The reform in the sphere of customs control recently initiated by the government of Ukraine has already brought the results: a new Customs Service of Ukraine has been created (previously, the customs were subordinated to the State Fiscal Service of Ukraine), and performing since December 8, 2019. According to the Statute of the State Customs Service of Ukraine No.227, approved by the Cabinet of Ministers of Ukraine of March 6, 2019, the Service's aim is to preserve the due balance between the customs control and lawful trade, and prevent violation of IP rights.
Several provisions to the Customs Code concerning movement of goods across the border that are important for the IP owners have also been updated (the changes took effect from November 14, 2019).
The abovementioned reform is aimed at insuring step-by-step fulfilment of obligations of Ukraine within the EU Association Agreement and WTO Agreement on Trade Facilitation. While the customs service is adapting its work to the recent amendments, it is worth looking to the amendments proper and analyze their effect on the protection of intellectual property rights when moving the goods across the customs border of Ukraine.
Novelties in the Customs Legislation of Ukraine
"Counterfeit" has been defined
In order to simplify control and improve screening procedures used by the customs, the legislator has made a more accurate definition of the "counterfeit goods", and complemented the law with new definitions, such as "pirated goods" and "goods suspected of infringing intellectual property rights".
The counterfeit goods are infringing IP rights if they are unlawfully labeled with:
- a trademark,
- a geographical indication,
- or are as well packages, labels, stickers, brochures, operation manuals, warranties or other documents of such nature, that are the subject of infringement of intellectual property rights to the trademark or geographical indication.
The goods fall into the category of counterfeit if:
- the designation on the goods is confusingly similar to a trademark, registered for the same kind of goods, or there is a possibility of confusion with such trademark;
- the goods contain the name, or the term, or are described by means of the name or the term protected by the geographical indication;
- packages, labels, stickers, brochures, operation manuals, warranties or other documents of such kind contain the designation, the name or the term, identical to the trademark or geographical indication protected in Ukraine, and can be used with regard to the same kind of goods as the protected trademark or geographical indication.
Pirated goods are the goods infringing copyright and/or related rights, or intellectual property rights to a registered industrial design in Ukraine, which are copies or contain copies manufactured without consent of the copyright or related rights holder or holder of intellectual property rights to the industrial design, or without consent of the person authorized by the right holder in the country of origin.
Goods suspected of infringement of intellectual property rights are:
- the goods with the features of infringement of copyright and related rights, intellectual property rights to the inventions, industrial designs, trademarks, geographical indications, plant varieties, topographies of integrated circuits, the rights under the supplementary protection certificates for the medicinal products and crop protection agents;
- apparatus, products or components, designated, produced or adapted mainly for insuring or simplifying circumvention of the technology, device or component, which in usual mode of operation prevent or limit the actions that are not permitted by the copyright and related rights holder;
- any form or matrix specially designated or adapted for production of the goods infringing intellectual property rights.
According to the amendments, utility model is not the subject of the customs surveillance anymore.
Suspicion is the ground for suspension of the goods
Suspicion of the customs of possible infringement of intellectual property rights is now the only ground for suspension of customs clearance of the goods, even if the right holder has not filed an application to protect his rights to the object of the intellectual property rights. The customs, in case of such suspicion, may suspend the customs clearance of the mentioned goods, except for perishable goods, at their discretion.
According to the former customs law, there was the list of exclusive grounds under which the customs authorities had the right to suspend a consignment at their own initiative.
Early release of the goods suspended on suspicion of infringement of IP rights to the industrial design, plant variety or semiconductor products
According to the new rules, the customs is entrusted with additional powers of early customs clearance of the goods suspended on suspicion of infringement of the IP rights. By solicitation of the owner of the goods or an authorized person such release can be carried out by the customs before expiration of the suspension period, by decision of the customs office without prior recourse to the right holder under the following conditions:
- customs clearance has been suspended in respect of the goods containing such objects of intellectual property as industrial designs, plant varieties and semiconductor products;
- the customs authorities have no information on prohibition of actions by the respective state authorities in respect of such goods, or application of other measures to prevent their use;
- the declarant or the owner of the goods has provided the customs authority with the documentary confirmation of consent between the right holder and the owner of consignment on its early release;
- customs formalities necessary for release of such goods have been fulfilled.
The new grounds of early release of the goods are aimed at reducing the number of notifications from the customs to the right holders and respectively the reduction of the term for customs clearance of the goods in respect of which there are all necessary documents and no prohibitions.
Principle of international exhaustion of rights
According to the legislative changes, the original goods, in particular the goods produced with consent of the right holder, or the goods produced by a person duly authorized by the right holder cannot be suspended on the basis of the customs Register or at the initiative of the customs, or if such goods are imported in international postal and express dispatches of small consignments of goods. Such goods cannot be destroyed on suspicion of infringement of intellectual property rights, and such measure as change in marking cannot be applied to such goods.
Therefore, the legality of the parallel importation has been formalized at the legislative level. This means that the principle of exhaustion, which was formerly recognized only by court practice, is now applicable according to the law.
Destruction of the goods at the border has become simpler
1. General provisions on destruction of the goods
The goods suspended on suspicion of infringement of intellectual property rights can be destructed under the customs surveillance without necessity to establish infringement of intellectual property rights.
This procedure can be applied within 10 working days (or 3 working days for perishable goods) after receiving a notification on suspension of the goods and when all the cumulative conditions are fulfilled:
- the right holder informs the customs in writing of infringement of his intellectual property rights and his intent to apply the procedure of destruction to such goods;
- the declarant provides the customs with a written consent of the owner of the goods regarding its destruction.
Along with that, if during the above period the declarant does not send a written objection of the goods owner about its destruction to the customs, the customs authority should regard absence of such objection a tacit consent and is entitled to destruct the goods.
The right holder is entitled to obtain samples of the goods before its destruction for training purposes. Payment of expenses connected with destruction, storage, transportation, paperwork, and other expenses, are made at the cost of the right holder.
2. Peculiarities of suspension and destruction of the small consignments of the goods
Small consignments of goods suspected of infringement of IP rights can be destructed if:
- there is a suspicion that the goods are counterfeit or pirated;
- the goods are not perishable;
- information about the subject matter of intellectual property right protected according to the law, about the goods containing the said subject, and the consent of the right holder for destruction of small consignments of the goods, are entered in the customs Register.
A small consignment of goods to which the destruction procedure is applied, shall be the goods sent in one consignment from one sender in international mail, or in one shipment of the express-carrier from one sender in express-dispatches, in the number of no more than three pieces of each subcategory according to the Ukrainian Classifier of Goods for Foreign Economic Activity or which gross weight do not exceed two kilograms.
The customs shall inform the declarant of their intent to destruct the small consignment of the goods, and if the declarant within 10 days from the date of the respective notification does not provide a written objection of the goods owner regarding destruction of the goods, the customs can destruct the goods. If the declarant provides the consent of the owner, the right holder shall incur expenses connected with destruction, storage, transportation, paperwork and other related expenses.
The right holder has also the right to file within the abovementioned term a court decision or a decision of another competent authority banning destruction of the goods. In such case, if there is no infringement of the customs rules, the goods shall be duly cleared.
Changes regarding expenses for storage of the goods at the customs warehouse
The goods suspected of infringement of intellectual property rights shall be stored at the customs warehouse starting from the next day after suspension of the customs clearance.
The right holder should pay expenses for storage of the goods at the customs warehouse, suspended on the basis of the Customs Register data, and at the initiative of the customs.
The storage is paid starting from the next calendar day after placement of the goods in the warehouse.
The right holder may request information about the amount of expected expenses, connected with storage.
The right holder has the right to claim from the owner of the goods a compensation of expenses connected with storage of the goods, if the court establishes the fact of infringement of intellectual property rights of the right holder at the time of moving the goods across the customs border of Ukraine.
Registration of IP rights in the Customs Register
The year 2020 will see a new procedure for registration of IP rights in the Customs Register of Ukraine, in particular with regard to the information required from the right holder.
The scope of the required information will be somewhat extended, aimed to provide sufficient information to customs authorities for unaided determination of the original goods and their distinguishing features, in comparison with the counterfeits, without involvement of the right holder.
The State Customs Service of Ukraine already has a new functioning operational IT system for classification of the goods aimed at facilitating classification of the goods and streamlining the customs clearance of goods.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.