Academic journal article Asia Pacific Law Review

Goods in Transit: Enforcement of IP Rights by Customs Officers

Academic journal article Asia Pacific Law Review

Goods in Transit: Enforcement of IP Rights by Customs Officers

Article excerpt

I. Introduction

Members of the World Trade Organization (WTO) are not obliged to enforce border measures by customs authorities for protection of intellectual property rights (IPRs) related to goods in transit.1 There were no disputes between WTO Members in respect of customs' protection for IPRs related to goods in transit prior to India and Brazil's request for consultations with the European Union (EU) on the issue of seizure of generic drugs in transit in 2010.2 This was not an isolated incident as some WTO Members became signatories to the Anti- Counterfeiting Trade Agreement (ACTA), including the border measures for protection of IPRs related to goods in transit.3

China has been the biggest merchandise exporter since 2009,4 which indicates that Chinese exporters may face more customs measures regarding protection of IPRs related to goods in transit. In fact, the European Court of Justice (ECJ) has reviewed two cases appealed from Belgium and the United Kingdom regarding goods in transit from Shanghai and Hong Kong respectively.5 This article will analyse the meaning of 'transit trade' and the obligations under the WTO agreements, the European and its Members States' practices, and China's response in this regard.

II. The Meaning of Goods in Transit and the Obligations Under the WTO Agreements

A. The meaning of goods in transit and the obligations under Art 5 of GATT

Article 5 of the General Agreement on Tariffand Trade (GATT)6 regulates the freedom of transit. Article 5.1 of GATT defines goods in transit as 'the goods (including baggage) in transit across the territory of a contracting party when the passage across such territory with or without transshipment, warehousing, breaking bulk, or change in the mode of transport, which is only a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes'. The 'contracting party' is deemed to be a WTO Member under GATT 1994.7

Article 51 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the 'TRIPS Agreement') provides that: "Members shall ... adopt procedures to enable a right holder, who has valid grounds for suspecting that the importation of counterfeit trademark or pirated copyright goods may take place, to lodge an application in writing with competent authorities, administrative or judicial, for the suspension by the customs authorities of the release into free circulation of such goods." However, Art 51 of the TRIPS Agreement contains a very important deviation which provides: "It is understood that there shall be no obligation to apply such procedures to imports of goods put on the market in another country by or with the consent of the right holder, or to goods in transit."8 There was a consensus at the Uruguay Round to exclude any obligations imposed on customs authorities to suspend the accused counterfeit trademark or pirated copyright goods in transit, which apparently correlated with Art 5 of GATT.9

Article 5 of GATT was included in the Protocol of Provisional Application of GATT (PPA)10 as part of the grandfather rights,11 which means that the Part II (Arts 3-23) of GATT shall be applied provisionally to the fullest extent not inconsistent with existing legislation, ie the existing legislation shall prevail over the provisional application of Part II of GATT. Therefore, the border measures implemented or maintained by customs authorities regarding freedom of transit will belong to the existing legislation in accordance with the PPA.

The grandfather rights have been extinguished since 1 January 1995 when GATT 1994 was entered into force as the part of 'a single package' of WTO Agreements. Article 1(a) of GATT 1994 provides that PPA shall be excluded. Accordingly, Members will be obligated to protect the freedom of transit under Art 5 of GATT without any existing legislation exception. The freedom of transit will be guaranteed to any goods in transit without any unnecessary delays or restrictions. …

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