McGuireWoods Kazakhstan about customs control of intellectual property transference in Central Asian republics

/McGuireWoods Kazakhstan LLP, Yuri Bolotov, Elena Shatrova, November 2, 05/ - In accordance with the provisions of international legislation and following the example of the Russian Federation, where intellectual property ("IP") objects have long been registered with Customs in order to stop the influx of counterfeit products onto the market, most of the CIS Republics have taken steps to protect intellectual property and discourage counterfeit products from entering the domestic markets. In order to coordinate the legislations of various countries and ensure a common approach to customs regulations across the region, in September 2001 the Presidents of CIS countries adopted a resolution in relation to the Rules of Customs Control over the Transference of Goods Containing IP Objects ("IPO") across the Customs Frontiers. In Kazakhstan and Kyrgyzstan the ways of handling by customs the problem of how to protect the intellectual property rights and the procedure for registering products containing IP objects ("IPO Goods") are regulated by the Tax Codes of Kazakhstan (1995 and 2003) and Kyrgyzstan (1997) respectively and the relevant by-laws. Although the Rules were developed several years ago, it has taken some time before the two Republics approved the procedures for registering IP Goods. These are now in force. The procedure adopted in Kazakhstan for registering IPO Goods is quite similar to that applied in Kyrgyzstan, however, there are some differences. KAZAKHSTAN The Republic of Kazakhstan's Customs Code, Section 10, Articles 410-420, requires customs authorities to protect the intellectual property rights of an owner at the border of the Republic of Kazakhstan. To do so, the Customs Control Committee under the Ministry of Finance of the Republic of Kazakhstan ("the Customs Control Committee") has established and maintains a Register of controlled products containing IPO. Entering Products Goods into the Register of IPO Goods Although customs authorities are responsible for maintaining the Register of IPO Goods ("the Register"), it is up to an IPO title-holder to file an application to register his IPO Goods. Customs authorities will not take the initiative to protect intellectual property rights when products are moved across the border of the Republic of Kazakhstan. With more than thirty thousand trademarks registered in as of today in Kazakhstan, the list of registered trademarks is quite large not to mention other IPO such as inventions, industrial designs, and utility models. The customs office is not required to monitor all of the registered IPO and to follow up on all possible rights infringements, as not all of these IPO are imported or exported. The customs authorities focus only on those goods that are (i) moved across the border or (ii) the ones that are suspected of being counterfeit or if there is a risk of them being counterfeited in future. According to Article 413 of the Customs Code, IPO Goods must be entered in the Register following the time a title-holder files an application with the Customs Control Committee. Such an application is expected to be accompanied with documented information on the applicant (state registration, location, bank account and the like), and on the IPO (IPO title document No., date of IPO registration in Kazakhstan, etc.), and the period of protection sought. The application should also include a description of original goods and detailed information about the products that in the view of the title holder are fake, to allow the customs authorities to detect such goods, including a description of the distinctive features of fake products. To reduce the possibility of a professional error, and possible subsequent losses by a bona fide importer or exporter, the applicant is also required to procure a liability insurance policy to compensate damages to the individual who is attempting to import or export the items (the "Declarant") or other persons, and to cover the expenses of the customs authorities, that might arise as a result of the unjustified temporary detention of registered IP Goods. The coverage specified in the policy may not be less than the monthly calculation index multiplied by 1000. Consideration of an Application to Enter IPO Goods in the Register The Customs Control Committee shall consider an application for entering the IPO Goods into the Register and make a decision within 30 days from its receipt (this period may be extended up to 3 months). The applicant will be informed about the decision in writing. With the aim of checking the information submitted by the applicant, The Customs Control Committee may ask third parties and relevant state agencies for documents supporting the above information. The said parties shall provide the requested documents within ten calendar days of the receipt of the request. A decision to deny registration in the Register is made where the information presented by the applicant is not true, and when the piracy of products cannot be proved. The Register of IPO Goods The Customs Control Committee shall define the procedures for keeping the Register and notify customs authorities and applicants to that effect. You may access the Register at the official site of the Customs Control Committee at www.customs.kz. As of September 26, 2005, 207 IPO Goods have been entered in the Register in the name of eight companies. These include five Kazakhstan companies: Philip Morris Kazakhstan OJSC (tobacco products), Rakhat OJSC (confectionary), Argus Limited (insulating materials), KazNaturProduct LLP (pharmaceuticals) and Leader LLP (fermented milk products), and three foreign companies: Balsara Hygiene Products Limited (toothpaste), Hyundai Motor Company (automobiles) and Yerevan Brandy Company (alcohol beverages). Where the information on products and IPO is amended, or the IP rights have expired, under the new legislation the applicant is given a set period of time to notify the authorized customs office to this effect. It is in the applicant's best interests to be aware of these requirements as, once again, the customs office will not take the initiative to notify him of the problems arising from obsolete information. Such problems could range from temporary detention of products to financial liability for the damage caused by wrongful temporary detention of products where the validity of IPO title documents has expired. Time Limit for Protection of Rights The authorized customs office sets the time limit for protection of the rights with account of that specified by the Applicant. This period is not to exceed two years from the day of entering IPO Goods into the Register. This time limit may be extended by the authorized customs office at the request of the applicant. Please note that the duration of protection of the rights may not exceed the period of validity of the right of a title-holder to his IPO. Suspension of Release of IPO Goods A copy of the Register is sent out to every customs office and every customs point to be maintained by them. Where customs officers find signs showing that the products moved across the border are counterfeit, a decision on temporary detention of such products for up to 10 working days will be made by the chief officer concerned. This period may be extended at the request of the applicant for another 10 working days. No later than one working day from the day of that decision the customs office shall notify the applicant and the declarant of the detention and the reasons for it. It will also inform the declarant of the name and contact details of the applicant, and shall inform the applicant of the name and contact details of the declarant. With consent of the customs authority, the applicant is entitled, under the customs authority's supervision, to take samples and specimens of products in question and examine them. If the applicant determines that the products are counterfeit and files a claim against the violation of his IP rights as a result of moving the detained products across the customs frontier, these products shall not be released until the court decides on the security of the claim. Only a court may issue a final decision on whether the products are counterfeit, on their destruction or, in some cases, on their transfer to the lawful title-holder of the IP rights. Where the products are found counterfeit, the declarant shall reimburse the costs involved to the customs authorities. If the products are found to be imported or exported lawfully, these costs shall be reimbursed by the applicant. These regulations give the owner of registered IPO the means to protect his products against counterfeit products at the border, and prevent import or export of counterfeit products. This has implications beyond the rights of individual companies, however. A failure to take such steps will result in a rapid distribution of counterfeit products in Kazakhstan, as it is almost impossible to withdraw them from circulation, and it is very difficult to fight such offenders once such products have been imported. KYRGYZSTAN As mentioned above, the procedure for registering IPO Goods in Kyrgyzstan is practically the same and differs slightly in some aspects. Under the Customs Code of Kyrgyzstan of 30 July 1997, there is a special customs regime in relation to IPO Goods which provides that the transition of IPO Goods through customs can be restricted by the international agreements ratified by Kyrgyzstan, the Customs Code and acts issued by the Customs Inspection of the Kyrgyz Ministry of Finance. Accordingly, the customs bodies of Kyrgyzstan are obliged to take measures to protect IP rights within the limits of their jurisdiction. Article 29 of the Kyrgyz Customs Code authorizes the customs bodies to detain IPO Goods at the request of the owner of the IP rights in the same way as in Kazakhstan. However, unlike in Kazakhstan, there is an official fee for submission of such application: - registration of one IPO product - 1,330 soms which is now approximately US$30; - extension of a registration term- 410 soms (about US$10). The Customs Code of Kyrgyzstan expressly states that the damage caused by a failure to protect IP rights or a detention of the importer's goods without adequate grounds shall be indemnified by the customs bodies, whereas the Kazakhstan Customs Code only provides for a liability of the customs bodies in such cases. On 27 November 2000 the Government of Kyrgyzstan approved a new procedure for customs clearance in relation to IPO Goods. Like in Kazakhstan any owner of IP rights, seeking to register an IPO Goods in the Register should file an application. In addition to the items listed above as required in Kazakhstan, the application should also include the following: - names and addresses of the entities which produce the stated goods and those which have the right to use the stated IPO, and the documents evidencing the corresponding authorisations; - place of production of the original goods. The Kyrgyzstan Customs Code also provides a list of other documents that should accompany the application which includes: - a patent or a certificate of the State registration of IPO issued by the State Agency of Kyrgyzstan for Intellectual Property; and/or - an agreement on assignment of rights to IPO (licence agreement, concession agreement). In Kyrgyzstan the owners of IP rights are not obliged to provide a letter from the bankers and a Certificate of State Registration of the Applicant. In addition to a description of goods, it is necessary to attach a sample or a photograph or other information, which gives a good idea of the appearance (form) of the said good. In Kyrgyzstan the applicant should provide other information, which allows to disclose counterfeit products such as: - a name and address of the importer and/or the consignee of allegedly counterfeit products; - a detailed description of the suspected goods including samples and/or a photograph of such goods; - a country or countries of origin and the manufacturer of allegedly counterfeit products; - a place where the suspected goods are expected to be delivered for customs clearance; - a type of transportation or the name of the carrier. The applicant shall enter into an agreement with the State Customs Inspection as to the reimbursement of expenses incurred by (i) the customs bodies if during a certain period of time after the detention of suspected goods, the IP rights owner fails to provide a documented evidence that he/she has filed an application with an appropriate court in relation to the detained goods; or (ii) the importer if the court establishes that the detained goods were not counterfeit. The State Customs Inspection accepts and considers the application and within five days makes a decision as to the registration of the IPO Goods and its protection. If the decision is positive, the IPO Goods are recorded in the Register. The Kyrgyz Customs Code, like that in Kazakhstan, provides that IPO Goods may be removed from the Register for several reasons: the owner of the IP rights may decide to remove it; if the IP rights owner fails to inform the customs bodies of any changes to the ownership of the IPO, the State Customs Inspection authority may remove it. Also the item may be removed from the register upon termination of a licence agreement or if inclusion in the register was based on false information in the application. As well as in Kazakhstan, registration with the State Customs Inspection of IPO Goods is valid for two years. In Kyrgyzstan the above two-year term may be continuously extended for another two years, if the IP rights owner applies for an extension and pays the fee. However, the term of registration may not exceed the duration of the IP rights validity. SUMMARY The practice of registering IPO Goods with the customs authorities in Kazakhstan and Kyrgyzstan is quite new. It may take some time before the customs bodies develop all supplementary rules and regulations needed for the issues not covered by the Customs Codes of these Republics. The provisions of the existing regulations also require clarification, and before that happens, doubts as to proper procedures will continue to result in inaccuracies in the work of customs bodies and confusion in the ranks of IPO owners. Customs provisions in Tajikistan are like those established in Kyrgyzstan and Kazakhstan and similar provisions will be introduced in Uzbekistan soon. Such changes will allow better coordination and consistency between these countries located in the Central Asia. As in Uzbekistan, the Customs Register in Turkmenistan is still in the planning stages, but cooperation with the Customs Agency is possible based on separate agreements where the Turkmen authorities substantially provide the same care of IPO Goods. The new Turkmenistan Customs Code and the corresponding Rules on the Customs Register are expected to be adopted within a few month. In detail: McGuireWoods Kazakhstan LLP mwk@mcguirewoods.com Information agency of the financial markets IRBIS broadcasts this material according to the agreement achieved with McGuireWoods Kazakhstan LLP. [2005-11-07]