Better protection: the KSA's fight against counterfeiters at the border

The Kingdom of Saudi Arabia (KSA), by acceding to the World Trade Organization (WTO) on December 12, 2005, became obliged to implement the WTO agreements, such as the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), particularly in relation to border protection of IP rights as specified in Articles 51 to 60 of the agreement.

In fulfilling its obligations towards the WTO, the KSA has issued Regulations for Border Protection of IP Rights ‘Trademarks & Copyrights‘ (RBPIPR), that conform to the TRIPS Agreement pursuant to the Minister of Finance Order No. 1227 dated 2005. The regulations make it imperative on the customs department to implement the order at border checkpoints to stop commodities and goods that infringe trademarks and copyright from entering the country.

It is to be noted that TRIPS obliges members of the WTO to provide the minimum protection of rights as regards trademarks and copyright.

KSA’s obligations

The KSA, during its negotiations to join the WTO, undertook to apply the minimum protection specified in TRIPS as regards border protection of IP rights, although the protection that has actually been provided by the Saudi customs exceeds, by far, the minimum required by the agreement.

"Article 8 of the rbpipr gives the part agaisnt whom a preventative siezure of goods has been imposed the right to request reconsideration of the seizure."

The reason behind this efficiency is that customs employees have gained enough experience to single out commodities and items that apparently infringe trademark rights and copyright.

The external features of counterfeit goods often give them away and hence they can easily be detected. Other IP rights that have been flouted are not as easily detected by their external features as those related to trademarks and copyright. The KSA’s undertakings during the accession process have been embodied in the RBPIPR.

Procedures for border protection of trademarks

Pursuant to Article 6 of the RBPIPR, the owner of a trademark has the right, at any time before lodging a civil suit or a criminal case, to seek issuance of a judicial order by the Board of Grievances (the concerned authority).

The order should be based on a complaint substantiated by an official certificate confirming the registration of the trademark; it should plainly instruct the seizure, by the Customs Authorities, of goods carrying a counterfeit trademark similar to the plaintiff’s; and it should ban clearance of the same pursuant to Article 49 of the Saudi Trademarks Law. Pursuant to Article 2(a) of the RBPIPR the Customs Authorities could, of their own accord, stop the clearance of commodities suspected of carrying counterfeit trademarks and inform the importer and the trademark’s owner of the incident.

Article 8 of the RBPIPR gives the party against whom a preventive seizure of goods has been imposed the right to request reconsideration of the seizure, without prejudice to the execution of the seizure order, by filing an application to the Board of Grievances within 10 days of being informed of the seizure.

The Customs Authorities may consult the Ministry of Commerce & Industry (MOCI) in writing as to the authenticity of the trademark and if the MOCI is of the opinion that the specimen carries a counterfeit trademark, then this opinion will constitute strong evidence capable of incriminating the perpetrator and/or the importer.

The RBPIPR has safeguarded the rights of parties insofar as it has allowed the rights holder and the importer to inspect samples of goods the clearance of which has been suspended in order to confirm or challenge the suspension. Upon suspending the clearance of goods of its own accord the Customs Authorities may request the trademark’s owner to provide, free of charge, any information or assistance, including technical know-how and facilities, in order to determine the falsehood of the goods.

The regulations oblige the Customs Authorities to immediately notify the importer and the trademark’s owner of its decision to stop clearance of the goods. The regulations specify a period of 10 days for the trademark’s owner, from being notified of the restriction, to institute proceedings with notice to the Customs Authorities, otherwise the order would be null and void and the suspension would be lifted according to Article 9 of the RBPIPR.

The Customs Authorities will be entrusted with the execution of judgments and decisions issued by the competent courts for the confiscation and destruction of goods infringing trademark rights and copyrights, and will have the power to dispose of the same through non-commercial outlets unless the judicial or administrative authorities see otherwise (Article 11 of the RBPIPR).

Some countries donate the goods in question to philanthropic societies if they conform to the standards of the land and after removing the counterfeit trademark (China is a case in point).

Goods donated to philanthropic societies should not be disposed of commercially.

Article 12 of the RBPIPR states that the Customs Authorities shall undertake not to allow the re-exportation of goods carrying counterfeit trademarks without altering their condition or subjecting them to another customs procedure, other than in exceptional circumstances, in conformity with the TRIPS Agreement.

However the agreement is silent regarding the re-exportation of a commodity without altering its condition. It is left it to member states to judge the circumstances that merit such actions, particularly in events of earthquakes and floods where time is of the essence. Such circumstances would be excluded from the framework of commercial channels.

The implementation of the programme of risk management by the Saudi customs and the formation of units in 2008 to combat commercial fraud have increased, to a great extent, the detection of counterfeit commodities during the period from 2007 to 2012 pursuant to the Saudi Customs Report of 2012.

The report states that in 2007 the Customs Authorities detected 1,069,596 units of counterfeit commodities to the value of SAR 7826738.2 ($2 million); in 2012 they detected 54,864,255 units of counterfeit commodities to the value of SAR 762997581.4 ($203.4 million). A supporting factor in detecting that huge number of false and counterfeit units is due to the skill and competence of the customs employees who have undergone intensive training.

Saudi customs won first place (out of 179 member states that constitute the World Customs Organization [WCO]) in combating commercial fraud and protecting IP rights in 2012. The portion of illegal goods detected by the Saudi customs in 2012 comprised 36.5 percent of goods detected by all members of WCO in the same year.

The US customs came second by detecting 14.9 percent, Chile third with 10 percent and Italy fourth with 7 percent (Illicit Trade Report 2012 issued by WCO). The KSA also ranked first in 2011 by detecting 12.5 percent out of the total violations of IP rights detected that year.

Crime of smuggling counterfeits

If the Customs Authorities receive a consignment that is suspected of infringing trademark rights and when that suspicion is confirmed by the MOCI (the specialised body in that respect), the case is classified as a smuggling and customs-evasion—a crime pursuant to Article 142 of the Unified Customs Law (UCL).

The general director of the customs department is entrusted with the task of handling the prosecution pursuant to Article 150 of the UCL.

The competent organs to adjudicate in cases of smuggling are the customs committees (Customs Courts of first instance). There are 14 customs committees in the KSA scattered throughout the various regions, as well as three appellate committees (Appellate Customs Courts, Article 162 of the UCL).

Cases infringing IP rights and cases relating to commercial fraud constitute no less than 60 percent of the cases determined by the customs committees. Between 2009 and 2012 the Jeddah Customs Committee (a court of first instance) adjudicated on 1,625 cases, 984 of which related to infringement of trademark rights and commercial fraud.

The attempt to smuggle goods into or out of the country is characterised by acts of the perpetrator in producing forged lists and documents or by affixing false or counterfeit trademarks on the units to be smuggled. The penalty upon conviction for such a crime is embodied in Article 145 of the UCL; the main features of which are follows:

a)   Confiscation of the counterfeit goods.

b)   Confiscation of the means of transportation (excluding public means).

c)   A fine of no less than the value of the goods and no more than three times of its value.

d)   Imprisonment for a period of no less than six months and no more than three years.

e)   The penalty may be doubled if the offence is repeated.

Both parties may appeal against the committee’s findings within 30 days of being informed of the committee’s decision.

Rights owners should join forces with the Customs Authorities to combat attempts to infringe their rights. Such close and constructive cooperation has already paid dividends and succeeded in tackling countless smuggling attempts.

Khalil Aljehani is the founding lawyer of Khalil Aljehani Law Firm. He can be contacted at:
khalil@aljehani.com.sa