administration of Customs Accept the L/G Issued by It?
Question: Our deposit bank is a US bank, will the GACC (General Administration of Customs of China) accept the L/G (letter of guarantee) issued by it?
Answer: If your deposit bank has been approved to conduct financial operations in the mainland of China, as per the provisions of the Announcement of the GACC on the General Bond for the Customs Protection of Intellectual Property Rights, the GACC may accept the L/G for the general bond issued by the said bank.
Can an Agency Apply for the General Bond for IPR on Behalf of Its Clients?
Question: We are an intellectual property right (IPR) agency. Can we handle the matter concerning the general bond for customs IPR protection on behalf of my clients?
Answer: Yes. But for the general bond for IPR on behalf of your client, you should first be the agent of the client registered with the GACC for customs protection of IPR, that is, you are authorized by the client to handle on its behalf the registration of the IPR with the GACC and apply to the port customs for detention of the suspected infringing goods.
How to Calculate the Guarantee Amount of the General Bond for IPR?
Question: According to the Announcement of GACC on the General Bond for Customs Protection of IPR, the guarantee amount of the general bond shall be equal to the sum of costs related to warehousing, custody and disposal incurred in the previous year after the IPR holder applied to the Customs for detention of the goods suspected of infringement. How to calculate such amount?
Answer: The said "sum of costs related to warehousing, custody and disposal incurred in the previous year after application to the Customs for detention of the goods suspected of infringement" refers to the total amount of the costs related to warehousing, custody and disposal actually paid by you in the previous year in accordance with the customs notices. For example, if you intend to apply for the general bond for 2007, the guarantee amount of the general bond to be provided should be all the costs paid by you at various port Customs in China throughout 2006. It is worth noting that the costs paid in 2006 may involve the cases settled in 2006 in which the Customs detained the suspected infringing goods in 2005, and may not involve the cases unsettled in 2006 in which the suspected infringing goods were detained in the same year.
How to Understand the Validity Period of the General Bond?
Question: Article 3 of the GACC Announcement on general bond stipulates "The L/G of the general bond is valid from the date on which the guarantor issues the L/G to June 30 of the following year", while Article 4 of the same announcement specifies "From the date on which the Customs approve the IPR holder to use the general bond to December 31 of the same year, the IPR holder is not required to provide bond to the customs when requesting the customs to detain the suspect infringing goods". In the two articles two expiry dates are stated, i.e. "June 30 of the following year" and "December 31 of the same year". What do those two expiry dates mean? What is the relationship between them?
Answer: The first expiry date refers to the date of expiration of the L/G of the general bond, i.e., the period during which the guarantor shall perform the obligations under bond; the second expiry date refers to the period during which the bond matters occur, i.e., the period during which the IP right hold is not required to provide bond separately to the port customs.
The relationship between the two expiry dates: As soon as the GACC approves the application for general bond filed by an IPR holder, the IPR holder is not required to provide separate bond for requesting port customs to detain the suspected infringing goods during the period from the date of approval to December 31 of the year; however, the bank's performance of the obligations under bond as the guarantor is not terminated on December 31 of the year. Because the customs’ investigation and handling of suspected infringing goods detained may be unsettled at the said time, and even on December 31, the customs may detain goods suspected of infringement, it is impossible to calculate costs on warehousing, custody, etc. and collect the corresponding charges from the IPR holder, and it is necessary to extend the period for the guarantor's performance of obligations under bond to the time when the customs settle the case. According to relevant laws and regulations, it takes 6 months for the customs to settle a case from the date when the suspected infringing goods are detained, and therefore, Article 3 of Announcement of GACC No. 31 stipulates that the expiry date of the L/G of the general bond is June 30 of the following year.
Are Revisions Permitted to the Format of the General Bond L/G Annexed to GACC Announcement No. 31?
Question: When we consulted with the bank on the issuance of general bond for Customs protection of IPR, the bank said that it intended to make some revisions to the terms specified in the format of the general bond annexed to GACC Announcement No.31. Will the GACC accept such revisions?
Answer: In principle, as the annex to that Announcement, the format of the general bond L/G may not be revised without authorization. However, if the bank really needs to add or change some words and sentences in the format of the L/G specified by GACC subject to the restrictions of its business practice in terms of issuance of L/G to its customers, in case that the aforesaid addition or changes do not affect the rights and obligations of the parties concerned specified by the Announcement No.31, GACC may accept the said addition or changes to facilitate the use of general bond by more IPR holders. But for prudence, it is recommended that the applicant should consult the IPR Enforcement Office of the Department of Policy & Legal Affairs, the GACC.
If a Subsidiary of an Overseas Company in China Applies to the Bank for Issuing a L/G for General Bond on Behalf of the Overseas Company, Will the GACC Accept Such a L/G?
Question: We are an intellectual property right (IPR) agency. A client intends to entrust us to apply to you for the general bond for IPR protection. The client is an overseas company and domestic banks do not want to issue a L/G to it. The client has a wholly-owned subsidiary in the mainland of China. Will you accept the L/G issued by a domestic bank to its China subsidiary?
Answer: Yes. Applications by the subsidiary of your client to the bank for the L/G of general bond will not affect the performance of obligations under bond by the guarantor toward the Customs.