Meaning
Financial guarantees provided by a party whose goods have been detained by customs allow for the temporary release of those goods while an intellectual property dispute is pending. Customs ip counter-security deposits function as a safeguard under the Regulations of the People’s Republic of China on Customs Protection of Intellectual Property Rights to prevent excessive commercial loss during litigation. When the General Administration of Customs detains cargo based on a request from a rights holder, the owner of the goods can request release by posting a bond equal to the value of the shipment.
This mechanism is only available for suspected patent infringement and does not apply to counterfeit trademarks or pirated copyrights. The deposit ensures that if the goods are later found to be infringing, the rights holder can be compensated from the funds. It also protects the importer from the decay or obsolescence of their products during a lengthy court battle.
If the rights holder does not file a lawsuit within a specific timeframe after the detention, the deposit is returned and the goods are permanently released.
Eligibility Criteria
Importers can only utilize this option if the detention is based on a claim of patent infringement rather than a clear case of trademark counterfeiting. Customs officers do not have the technical expertise to determine patent validity or infringement on the spot, so they allow the release against a bond. For trademarks, the law is stricter because counterfeit goods are considered a threat to public order and the integrity of the market.
The applicant must submit a written request to the local customs house along with the full amount of the deposit in cash or an approved bank guarantee. Once the deposit is verified, the customs office issues a release notice to the terminal.
Security Amount
Calculation of the deposit usually matches the declared customs value of the goods, including freight and insurance costs. This high amount reflects the potential damages the patent holder might suffer if the goods are sold. The deposit stays in a government-controlled account and does not earn interest for the importer.
If the court eventually rules that there was no infringement, the importer gets the full amount back. However, if the patent holder wins the case, they can apply to the court to have the deposit transferred to them as part of the damages award. This financial pressure encourages both sides to resolve the dispute quickly.
Procedural Timeline
Rights holders have a window of twenty working days to file a lawsuit after receiving notice that the importer has applied for a release through a deposit. If they fail to provide the court’s acceptance notice to customs within this period, the goods must be released and the deposit returned. This strict timeline prevents rights holders from using customs detentions as a tool for permanent harassment without judicial oversight.
Even after the goods are released, the legal battle continues in the people’s court, but the importer can at least fulfill their commercial contracts in the meantime. The customs ip counter-security deposits balance the interests of rights holders and legitimate traders in a complex regulatory environment.
