After China lifts the epidemic control policy and under the effect of recent exchange rate, exportation businesses are recovering rapidly. This change has been reflected on the increasing number of customs seizures this year. 

I. Importance and Necessity for Applying the General Guarantee

Given that intellectual property right holders value brand protection through Chinese customs, we recommend applying for General Guarantee with the General Administration of Customs (the “GAC”). You may understand that the most burdensome aspect of customs enforcement is to submit a bond payment to the relevant port customs where the goods have been detained. Every time we filed the customs seizure, we will be required by the customs to pay different amounts of bonds within a very limited time (around 3 days). If we could not pay the bond timely, the customs will not seize the goods and we will miss the deadline for catching the counterfeiting goods. 

While if the General Guarantee is filed and accepted, intellectual property right holders do not need to make bond payments each time when filing the customs seizures. All the customs around China will directly seize the goods when receiving our seizure application, without requiring urgent payments for the bonds every time. This approach will significantly save client’s time and efforts in paying the bonds, and avoid the risk that the cash bond is not paid in a timely manner. Therefore, applying for the General Guarantee with GAC is of great benefit to intellectual property right holders.

II. Procedure and Materials for Filing the Application 

Step 1: Determining the Amount of General Guarantee 

The amount of the general guarantee shall be equivalent to the sum of the warehousing, safekeeping and disposal expenses incurred by the intellectual property right holder in the previous year. Where the right holder has not applied to the customs for seizure in the previous year or the warehousing and disposal fee is less than CNY 200,000 (around USD 28,740), the amount of the general guarantee shall be CNY 200,000 (around USD 28,740). 

Step 2: Bank Issuing the Letter of Guarantee 

After determining the total amount of guarantee to be submitted, we shall apply to the bank for the issuance of a general guarantee letter and sign a guarantee agreement. The bank that can issue the general guarantee letter shall be a bank that has been approved to carry out financial business in mainland China.

As for “bank that has been approved to carry out financial business in mainland China”, it can be either a domestic Chinese bank or a branch of a foreign bank that can conduct financial services in mainland China. Moreover, if the IPR holder is a foreign company, it is also possible for the IPR holder's domestic subsidiary to apply to the bank for a general guarantee bond, which will not affect the guarantor's performance of its guarantee obligations to Customs.

The bank issues a general guarantee in favor of GAC in accordance with the guarantee agreement and in the form prescribed by GAC. The bank issuing the general guarantee letter shall be jointly and severally liable for the performance of the legal obligations of the right holder.

Step 3: Filing the Application to GAC

When applying to the GAC for a general guarantee, the right holder shall submit the documents below:

1. an application for general guarantee;

2. a letter of guarantee for general guarantee issued by a bank; and

3. a list of storage and disposal fees incurred by the intellectual property right holder in the previous year.

Step 4: Review and Approval by GAC

The GAC shall issue a notice of approval to the applicant when approving the application for general guarantee. The effective period of General Guarantee is from the date of approval to December 31 of that year.

The above is all about a brief introduction to the practice of General Guarantee with China customs. We hope it is clear and helpful. Should you have any questions, please feel free to contact our Partner Mr. Ason Zhang at asonzhang@changtsi.com.